#36: HOW MUCH TO BRING HOME VS. LEAVE IN THE BUSINESS

In this episode I’m tackling one of the most common questions among business owners: how much money to take home vs. leaving in the business. I’ll cover practical strategies to create a financial balance between your personal and business budgets while prioritizing your goals. From budgeting basics to specific allocation percentages, I’ll give you actionable steps that will help you determine where your money should go.

Key Topics:

• The Importance of Budgeting
• Personal vs. Business Priorities
• Allocation Strategies for Margin
• The Power of Long-Term Planning
•  Tools and Automation

Resources Mentioned:

• Episode 8: Transition When You’re in a Good Position
• Episode 26: How to Ditch Debt and Grow Your Business with Cash
• Episode 2: Don’t Fudge it, Just Budget
• Budgeting Tutorial on YouTube

Helpful Resources:

• Free Estimated Tax Guide
• Get my Estimated Tax Tracker

Email me with any questions you’d like answered in future Q&A episodes!

Recommended payroll software (affiliate links):
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My favorite budgeting app w/ an amazing free version:
EVERY DOLLAR BUDGETING APP

My preferred business credit card with cash rewards (affiliate link):

If you have healthy behaviors around spending with a credit card, this is a great one to use and earn cash back. It also links up well with QuickBooks Online. If you have unhealthy spending habits with credit cards, please avoid using one! You need to be able to pay it off monthly and not carry a balance. I use this one for my business and it makes paying bills simple.

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Disclaimer: This content is for educational and informational purposes only. Please consult with an accounting professional for direct advice based on your specific business situation.

Transcript

Hello there, my entrepreneurial friend! Thank you for tuning in with me today and for being an amazing business owner and checking in with something that will give you knowledge like this podcast to help you in your business. I feel like that deserves a big pat on the back because you showed up to learn something about your business to move the needle forward when it comes to being a better steward of the money you get through your business So just give yourself a pat on the back for being here today and listening to this podcast and showing up for yourself. That's amazing. Today marks eight months that I've been doing this podcast and it has been so much fun I started this podcast really as a way to help more chiropractors with their businesses…and manage the financial aspects of their businesses. I run a chiropractic bookkeeping business and it's been a huge blessing to work with so many amazing practitioners in that one-on-one capacity…But I've really been wanting to help even more of you win with your business finances and give you simple actionable ways to do this.

So if you haven't yet please share my podcast with a chiropractic friend And if you're moved to do so please leave me a review. Uh

my goal is to reach as many business owners like you as possible and word-of-mouth is simply more valuable than an ad

So let's get into today's podcast episode.

Which is how much to bring home versus leave in your business. I get this question a lot and if you've been in business, Any length of time I'm sure you feel like your in a juggling acts some months when it comes to where your money is going.

As a business owner myself, I've felt that pull pretty much every single month to be honest, it can feel like there's so many things…Pulling at your money on both the personal side and the business side.

I'm sure you want to build a strong financial foundation at home and in the business but sometimes it can feel confusing about which to prioritize…

Do you take additional business margin you have and use that personally for that home project like a roof on your house or for personal emergency savings or do you leave it in the business for say a new piece of equipment or building up your savings there. It seems like our money needs to do so many things. And it's really hard to know where to send it first. There are probably many things you could list out right now that you need to do on the personal and the business side but, unfortunately we only have a certain amount of money each month that's left over to allocate…

Today I'm going to help guide you when it comes to how to prioritize what to do with your money each month. And how to work through that depending on what's going on in your life and in your business.

The first thing I wanna talk about and I talk about this all the time, but there's a reason for that. You need to start with a budget…

You must be proactive when it comes to planning for where your money is going, or you're just blindly sending it somewhere with no real purpose or end goal and then you may need to backpedal and send it somewhere else later. A budget or what I like to call it is a money out allocation plan or map…is going to be the way for you to do this to give your money purpose and send it to where you want it to go.

You need a personal and a business budget…

First you have to look at your Business budgets. this is where the revenue is being generated, and it's flowing from there. So the goal with a budget is finding out what margin you have And what this means is…just how much is left over that month after all the money flows in and all the money flows out for necessary bills and payments…

For your personal budget after your necessary expenses accounted for, what you need beyond that to live comfortably and save the way that you want to is…what you're looking for within that budget You're trying to find…That number that you need to cover your bills…and make life work, and then maybe save a little or figure out what your goals goals are beyond that but you need to look at your business budget first to see what kind of margin you have going on there and how much there's going to be in future months to allocate

To personal draws your salary, However you do that in your business. So the goal is you start by knowing your margin and then you can go from there…

When you figure out what you need in your personal life to be comfortable and to pay your bills. Then you you head backed to the business budget and you're kind of doing this Your head you're going back and forth between the two budgets, trying to work out what you need in both and what margin you have in both. So when you head back to your business budget you see what that looks like when you factor in how much you need to live personally.

