#42: HOW TO CREATE YOUR MONEY ALLOCATION PLAN

In this episode of Financially Adjusted, I break down the exact steps to create a Money Allocation Plan (MAP) for your chiropractic business. A MAP is more than just a budget—it’s a strategic way to direct your revenue to align with your business and life goals. If you've ever felt like your money is slipping through your fingers, this episode is your guide to taking control in just 4 simple steps!

Resources Mentioned:

• Episodes 11: Understand Your Profit & Loss Like a Boss
• Episode 12: Understand the Meat of Your Balance Sheet
• Episode 36: How Much to Bring Home vs. Leave in the Business
• Budgeting Tutorial

Helpful Resource: Free Estimated Tax Guide

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

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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

Hey there, my chiropractic friend. How are you? If you are new to me, I'm Leslie Roth and every week on Thursday I'm bringing fresh content to this podcast that will help you manage the money well in your practice. Today I am giving you some really tactical step by step instructions on how to create a money plan or money allocation plan, otherwise known as a budget. I like to call it a money allocation plan or business MAP.

It has a much more intentional and positive ring to it and MAP isn't just an acronym. It's truly what it is for your business. When you intentionally tell your money where to go in your business, you are mapping it out to align with your business and life goals. Your money allocation plan essentially is a GPS system for your business.

When I guide you along in these steps today, I'm assuming you are completely new to this. If you're not you can use this as a way to gain a new strategy perhaps for allocating your money or measure it against your own system and see if you have any gaps in yours.

Creating your money allocation plan can really be broken down into four overarching steps, which is what I'm going over today.

Step one is simply listing out your projected revenue. For this, you can use an average of the last twelve months, or you can use the amount from the same month the prior year.

Let's be clear on what revenue is. Revenue is not profit. Revenue is what they call gross revenue or gross income. It is the total amount that you have made in your business before expenses are taken out. So, revenue is going to be you know what you're bringing in from insurance company reimbursements, from your patient's paying via credit and debit card, cash, checks, Care Credit, whatever it is that they're using to pay you. You're taking the total amount that you've made in your business…and projecting what you're going to make for that month in your money allocation plan.

So, ideally I think It's great to have at least six to twelve months of a money allocation plan projected for your business. I also recommend doing that personally so that you are directing your money where you want it to go, in both aspects of your life. So…You can project this however you want but the key is to make it realistic.

That's completely up to you how you want to do that. It might be a little more realistic if you are taking the revenue from the same month the prior year.

Now if you are new in business, you might not have that historical reference you might not have prior months to take from. So, in that case, you're just trying to do an educated guess on how much you think you're going to make. But most likely you're an established business and you do have the historic revenue to look at.

So, hopefully you're growing your practice, and you earn a little bit more every year, but you can definitely take that figure - let's say it's January- and you're mapping out your January budget or likely you already did if you're being really good about it. You would take January's revenue from the prior year and plug that into your budget.

The important thing is that you have the most realistic revenue projections possible, and I encourage you to err on the side of conservative. So, even if you're growing in your business if you take last year's revenue…and plug that in, you're going to be conservative because most likely you're going to be making more than that. But you want to underestimate versus overestimate.

Step two is listing out your recurring expenses. These are expenses that are the same each month so this part should be pretty straightforward.

Use this step as an opportunity to also analyze whether or not these expenses are necessary. Ask yourself how much you're really using these subscription and whether or not you could cancel any at this time. If you can do this part of the step, then you will likely uncover some payments that you've been making for things that you're not even using so many of us um do the you know the set it and forget it automatic payments for things and then we truly forget it. We end up forgetting what we're paying for and end up paying for things we aren't using.

And I'm guilty of this as well. Life just gets busy, and it happens most of the time I'm pretty good about because I am the financial person, so I'm supposed to be, but I am human too and life gets crazy and I'm like ‘oh no I've been paying for this I don't really need that’. So, make sure that you are analyzing your expenses at least once a month so that you can catch any of these expenses that you need to get rid of and that you're not really using.

If you have recurring expenses that are variable, you can estimate as realistically as possible what that bill will be or use an average like you did with revenue. For instance, your utility bills come out each month so they were recurring but they're likely different variable amounts from month to month. You can either do a monthly average or use the amount from the last January for this January.

Most likely you're in different seasons and it's going to be variable based on the season. So, it probably would work better to just use the prior year's amount.

So, moving on to step three, list out your one-off expenses. So, we listed out our recurring expenses in step two. Now we're listing out any unique one-off expenses that aren't happening each and every month. They are sporadic or only happening one time. This might be something you decided to purchase for your chiropractic clinic that you likely wouldn't have to purchase again like maybe artwork or decor or furniture or something like that.

Make sure you're including every single purchase that's flowing out during the month so don't leave anything out. This is all expenses no matter how big or how small…With this money allocation plan you are accounting for every single cent that's flowing through your business.

So, step three you're going to catch every single expense no matter how big or small that's flowing out of your business.

Okay, step four…is breaking out what's left into different buckets. And this is really where we're in the driver's seat. This is really where we are directing and aligning our money with our goals. Because what is leftover or margin, as it's also called, this is going to really be the money you to play with and to direct to where you are meeting goals and you know savings goals um personal savings goals, business savings goals, all of that. There are four different buckets I'm going to mention and depending on your specific situation: you're going to allocate differently. The only one that stays the same for everyone is the tax savings bucket so I'm going to mention that one first.

This is twenty-five percent of your net profit or your margin and this is non-negotiable. You always need to save this because you are always going to be paying taxes on your net profit.

