#092: How to Manage Your Cash Flow Like a Pro When You Have a Variable Income

Welcome to the High Income Business Writing Podcast, helping you propel your writing business to a whole new level. And now, here's your host, Ed Gandia. Well, hello there and thank you for joining me for episode 92 of the High Income Business Writing Podcast. My name is Ed Gandia and this is the podcast for business writers and copywriters who want to take their writing businesses to the six figure level or the part time equivalent. As a quick reminder, you can find details shown us for this episode by going to b2b launcher.com episode 92. You know, as freelancers, we don't have the luxury of a fixed paycheck. That might be just about the one thing I can think of that are Dilbert Cube friends have one advantage that might have over us over freelancing. But that's the only thing I can think of. And the reality is that even when you're booking work like crazy as a self employed professional, your cash flow is going to be irregular. I mean it's just going to be, it is what it is. Sometimes it's even going to be unpredictable. And the trouble with all this is that when you turn turn to financial experts, when you turn to those money management books, this issue is rarely addressed because those books, those experts, all that, that entire industry is geared towards helping people with steady paychecks. Not professionals like us, not self employed freelancers. In this episode you're going to hear from my friend and colleague Diana Huff. And Diana has been trying to solve this cash flow dilemma for a long time and over the past few years she's come up with some very specific and very realistic strategies for those of us who earn a variable income and have to treat cash flow management differently. This interview and this show is part one of a two part series on the topic of money. I really feel that this isn't a, this just is a topic that we haven't covered extensively in this podcast and I'd like to dedicate a couple of shows to it. Part two will be a little different. So this particular episode is going to be very practical, very hands on. Part two will be much more focused on mindset, in the mindset of money. And that episode will come on January 7th. It's going to be the first episode of 2016, so be on the lookout for that. But this one, like I said, will be very focused on practical things you can do right now to improve the way you manage your money and have more peace of mind when it comes to cash flow. So with that, let's get to today's interview with Diana Huff. Hey, Diana, welcome back to the show. It's so great to have you here.

Thank you. I'm very happy to be here with you again.

Well, it's been a while since you've been on the show and of course last time you were here is on a very, very different topic. So either way, I'd like for you to kind of reintroduce yourself. And it has been a while. So even people who know you might need a little bit of a refresher about your business, what you do today, how you started freelancing. Because I know all that ties into what we're going to be discussing today.

Yep. So I'm Diana Huff and my company is Huff Industrial Marketing Inc. And I'm a marketing consultant and I help small family owned manufacturers and job shops market, grow and succeed. So I started freelancing in 1998 and I did that because I wanted to be home with my son. And now he's all grown up and he's in college. So that's very exciting. And in. At the end of. Well, it was about a two year process, but at the end of 2014, I made a huge shift in my business and I changed the name to from it used to be DH Communications Inc. When I used to do freelance copywriting. And so now it's Huff Industrial Marketing. And I had always been working with industrial manufacturers, industrial companies, and that was always my love. And so my business shift was to focus exclusively on industrial companies, manufacturers, job shops, OEMs, and more marketing. So more marketing consulting and far less copywriting. Although I do do copywriting. My main, my main, what I do best now is the consulting and then what I call website overhauls.

So you started as more of a writer, copywriter, but it has evolved over the years into this consulting piece.

Yes. Yep. Mostly. And the websites are the big part of it too, because I, I learned, I taught myself SEO in 2001 and once I did that, that's when my business really went from being a freelance copywriter to being an SEO person. Because at the time there were very few B2B SEO copywriters. So that's how my business really grew was because I taught myself SEO and I became known for a while as a B2B SE.

Now I'm curious because this is not really about what we're going to be talking about, but this is something that comes up all the time. Might as well ask you, did you have a background in industrial manufacturing? How did you end up here?

Yes, actually. Yes. So you can read my about page@dianahuff.com but basically I grew up working class. My stepfather worked in a factory and we lived, believe it or not. So I lived in Alameda, California, which used to be a naval air station. There was a naval air station there. And it was. We were in a working class neighborhood and right down the street was, and it's still there, intact, one of the few intact factories, a U.S. steel plant. So I used to walk down the street and I could actually watch the men in the plant. Poor molten steel, because it had, it didn't have walls, just had a roof and these big beams and I could watch them moving things around and I could see the steel being poured and I used to stand there and watch that. And when. So I went through college, I got to my degree. Well, while I was going through college, I made sales for sailboats. And that's when I learned manufacturing because I was making stuff. And my first job out of college was at an industrial manufacturing, woman owned. We, we made custom cloth products for military and aerospace applications. So I ran. I was the office manager for seven years and then I went to Varian. I supported two manufacturing factories within Varian. So I've always been in industry.

And when you started as a copywriter, the first five years or so, were you positioning yourself this way as kind of an industrial.

The first. Yep. My first tagline was high tech, was copywriting for high tech and industrial companies.

Excellent. Well, you know, and it's interesting because what I know about you, it's. You started out that way, but you've connected those dots even further over the years, haven't you? Like, as you've figured out what you like, what you enjoy, what you're really good at, you've pivoted several times until this last iteration, which is really the culmination of all that.