If you're an s corp your salary is already baked into your business budget So you've accounted for all of your payroll…taxes and your payroll processing fees…and whatever that looks like for you If you're an LLC you're simply taking draws from your business as a way to pay yourself, So you will be transferring…from you know your business bank account to your personal bank account. And a reminder kind of a side note reminder here is to keep your business and personal expenses separate. You first figure out how much you need to pay yourself, then take that as a salary or draw or both depending on what you have going on then It's in your personal account and you do personal things with it You do not do personal things directly from your business accounts, Meaning only business transaction should flow In and out of your business accounts personal transactions should then flow in and out of personal accounts. So ask yourself, what is your business margin ?… Do you have enough to cover business goals and personal goals? So at this point you would have looked at your personal budget so you know How much you need to cover your personal expenses and then live comfortably.

Like if you're in a place where you have a lot of debt and margins are really tight, Being comfortable in your personal life looks a lot different. Meaning…

you aren't going out to eat all the time you know you're not living with a lot of extras you're kind of reigning in a lot of the spending you're covering your bills and you know maybe you do have a little bit of fun money because know we we wanna a lot just a little bit even if we're in a tight place

Figure out what that looks like for you. Personally in the place that you're in and then with your business same thing If you have a lot of debt you're you're not really spending a lot on extras like going to conferences and you know getting nice decorations for the office You're reigning in that spending too. I talked in a previous episode about this but Since you will likely have personal and business goals you need to have a money allocation plan or your business map I like to call it. For at least three to six months in advance, for business and personal So you can map out

How you're going to reach your goals for both? By doing it that far out in advance, You are able to project forward and then you already have this plan set and all you need to do is tweak it You have a good idea of what's going on. In your business budget and your personal budget and you know ahead of time that margin So then when life…does happen…you can already know okay I probably have this much margin for that month and you already know off the top of your head or very quickly by looking at your budget How much you have to work with when that thing pops up For instance if you need a new roof on your house but you also need a new piece of equipment, In your business you need to decide which one takes priority and concentrate your efforts there.

Can you limp along? A little bit more, with one goal or another and stretch that out But by doing that three to six month budget, Then you can kinda look and see well maybe I can't do it this month. But in two months from now I'm gonna have a bigger influx of revenue or less expenses or just have more margin to work with So you can look down the road and plan things out a little bit better. And it all just depends on your goals and where you're at in your business…

Yeah if you do have those tighter margins, it might be a time where you just cut the nice to haves versus need to have…at home and your business…

If you're in a more stabilized position in your business and you have have more margin, it might be time to assess how your savings look Both personally and professionally and work toward building up your emergency fund at home

and in the business…

If you're in a big growth phase, It'll likely be that you can take more home and still be able to reinvest in the business and save in the business and…

you know hold back some funds for you know whatever you wanna do in your business when it comes to continued growth.

My biggest piece of advice…is that if you have debt personally or professionally? You need to pay that off and develop a plan to pay that off and prioritize it. And by doing this budget that's Extended out three to six months, you're able to strategize more long term about how you're gonna pay off that debt Because you know how much margin you have, you can then decide…Based on the debt that you have like how much you can You can put towards that debt every month and have a plan for it. And then if additional expenses pop up that you have to take care of right away, You also have an idea of, you know whether or not you can do both you know can you pay down the debt Or do you have to like pause paying down the debt Maybe save a loan for that expense or pay that expense and then get back to paying off debt…

As far as the debt payoff…

I mean it's up to you Everybody has their own like pain point and threshold when it comes to debt if you are somebody who hasn't really examined, you're behavior around debt I urge you to do that I think it's really important to be a good business owner and a good manager of your money to first get real with yourself and just You'll take a cold hard look in the mirror and understand your behaviors when comes to money. It can be really really hard but I promise you it's worth it in the end because. You will get to know yourself a lot better and moving forward You'll be able to…set habits…in place and like set disciplines…around your behaviors Like if you know every time you get a credit card you are gonna spend on that credit card and you're gonna live beyond your means or spend in your business beyond your your means, then don't get the credit card. Don't set yourself up for failure if you know you have a…trouble behavior around something.

