3 Rock-Solid Steps to Financial Freedom Coaches Often Miss
You started your coaching business for freedom!
How do I know? Because that's the answer 95% of coaches give me.
And it's a great WHY!
It's something you can't get in a 9 to 5 working for someone else or even a local brick & mortar store where you have to be there all hours of the day.
Coaching sets you up perfectly for time, money, and lifestyle freedom!
Unfortunately, SO MANY coaches miss out on this because they don't know the right way to get it. I'm guessing that's you if you've landed on this page.
You watch the more well-known coaches, try to emulate what they do. You have a few clients, but your income isn't where you want it yet.
Instead of trusting that you already have the answer to helping clients and bringing in new clients, you buy course after course and invest in high-ticket programs.
It looks bad to be a coach who isn't investing big bucks in another coach.
You might not like me for that last statement, but you know it's true. It would somehow discredit you, so you keep investing.
You make more money? It's time to uplevel your business and start working with that even bigger name, using the same expensive software they do, and hiring a team.
The problem isn't with this upleveling, it's that you're trying to run your five or six-figure business like a seven-figure business...and it just isn't there yet.
You're actually hurting your business with these habits and overspending.
I know I seem like a huge jerk for saying it, but NO ONE ELSE IS SAYING it and it's fucking true!
Even if your coaching business only consists of you, it is still a BUSINESS! And you need to run it like one!
That's what this post is about.
Helping you see where your business is right now and what you need to do to turn it around and start making your money work for you.
All this over-hustling and over-spending is bullshit!
You KNOW how to make money! You just don't know how to manage it.
So let me share my 3 rock-solid steps to getting you to that free life you've been dreaming about and out of this frustrating spiral where you just feel stuck!
Step 1) Get Your Accounting on Lock-Down
OK, I get it. Accounting is NOT sexy.
It downright makes you queasy.
And THAT is why so many coaches are missing out here.
Let me guess, you think bookkeeping is only good for getting taxes done right?
If the government didn't require it, you wouldn't touch it with a 10 ft pole!
You've got a lot to learn!
Bookkeeping is your SECRET WEAPON!
I really believe the reason so many businesses fail is because they don't this!
They let the books slide and see it as a "have to" on their to do list that threatens to suck the life out of them every time they attempt it.
And yeah, it's not so much fun to do on your own.
Side Note: We can take your accounting off your plate! You can build the package you want with the services you need, starting at just $49/month.
But the insight you get from the information you create is SO INCREDIBLY HELPFUL!
On your Income Statement (also called a Profit & Loss or P&L), you can learn how much money you brought in, how much you spent, and how much was left over (your net income).
Hint: If your net income is low or negative...MAYDAY MAYDAY we have a problem that needs immediate attention!
The point is, without bookkeeping and actually looking at the numbers, you're basically stumbling around in the dark making buying decisions, hiring decisions, and major business decisions without all the info you need!
This is the first step...the foundation that the other two steps rest on!
Step 2) Create Radical Profits with Your Coaching Business
As a coach you have a WILDLY unfair advantage!
Your business is the BEST setup to create insane radical profits!
- Your overhead (building, electricity, vehicles, etc) is basically non-existent.
- You don't require true employees, a few contractors and you're good to go.
- Your complete tech stack (website, email marketing, etc) can be created for <$200/month - though most people add all the bells and whistles until their software costs are up in the $600-1,000 range.
- You can monitor advertising to make sure it creates an ROI so you never go in the whole with nothing to show for it.
That sounds good in theory, but then why are so many coaches struggling to reach radical profit?
Why are you bringing in all this money and then wondering where it went each month?
A) Because you aren't looking at your income statement each month which tells you exactly where your money is going.
B) But more importantly, you're just expecting your money to take care of itself!
Let me tell you a little secret...PROFIT DOES NOT JUST HAPPEN!
Profit has to be PLANNED!
You need a profit system in place. One that makes damn sure you are profitable EVERY SINGLE month!
So how do we create this system?
Well, personally, I use a program called YNAB (you need a budget) to help me keep all my money separate.
