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Love + Money! In your handmade business, you can’t have one without the other. But of course you’re not ALONE in your love, you’ve got partners (romantic + business), family, and relationships with everyone from your customers to the press. But money is still kinda tricky to talk about with our loved ones, especially when our money flow is just starting or changeable. That’s why I couldn’t resist answering the question Faith asked:
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“I have a hard time with budgeting and setting boundaries for the income I make. At first I wasn’t sure if I could make any money and anything I earned sat in my PayPal account. As I grew and my income became steadier and I took on paying a few bills I lost a TON of motivation and felt really taken advantage of. Like my family complained about how much time I spent on my work but then expected me to be able to pay for eating out/go on vacation etc. Which killed my motivation for my business. What do you do to make your budget work? How do you communicate and hold yourself accountable?”.
Do you mind if I get a bit Dear Abby and answer Faith’s question directly?
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Wow does this resonate with my own experience and feelings about bills, business and my role as a breadwinner in the family! This is complicated because it’s about more than just one thing – there’s a few things that are getting all swirled together when you think about it. .
- Budgeting for what you make and how you want to spend it.
- The way paying bills with your passion changes the way you feel about that former “hobby”
- Your family’s expectation for your business.
Although you ended with the question about making your budget work, I’m guessing that the real issue is your feelings about your work + money + family. No matter what budget you set or how you stick to it, unless you get your family on board, it won’t feel settled.
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Let’s start with you. You’ve learned what you don’t like – feeling taken adventage of, turning your passion into a must-do, feeling like you’re supposed to not be busy, but still get stuff done.
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But now dig in to what you do want: What do you really want for your business? Why are you earning this money? What do you want to do with it?
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First, permission. You’re allowed to want whatever you want. In this step you’re ignoring all the should’s and expectations and focusing exclusively about your feelings about your money. Do you want your biz-money to take you on solo-retreats (ie, without the family) or do you want to have money for fancy coffees? Or do you want to change your family’s life by doing what you love?
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Second, accept that things are different. Money changes things. It changes your role in the family. It changes your earning power. It changes the way you look at your craft. Getting paid for your work is an exchange of value: people value what you offer and they pay for the joy it brings them. That changes you and how you feel about your work.
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But time also changes things. You’re changing as a person, a crafter, a businesswoman and a family member.
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Humans like stability and we don’t much care for change. So the tension in your family is probably exacerbated by a fear of a change they don’t understand. Before you can help them understand it, spend some time understanding it yourself. What’s different now than before? What’s better?What do you want it to be?
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Third, communicate what you want and the changes that are happening. You get to help set the expectations your family has of both your money and your time. Tell them what you love about your work, how money is changing your relationship to it, and how that’s going to impact your time and your life.
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Then listen to them. What are they really resisting? Is it about money? Or is it about time? Is it about your role in the family? What would they like you to do to? What are their actual expectations of you? And then have the conversation: which one of those expectations do you want to reach and which ones need to shift?
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Ask them for their help in making these changes (accepting that you’re going to spend time on the work). This might mean you’re not there after school, or you take turns making dinner. It might be that as your time moves to your business is moving away from what they think you should spend your time on. That’s part of changing and growing, but it can be uncomfortable. Talk through what you can all do to make it easier on everyone. Can they pitch in? Can you agree to a stop-working time?
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No matter what, it’s going to be a compromise for all parties – the goal is to feel like your comprise is an act of love, not sacrifice.
Once you’ve had those conversations and have a plan for how your business money will contribute (or not) to the family, you can set a plan for where your money goes in your business. You might call this a budget, but as a self-employed person, it’s kinda the opposite.
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See, in a normal budget, traditionally-employed people start with how much they know they’re going to make, and then they make their expenditures fit within that frame. But as a self-employed person, we can start with the other side of it: the expenses we want to cover can determine how much we want to make in a month.
Here’s how I do it:
- Add up all business overhead (stuff like studio space, paper, ink, packaging, supply orders, web hosting, etc). This is the money your business has to make to stay in business! **This is a good place to do a quick double check of your last few months – are you at least making enough to cover your overhead each month? If not – stop here and figure out why not. Is it because your expenses are too high? Is it because your prices are too low? Or is it because you haven’t been producing or selling enough? Before you can even think of taking money out of your business you have to be well above this number each month!**
- Add in any extra business things you want this month: a business class, a new tool, saving for a studio or helper.
- Add in it what you’d like your business to pay you this month. This number will come from all the conversations and thinking you did earlier. (For me, this is enough to pay for…my life, because this is my full-time job. If you only want to work part-time, the number might be smaller.)
- Add all this up and you have your income goal!
Now, as you know, this doesn’t mean you’ll actually make this much this month, especially if you just let the goal sit there, untouched. The trick to making it actually happen is to break it down: how many products would you have to sell to make your income goal? If you have a bunch of different products, do some puzzle-fitting: how many of product A? Product B?
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Double-check! Did your supply order (the one you counted in your overhead) actually cover this many products? Is it physically possible for you to make this many products this month?
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Fiddle with your numbers until you have something close to reality. (If you’re not coming close to reality at all, scale back somewhere – either your extra business expenses or what you pay yourself….with the goal of building it up to where you want it to be month over month).
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You can also use this budget as a tool for talking to your family – explain that you can’t transfer any money to the family until you cover your overhead. Thus, if they want the extra vacation, you have to make, photograph, and market X items a month, and that should take you around Y hours. With the numbers in front of you it’ll be much easier to make decisions, both spending and earning, and you can set realistic expectations for everyone!
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So you see, dear Faith, you can do this. It doesn’t happen all at once and there’s no simple answer. But you can do some math and do some pondering. Instead of just wondering – how much should I give to my family? how much should I keep in my business? – you can create a clear guide.
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Editor’s note: I am so excited to welcome Tara as one of our contributors, she has inspired me for years with her insight & thoughtful perspective. To welcome her to our community and really get a chance to sink our teeth into this topic we’ll be talking about budgets & boundaries at our #OMHG chat tomorrow. Join us from 1-2pm EST on Twitter or share your questions for Tara in the comments. Get all the details about how to join our chats on our brand new OMHG page!
Something that has helped me is using an accounting software. This helps me see where my money is going. It also helps with determining taxes. I am still not paying myself what I want and some months (like this one) are harder than others, but just knowing where my money is going helps me to determine cost, know when to cut back, buy that new printer, etc. And the advice about the family is great! I had to start drawing some boundaries a little over a year ago with friends and family – most expected to get things from me for free. I was surprised when I started charging them how many of them no longer did business with me. And during very busy months I have to designate “cut off” times. Sometimes this means I am staying up later at night when everyone is in bed, but it gives my husband and my children my time during the evening hours – which seems to make a big difference. Hang in there. The whole transition from hobby to business is a hard one to navigate and sometimes friends and family just don’t get it.
Yes! Totally agree about the software – tracking everything is the key to know what you *really* have! It can also help you figure out what’s sustainable: at what level of sales numbers will you be able to pay yourself?
A Cut Off hour helps so much! Even when sticking to it means you didn’t finish your list!