It's really about peace of mind and not stealing from future you. You want to set yourself up to not have to be worried about paying off debt for many years to come in your business. Episode twenty six is one that I did about this topic so Head back and listen to that If you haven't already I really think that it can help you in your business and get the wheels turning on how you can be more efficient at…running your business…

The next thing I wanna talk about is um savings So I recommend saving six months of a personal emergency fund as quickly as possible if you are debt free…

I recommend also three to six months of business emergency savings, Less is needed if you're a sole proprietor and don't really have pay anyone other than maybe um a contractor. But if you're running a business that pays a handful of W2 employees, I recommend going a little higher with your emergency fund so that you could potentially cover a payroll if you run into issues. Now if you're in the process of paying off debt I think you should have more like One to three months of emergency fund if possible and then start paying debt more intensely. You really just have to assess your situation Everybody's situation is different. So if you are running a pretty lean business like you don't have a ton of outgoing expenses or people to pay you can get away with having a little bit less an emergency fund saved up.

But If you are in the process of paying off debt the idea is to save enough that you could limp along if something happened for like a month or two. But still get that debt paid down. And so really you just have to assess…

How long it's gonna pay you're gonna take to pay off debt as well. And go from there. So as far as your intensity level it just depends on your specific situation…

So profit allocation buckets for business depending on whether you're in debt or out of debt. Is something I'd like to talk about because most times…it's easy to say like save um three to six months of business emergency savings But, you know that can feel like it's vague and and it's really hard to understand like how long it's going to take you to do that and how much you can allocate to doing that So…

I like to break down different um percentages of your margin that you can allocate to different things in your business based on…if you have debt or not. So if you are in debt, there are first of all there are four buckets So the four buckets that I recommend looking at and putting your money when you're looking at how much you have in left over funds every month like, after all your revenue has come in and after all of your expenses are paid out, in your budget how much do you have left And then this is that margin or that that leftover money that I'm talking about So these four buckets that you want to allocate that to are tax savings, Owner draw or shareholder distribution whether you're s corporate LLC…

emergency or, other savings you know emergency savings or if you're saving for something specific or just general savings. So tax savings owner distribution, savings and debt payoff is the fourth one. So if you are in debt, what I recommend as far as a percentage to allocate towards that debt, is thirty percent of your margin. Tax savings is always gonna stay the same You're always going to stay twenty five percent of your margin…for taxes because you have to pay taxes no matter what, So make sure you set that twenty five percent of your net profit aside…Do not touch it.

Now as far as owners, distributions, I say thirty percent for if you are in debt. You can even go less than that So if you are an s-corp and you're paying yourself as a salary and you're already getting salary and you're used to living on that you could even go down to zero your distributions. But if you're used to taking like a significant draw, then I would say just go down to thirty percent. Of a draw…

And then as far as debt payoff, It's that thirty percent that I mentioned So If you go a little less with your distributions and you can do that and live personally then you can hike up that debt payoff percentage past thirty percent. And as far as savings that is going to be fifteen percent when you're getting out of debt. Let me run through those again So the four buckets are tax savings, owner's distribution…savings…

like emergency savings general savings, and then debt payoff So your tax savings No matter what you're doing that and that's twenty five percent. Owner's distribution…is thirty percent You can go lower. Emergency savings or other savings are going to be fifteen percent and then debt payoff is going to be thirty percent. But if you can decrease your owner's distributions…I recommend doing that and then just, like jacking up that debt payoff percentage so…the idea is just get that as high as you can while you're in debt until you have that paid off. If you are debt free, there's three buckets There's the tax savings which is always going to be that twenty five percent.

Owner's distribution and then emergency savings or other savings So Tax savings twenty five percent, owner's distribution, fifty percent. And then emergency savings or other savings would be twenty five percent. And those you can play around with the the distribution and the savings So again it depends on your situation. So if you are someone who you are an LLC you only take owner's draws as your form of paying yourself you very well might want that owner draw to be upward of like fifty percent. But if you're an s corporation like I mentioned for and you're able to live on the salary you get and then…

distributions are just like the gravy, then you can definitely decrease that and increase your savings rate in the business So It is dependent on your situation and everybody's situation is different when it comes to their business and their personal life. Your friend in business might not have the same goals as you they might not be in the same position as you So maybe they're able to you know get away with taking a little bit more from the business But if you're maybe in debt and you don't have that luxury right now. it's just going to be a season where you take a little less, but it's not always gonna be case you know once you meet your goals of paying off your debt and your savings goals you can take a little bit more from your business

…

If you go through this exercise of figuring out you know what's in your budget what's your margin and then how are you allocating that margin, and you realize, shoot I do not have enough to cover my personal bills to take from the business and cover business bills. Then you need to do a little bit more of a deep dive analysis of what are your expenses and what is your revenue in the business. How can you get expenses down Are there things you can cut to create the margin you need in your personal life. And if there aren't Different levers that you can pull in your business to give you more margin then you may need to think about doing some other things bring in revenue and income in your life.