That's right, you've got to actually separate your money out. Lumping it all together in one account isn't going to cut it! That's how all your money disappears.
So you need to separate your money out. How you decide to do this is up to you, but I like the categories specified in Profit First.
- Owner Pay
As money comes in as income, you then decide what percentage you will send to each category.
The easiest way to do this is to figure out how much you're currently using on each of these categories and start making SLOW movements in the right directions.
So for example, when I first started looking at this, my expenses were 80% of my income!
So I slowly started cutting expenses each month and making more income without spending more money, until my expenses were down to 30%.
If you haven't paid anything in taxes in the past because your expenses were too high, as you lower your expenses you will want to raise your tax savings. Think of these two like a see-saw. One goes up, the other goes down and vice-versa.
The main point here, is that you need to know how much money you have in each category and don't spend money until it has been categorized.
So if your expense category is down to $200 and there's this program that costs $997 you want REALLY REALLY bad...well you can't buy it! UNLESS you can bring in income without spending money that will raise your expense category to over $997.
No, it's not always going to be fun!
But I'll tell you what IS fun. When you can increase your profit for your business radically, you open the door to paying yourself more which helps you transition into the last step!
Step 3) Start Wealth Building with Cashflow
So we need bookkeeping to get the numbers to help us create a profitable business.
And then we need a radically profitable business so we can start paying ourselves insanely well and start building wealth!
The mainstream people of the finance world would have you believe the road to wealth looks something like this:
- Go to college and get a good paying job
- Forgo coffee at Starbucks so you can SAVE SAVE SAVE
- Due to compounding interest, after giving 40+ years of your life away and living off peanuts, you will finally be a millionaire
- Live off your savings until you die
Ok so here's some flaws here.
1. Go to college and get a good paying job
This might have worked in the past, but here's the problem with this strategy now.
Based on these numbers, if I use a simple student loan repayment calculator with an interest of 6.94% which is the average student loan interest (via www.studentloanhero.com), we find these repayment options.
- Standard (120 months - 10 years) $455/month
- Extended Fixed (300 months - 25 years) $276/month
- Income-Contingent Repayment $387-413/month
Making $50,556 per year, your take home pay each month will be approximately $2900 after taxes and insurance. If you live in a city it would likely be less due to city taxes taken out as well.
2. Forgo coffee at Starbucks so you can SAVE SAVE SAVE
$2900 to cover your student loan debt, any other debt like credit cards you took out in college, food, housing, car, entertainment, clothing, eating out, utilities, cell phone bill, etc.
That money is going to go fast! You'll be lucky to save any of it.
But let's just say you are an exceptional saver and you do manage to save 10% of it.
3. Due to compounding interest, after giving 40+ years of your life away and living off peanuts, you will finally be a millionaire
It you save $290/month for 40 years in a 401K which is how most of America invests, you would likely get a 5%-8% return (via Investopedia).
After 40 years, you'll have $441,402. Womp womp.
To make matters worse, in 40 years from now due to inflation, $441,402 will only be worth $135,314!
Double womp womp!
OK What About 8% Return
Closer! After 40 years, you'll have $973,637.
Almost a millionaire!
But after 40 years of inflation, this money will only be worth $298,475.
So that's kind of disheartening!
4. Live off your savings until you die
Oh boy...here we go!
Our medical advances have drastically increased how long we humans live.
With the average retiring age at 62 (USNews.com) and the average death age at 79 years (Fortune.com), that's 17 years we've got to live off this savings!
Of course I could do the actual amount you would be living off each month, but that won't give you a real understanding of how much money you will actually have in relation to the cost of living. So I'm going to use the uninflated amounts to help you get a true feel for how off this strategy is!
Back to the 5% return
You have to live off the equivalent of $663/month 😭
And the 8% return
You would have to live off the equivalent of $1,463/month. Not as bad, but definitely NOT living luxury there like the money gurus would have you believe!
This is a LOSING strategy!
Unless you're making big bucks each year and putting away big bucks each year, this isn't going to work. The average earner is screwed!