Now, you have been creating this budget on everything that's flowing in and everything flow that's flowing out of your budget. Now what's left over is margin. This isn't necessarily going to be exactly your net profit, which is what you pay taxes on. You likely put any loan payment and credit card payments in there.

The only thing that is considered an expense on your profit and loss statement is going to be the interest portion of that. The principal portion of any loan payments, that's going to be a balance sheet account.

If you need to learn more about these statements, you can go back to episodes eleven and twelve where I break down what's in these statements and how to analyze these statements.

So, you pay taxes on your net profit. That's what you're saving that twenty-five percent tax savings on. So, everything that's left over in your budget, except for that principal portion, you're going to save that twenty five percent on taxes. If you are confused by that right now don't worry about that too much. Just make sure whatever is left over. That margin that's left over in your budget you're setting aside twenty five percent of that So you're going to do that as soon as you've done steps one through three.

Listing out your revenue and your expenses, this is the next step. This is the First thing you do in step four is take that twenty five percent of what's left over, stick that into your budget or your money allocation plan and put that into a separate savings account.

If you don't have a separate savings account in your bank already for tax savings, make that something that's a priority on your list this week. Go and set up a new account if you have to just make sure you have a tax savings account that is separate and that is…one that you don't touch. So, not negotiable on that one. Now I'll talk about the other buckets, and they can really vary depending on what you have going on in your specific situation, so the other buckets are debt payoff, owner's draws, and savings. So, these look a lot different depending on if you are paying off debt or not.

So, if you're paying off debt, ideally you want to put as much in this bucket as possible, until you get that debt paid off. This bucket that we're talking about is additional debt payments that you're making on top of your regular loan payment. So, you already put those in the budget…in steps two or three. They're likely recurring and it's the same payment you have to make every month, so it was probably step two thing where it was a recurring expense. This debt payoff bucket out of your margin is extra. This is extra that you're paying. So, this could be thirty percent. This could be forty percent It just depends on how much margin you have and how much money you have to take home, and how much you want to put in savings same time So…

I would like you to have some savings so it's a good idea to also save alongside paying off debt but paying off debt should really be a priority if you have it. Maybe you can set aside thirty or forty percent for paying off debt let's say it's thirty percent. Out of your margin, you have these four buckets Tax savings debt payoff owner's draws savings. You're already putting twenty-five percent of that margin into your tax savings account. So…that is going to leave seventy five percent left If you let's say take thirty percent for debt payoff for those additional debt payoff payments then…that's fifty five percent of your margin. So, you've got about forty five percent left to play with when it comes to owner's draws and savings…

Let's say that you are not paying off debt. You don't have to worry about this bucket so the rest of that twenty five percent after you've saved for taxes…is all going to be for draws or savings whatever you need that for. So, If you're in a phase of your business where your you're really trying to save up an emergency fund, you want to allocate a little bit more to that. You also need to decide how much you need to take home like what do you need in your personal life to live.

Ideally, you're doing a personal budget and you already know that. So, you know how much you have to take from your business So, you're really going to divide up your margin that's left in your business into these different buckets based on your specific situation.

I did an episode on how to decide and balance what to leave in the business and what to take home. This could be really helpful to you when you're working on this step of your money allocation plan. So, go back and listen to that episode if you haven't already. it's episode thirty-six and I'll link that in the show notes for you.

Today's episode is going over the overarching steps to create your money allocation plan, but I did it to tutorial on how to set up your budget in every dollar which is the app that I highly recommend using for your money allocation plan. It's what I use, and I love it. I use it for my personal budget and my business budget. I will link that in the show notes. It’s completely free. You can pay for a more enhanced version where you can link your bank accounts if you want to do that but I think the free version is great and it works well for your browser. And there's a fantastic app for your phone.

In the tutorial I will show you how to set up your account so they match up with the categories from your profit and loss statement. That can be really helpful for you. Then you can realistically set up your budget compared to what's happened in your profit and loss. You can tweak things in your budget depending on you know what actually came through and what your expenses actually are more in real time. 

And if you have those categories aligned between your money allocation plan and your profit and loss statement, it makes it a lot easier to compare and to do that every month. The key to having a plan for your money is to be as realistic as possible and to map every single cent so that you're aligning your money with your goals.

For those of you who have never budgeted, and are apprehensive about doing this, I want to really challenge you to start thinking differently about how you manage your money. When you don't have a plan for the money that flows into your business and your life you're not fully in control.

When you create a plan and stick to it you are in the driver's seat and you're intentional about where your hard-earned money goes. You work way too hard to just let it slip through your fingers and it's time to start being a better steward of the money that you've been blessed with and start aligning your money with your goals and your dreams.

No one else will do this for you. It's up to you. If you're avoidant when it comes to finances, it's likely because you've been telling yourself a story when it comes to your ability to manage money or your desire to manage money. Start telling yourself a new story and start focusing on your why and your goals and your dreams and recognizing that your money plays a really big part in that it.

It is the tool that will get you there. The resource that will get you there. You are absolutely capable of managing the money in your business and it's your responsibility to manage it. It doesn't matter if you've outsourced your bookkeeping, or you have an office manager that handles expenses, or your spouse handles all of that. No. They're not you, and you can't expect anyone to care more about your business than you do.

If it's a spouse that's doing this alongside you or they kind of do it and they just tell you what's going on, that needs to change too. You need to be on the same page because it will level you up in your business and your life. Get on the same page with your spouse or your business partner. Be the one to take control of your business. 

You also have to be patient with yourself. You're not going to be perfect at this stuff. Perfection isn't necessary, but intentionality is. Now's the time to start taking control of your money. So remember, action brings clarity and imperfect action is better than none at all. Have a great day, and I'll see you next week.