I'm Val! Coach for creatives
like you who are ready to be healthier, happier and more empowered women who love the business you run, the people you serve and the life you live!
I’ve got a hot take for ya…if your business can’t afford to pay you, I don’t think you can really afford to be in business. If you’re struggling to pay yourself as a business owner, this episode is for you! Whether you’ve been in business for 10 minutes or 10 years, I want to encourage you to simplify your salary using three tips to pay yourself well. Lean in as I share my own paycheck journey (with actual numbers!), debunk a few misconceptions about paying yourself, and show you how to create consistent and significant paychecks for yourself.
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Starting your own business is an adventure filled with many challenges, but also joys! One of the key elements that often gets overlooked is paying yourself. It’s easy to fall into the trap of reinvesting all the profits back into the business with the hope of fostering growth. However, not drawing an appropriate salary can hurt both the business’s growth and your personal financial stability.
While it might seem harsh to say that your business can’t afford to be a business if you’re not paying yourself, it’s an often-overlooked harsh reality in the creative industry. Instead of considering personal payment as an expense, it’s a necessary investment to sustain an entrepreneurship journey.
Not paying oneself decently can create a toxic ecosystem that can ultimately stifle creativity and innovation. When a business is constantly siphoning all its profits, it tends to become overly reliant on cash flow rather than focusing on inventiveness and resourcefulness, which are the real engines of growth and evolution. Many business owners fall into the trap of over-reliance on profits to solve problems rather than innovative thinking. By putting creativity and innovative solutions ahead of simply spending money, business owners can truly explore their potential and keep their businesses thriving and forward-moving.
1. Pay yourself a set amount monthly, not the full percentage
I truly believe that the best way to pay yourself as a business owner is to do a set amount, especially if you’re a seasonal business. The only way you can truly maintain a consistent income year round is through a consistent paycheck that you can sustain a full year.
How do you decide on this amount? First, determine what you need. This is based on what you’re spending in your personal life—which might mean you need to set a budget. In knowing your budget, you can meet your personal and business goals, as they help you reach your own dreams.
2. Pay less than what you can afford.
My second tip for simplifying your salary is to pay yourself less than what your business can afford so that you can continue to pay yourself the same amount, but also build up an emergency fund for your business.
In my own emergency fund, I personally like to have three months of paychecks in my business account as an emergency fund at all times. This has allowed me to take time off when needed in both emergencies and maternity leave. It also can allow you to take a slower season away from client work to focus on a particular project.
Another bonus to this is creating room for bonuses in your business. For my business, I do quarterly, but then at the end of the year, I sometimes get a little extra for my Christmas bonus!
3. Use this formula for your monthly paycheck.
My third tip is to pay yourself at least 50% of your annual income. To get your monthly salary, you’ll use the following formula based on Profit First:
Annual Income* x .5 = Annual Salary
*(Minus Materials & Revenue Generating Contractor’s Pay)
Annual Salary / 15 = Monthly Salary**
To find your monthly salary, I recommend dividing it by 15 rather than 12 so that you can build up that three month emergency fund over time.
**Your formula will change slightly based on income range. If you make more than $250k in a year, your percentage will be different. Download the freebie to see how this changes for you.
I think there is so much power in transparency in business, which is why I want to share real numbers, so that you can see what a salary journey can look like.
Fifteen years ago, I started my business as a wedding photographer. I didn’t do anything consistent to manage my income aside from tithing 10% to my church. In 2017, I started using Profit First, paying myself $500/month about halfway through the year. This continued through 2018. In 2019, I increased my salary to $1000/month and also had a 4 month paid maternity leave. In 2020, I increased to $1500/month and had my second paid maternity leave.
This meant that I gave myself a raise each year even when I had a four month paid maternity leave two years in a row.