Now like I said, you have an advantage with your coaching business!
You can get paid a lot more than the average employee. BUT, I still wouldn't go with this strategy, because you will miss out on a lot of opportunity!
!!Quick disclaimer!! I am not a certified financial planner! I'm figuring this stuff out too. But I want to share what I learn because this isn't taught very much and definitely isn't mainstream. So I'm not giving advice, just sharing what I've learned and my insights!
So what road am I taking?
- Radical profits in my biz so I can pay myself really well
- Living on less for a time so I can INVEST INVEST INVEST
- Buying assets instead of liabilities to increase cashflow
- Live off cashflow while investments never dwindle
That may sound confusing right now, but I'm going to break it down for you ;)
1. Radical profits in my biz so I can pay myself really well
I'm already past this step! My business is a freakin' profit machine. So I get paid way more than I ever could in a job.
Now, as my income in my business increases, I know that my personal income will also increase!
2. Living on less for a time so I can INVEST INVEST INVEST
This is the step I'm currently on!
Right now, my family doesn't look rich. In fact, some people might even think we're poor (who cares?!).
We've committed to living on less for a time so we can get our cashflow snowball built.
In some ways I feel like this is the hardest step. It's not fun to live on less...ask me how I know!
The goal here is not to save money. We aren't putting this money in a savings account. It would actually lose money with the low interest rate + high inflation rate!
So instead we are experimenting with some smaller investments that can help us grow this money while we keep putting more back. For right now, I'm using The 12% Solution, but down the road we want to learn more about dividend investing.
3. Buying assets instead of liabilities to build cashflow
All this living on less and investing smaller amounts is with the end goal of buying assets. Technically the smaller investments are assets too.
But what is the difference between a liability and an asset?
Liabilities cost you money. Examples:
- House (you live in - maintenance and insurance are ongoing with no income)
- Car (maintenance and insurance again)
- Boat (maintenance and insurance)
- Electronics (phone, computers, tvs, etc)
- Anything else you buy that doesn't bring in income
Assets make you money. They help you create cashflow. Examples:
- Rental houses (monthly rental income)
- Vacation rental houses
- Business (that's right, you've built your coaching business asset)
- A business that doesn't need you is even better! Leverage other people or software to do the work for you!
- Venue Rental
- Divindend Investments
- Business Investments with Profit Sharing Terms (you get paid profit returns for your initial investment)
- Personal Loan Investing (a little more risky, but some online lending platforms allow you to diversify and have many people lending to one borrower)
- I'm sure there's more!
4. Live off cashflow while investments never dwindle
The biggest difference between this strategy and the mainstream strategy, is that the mainstream strategy wants you to live off an ever-shrinking savings pile.
This strategy, you are living off the cashflow of returns of your investments which means the investment pile never shrinks. It either stays the same, if you live off all the returns, or it grows if you reinvest part of the returns.
Pretty nifty, right?!
So what does that mean numbers wise? How much do we need in investments?
Depends on what type of assets you invest in.
If you decide to do all rental income, you can figure out how much a small 2br 1ba in your area sales and rents for.
In my area, I can buy a house like that for $60,000 and the rental range is $400/mo for a crappy house, up to $650/mo for a nice house. Of course some of that will be expenses, so let's say I decide to have all nice homes and net $450/mo from each rental.
So if I want my annual income to be $150k/year, I'll need to have 28 properties netting $450/month.
Dividend yields can be anywhere from .03% up to 12%!
So let's say you fall right in the middle at 6%. You would need to have $2.5M invested to get dividend yields each year of $150,000.
Living like you're rich now means living poor later!
This is why I get so sad when I see so many coaches splurging with their money! They hit 6-figures and immediately start living a 6-figure lifestyle, never thinking about the future.
With your amazing position as a coach, you could so quickly build a cashflow snowball that would create income for you ongoing!
Imagine, never having to work for money again! Coaching being something you do for fun or for a little extra money when you want a quick splurge!
Making money on autopilot because you set up a wealth-building system!
Like I said, money doesn't just sort itself out. YOU HAVE TO PLAN IT!