Learn to pay yourself first as a way of taking control of your finances—and making sure you get a regular paycheck

As if it wasn’t enough that you do everything for your massage business, including the never-ending piles of laundry, you also have to add tracking income and expenses, and managing both home and business budgets.

If you are new to the self-employment world, it is overwhelming, to say the least.

However, I have a simple system to share about how to make managing your business and personal finances easier. It involves separating your business and personal finances, and making sure you are paid first.

Separate the Two Halves of Your Financial World

The first thing I will offer you is to completely separate your business income and expenses from your personal account. This one step automatically creates the information you need to simplify many of your business bookkeeping needs.

As a sole proprietor, you are aware that you can file your taxes under your social security number. This also means you are not required to separate your personal expenses and business expenses or to have a special “business account” to put business funds into.

The problem with this is unless you are sitting down each week or month for basic bookkeeping tasks, your business income and expenses get mixed in with your personal expenses, creating a jumble of information you must sort at some point for taxes. That usually occurs right before taxes are due and you have information overload trying to sort out expenses, not to mention the important missed expenses that can create a difference in what you might owe in taxes.

The solution for this is to have two separate banking accounts: a business account and a personal account.

Let’s look at the benefits of having the separation and then talk about each of the following topics:

  1. Monthly Earned Income
  2. Business Account and Expense Tracking
  3. Personal Account and Paying Yourself

Monthly Earned Income

From a financial standpoint, the most important thing for you to know for business success is exactly how much money you are making each month. In coaching massage therapists, I have learned that while many therapists successfully use intuition at the massage table, that intuition tendency trickles over to how loosely their business income is tracked.

  • Example: If your schedule was full then you made enough, correct? This is frequently inaccurate and creates a false sense of security.

It is important to know if you are consistently meeting your budget goals. Gift certificates, trades and no-shows can add up to an amount that impacts your ability to pay both business and personal expenses.

By depositing all business income into the business account, you immediately see your income for each week/month without having to track a daily or weekly total. This also gives you the opportunity to make adjustments in your business practices if you see problems with income behavior. Some ideas for adjustments could be trading less for other services, utilizing reminder texts for a higher show-up rate, or having a cancellation list ready for short-notice availabilities.

Making each massage hour count by having a paying client in every available time slot is the key to maximizing your financial goals as a massage therapist.

Business Budgeting

When looking at month-to-month business expenses, you will most likely see similarities in expenses.

For teaching purposes, let’s use the following as an example of a basic business budget:

Rent: $400

Supplies: $200

Office expenses, marketing: $100

Phone: $75

Licensing and continuing education: $100

Savings: $50

Total average monthly business expenses: $925

While there might be some special purchases made throughout the year, every month will have a similar expense amount. If you have all business income and business expenses coming out of one account, you could simplyuse 12 months of bank statements and quickly calculate a year’s worth of income and expenses for taxes. This works because you “presorted” business expenses and those expenses are not mixed in with your personal account and receipts.

Taking this concept one step further, I would also suggest getting separate debit cards for each account. By being consistent with only making business purchases with your business account/debit card, your receipts will be presorted for you as well. I choose to take the time at the check stand to make two separate purchases anytime I am buying for my business and personal life at the same time. If you do not take the time at that moment, you will have to take the time later to separate your purchases on receipts for work or home.

You will be amazed at how much the two simple changes of having a business account and using a business debit card for all business purchases, makes tracking expenses a breeze.

Pay Yourself First

Question: How would it feel to give yourself a paycheck every two weeks?

This is something I ask small business owners frequently. The typical reply I get is “to see that larger deposit in my personal account and to know I made that money to budget off of — I think I would feel more validated about my business supporting me.”

Most massage therapists I have met pay themselves with small, frequent amounts whenever they need to pay a bill or buy groceries and miss the feeling of a “paycheck.” This is the feeling of a worthy exchange of your time for money that is lost when there isn’t the reward of a lump sum every two weeks.

For the massage professional, it becomes especially important to feel and see your efforts supporting you for you to support the health needs of others. If you feel like you are never really getting paid, it can eventually impact your massage session quality, decrease customer service and create a feeling of burnout.

Fortunately, you can create this for yourself. By planning ahead correctly, you can start paying yourself every two weeks. I have repeatedly observed this one change profoundly affect massage career satisfaction. The paycheck concept will also quickly show you how much you have taken as a personal draw over 12 months so you can figure the amount of taxable income and be better prepared if you owe taxes or if you should spend more on business expenses.

Since this year is a year of new beginnings, my challenge for you is to take control of your business and finances by creating a new, supportive system for your financial health. And come tax time next year, you will thank yourself for making bookkeeping so much easier.

About the Author:

Amy Bradley Radford, LMT, BCTMB, has been a massage therapist and educator for more than 25 years. She is the owner of Massage Business Methods and the developer of PPS (Pain Patterns and Solutions) Seminars CE courses and a National Certification Board for Therapeutic Massage & Bodywork-approved CE provider. Her articles for this publication include “Start a Massage Practice. The MT’s Guide to Budgeting for Startup Costs & Monthly Expenses” and “The Client’s Body Does the Healing (The MT Provides the Opportunity).”