After having my babies, I scaled back my work hours to 2 days/week (about half of what I was working before). In 2021 I increased my paycheck to $2,000/month and in 2022, I increased again to $2,500/month even with 1.5 months off. In 2023, I increased to $2,600/month and took 1.5 months off of work, along with 2 full months off of client work, meaning there were about 2.5-3 months where I was making little to no income, but still paying myself.
None of this would have been possible if I didn’t know my numbers, have a cushion to pay myself during slow/off seasons, or know what it would take to get there. While $2,600/month may not feel very impressive to some people, it is significant for our family and our budget, while working just two days a week.
Oftentimes, we fall into this success trap where we solely measure our accomplishment by high income figures or what everyone else is doing. It’s high time we redefine success based on our personal goals, what we want to accomplish with our income, and most importantly, what we want to do with our lives.
I want you to stop looking at success as six or seven figures. Bring it back to your life, your goals, and what you want to do with your income and your paycheck. What is success to you? That’s what I want you to build your paycheck around. That’s what I want you to define your success as.
If all of this feels a little overwhelming, believe me when I say, you are capable of figuring this out and making the change—I am living proof of that.
2:10 – The Pitfalls of Not Prioritizing Pay
4:24 – Simplifying Your Salary
10:49 – Personal Story: What I Pay Myself Now + How I Got Here
16:35 – Scaling Back Work Hours
17:13 – Increasing Income and Taking Time Off
18:42 – Redefining Success and Paying Yourself
20:33 – Encouragement and Capability
22:44 – Summary and Resources
To kick us off, I’ve got a hot take. If your business can’t afford to pay you, I don’t think you can really afford to be in business. Now, I know that might feel harsh and maybe too broad of a statement, but hang with me just for a second. There are so So many misconceptions around paying yourself, especially in our creative industry.
I hear all the time, things like I’m not making enough to pay myself, or I don’t really need the money right now, or I’m okay. Not taking a salary. Well, I reinvest the money back into my business to grow it. Or sometimes it’s more about fear and just not knowing how much money you really need.
Maybe it’s, I’m so afraid that I’m going to need that money for something or I’m going to do something wrong and I just want to have that extra cushion there.
And honestly, there’s a hundred other reasons we’re not paying ourselves, but here’s the thing, this type of thinking is hurting us way more than we realize, not paying ourselves a reasonable salary is actually stunting our business growth. I know that sounds counterintuitive, but it’s really true when you put all of your money back into your business, you end up building a business that needs all of that cash to survive.
You’re building a business that isn’t able to pay you. It can’t afford to pay you because it needs all that money just to keep running as it is. So then what happens? If you want to go full time or what happens even if you want to give yourself a raise or you need to make more than 2 an hour, like you might be paying yourself right now in order to do that, in order to go full time, in order to give ourselves a raise, our business needs to be able to survive and thrive on less than.
All of the cash that we’re putting back into the business. Now, the other thing that happens when you put all of your money back into the business is you end up spending money to solve your problems instead of getting creative and really innovating. So, when we think we have this money to spend, it’s just so easy to take The easy way out, right?
There’s so many things, so many services and amazing products out there that can help us with the issues that we have. But we are missing one of the key elements to being an entrepreneur when we buy ourselves out of everything. We need to prioritize innovation in our business. That is what really pushes the world forward, right?
And that’s what we are as entrepreneurs. Maybe you’re not trying to, you know, completely change the industry or change the world, but we should be caring less about what’s easy and we should be caring more about. What is effective and what is actually getting us to that destination that we’re trying to work toward?
What is actually getting us toward those goals that we have? And I’m not even talking about income goals or, all of the like typical six figure goals that you might hear. I’m talking about. Your definition of success, where you are actually going and where you actually want to be in life and in your business, we need to be innovative in our business in order to solve those types of problems.
So we don’t want to just put all of our money back into the business for any of the number of reasons you’ve been told. That’s a good idea. We need to be prioritizing paying ourselves so that our business can actually last so it can be sustainable so it can survive and be self sustaining. So if you’re putting money into your business from your personal bank account, that is, your business is not standing on its own two feet.
