While it’s great to make more money, it’s equally critical that you know how to effectively handle the money you generate. If not, it can have disastrous consequences for your business.
For professionals in the beauty industry, managing your cash flow in an efficient manner can be a game-changer. Understanding your numbers will not only help you to see your current situation from a new perspective but also provide you with a strong foundation to plan for the future.
Below, we outline budgeting and financial tips that every stylist can benefit from:
Keep tabs on your expenses every day.
Start with tracking your daily expenditures. If you don’t know where and what your money is being spent on, it’s basically impossible to create and follow a budget. Make it a habit to jot down all your expenses daily, including bills, taxes, credit card debts, products, and tools, etc.
To better understand your finances, convert your expenses into percentages so you know how much of your income you are spending on a monthly basis. This lets you know if you spending too much and where to cut down. There are some great apps (like Mint) to make the process (almost!) painless!
Carefully prioritize your payments.
If you have debt & make payments, take the time to evaluate what you owe and what rates you are paying. Chip away at the debt with high interest first, followed by debts without tax-deductible interest. Stay current on all outstanding debt to keep your credit score in good standing. Letting go of your money to pay off debt can be very difficult, so always try to keep your credit card balance at the lowest while focusing on the end goal.
Set realistic financial budgets and goals.
It is often said that the best way to stick to a budget is to have one, so make sure that you set a budget that you can follow. This ensures that you spend your money wisely and that your expenses don’t go above your revenue. Besides, having a budget creates awareness, which can help you curb unnecessary expenses and thereby increase your savings.
Whether you have a weekly or monthly budget, what matters is that it is realistic. While it depends on personal preference, it is suggested that you have a detailed, categorized budget because it makes it easier to break down your expenses.
Buy what you need and less of what you want.
If you have a budget, this tip becomes so much easier. It’s all about controlling your outflow of cash by simply buying what you need and not impulsively buying what you want. Often times, we spend our money on things that we desire but can totally live without. The ‘treat yourself’ mentality is fun, but can really drain your finances if you don’t keep close tabs on it.
Have at least six months of living expenses in savings.
Experts suggest that to be financially secure, you need to have at least six months of savings in your bank account. This can come in handy for unforeseen expenses such as medical emergencies. When creating your budget, keep this goal in mind and plan accordingly. Start somewhere. Open a savings account and set up a scheduled draft, even if it's $25 a paycheck at first. You’ll be surprised at the difference you’ll see in your bank records & how the money adds up over time. As you can afford more, increase your savings to build your emergency fund. (As sad as it may be, a killer shoe sale does not count as an emergency!)
Invest in tools and products wisely.
Finally, you need to invest in tools, equipment, and products wisely instead of simply following trends. In the beauty industry, tons of new products come out every season and chances are you probably won’t use a majority of these. Most of your revenue comes from the basic services that require basic products and tools so don’t make unnecessary purchases without proper research on what’s truly beneficial for your clientele and your bottom line.