My Simple Personal Finance System
I’ve worked as a Wedding Photographer for about 8 years now. And while I love being an artist, at the end of the day, you need to have some grasp on finances and how to run a business. I started my business in college with very little knowledge of personal finance. I’m by no means an expert in personal finance, however, I don’t think you need to be in order to have a system that works. After 7 years of trial and error, the biggest thing I’ve learned when it comes to finances is to keep it simple. The last thing you want to do is create a system that overwhelms you to the point that you start to neglect it. A simple finance system means that you are more likely to keep using it, spend less time thinking about the stresses of money, and more on your clients and photography. . In this blog, we’ll go over my simple approach to how I handle my finances for my business. We’ll go over how I split up my deposits for my expenses, income, and tax savings, as well as how I automate most of it.
disclaimer - this isn’t professional financial advice. This is a system that’s worked well for me and my specific, neurodivergent brain. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
My Problems
Feeling like I had more cash than I actually did
You may have 10,000 in your checking, which can make the decision to buy that new camera much easier. However, $10,000 after paying your quarterly taxes and paying yourself is actually more like $2,500. Buying that $2,000 camera sounds like a horrible decision now.
Always feeling like I might not have enough for quarterly taxes
I would always tell myself that I will save money for quarterlies when I get paid, but when quarterly tax time came around, I realized I had never actually set any money aside.
Navigating through months of high and low income
In the wedding world, it can be normal to make $15K+ in payments during the months of April - June and September - November. Which is great. But how about during January - March when you make $2k a month? How do you live off of that?
Build savings and safety cushion
Building your business savings or safety net is great, but never prioritized. There’s always another lens, new software, or workshop to attend. This leads to constantly feeling like you’re one unhappy client and a refund away from going bankrupt. Building a safety net allows you to also make riskier decisions that you wouldn’t normally make.
Setting Financial Goals
When it came to setting my prices, I would set them relative to my understanding of what I felt my worth as an artist was, and not what I realistically needed to run a sustainable business.
The Key to this System
Automation
By automating various financial processes, you eliminate the emotional piece of money and reduce the manual workload. This ensures consistency and removes the burden of constant decision-making.
Simplicity
Building a system with the least amount of friction and steps increases the likelihood of maintaining it long-term. Fewer steps mean less time and effort spent managing finances, allowing you to focus on other things
Profit-First Approach:
This approach involves prioritizing and setting aside your profits before anything else, ensuring that you are profiting from each project. It emphasizes setting aside funds for taxes, paying yourself a consistent salary, and controlling operating expenses.
Before you start
Checking Account for Operating Expenses:
Use this account to cover your regular business expenses, such as software subscriptions, office supplies, and marketing costs. Keeping it separate from your account provides better financial clarity.
Tax Savings Account:
This account will be used for holding your quarterly taxes. Any leftover money after taxes is used to build my savings and use as a cushion for my business.
Salary Account:
This is the account you will pay yourself from.
20/30/50 Percentage Split
This is the percentage split that you divide each deposit you receive:
Checking - 20%
Tax Savings - 30%
Salary - 50%
The System
Step 1: Set your payments to deposit into your Operating Expenses Account
I have Honeybook set to put all of my deposits into my Operating Expenses account. This ensures that any and every dollar that I make goes to the same account.
Step 2. Create an Automation to move 30% of Deposits to Tax Savings
Set the transfer amount as 30% for all deposits that are considered revenue and direct it to your Tax Savings account.
Most banks offer an autosave feature to help with this. If your bank doesn’t, try using a 3rd party service like Qapital
30% is the suggested amount to set aside for taxes. Obviously, this will depend on the state and your specific business etc. I would look at the total percentage of taxes that you paid last year. In Tennessee, I paid closer to 22% of my total revenue to taxes. I use the extra 8% as a buffer for the end of the year tax season, or as savings.
Step 3: Set up another Automation to move 50% of the original deposited amount to the Salary Account
Make sure you take the total deposit amount (in this case, $1,000), and not what’s left over after you transfer 30% over to tax savings.
Step 4: That’s literally it
And that’s the point. Simplicity is key. If set up correctly, your accounts should look proportionately like the photo below:
The Magic Behind This System
A better perspective of how much money your business actually has
Instead of having all of your money for expenses, taxes, salary, etc in one account, this system separates and designates your money, giving you an actual perspective of how much money your business has to work with. Working with an operating expense account that runs “lean” will force you to cut unnecessary costs, saving you even more money in the long run.
You’re always prepared for quarterly taxes
The tax savings account ensures you are ready for quarterly tax payments. The automated 30% transfer helps you save the necessary funds, and any surplus left in this account can be considered a "return" on your taxes. You no longer need to stress when the tax man comes around.
A systematic, consistent way to pay yourself every month:
With a dedicated salary account, you can create stability by setting a consistent income for yourself, even during months with lower freelance earnings. This helps normalize your financial situation and provides peace of mind.
A clear and logical way to set your pricing and goals
With 50% of each deposit going to your income, you now have a formula to figure out how many weddings you need to book at X pricing to reach your financial goals. For example, let’s say I charge $6,000 per wedding and I want to take home $50,000 after taxes. Following our 50% income rule, in order to bring home $50,000, I need to make $100,000 in gross revenue. From there, divide $100,000/$6,000 and you get 16.7 Weddings. So, in order to take home $50,000 at an average of $6,000 per wedding, you need to book 17 weddings. I find that this approach to goal setting and pricing forces me to eliminate the emotional or ego side of pricing and only look objectively at the numbers.
Endless ways to adjust and tweak
Find yourself saving too much for taxes and want to pay yourself more? Or maybe you’d like to have more cash on hand for your day to operations. Simply adjust the percentages or add more automations. There are truly endless ways to customize this system to YOUR business.