It’s being funded by some other source. It’s not being self funded. So the good news though, about paying yourself is that it really is not rocket science. You don’t have to be a numbers person and you can actually start paying yourself from day one. And I’m going to show you how.
Make sure you download my salary made simple freebie at valmarleen. com slash salary made simple. You can also get the link in the show notes. So here’s three tips to simplify your salary. Number one, pay yourself a set amount monthly.
Now, let me just repeat that for a second. Pay yourself a set amount. Do not pay yourself more in your higher income months. When you have seasonal or inconsistent income, the only way you can pay yourself year round is to not fluctuate your income. So we need to have a monthly paycheck, or if you want to do bi weekly, you can do it that way.
But either way, we need to have a consistent amount that we are paying ourselves that we are able to sustain the full. year. Now, you might be asking yourself, well, how do I figure that out? How do I know what that number is? And that’s what we’re going to talk about here. But I want to start from what you actually need.
And what that means is you have to understand what you need to bring in to cover your personal budget. That means you need to understand what you’re spending personally. And I happen to know that the majority of people I have worked with have very little idea. What they’re even spending in their personal life and they don’t have a budget and they’re not being intentional with that money.
And so even if that scares you, even if that feels. restrictive and no fun and intimidating, whatever the things are that are keeping you from having a personal budget, I would just really love to encourage you to move past that and make it a priority. It doesn’t mean it’s going to be easy. This has never come easy to me.
I still struggle to stick to our personal budget, but It is so valuable and so beneficial because we are actually able to meet our goals by having a personal budget. I like to tell people we budget because we dream. You have dreams. It’s probably different than mine. Your definition of success is going to be different than mine, but you have dreams of where you want to go in your life.
And to do that financially, we need to start from those dreams and work backwards to see what it will actually take to get there. You need to know where every dollar of your money is going and you need to have a plan for every dollar. So once you know how much you need to spend in all of the different categories in your personal budget, then you’ll know what you actually need your business to pay you and that’s where we start. So number one, pay yourself a set amount monthly number to pay yourself less than what you actually can afford at first.
So this gives you some time to make sure that you can sustain the paycheck amount. And it also allows you to build up an emergency fund. So I personally tried to have three months of my salary saved in my salary account at all times. This brings so much peace of mind and gives me so much flexibility, both in my business and my personal life. So here’s what this allows me to do. This allows me to take time off unexpectedly. So this can be a personal emergency or it could be a maternity leave. I had to take two maternity leaves in two years because our second baby was a complete surprise. But it wasn’t that stressful because I had been in the practice of paying myself less than what I could to build up that three month emergency fund.
So there’s also the situation where you might have some tragedy happen in your life or, you know, there’s so many. unexpected personal emergencies that can come up. And I want you to be able to shut your business down for a couple of months to take care of yourself in the midst of that. So that is one of the most beautiful results of paying yourself less than what you actually could.
The other thing you can do is you can actually Take some time in your business to work on a big project. You can take less clients or no clients at all for a season so that you can get something done that you just have not been able to prioritize with your other time. I did this this year. I took. Two months off of clients where I fully devoted myself to building out my online course and learning and being educated in marketing that course, and also in getting profit first certified and.
That was, although it was a risk, it was a calculated risk. I knew that I had the money to pay myself through that time, even if I didn’t bring any income in. And that allowed me to accomplish this huge goal. that I have had for a while and was not honestly really planning on doing this year. It kind of happened unexpectedly, but I’m so glad that I had that cushion in place to allow myself to do that.
Now, one other thing that having this cushion has allowed me to do. is give myself an extra Christmas bonus. Now, if you know anything about Profit First, and if you know me at all, you know that I get quarterly bonuses. That’s just built into the system, but I’m talking about an additional bonus. So pretty much every year, Mark and I, Mark is my husband, we, and let’s be honest, it’s mostly me, pretty much every year, I end up spending a little more, sometimes a lot more, than we were really planning for Christmas.
