Episode 55: The Missing Facts from Traditional Money Advice with Jen Hemphill
WHAT IMPACTS MY MONEY MINDSET?
This week I sat down with Author and Motivational Money Coach, Jen Hemphill.
Jen Hemphill helps busy determined women who are content with their income but not their bank account. She helps them transform their finances from being overwhelming to bringing them financial confidence, control and freedom. She is a Motivational Money Coach, an AFC® (Accredited Financial Counselor), author, and host of the Her Money Matters Podcast.
HERE’S WHAT YOU’LL LEARN FROM THIS EPISODE:
What kind of impact your upbringing can have on how you manage your money
How hearing things like “we can’t afford this” or “we don’t have the money” can impact your money mindset
What to do when you feel like you’re making the right money moves but aren’t seeing the results
How much your past and future money mindset can impact your financial goals
Three steps to take to better understand your money mindset
The importance of a budget and how to make it work for you
A simple trick to ensure your cash flow plan isn’t derailed by things like insurance premiums, preschool tuition, etc.
Actions you can take to become more confident around money.
Why you should have a dream budget and what it can do for your goals.
How to overcome a negative mindset you might be in around your money.
Insight into Jen’s book and what she sees missing from traditional money advice.
Episode 01: Welcome to the Work Your Wealth Podcast
Welcome to the first episode of the Work Your Wealth Podcast, a weekly podcast for those wanting to make smarter choices with their money.
Featuring expert interviews with leading authors, business owners and professionals, the Work Your Wealth Podcast will give you the education, confidence and clarity around your finances that you deserve. If you’re ready to use your money to live a life you love, this show is for you.
I’m your host, Mary Beth Storjohann. I’m a CERTIFIED FINANCIAL PLANNER™, the Founder of Workable Wealth, where I serve as a financial planner and accountability partner in working to help clients in their 20s-40s across the country make smart, educated choices with their money.
I’ve been named as a “Top 40 Under 40” financial planner by Investment News, one of “10 young Advisors to Watch” by Financial Advisor Magazine, and one of “10 of the Best Personal Finance Experts on Twitter.” I frequently appear on NBC as a financial expert and my expertise has been featured in Glamour, Women’s Health, Brides, The Wall Street Journal, CNBC, Forbes, and more. You can connect with me via Instagram, on Facebook, or via Twitter.
In this inaugural episode of the Work Your Wealth Podcast, I talk about why I created this show, share a bit about my background, and explain who this podcast is for and what you can expect each time you join me here.
WHAT YOU’LL LEARN FROM THIS EPISODE:
Introduction to me, Mary Beth Storjohann and the Work Your Wealth Podcast.
How I ended up in a career as a Financial Planner and started Workable Wealth.
Ask an entrepreneur about the perks of running their own business and you’ll typically see them light up. They’ll be eager to share about the advantages of entrepreneurship, which include freedom, flexibility, independence, and control of your work life balance. These are serious benefits – and studies show that no matter what kind of money entrepreneurs are making, the personal satisfaction and freedom that their path grants makes people who started their own ventures some of the happiest among us.
It’s important to note however, that money is apart of the equation, and creating good money management habits as an entrepreneur can be difficult due to the lack of a steady, reliable paycheck that employees get to take home on a regular, known basis.
Volatile Income Can Make Managing Personal Finances Difficult
Entrepreneurs (and freelancers) don’t have the luxury of pulling in the same amount of money on a bi-weekly or monthly basis. While not knowing exactly what your monthly income will look like makes managing finances more difficult, it’s not impossible.
Make your budget as flexible as your income can be each month. Create a budget where it’s easy for you to see what can be cut if funds are short one month. In other words, get serious about separating your wants and needs so that in tight months the wants can quickly be eliminated if necessary.
For example, break down everything into detailed categories that make sense to you; you can have a “meals out” category and an “entertainment” category as part of your discretionary spending. If your income is lower than expected one month, you know you can easily and painlessly eliminate these two budget areas to pare down your spending. In this way, you can make sure the smaller amount of cash coming in is allocated to your real needs, like bills, utilities, and groceries.
Accept a Slightly Leaner Lifestyle
As an entrepreneur with a variable rather than fixed income, you need to be particularly careful to guard against lifestyle inflation. Your income may allow you to live like a king one month – but the next month could see a slow-down and a subsequent painful drop in earnings.
Prioritize your spending and ensure that any money going out is being used to acquire things you truly value, and ensure you’re paying yourself first by contributing to savings goals, retirement accounts, and rainy day funds.
Be Prepared By Planning Ahead
Entrepreneurs on a budget need to be proactive about unexpected expenses and savings. Although everyone should have money set aside for emergencies, those who are freelancers or who own their own businesses should consider building multiple fallback funds (or having an emergency fund that is much larger than the average recommended amount).
When you have a volatile income, you’re at a higher risk of coming up short when you need money to cover something unforeseen. Aim to set aside three to six months’ worth of household expenses that can help you get by if you experience a few months of low earnings. Once you have this fund established, work to build a separate fund that will help cover emergency situations.
After building a comfortable cushion should things head south, you need to think about your future. Entrepreneurs need to be diligent about saving for retirement, as there aren’t any employers to offer you sponsored plans or company matches.
Note: You do still have a lot of great options (you just need to take the initiative). Opt for one a SEP IRA, a Solo 401(k), or a Simple IRA.
How to Automate Your Savings and Stay on Track (Even with a Volatile Income)
It’s not enough to know that you need to save – you need to actually make those contributions to your accounts! However, that’s really difficult when you don’t know exactly what each month’s income will pan out to be.
Take a look at your past earnings and calculate an average. Based off this number, you should be able to determine a pretty safe guess for what you’d be comfortable contributing to your savings monthly. Try to set up an automated payment to your accounts (it’s easy to forget or let it slide if you have to do it manually every time).
Because your income will change, follow up this action by making time to sit down on a bi-weekly or monthly basis to review all your finances. This will allow you to adjust spending and saving as necessary – but still have that automated foundation to work from.
Managing your personal finances as an entrepreneur with a volatile income can be tricky, but it is possible. Plan ahead for emergencies and unexpected slow months, make your spending as flexible as your income, and continue to enjoy your freedom and independence while you build your business. Want more information on taking control of your financial life? Get on the Workable Wealth Insider List for instant access to 9 Steps to Workable Wealth, a guide to getting in your best financial shape yet!
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