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What if you could get more of what you want in life? But not through pushing, forcing, or pressure.
You can.
When it comes to money, time, and energy, no one’s gonna turn away more.
And Kate Northrup, Bestselling Author of Money: A Love Story and Do Less and host of Plenty, is here to help you expand your capacity to receive all of the best.
As a Money Empowerment OG who’s been at it for nearly 2 decades, Kate’s the abundance-oriented best friend you may not even know you’ve always needed.
Pull up a chair every week with top thought leaders, luminaries, and adventurers to learn how to have more abundance with ease.
Do not have the delusion that you cannot feel safe and secure until you have your cushion fund funded. You get to feel safe right now because the source of safety you have access to right now, which is your body. Your nervous system mitigates if you feel safe or not. Welcome to Plenti. I'm your host, Kate Northrup.
Kate Northrup:And together, we are going on a journey to help you have an incredible relationship with money, time and energy, and to have abundance on every possible level. Every week, we're gonna dive in with experts and insights to help you unlock a life of plenty. Let's go fill our cups.
[voiceover]:Please note that the opinions and perspectives of the guests on the Plenty podcast are not necessarily reflective of the opinions and perspectives of Kate Northrop or anyone who works within the Kate Northrop brand.
Kate Northrup:This is a question I get all the time, which is how do I manage my money when my income is irregular because I run my own business, I'm an entrepreneur, and some months are really high, some months are are lower. So first of all, I just wanna say welcome to entrepreneurship. That's the game. We we became entrepreneurs. We became, you know, self employed people because we didn't wanna depend on anyone else for our income.
Kate Northrup:And the nature of it is that it's unpredictable to some degree. But the good news is, even though you're not getting the same amount of income in your paycheck every 2 weeks, like when you have salary, you are in control of increasing the amount of money you make at any time. And so we give up consistency for possibility. And neither one is better or worse. But I just wanna say, first of all, if there's any part of you that's thinking there's something wrong with you for having inconsistent income as an entrepreneur, there's nothing wrong with you.
Kate Northrup:That's just, that's the game. And so if you're having income that's up and down as a business owner, that is totally normal. Now some businesses are seasonal, you know, some businesses like our business, we have one big launch a year in April, May, and then the rest of the year is smaller income on those months. We have like, a huge couple of months, and then some smaller income months, and we just know that. And so my number one tip for you well, actually, this is my number 2 tip.
Kate Northrup:I'm starting with the number 2 tip, and then I'll come back to number 1. The number 2 tip is know your business, know your seasons, know your cycles, know your customer. It shouldn't actually be that unpredictable, quite frankly. If you know your data, if you can look back and look at the last couple of years of income, you should be able to see patterns. And one of the things that I see with entrepreneurs all the time is a deep seated avoidance around looking at the numbers.
Kate Northrup:Like, you we can be so busy making just like making the doughnuts and serving our customers and being in marketing and doing social media and delivering our courses that we don't even look back to see what are the trends? What are the patterns? What can I learn from this? So I would say go back and look at your historical financial data to see when were those income spikes? When were those lower months?
Kate Northrup:Is there a seasonality to it? Is that seasonality related to the nature of your business? For example, this summer, we went on a lighthouse tour in Maine, and you're not going on lighthouse tours in Maine in January. That sort of thing happens in the peak season. So seasonal businesses know that they're gonna make almost all their money over the summer if you serve tourists tourists in Maine, and then they're not going to be making money the rest of the year, so they plan for that, but they, first of all, can plan for it because they know it.
Kate Northrup:Every year, the guys who run that boat tour company, they're not like blowing their entire income from the summer in the end of August or after Labor Day and then realizing, like, oh, shit. We don't have money coming in. They know their numbers. They know their business, so they know that the amount of money they make over the summer is going to need to be spread out around the rest of the year, and I'm gonna give you some tips on managing that cash flow in a minute. So my number one tip, know your numbers, or that was my number 2 tip, know your numbers, look at the numbers, get acquainted with the seasonality and the patterns in your business.