So maybe you can add another revenue dream in your business um possibly pick up some you know health coaching or something like that, or maybe you can get a part time job just temporarily until you figure this out in your business So I know a lot of us we start our business and some of us start it as a side hustle you know maybe not chiropractors but You know there are other business owners that you start as a side hustle and you'd really want that to be your full time income So you're heading in that direction. But…

sometimes you do it a little bit too soon like I know a lot of business owners that have jumped into that a little bit too soon. And then you just can't quite cover the spread of bills that you need for your business and your personal life. So if you are in a position right now where you're actually assessing, whether or not you can come in full-time and what that looks like and all the things that you need to consider.

I actually did an episode all about this whenever you are ready to transition from your full time job into your side hustle or into your your what will be your full time business. And it's uh episode eight transition when you're in a good position So I'll link that in the show notes because it's really helpful…to list out some things that you might not be thinking about right now as far as expenses and what it what it looks like in all the things to consider when you make that transition…

But it's just best to do it when you're in a good financial position So If you are somebody who you know you're struggling to find margin in your business and your personal life, do a deep dive analysis just see where you can create more margin or see where you can create more revenue and see what can be finagled to get you there…

And with your budget and with your money plan or whatever you wanna call it. You are constantly tracking and adjusting this And it's not when I say constantly it makes it sound negative but it's not negative Like you are…Doing the work upfront with your budget you're creating your budget, And really it's just a copy and paste thing so most months are probably fairly similar in your business especially if you're a chiropractor or there aren't gonna be…

crazy expenses outside of the norm every month you're gonna mostly have this same recurring transactions with some different ones each month, so you can you know tweak each month accordingly, but you're copying and pasting that If you use an app like every dollar or other budgeting apps they allow a copy and paste into the next month So all you're doing is just popping the prior month and then you're changing things for that month. And what you're doing is that three to six month budget ahead of time so you've already kinda looked ahead and you've plugged in everything that you can think of ahead of time. But you wanna track and adjust regularly because you might have bills that you didn't know about You might have revenue You didn't know about. And that goes for your personal budget as well. And you don't know what margin you have.

Hundred percent until you're in that month So you definitely want to take a look as you're in the month and right before the month as well. Just to see you know what is…

fluctuating as far as revenue and expenses and what do you need to change and how does that allocation plan and those percentages need to change based on what's going on. If you're in a place where your finances are more stabilized and you have more margin, set up some automatic transfers for yourself to pay you know yourself draws savings draws So if you're in a place where…you don't have to know constantly change that percentage of allocations for your money You can automate things you know just like you automate your your retirement savings you can automate stuff in your business. Just to make it simple and where you're not thinking about it and you're not you know tempted to take the savings or the money that you are going to save and put it towards something else. No matter what situation you're in I recommend doing…Your tax savings like this so that you don't think about it. And what I do for my tax savings is, calculate what I'm gonna save based on my budget and the margin that's there So I'll project out how much net profit I think I'm going to have and I'll take that twenty five percent of what I think that's gonna be and put it into my budget And then as the month is coming to a close and I know for sure what that net profit is, I make sure I have the full twenty five percent in my savings So that's one that you're always automating that process You're always saving that twenty five percent But the distributions to yourself, emergency savings like the additional savings and the debt pay off those types of things,

that's where like if you're in a stabilized position, you can start to automate those too You might not be able to do that really until you are in a more stable position. Because they may be changing frequently but you can set up automatic transfers like in your bank account so that every month on the same date that's same amount or that same percentage is getting transferred into your bank account…

…I recommend always using a tool that makes it more likely that you're gonna check-in. So if you've set up a system…with spreadsheets and you hate spreadsheets there's a really good chance you're not gonna plug in to your budget every month because you hate doing spreadsheets So Use a tool that you…are more likely to check-in with…Each month will not necessarily look the same for you when you are doing a budget It's about finding the right balance for the month that you're in. You never know what life is going to throw at you

Depending on what happens in your life Priorities will always be shifting between personal and business. By having a budget that you're checking in with throughout the month or a weekly basis as I recommend, you can guide your money to where it needs to go according…to your priorities that month. When you don't have a budget and you're trying to spread your money in a bunch of different places, That's when it feels like a juggling act You need to decide where the right place is right now to send your dollars and that requires being proactive with a money plan. You can't focus your efforts and your money in a bunch of different places and expect to move the needle with your goals…

That's all I have for you today. How are you feeling? How are you feeling about your money allocation plan and…weighing your goals with your business and your personal?…If this is something that's new to you and you're not quite sure where to start, listen to episode two of this podcast…and watch my tutorial on YouTube toop It's all about creating this plan and this budget for your money and how to do that and how to sync up your business with your personal. I will link both in the show notes.

And no one is great at this stuff right from the start It takes some time to get used to it so show yourself some grace and make it a habit to check-in weekly so that you can stay in control of your finances, and allocate your money to the right places at the right time. And as always remember that action brings clarity and imperfect action is better than none at all Have a great day!