Working for yourself comes with lots of perks and for most people it can appear to be the ideal situation: make your own schedule, spontaneous coffee trips and mid-day napping… right?

Well, not quite.

Aside from the fact that you actually do work – probably more than you ever have in your life – there are other stressors that non-entrepreneurs tend not to think about. These are benefits that are generally offered in the employee/employer relationship: health insurance, paid time off, sick days, retirement savings and steady predictable pay.

As an entrepreneur, managing your money, takes on a whole new meaning. With the ultimate goal being to avoid monthly panic and actually be able to look at your bank account with peace of mind. This requires an intentional approach to your income.

Creating a manageable plan that doesn’t require your attention every day is the ultimate goal. It will allow you to breathe easy and get back to doing more of what you love to do (or more of what you need to do… to pay the bills).


In this next section, we’re going to go over the three essential steps needed, for you to successfully create and implement the entrepreneur’s budget:

1 – Know the EXACT amount of your monthly expenses.

2 – Set up separate bank accounts.

3 – Create a cushion.

Monthly Expenses

Having a ‘general’ handle on how much your total monthly expenses are, is no longer good enough. It’s time to break it all the way down, like you’re a business owner on The Profit, and Marcus Lemonis is ready to invest. The best way to do this (no matter how tedious the process is), is to write it all down. Get out all of your bills, log into your accounts and check your credit card balances. Use a rough estimate for expenses that fluctuate like fuel costs and home utilities.

Once you have everything written down, divide your expenses into two separate sections: Business and Personal. You need an overall view of what you’re spending, but you also need to be clear about what category each expense falls into. It can be more difficult to create a budget when you’re self-employed. That’s why, at the moment, we are solely focused on expenses. We’ll discuss how to calculate income later.

Separate Accounts

Properly managing your money and avoiding the peaks and valleys that come with self-employment, is a major milestone for entrepreneurs. It’s a sign of fiscal maturity – that you can weather the lean months and maintain a strong financial discipline during periods of abundance. Separate bank accounts will help you keep things organized and help you manage unexpected expenses… like the hefty self-employment tax bill. Most online banking will allow you to easily add an account or two, to your existing account – but for some banks, you may need to actually visit the branch.

For the tax account and the retirement account, these are additional checking accounts that you need to open. The names are for your record keeping – I don’t want you to visit your local bank and ask to open a ‘tax’ account, although you may want to look into your IRA options for the retirement account.

Here are the accounts you’ll need to keep everything in order and on track:

A personal checking

A personal savings

Two separate business checking accounts

A tax account

A retirement account

Create a Business Cushion

This is one area that you will need to treat the same way that you treat your personal savings… you need a cushion. A stash equal to 1-2 months of business expenses. If you don’t already have this built into your financial plan for your business, implement it now. Even if it takes you a few months to put the money away, it will be well worth it when things get tight! This one step could keep you from giving up, before you even get started, and it is the best safeguard against having to use personal funds during ealn times.

Now that we’ve tackled the essentials let’s create your entrepreneur’s budget!

The separate accounts that you’ve set up, will make implementing these steps fairly easy. Since blurring the lines between personal money versus business revenue can happen a lot when you’re self-employed, this system will show you a great way to allocate your money.

Let’s get started.


Just in case no one’s filled you in, or this is your first year in business, let me give you a wake-up call: self-employment tax can be high. You, as the business owner, pay the entire tax burden; whereas when you work for an employer, there’s a portion that they contribute, in addition to the amount that is deducted from your pay. If you have an accountant, they can help you estimate what percentage of your income you should plan to put away. But, if not, start by saving 25-30% of your income. This is the amount that should be moved to your Tax Account each month. This is the best way to not have any surprises when the time comes to file your taxes and to ensure that you’re not spending your tax liability.


In some way or another most jobs provide an avenue for you to save towards retirement. When you work for yourself… YOU are solely responsible for your future financial security. Since you’ll already have a sense of urgency to make sure that your tax account is funded each month, the next step is to move 5-10% of your income, into your Retirement Account, with the goal being a solid 10% each and every month. This percentage shouldn’t fluctuate unless you’re increasing your contribution. The secret to securing your future is consistency!

Personal Checking

The moment you’ve been waiting for: PAYDAY! Go back to your calculated monthly expenses, and utilize that total amount to pay yourself monthly. Your pay should be like a salary – the same amount is paid out every month consistently. During high revenue months, this isn’t the time to give yourself an unlimited bonus… continue to pay yourself your set salary and put the excess income away to ensure that you receive your regular pay during leaner times.

Tip: Consider implementing a bonus system, based on exceeding your target net income.

Personal Savings

Once you’ve established a 2-3 month business cushion, you can now move all remaining funds to your personal savings account. There will be times that you will need to utilize money from the cushion account. When this happens, be sure to the go back to moving excess income to the cushion account until it is built back up to 2-3 months of business expenses – this is an amount that you want to have on hand at all times.

For example, last month, you exceeded your net business income goal by $1000. Your bonus system allows for 20% of excess income to be paid out to you as a sales bonus. You are paid out a $200 bonus check and the remaining $800 is transferred to the business cushion account.

Business Checking

Now that you’ve set aside your tax liability, saved for retirement and paid yourself, all remaining funds should stay in your business checking account. If you have more than a handful of business expenses, you may want to have two business checking accounts: one to pay expenses (contractors, bills, services, fuel… etc.) and another to maintain funds allocated to your business cushion and for future business reinvestments – think new computer equipment, event location rental or even new office décor.

As you build consistency with this plan, you will be able to make adjustments that better suit your goals. For example, you may want to be more aggressive with your retirement savings. After your first year, you’ll also be better informed about the approximate percentage of your income that you need to stash for your taxes. This plan is not a bible, it’s simply a guide, to keep you from experiencing unnecessary financial stress and to organize your money along the way. It’s flexible to your needs and any changes that you make, are completely at your discretion.

Wondering how all of these percentages add up? Here’s a 3-month example of how this plan can help you maintain your financial sanity, when it’s needed the most:


January: $4,000 income

Tax account: 25% of income, or $1000

Retirement account: 10% of income, or $400

Personal paycheck: $2,250 {monthly salary}

Remaining: $350 {cushion or personal savings}


February: $9,800 income

Tax account: 25% of income, or $2450

Retirement account: 10% of income, or $980

Personal paycheck: $2,250 {monthly salary}

Remaining: $4120 {cushion or personal savings}


March: $3,150 income

Tax account: 25% of income, or $787.50

Retirement account: 10% of income, or $315.00

Personal paycheck: $2,250 {monthly salary}

Remaining: -$202.50 {covered by the cushion}

As you can see, month 3 didn’t necessarily go as planned.

But guess what? Your pay didn’t miss a beat. Because you allocated money, to your cushion account, when there was excess income and as a result, you were prepared.

Don’t let this plan overwhelm you. I made it as simple as possible. Just follow each step and you’ll be well on your way. I know that initially, you may want to keep more of the money, in your pockets, on the front end. But, this plan will help you create the foundation for a sustainable self-employed lifestyle. Don’t worry, if you exceed your income expectations for 6-12 months consistently, then give yourself a raise or a travel/holiday bonus. You deserve it!

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