Kate Northrup:My number one tip is work with your nervous system. Because when we have a nervous system that is depending on the number in our bank account in order to get permission to feel safe or not, we are going to be on a freaking wild ride. Instead, when you train your nervous system, when you heal your nervous system so that your sense of safety and security and financial well-being is actually sourced from within, from your deep connection to source, then you won't feel like you're on a roller coaster financially. Your consistency energetically comes from inside, And then you can actually look at your numbers and make smart decisions because when you're regulated, you have the ability to focus and be creative with your business and be super smart about it and make great decisions and think critically. So my number one tip is heal your nervous system as it relates to money.
Kate Northrup:That's what we do in my program, relax money, which will be open for enrollment in April. Then my number 2 tip is know your numbers. Look at the patterns, and you will see that probably things are more predictable than you think if you just look at them. Number 3 is to build up a cushion fund. So some people like to call it an emergency fund.
Kate Northrup:I don't like calling it an emergency fund because to me, if you're saving for an emergency, then you're focused on an emergency and you're gonna get an emergency. Instead, I like calling it a cushion fund because everybody wants a cushion. Who doesn't want a soft place to land? So having cash reserve, a cushion fund in your business is critical. I recommend 3 months of cash minimum.
Kate Northrup:What does that mean? Figure out how much it costs to run your business on a monthly basis, what's your business nut, and triple it. And then whatever your business expenses are, have 3 months of them in the bank. I recommend keeping them in a high yield savings account because then you're earning interest on those funds while they're just sitting there and that interest compounds. So cushion fund.
Kate Northrup:I also recommend having 3 to 6 months of living expenses in the bank for your personal so that if anything were to happen in your business, you're also covered in your personal. Now it's not like you're gonna just snap your fingers and have that cash immediately. That's something you're going to build up over time. But make those your first two financial goals is to have 3 months of living expenses in the bank for personal and 3 months of business expenses in the bank for your business. Those are key.
Kate Northrup:When you have your cushion fund fully funded, there is a beautiful feeling of, well, whatever happens with my business happens, and I've got a certain amount in the bank that I am covered. Now I do wanna say on that, though, do not have the delusion that you cannot feel safe and secure until you have your cushion fund funded. You get to feel safe right now because the source of safety you have access to right now, which is your body. Your nervous system mitigates if you feel safe or not. You need to practice feeling safe in your body, regardless of the external circumstances, and then you will more powerfully and probably more easily be able to build up your cushion fund.
Kate Northrup:Because when we already feel the way we wanna feel, when we already feel the way we think being in a specific financial situation is going to make us feel, it makes getting into that financial situation so much easier. Okay. Number 4, save for taxes. So every check that comes into your business, every transfer that comes in, put aside a certain amount for taxes. Every single Friday, Mike and I have a money meeting, and we take the inflows from the week from our company, and we put a certain percentage in our taxes account.
Kate Northrup:We do that methodically every single week. And then when taxes come up, we're never surprised because guess what? You're gonna pay taxes every year. That's just a given. Now you can work with a wonderful accountant who's gonna help you to minimize your tax liability, and that's a wonderful choice.
Kate Northrup:I really believe in paying the minimum taxes we can, because I want to actually deploy funds towards causes and projects that I believe in. I don't always a 100% agree with what the government is spending money on. So I believe in paying the taxes, but doing so in a legal way that minimizes my tax burden so that I can have more funds to grow my company and make an impact that way and to donate towards the causes that I believe in. So that's my philosophy on that. But put money away for taxes every single week as a business owner.
Kate Northrup:Just take the percentage off the top, put it away, also in a high yield savings account, So it's earning interest because why would you not earn interest on the money you're saving for taxes, you should do that. And then number 5 is work on monthly recurring revenue, otherwise known as MRR. This is why subscription based companies tend to have a 10x valuation compared to non subscription based companies. This means memberships, subscriptions like a Netflix or, you know, a HelloFresh or companies where people pay monthly for a service, for a product, for access, that creates an incredible amount of consistency, where you've done the work of making the sale one time, but then that money comes in every single month. We had a membership for 6 and a half years.
