Budgeting for Financial Investments & Hiring with Katie Scott

Hey guys! In this episode of the Joy to Lead Podcast, I chat with Katie Scott of More With Money, who shares with us some valuable financial planning advice. She’s in the business of helping entrepreneurs build their business to live the life of their dreams and change their financial legacies. That’s a mission we can all relate to, and I know you’re going to love this episode.

Listen to this episode now!

If you caught the January 28th episode with Abby Herman, you learned about growing your business slow and sustainably. What if you’ve been growing and suspect it’s time to hire, but aren’t sure if a new hire fits into your budget? Katie’s got some advice to help us know when it’s time to pull the trigger.

Katie shares with us the financial formula she uses, how to set a budget, and what steps you can take now to begin stretching yourself to that goal. Listen to the episode for all the details and hear why Katie says the key to financial success is staying intentional.

I know you’ll really benefit from Katie’s financial wisdom in this episode. Here are some key takeaways from our conversation.

Katie Scott’s journey to More With Money

While earning her accounting degree, Katie spent time in an internship, as many students do, and after graduation was offered a job with the company. She immediately started as a staff accountant and soon realized the work was far different from the work she’d completed as an intern. To her surprise, Katie hated the job. Though it was a really rough period, she learned a lot about herself and what was important to her. After 14 months, she decided it was time for her to leave.

This started Katie on a journey of discovering what to do next. She found the world of blogging and tested the waters of affiliate income, which wasn’t as easy as everyone made it out to be. This led her to try some bookkeeping and accounting, but this still wasn’t what she was truly passionate about. And then she found her sweet spot, helping entrepreneurs with personal and business money management.

It’s clear to see that this is truly her sweet spot! I’ve taken one of her courses. Katie is a gifted teacher who helps you create a plan that is actionable and clear.

What is Profit First, and why is it Katie’s financial model?

Profit First is a money management system developed by Mike Michalowicz, and when Katie read about it, she knew that the logical approach would be beneficial for her clients. It’s simple. You allocate a certain percentage of revenue as you earn it into four areas: emergency cash cushion, tax savings, paying yourself, and business expenses.

The initial recommendation is to set up five separate bank accounts. One to deposit all revenue into, and then four others to distribute out the four areas above. If you don’t want to do that, you can track funds with a spreadsheet. Some of Katie’s clients use a budging app called YNAB (You Need a Budget).

One of the beautiful things about the Profit First method is that it’s a cash management system based on money coming in. It helps you make a plan for the money you do have, instead of trying to set up a system for money you predict will come in.

Another benefit of this system is the priority in which you distribute money. Typically, we focus on expenses first. And then whatever is left over, we might save for taxes or pay ourselves. This system allows you to take a percentage of revenue for yourself, each time, and contribute incrementally for taxes and unplanned expenses that pop up.

What are the critical steps in setting up a budget?

I asked Katie what to do if we need to set up a budget so we can figure out how much money we have available to hire or make an investment. She identified these steps, whether we’re starting from scratch or catching up.

Make a list of monthly subscriptions, variable costs, office supplies, any reoccurring expenses. You may need to look at 2-3 months of bank statements to help.

Set up sinking accounts for emergency expenses. Ever get taken off guard by a broken laptop or an annual fee like web hosting? We know these things will happen or are likely to happen, but if we don’t set aside money for them, it can be devastating. Saving towards these expenses every month helps to keep you on track with your budget.

Now you can see your actual cost of doing business and determine if extra cash coming in is actually extra cash. If it is, you can invest in your business or make a new hire.

What else do we talk about in this episode?

Listen to the full episode to hear Katie’s advice on how much to deposit in the emergency cash cushion, tax savings, paying yourself, and business expenses accounts. She also shares some insight into how you can stretch yourself and start planning now for a big financial move.

We also talk about how to get real clear on what we want out of life, to help us make realistic financial goals. Katie says being intentional with your money is vital in making goals that stick.

“I like to talk about numbers, and I like to give you facts and figures. But a lot of this is ‘go with your gut’ quite honestly. Trust yourself. Trust your intuition. Trust your knowledge of your business. And go for it!” — Katie Scott