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In my experience working with and teaching small business owners, this question comes up a lot: "How much should I pay myself?"
Usually this question comes up when the business is starting out, or when there’s a major change that has forced a reset. The change could be business (a bad quarter, or a big investment that’s eating up your cash), or personal (the new apartment rent is too damn high). Either way, there’s a (potential) money squeeze that you’re facing, and you seek clarity so you don’t get thrown into confusion.
"Feeling squeezed" and knowing in dollars and cents exactly how squeezed are two very different things.
One way I like to stay grounded is through budgeting my numbers for where I’m at today and where I want to be. It removes emotion and keeps me focused in reality.
There’s a lot of uncertainty right now, and I kept putting off the whole budget thing. And then I took my own medicine. Doing my personal budget was one way to get me unstuck and give me the clarity I needed to keep going.
If you’re feeling squeezed, hope this guide helps you, too.
-Elli
Peanut Butter & Jelly. Romeo & Juliet. Ying & Yang.
And…. Personal & Business Finances.
Some things just go together. And the same can be said about your personal finances and business finances. They're an inseparable pair that give and take from each other, with the goal that the business gives you more than you put in.
Why this matters for business owners
When money is tight due to business growth or struggles, the sacrifice business owners make happens quietly in the background — they invest more of their own money in the business, skip a salary, or put their home up as collateral to secure debt.
In other words, business owners have to adapt their personal lifestyle based on how the business is performing, and fast.
Tackling your personal budget is a way to figure out what you need and want to pay yourself.
The 50/30/20 budget from Elizabeth Warren's book, All Your Worth, is a budget framework that gives this layered dimension:
50% for essential living needs (rent/mortgage, food, utilities, insurance, etc.)
30% for quality of life “wants” (dinners out, hobbies, trips)
20% for savings and debt (dedicated to building financial security for your Future You.)
By design, this breakdown forces you to separate needs, wants and your Future You. Your Future You is what business owners often forget when they’re caught up in the day-to-day. You want to cover the basics, sure. But really, there’s so much more to actualize your personal growth & development.
But what if my problems are bigger than my income?
This is one of the most frustrating realities. Income and spending fluctuate month to month, especially with so much economic uncertainty. At some point, if you keep squeezing, the peanut butter and jelly spills right off the sandwich and onto the floor. This is exactly why getting consistent with your budget matters — it allows you to navigate the peaks and valleys to keep both you and your business afloat.
Practical Takeaway: Once you’ve created your personal budget to figure out what you need to pay yourself, plug your compensation figure(s) in your business projections or break-even analysis. You’ll at least know what your sales and profit targets need to be to realize your Future You.
If Budgeting isn’t your jam, try this Personal Budgeting Guide.
I put together a personal budgeting template to help you apply this framework to your own life and business.
Want to go deeper into personal budgeting?
I’ll show you how in our new Community, coming this June, where I’ll bring this guide to life for you.
PS. Know a fellow creative business owner who'd find this useful? Forward this along — I'd love to meet them. 📩
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