Savings Strategies for Entrepreneurs: How Gina Knox’s Clients Saved $7.5 Million Dollars
Episode 872: Show Notes
As the owner of a small business, every dollar counts, and strategic financial management can make all the difference. Today, we’re joined by self-proclaimed money nerd, Gina Knox, a money coach for entrepreneurs with variable income. Gina teaches business owners how to build their savings, pay themselves well, and create a wealth portfolio. In the last three years alone, she has helped her clients save over $7.5 million!
In this episode, we break down tactical ways to approach cash flow, new ways to look at debt, and the money mindset beliefs you need to readdress to feel empowered to build the wealth you dream of! Gina also shares her unique perspective on some common industry strategies, offering you alternative paths to reach your financial goals. Whether you're a seasoned entrepreneur or just starting out, this conversation will provide you with new opportunities to reassess the thought patterns and money beliefs that have been holding you back!
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An Unconventional Path to a Fulfilling, Finance-Focused Career
Most of us don’t find our purpose right out of college. Gina’s unconventional path to financial coaching started in art school and led her through Silicon Valley to financial software company, Intuit, where she worked on QuickBooks as a small business researcher. There, she interviewed business owners and accountants about their finances, examined the backend of how they managed their money, and discovered her passion for helping others with their finances.
After becoming the go-to tax expert among her colleagues, hosting Wine and YNAB nights (where they would drink wine, make charcuterie boards, and budget together), and battling a “complicated sense of dissatisfaction” with her job, Gina decided to pursue a career as a money coach at a friend's suggestion. The rest, as they say, is history! By transitioning from the tech and design world to a finance-focused career, Gina developed an innovative approach as a money coach and takes pleasure in finding creative ways to tackle financial challenges. Her story highlights the power of following your intuition and finding a niche that sets you apart.
How NOT to Manage Your Business and Personal Finances
If you want to adopt the habits you need to meet your savings goals, you have to first accept that the rules of personal finance do NOT apply to business finance. While budgeting and emergency funds play a role in your personal finances, Gina emphasizes the fact that business is a lot more fluid and dynamic. While you may not want to touch your personal emergency fund unless it’s, well… an emergency, in business, you should always be spending and replenishing your savings.
Businesses have to spend money to make money. You have to begin by understanding that. You also have to acknowledge that your income will always be variable. So many new business owners become frustrated and say things like, “When I make 100K…” or, “When I start having consistent 10K months… then I’ll be able to (insert financial goal here).” Not to burst your bubble, but you will probably never have consistent business income. And that’s okay! Don’t waste your energy trying to solve it. Instead, Gina teaches her clients to accept their inconsistent income and learn how to save with it, not in spite of it.
The Cash Flow Waterfall Method
Hot take: budgeting doesn’t matter! In Gina’s banking-based savings method, it’s literally this simple; when you have a high-cash-flow month, save the excess. When you have a low-income month, use your savings to float the business. Gina calls this the Cash Flow Waterfall, and it includes a lesson on creating a “buffer number” in your checking account, which differs from business to business. If you’re over your buffer number, you move the remainder to working capital. If you’re under, you move some money back. You don’t need a budget or a complicated spreadsheet to do that.
Tax savings should be considered separately. A lot of business owners have two accounts, checking and savings, and they say, “I don’t want to touch my savings because I need some of it for taxes!” By creating working capital, you always have money that is “safe to spend.” This creates a much more intuitive sense of how your business is doing rather than obsessing over every dollar saved or spent.
Why it’s Important to Reframe Your Perspective on Debt
If you have strong negative emotions about debt, you’ll use those feelings to fuel your financial strategy and you will miss other opportunities. For this reason, Gina believes that we have to adopt a morally neutral perspective on debt. In all her time as a money coach, Gina hasn't encountered a single business that has never been in debt, yet she constantly meets business owners who wear debt as a badge of shame.
The wealthiest businesses use debt as a tool. In the same way that you have to spend money to make money, sometimes you need access to capital that you don’t have to invest in and scale your business. That’s why you have to work on reframing your perspective on debt rather than trying to avoid debt altogether. We have to shift our focus onto leveraging debt as a tool to build wealth rather than vilifying it for existing.
Your Guide to Mastering Your Money Mindset
There’s nothing woo-woo about a money mindset. Simply put, your money mindset is your unique set of beliefs about money that drives all of your saving and spending decisions. It might sound cliche, but being mindful of how you react to your financial circumstances is crucial. Just one negative emotional reaction can cause a significant domino effect! Never underestimate the power of pausing before taking action. This alone can change how you respond.
When our brains go into fight-or-flight mode, we often amplify the urgency of a given situation. As difficult as it can be to pause in that moment, remind yourself: what will happen if you don’t make a decision immediately? Yes, there might be consequences, but what are they? Realistically, what would happen if you chose to wait five minutes? Your money mindset might be deeply ingrained, but you CAN create new neural pathways and retrain your brain with consistent practice. Having a solid financial strategy is important, but you’ll never reach your goals if you don’t master your money mindset first!
The Variable Income System for Paying Yourself Well
As a business owner thinking about your expenses, your salary is one of the easiest things to overlook. We’re all familiar with the trope of the founder who doesn’t pay themselves for the first few years as a sacrifice to get a new venture started. If you had a job and your boss said, “I know we usually pay you X amount every month, but the business is in a lot of debt right now, so we’re going to cut your pay for this month so we can pay it off,” you would be furious!
As a small business owner, you deserve to be compensated for your labor, but paying yourself is a habit like anything else. There are various strategies for this. Gina doesn’t believe in percentage-based approaches because, as we’ve established, inconsistent income is a reality for the majority of small business owners. You shouldn’t have to replicate that in your personal finances. She recommends a “same dollar amount” approach. Decide on an amount that your business can afford by calculating your average profit over the last six months. During low-cash months, you’ll still pay yourself the same amount from your working capital. During high-cash months, you’ll refill your working capital with whatever is left over.
Quote This
“You have to first accept and realize that personal finance has nothing to do with business finance. They are two completely different subject matters – and they are two completely different goals.”
— Gina Knox
Highlights
An Unconventional Path to a Fulfilling, Finance-Focused Career. [0:01:45]
How NOT to Manage Your Business and Personal Finances. [0:11:28]
The Cash Flow Waterfall Method. [0:17:50]
Why it’s Important to Reframe Your Perspective on Debt. [0:23:07]
Your Guide to Mastering Your Money Mindset. [0:29:14]
The Variable Income System for Paying Yourself Well. [0:38:48]
OUR GUEST:
Gina Knox
Website | Podcast | Linkedin | Instagram
Gina Knox is a financial coach for entrepreneurs with variable incomes. She teaches entrepreneurs how to save $100k with her program 6 Figure Saver, then she helps her clients create a 7-figure wealth portfolio with her mastermind 7 Figure Wealth. Over her career as a coach, Gina has helped her clients save $7,772,532.72 in less than three years! Gina is a Mexican Mom, an art school grad, a designer, a hobby potter, a world traveler, and a money nerd.
OUR HOST:
Abagail Pumphrey
Boss Project on Instagram | Facebook
Abagail hosts the twice-weekly podcast, The Strategy Hour, which is recognized by INC and Forbes as one of the best podcasts for entrepreneurs.
Key Topics:
Business savings, Financial management, Money coaching, Wealth building