And what I love about having this cushion built in is I can pretty much always give myself an extra like thousand dollar Christmas bonus just to cover those extra things we want to do around that time of year. And, and I love that we have that built in. Yes, I need to maybe do a little bit better with my Christmas spending and, you know, be more intentional with that time of year.
That’s something I’m working on. But isn’t it beautiful that I have that cushion in place to kind of catch me when I fall. So first we’re going to pay ourselves a set amount monthly. We’re going to pay ourselves less than what we actually could at least at first. And then the third thing is I want you to pay yourself 50 percent of your annual income.
Now, if you have materials or subcontractors, things that you need to actually create or fulfill your product or service, you’re going to take that money out before you pay yourself the 50%. So just to add some clarity to this, materials would be anything that you need to actually create or fulfill your product or service.
So this is not going to be general operating expenses like your website. This is not going to include shipping. It’s just going to be the actual materials that it takes to create or fulfill that product. Subcontractors are going to be people that you pay per project to do the actual work of your income generating product or service.
So I want to say that slowly to help give you a second to process. So a VA. Who completes tasks for you at random that don’t really bring money in that’s not what we’re talking about here We’re talking about someone who does the actual work that you are providing to your client So if you are a photographer, this is an easy example if you have a second shooter or if you have an associate photographer somebody that you pay to do the photography Under your business name, that would be a subcontractor here.
So to get your, this number we’re starting with, the annual income, we’re actually going to subtract those materials and subcontractors. Then we are going to divide that in half and that is what you should be able to pay yourself. Now that gives us just the number for the full year, right? So we need to break it down per month.
So once we have that number, we would think we would divide it by 12 because there’s 12 months in a year, right? But I actually recommend that especially when you are starting out and if you don’t have any buffer savings, divide by 15 so that you Within that first year, build up that three month emergency fund if you don’t already have it.
So you’re going to take your annual income minus your materials and subcontractors and then divide. By two by 50%. Then you are going to divide by 15. And that is the number that you should be able to pay yourself monthly. Now, this is based on profit first. It’s based on the target allocation percentages that he recommends.
for paying yourself. If you make more than 250, 000 in a year, your percentage is actually going to be a little bit different. So make sure you get my freebie and you’ll see the breakdown of what your percentage would need to be for that. Okay, so let’s recap. The three tips to simplify your salary are to pay yourself a set amount monthly, pay less than what you could at first, and pay yourself half.
of your annual income. Now, I just want to tell you a little bit more about my story and how my salary has evolved over the years. So I’m going to tell you the real numbers. I’m going to go there because I think that it is so valuable and so helpful for you to see just real life numbers of what, what I am actually paying myself and where I started and how long it took me to get to where I am.
So If you don’t know this already, I actually started as a wedding photographer in college. So way, like 15 years ago, I started my business as a photographer. And at that point, I did not pay myself regularly. I did not budget. I really just took random draws from that money whenever I needed or wanted it.
The only thing I did consistently in that time is I tithed 10 percent to my church. So I’m not going to start there. We’re going to start. At the year when I started doing Profit First and I actually started paying myself monthly. So the year was 2017. That’s when I first started Profit First and I started paying myself 500 a month about halfway through the year.
I continued paying myself 500 a month through 2018 . I increased my salary to 1, 000 a month, and that was also the year that I had my first maternity leave. So there were a couple reasons here. I increased to 1, 000 in order to cover more expenses for my family, because having a baby, you’ve just got more. to pay for, right? So that was the first big jump that I had.
And then in 2020, I actually increased to 1, 500 a month and had my second four month maternity leave. So both of them were four months. The first one, I was not expecting to be four months. My daughter actually came a month early. And so I was able to take a little bit longer than I had originally planned.
So within those two years, I gave myself a raise every year, had a four month maternity leave both years. And it wasn’t a big issue. I was able to do that. And I was able to do that with confidence because I knew how much money I had and what it would take to be able to pay myself that amount. So then in 2021, I increased again to 2, 000 a month and during this time frame, I also just want to make it clear that I actually scaled back my work hours quite a bit.