Kate Northrup:It was a multiple 6 figure membership every single year. It was a beautiful thing, especially in those years when I had my babies and when Mike was really sick in those early years. Having that monthly recurring revenue, knowing that this money was gonna come in, whether I did a promotion or not, was deeply relaxing. So look at your business and ask, is there a way I could add in a subscription here? You know, for example, the place I go for waxing, they have a membership, you save on waxing if you become part of the membership.
Kate Northrup:It's a brilliant business model. So look at is there a way that I can encourage recurring revenue in my company? How can I sell a membership or a subscription so I can build in monthly recurring revenue? And then my last tip number 6 is to utilize the profit first system with a software called YNAB, You Need A Budget. So this system combined, we learned how to do it through a program called Profit for Keeps.
Kate Northrup:You can learn more about that by going over to katenorthrup.comforward/profit. If you wanna join the software YNAB, you can go to katenorthrup.comforward/ yNAB. Both of those are in the show notes. And this system allows you to manage your cash flow in a way that quote unquote ages your money. So YNAB is a cash flow management software.
Kate Northrup:It's not a bookkeeping software. It's a cash flow management software that allows you to give every dollar that comes into your business a job. So at any given time, Mike and I can go into our YNAB portal, and we can see how long our cash will go in our business based on our real expenses. What I used to do is I would make the mistake of making investment decisions in our company based on how much cash we had in our business checking account. That was a terrible system.
Kate Northrup:Because what would end up happening is when I look at the total balance in my checking account, it is not telling me the truth. It is not telling me that, you know, for personnel this month, I already have have committed to paying x number of $1,000 It doesn't remind me of all these recurring expenses that are coming up. I can't look at that top line number and remember all of that stuff in my mind. It just doesn't work. And so I'd be like, oh, great.
Kate Northrup:You know, we have $50,000 in the business checking account. Therefore, we can afford x y z investment. But that was not telling the truth. And so what what I would end up doing or what we would end up doing is essentially stealing from ourselves because that money already, like, pretty soon within a month or 2 was going to be needed for something else we had already committed to. And then I would spend it on something else.
Kate Northrup:And then by the time it was time to, like, pay our team or, you know, pay for this business trip or whatever, then things would be tight. And it just it didn't feel good. And so incorporating the profit for keeps system with YNAB was an absolute game changer for us, and I highly recommend looking into that for yourself. So in summary, heal your nervous system so that you can feel safe no matter what. Get clear on your numbers and look for patterns.
Kate Northrup:Number 3, build up a cushion fund. Number 4, save for taxes on a weekly methodical basis, and make it fun. I just wanna say, like, I don't wanna sound like one of those talking heads finance people who are just, like, just be responsible. I could never do the things that those people told me to do because it just felt boring and, like, bleh. So make it fun.
Kate Northrup:Throw yourself a little party every time you do the transfer for your taxes. Like, do a dance, drink a fun beverage, put on a song, whatever it's gonna be, but signal to your nervous system that this is fun, this is safe, this is a party. Make it pleasurable. That will help you rewire so that getting into these habits actually feels really delicious and yummy, and you will start to crave doing them as opposed to avoid doing them. So that was taxes.
Kate Northrup:Look into how you can build up monthly recurring revenue through some sort of subscription or membership, and then look into combining the Profit First model with YNAB. Thank you so much. I hope this was helpful for managing inconsistent revenue as an entrepreneur, and just know you are doing great. Thanks for listening, and I'll see you next time. Thanks for listening to this episode of Plenti.
Kate Northrup:If you enjoyed it, make sure you subscribe, leave a rating, leave a review. That's one of the best ways that you can ensure to spread the abundance of plenty with others. You can even text it to a friend and tell them to listen in. And if you want even more support to expand your abundance, head over to kate northrupdot comforward/breakthroughs where you can grab my free money breakthrough guide that details the biggest money breakthroughs from some of the top earning women I know, plus a mini lesson accompanying it with my own biggest money breakthroughs and a nervous system healing tool for you to expand your abundance. Again, that's over at katenorthrup.comforward/ breakthroughs.
Kate Northrup:See you next time.