Cash flow is one of the most important aspects to budget for as a creative business owner. As a photographer, and for many other creatives, it can mean the rise and fall of your business. It’s time to take control and set up your budget with these 3 simple steps, so you can save money while managing cash flow effectively!

1. Make a budget plan
2. Track spending
3. Save regularly

The popular proverb, “If you fail to plan, you’re planning to fail,” is true with one exception: freelancers and creators who are paid irregularly. The question is: how do you overcome this obstacle and set goals for your income ambitions?

You will never grow or exceed your current level of success if you don’t have goals. And budgeting is the first step to reaching those goals because it forces you to examine exactly what has been happening with your money and how much more value are you getting by spending that extra pound/dollar on a latte.

Once I learnt goals and planning were a core element in the journey to financial mastery, I set out to read every book I could on finance, goal setting, and the psychology of money. Why? Because I love my business and I don’t want it to fail because of cash flow, and I don’t want other creatives to go through the same issues either.

Planning for the future is an essential part of life. It helps us be more successful when we take steps to plan ahead and create a budget. So what often leads people to not do this with their finances?

Let’s be honest: it can be boring, complicated, and sometimes we don’t want to face the truth about our financial situation…

How to Start Budgeting

You should start your first budget with a simple tool, as you’ll overwhelm yourself by using a complicated one. It will be far too hard to keep it up, and you’ve already got a lot on your plate as a business owner.

Using a simple, free budget template like the one I created here is recommended (which is basically like an online version of the paper-and-pencil type). While there are a number of great options out there, many of them can become too complicated and the more confused you are about the tool you’re using, the less likely you’ll keep up with your budget.

Don’t let this happen to you. Instead, stick to simple tools (especially when you’re just starting out), and stick to a monthly or weekly routine.

How to Start Saving

Have you read Profit First? I’d highly recommend it. The key takeaways are to change your thinking from

“Sales – Expenses = Profits” to “Sales – Profit = Expenses.”

Here are the steps I recommend you take to start saving:

1. Do a few things well and strive for increased efficiency.
2. Resist the temptation to spend by allocating money to separate accounts.
3. Never, ever reinvest profit you’ve taken out of your business back into it.
4. Address your debt aggressively but pay yourself first.
5. Cut your expenses

“Profit must happen now and always. Profit must be baked into your business. Every day, every transaction, every moment. Profit is not an event. Profit is a habit.”

Mike Michalowicz

Cut your expenses and don’t add to them when you have a great month or quarter (which means don’t go buying new equipment if you don’t need it!). I’d buy equipment if I can foresee the same job happening more than once and only then would I weigh up the cost of hiring versus buying.

Following a 70/30 rule will also guide you when dividing up your income and budget. I’ve found that this budgeting technique is the best because it’s so simple and effective for businesses with variable incomes, such as photographers who don’t know what their next job will be or how much they’ll make from it.

The 70/30 rule means you put away 30% of your income into savings and after you’ve paid the tax, learn to live on 70 per cent of your after-tax income.

Once you’ve done this, it’s important to look at how you allocate your remaining 30 percent. Let’s allocate it in the following ways:

Charity

Charity can be hard to stomach when you’re struggling and I by no means insist this is something you should do if you are indeed in financial difficulties. Firstly, help yourself and then you’re better equipped to serve others.

Charity comes in all forms, and these little acts of kindness have been documented to help with your wellbeing. Those who have spent money on someone else have reported happier moods than those who’ve spent money on themselves.

“Thinking about money may propel individuals toward using their financial resources to benefit themselves, but spending money on others can provide a more effective route in increasing one’s own happiness.”

2 Elizabeth W. Dunn, Lara B. Akin, Michael I. Norton (2014). Prosocial Spending and Happiness: Using Money to Benefit Others Pays Off. Current Directions in Psychological Science 2014 23:41.

This means, where and when you can, treating a loved one, a friend or a stranger will promote wellbeing two times over. I’d say that is a win-win.

Investment

With the next 10 percent of your after-tax income, you will make money. You can buy or fix or sell things, but the important thing is to do something with the money, even if it’s only a part-time job. There are many ways to make money.

Imagine what you can do. Think about the skills you have in your job or other things you like to do. You might be able to turn these into a business. For example, if you want to buy something for a lower price and sell it for more, this might be an innovative idea for your business. And then the other option is investing in the stock market, which is one of my favourites. It doesn’t have to be loads, £25, £50 or £100 a month is a great place to start.

Use this 10 percent to purchase your equipment, products or equity—and get started. There is no telling what genius is inside you waiting to be awakened by the spark of opportunity.

Check out the investment apps I like to use:

• Moneybox – Great for income roundup and savings
• Plum – Income round ups
• Wealthy – Great for investing
• Trade 121 – Great for trading for intermediate

Saving

The last 10 percent should be put in savings. I consider this to be one of the most exciting parts of your wealth plan because it can offer you peace of mind by preparing you for the “winters” of life.

“Poor people spend their money and save what’s left. Rich people save their money and spend what’s left.”

Jim Rohn’s

With saving and investing it’s the long game: put the money in and act like it doesn’t exist.

Once a year I check on my savings and once a month on my investments (depending on how volatile the market is). But I’m in it until I’m 60 and that’s how you have to think about it.

Twenty years ago, two people had each earned £1,000 a month. They earned the same amount every year. One person spent money and saved what they had left. The other person saved first and spent what was left.

Today, if you knew both people, you would call one poor and the other wealthy.

Give, invest or save like any discipline. The results are only seen at the end of the day, week, month, or year. They are not noticeable. But if you wait 5 years–the difference will be big. Wait 10 years and there is a huge difference in your life.

Where I save my money:

• Pension
• Vanguard ISA

Overall you have to look for ways to make more money as well as a way to save the money you have in your business to keep it profitable when times get hard (and they do get very hard). Here are my final top tips to flourish and thrive as a creative business owner.

1. Identify your creative strengths
2. Find a niche that you can serve well with your talents
3. Invest in the tools and resources for the job, like good quality camera equipment or software programs
4. Set up an online shop to sell your products, or look for other passive income opportunities
5. Seek out opportunities to create more of what you’re good at – don’t be afraid to experiment!
6. Create a blog/show/podcast about your business so others know how it works and how they can get involved too!  (Be sure to include links!)

And if you want to go the extra mile with your finances…

1. Set up a budget for your business
2. Make a list of all the things you need to spend money on, and then prioritize them
3. Create an expense report template for your business so that you can keep track of what you buy and when
4. Review your expenses every month in order to find ways to save money
5. Look into tax deductions as a way to reduce how much income tax is taken out of each invoice.
6. Consider hiring someone else who can take care of some tasks or projects while still being paid fairly, to give you free time to find a way to make more income in your business

The most important thing you can do as a creative in your business is to save and invest your money. Every pound that goes to work for you, rather than working for someone else is something powerful.

Let’s talk about how we can help make the cash flow more freely so you have time to focus on doing what it is that makes your heart sing!