So before I had my babies, I was working around full time, probably maybe closer to 30 hours a week. But I had, you know, full time to be able to do it. But then I scaled back to only two working days, sometimes three a week, those first couple of years of having my babies. so I continued to increase my paycheck amount. year over year while consistently working less hours. So in 2022, I increased again to 2, 500 a month. And that actually was the year that I launched my first passive income product, my spreadsheets. But that launch didn’t happen until November. So that was a very small part of my year. So then this year, this past year, 2023. I increased just a little bit. I only increased about a hundred dollars a month, but it was very specifically because I wanted to be able to put more money toward groceries.
We had been making some health changes throughout the year and I wanted to have more flexibility in how much we spent on our groceries. So this year. I paid myself 2, 600 a month. There were a few months in there that I think it was still the 2, 500, but most of the year I did that. However, not only did I do that, but I actually took one and a half months completely off.
I like to take June off every year, and then I also like to take the two weeks off before Christmas every year. So I took one and a half months completely off. I also took two additional months off of client work. In order to launch my course and to get Profit First certified. So I was able to do that because I had that three month cushion I knew that there was no way in my two days a week that I would be able to make the income I needed. And build and launch an online course and get Profit First Certified. So I took a risk. I took that time off of clients. I did not make very much money at all those months, but I was able to put the time into building my business in the direction I want it to go.
And now for the rest of the year, I have had most of my income come from my online course that I created during that time. That would not have been possible if I did not know my numbers, if I did not have a cushion saved up for what to pay myself, and if I didn’t understand what it would take to do all of those things.
Now, I want to just kind of call out an elephant in the room. I know that 2, 600 a month may not. feel very impressive to some people. And it certainly is not measuring up to the classic six figure income thing that we’re all obsessed with. I am here to just kind of shut down the stereotypes and the assumptions of what success is want you to look at what I’ve done over the past six years as very significant because it is. It was for me. It was for my family. My income is very significant for our monthly budget. And I do that with two days a week and childcare. I’m paying for childcare during that time within that money. And so that is what success looks like for me right now.
That was a huge win. For me, and I want you to stop looking at success as six figures, seven figures, whatever those numbers are. And I want you to bring it back to your life and your goals and what you want to do with your income and your paycheck. And that’s what I want you to build your paycheck around.
I want you to start thinking about paying yourself as a non negotiable. This is something that you need to do ASAP in your business to build a sustainable business that is something you want to do and can do long term. It is so vital for you to benefit from your business. It psychologically affects you when you get a paycheck and when you get bonuses.
We can talk about that in the future.
You do not need to make six figures. For you to be successful and for your paycheck to have a significant impact on your life. I also want to encourage you that if all of this feels a little bit overwhelming, you are absolutely capable of this. You are absolutely able to figure this out, to make this change, and I am living proof of that.
Someday soon, I’m going to share with you all my whole story of how none of this came naturally to me. Numbers are very difficult for me, but I have been able to take complete control of my money and my business I have been able to do very significant things for my family financially out of what might not seem like that impressive of a number.
So let’s recap. First, you’re going to pay yourself a set amount of money every month. Then you are going to build up a three month salary emergency fund by paying yourself a little less than you probably could. And to wrap all of that together, you are going to pay yourself 50 percent of your annual income.
Now, don’t forget to download the freebie Salary Made Simple, especially if talking through these numbers is a little bit hard for you to comprehend without seeing it. I’m going to show you the actual formula in the free download. So make sure you head to valmarlein. com slash salary made simple, or you can just get the link in the show notes.
thank you so much for being here today. I am so excited to start this journey with you and show you how you can build a healthy, sustainable, and profitable business that actually pays.
I'm Val! Coach for creatives
like you who are ready to be healthier, happier and more empowered women who love the business you run, the people you serve and the life you live!
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