Episode 20: Pay Yourself First, Not Last

   📍 Welcome to CreativeMind Smart Money, the podcast where creativity and business smarts collide. I’m your host, Samantha Eck, bookkeeper, business coach, and your go to guide for building the creative business of your dreams. Whether it’s mastering your money, streamlining your systems, or growing your business, I’m here to share insights that empower you to thrive.

Plus, I’ll be bringing in industry experts to dive into all aspects of entrepreneurship, so you can turn your passion into profit without losing your creative spark. Let’s get started.  

You’re listening to the Creative Minds Smart Money Podcast where creativity meets business smarts. We’re diving into a topic I know a lot of you’ve been tiptoeing around how to pay yourself as a business owner because let’s be real What’s the point of all the work we’re doing if we’re not getting paid?

You are not running a charity, my friend. You’re running a business. And if you’re over there not paying yourself because you want to reinvest or because it feels like you don’t have enough cash left over, we’re about to have a serious chat. Spoiler! Not paying yourself can tank your business faster than you think.

So grab that coffee, your notepad, or whatever gets you into the zone and let’s figure out how to get those dollars flowing into your personal account. on the regular. This episode is going to be short but sweet, but you’re going to walk away with some actionable steps that we can take to help you know how to pay yourself.

First things first, how you pay yourself depends on how your business is structured. I know, snooze alert, but trust me, this matters. If you’re a sole proprietor or a single member LLC, things are pretty straightforward. You’re going to take what’s called an owner’s draw. Basically, you’re pulling money directly from your business profits.

It’s simple, but just because you can take all the cash doesn’t mean you should, and we’ll get into why later. It’s very basic, you can transfer money, you can pay yourself with a check, you can sell yourself money, you can buy yourself money. However you want to do it, you can do it.

Now, if you’re running an S corp, which some of you fancy creative business owners are doing these days, it’s a bit more structured. By law, you’ve got to pay yourself what’s called a reasonable salary. The IRS is not playing around with this. You can’t just pay yourselves pennies and pocket the rest as dividends.

If you’re working in your business, you’ve got to be paying yourself like a real employee. So keep it fair, keep it legal, and don’t skimp on paying yourself properly. And for those of you who aren’t sure what your business structure is, Call that CPA. Let’s make sure you’re doing this right from the start.

Okay, the part no one likes but everyone needs to get cozy with, knowing your numbers. We’ve already covered cash flow, but here’s the recap. Cash flow is the lifeblood of your business. It’s not about how much money you’re making.

It’s about how much is actually flowing in and out of your business. If you’re not tracking it, we’ve got bigger problems. And then there’s profit, specifically your net profit. I don’t care how impressive your revenue looks, what matters is what’s left over after you pay all your expenses. Because that’s what you pay yourself out of, not the revenue, the profit.

Take a look at your profit and loss. Statement or your P& L if you want to sound fancy, and if you don’t have a clue what you’re I’m talking about, check out my episode on financial reports. It’ll give you the full rundown of what you need to be looking at. Now that you know how your business structure affects how much you pay yourself and you’re familiar with your profits, it’s time to tackle the big question.

How much should you actually pay yourself? There’s no one size fits all answer here, but I’ve got a good rule of thumb that’ll help. Start by paying yourself 30 to 50 percent of your monthly profit. Why not 100 percent? Because you need to leave cash in the business to keep it running smoothly.

This is especially true for Slow Months, which, let’s be real, it can happen to all of us. And if you haven’t already, make sure you check out last episodes on Slow Months. You’ll need that buffer, otherwise you’ll be pulling your hair out when your business takes a dip. Let’s break it down. Say your business made 5, 000 in profit last month.

You could pay yourself somewhere between 1, 500 to 2, 500. That leaves enough in your business to cover taxes, reinvest in growth, and save for any rainy days ahead. We can’t talk about paying ourselves without addressing everyone’s least favorite part. Taxes. No matter what your business structure is, you have to account for them.

If you’re taking an owner’s draw, you’re still on the hook for self employment taxes. And for those of you in S Corps, you know the drill. You’ve got payroll taxes to handle. Here’s the deal. Set aside 20 to 30 percent of whatever you pay yourself for taxes. Yes, that much. It’s not fun, but it’s necessary.

Open a separate account for your tax savings and for the love of everything, don’t touch it until tax time. Seriously, I don’t want you getting hit with a tax bill you’re not ready for. Been there, done that, and it’s not cute. Next, we need to set up a routine for paying ourselves. I’ve said this before when talking about your cash flow routines, but structure is your friend.

You need to pay yourself like it’s a non negotiable bill. Because it is. Try to set up a system where you pay yourself bi weekly or monthly, just like you would with any other paycheck. This keeps things predictable and honestly, it makes you feel so much better than just pulling cash whenever you feel like it.

Plus, when things are consistent, it helps you avoid overspending during those flush months and scramble during the lean ones. Get that direct deposit set up and make sure you’re getting paid on time every time. You deserve consistency just as much as your Netflix subscription does. Let’s talk about investing back into your business.

Just because you’re paying yourself doesn’t mean you’re done. Now you need to keep reinvesting, especially if you want your business to grow. This can look like upgrading your tools, working with a business coach, or even putting some money aside for future projects. The more you invest back into your biz, the more it’s going to return the favor.

Think of it as feeding your business the good stuff, so it’s ready to give you those golden eggs.

This is the part where I’m going to hit you with some real talk. It’s time to stop thinking of paying yourself as an extra or bonus you’ll get to when you can. Paying yourself is a necessity. When you don’t pay yourself, you’re signaling to yourself and to your business that your work isn’t worth compensation.

And I’m here to tell you that that’s BS. You work hard. You show up. You’re the reason that your business even exists. So why would you put yourself last? Trust me, when you start paying yourself properly and regularly, something shifts. You start showing up differently because you know your time and talent are being compensated.

It’s about respecting your own value. When you pay yourself, you’re not just covering your bills. You’re investing in you. And let’s be real, when you’re stressed and broke, your work suffers. Clients can tell that you’re operating out of desperation. Don’t do that to yourself. So here’s the mindset shift.

You are the CEO of your business, act like it. Pay yourself first, and I promise you, Your business, your mental health will thank you.

📍 Let’s get into that recap that we’re talking about where we can walk away from this episode ready to get paid. First of all, understand your business structure. Whether you’re taking an owner’s draw or you’re on payroll, knowing how to pay yourself depends on how your business is set up.

Know your numbers. You have to understand your cash flow and profit to pay yourself the right amount. Aim to pay yourself 30 50 percent of your profit. Don’t drain your business, but make sure you’re getting compensated. Save for taxes. Set aside 20 30 percent of what you pay yourself so Uncle Sam doesn’t come knocking.

Create a payday regime. Consistency is key. Treat it like a paycheck, not just a random draw. And invest back into your business. Don’t forget to feed that goose that lays the golden eggs. And more importantly, paying yourself is not a luxury, it’s a necessity. All right, my creatives, that’s all for today. Go out there, treat yourself like the boss you are, and get that paycheck flowing.

Until next time, farewell fellow travelers.