Rainy Day Fund: Small Business Owner Edition

Small business owners get to experience the freedom of self-employment, but that doesn’t mean they’re exempt from ‘rainy days.’

A rainy day could show up in the form of an unexpected, unavoidable expense. Or it could turn into a rainy MONTH if you’re unable to work and don’t have any source of income for the time being. 

In this blog I’m covering a few strategies to build up your savings account and confidently navigate through an unexpected storm. 

How to Pay Yourself as a Small Business Owner

There’s no right or wrong answer regarding how you pay yourself as a small business owner. Methods vary because the needs of every small business owner are unique. 

But in order to have funds necessary to cover the unexpected it’s important to save whenever possible. How can you do that?

Paying yourself first. 

The idea of paying yourself first is simple: when money comes in, put a set percentage of it aside in a savings account. This ensures that, NO MATTER WHAT, you are saving small amounts of money for those unexpected expenses. Staying consistent with your savings contributions will build your account over time and give you peace of mind knowing you’re covered - in some capacity - for whatever lies ahead. 

How Much Money to Save as a Small Business Owner

Now that you’re thinking about how often you’ll start putting money away, it’s time to address how much is enough. 

Sometimes, “whatever you can” is the right answer. 

The ebbs and flows that come with entrepreneurship mean you can’t necessarily draw income consistently or in the same amount every time. That also means you may not be able to save the exact same amount every time. 

Start by making a simple *but realistic* budget first. This will give you a pretty good baseline. There’s no shame in reaching out to your accountant to see if you’re missing anything either! Your accountant can take a holistic look at your financial situation and make recommendations that are attainable and align with your long term goals. 

How to be Prepared When You Can’t Hit Your Savings Goals

Let’s be honest - sometimes we need every penny that comes into our businesses and we can’t contribute to our savings. 

There are some programs in place to help Canadian small business owners navigate times of financial uncertainty. Here are some examples:

Employment Insurance (EI) for self-employed people.

The federal government has a special benefit program to help out if you need to step away from your business to take care of yourself, a child or a family member. Learn more about this special benefit online here and speak with your accounting professionals to help with registration. 

Having access to a line of credit (LOC).

When you can’t cover the unexpected with cash, a line of credit could help. LOC typically has a lower interest rate than a credit card meaning it costs you less to borrow funds. They’re a great tool to provide peace of mind knowing if cash wasn’t accessible you can still handle your affairs. 

Build a Business That Also Builds a Life you Love 

Financial stress is sometimes unavoidable in life and in business. But, I hope this blog has you thinking of ways you can set yourself up for success and be prepared for those inevitable rainy days!

For additional tips on saving money in your business, and creating habits that stick, check out this blog post!