Exactly. Yep. So now I combine everything I know. So, you know, like today I'm actually, I was been working on what I call a traditional PR campaign where I wrote a traditional press release. I'm going out looking for the publications that best fit the client and then pitching the release and story ideas to various editors. That's all old, old PR work.

Gotcha. Excellent. Well, that's really good background. And you obviously haven't been. You're not new. You've been doing this for a long, long time. You've seen the ups and downs. And that leads me to, I guess the first question here, which is your take on money and cash flow as a freelancer and managing cash Flow. You have kind of a different view of this, which has evolved over the years. Before we get into kind of the details about that, give us a little bit of background on your view and maybe a quick summary of your position on the issue.

Well, basically, my ideas started changing a few years ago. They started changing around retirement. So I found myself. I kept asking, why was I being told by personal finance experts to work like a dog and then put off life in order to save a million dollars or so so I could, quote, retire? And I kept asking myself, what exactly would I be retiring from? So I sit here at a desk, I work on a computer. You know, at the end of the day, my brain is fried, but my body is not being torn apart. I go to the gym, I'm very healthy. I don't smoke, I don't drink, or I drink once in a while. I'm not teetotaler, but, you know, I'm very healthy. I take very good care of myself. And I'm thinking, okay, so as long brain is active, why would I want to retire? And I kept thinking, and what would I do if I did retire? I kept thinking, well, I would work because I enjoy what I do. I. I mean, I. It just seemed like I just couldn't make this connection. Like. And then, you know, and then, you know, of course, I've given presentations at the Awai B2B Boot Camp. And so there are lots of people there who are learning to be a copywriter and after they've retired. So I kept thinking, okay, I'm already doing something that a lot of people are retiring to. And then I live in this small house so I don't have to downgrade. And I just. I just couldn't make this connection. So I finally, you know, I kept thinking maybe someone has it wrong, and never thinking that maybe I was right. And then I started reading more books about the 401k process because I was trying to teach myself how to better manage my 401k. And I. And there are all kinds of books out there about how the whole process is broken down. And, you know, we're being told to save and save and save, and yet, you know, these stock market crashes happen. So if you've been diligent and saved all your life, you could lose everything in one stock market crash. And then you're being forced to work more or longer to make up for this. This loss. So I just. I just couldn't figure out why none of this was connecting in my head. And then on top of that, so here I'm a freelancer, and I was. I have always made very good money. And I couldn't figure out why I couldn't save and why I kept going further and further into debt. And I kept looking at, I'm like, wow, I made all this money last year. And so I bought into the standard advice, oh, you're not. You're living above your means, blah, blah, blah. And I'm just looking at everything going, well, I don't know, I'm looking around here. I don't look like, like I'm living above my means. And so finally I finally, it just like something connected in my head and I realized that the standard money advice that we get today, totally outdated. And that's because it's geared toward people who work at the Same company for 20 to 30 years and then retire with a pension. It's not geared toward freelancers with highly erratic and variable incomes. Or, you know, one month you could be up and one month you could be down. And so it. Once I made that connection, I ditched all the financial books and I started figuring things out for myself.

So in a. What you're saying really resonates with me because I've had that, that itch as well. It's like, man, it's just. There's something about this. This doesn't ring true.

Exactly. I know.

And it's, you know, and then you feel bad about the things that you might be doing that the books and the experts tell you not to do, but then you wonder, well, what am I doing wrong? Because I don't feel like I'm doing anything wrong here.

Exactly. And then I kept thinking, well, I must not be getting it right because I'm not a numbers person, I'm a woman. I need to have someone who's smarter than I am tell me how to do this. And it was the totally wrong approach. And once I ditched all that, everything changed.

Let's talk about some of the most common financial tips, strategies, advice that you hear all the time that you found doesn't quite apply to us as independent professionals.

Yep. The biggest one is save 10%. So that one. So that advice is really good. You should save money. I'm not saying you shouldn't. But if you have a variable income, saving that 10% can be very, very hard. So just, let's just take the whole advice all the way through. So, so first off, the standard device is save 10%. So as I was thinking through all this stuff, I kept thinking, well, I'm a business Owner. I have two accounts. I have personal and a business account. So do I save 10% on my business side or do I save on the personal side or do I do both? Then I kept thinking, okay, well do I save 10% if I'm doing it on the business side, Am I going to save 10% pre taxes or am I going to do it after taxes? But I pay myself because I'm an S corp. So do I save 10% on what I pay myself? And then I thought, okay, or then I, I was getting, I kept trying to do both and nothing was working. And then I, I read somewhere, save 10% as soon as a client pays you well. Okay, and I'll get to this in a minute, but if you, if you just take 10% off the top, if you're not making enough money to break even, saving that 10% off the top doesn't work because you need that money to meet your expenses. So I was so of going a little crazy. So. And then another standard piece of advice connected with that 10% is put that 10% into automatic savings, meaning just have it taken straight out of your account and you never miss it. Well, that works for people if you have a paycheck. But if you're in self employed, your freelancer, you know, what if your client pays late? What if a project gets canceled? I mean, I've had clients, I'm sure you have too. I had a client where I was doing a monthly, what was it, monthly, quarterly. I was getting a good fee for this e newsletter and it was like boom, boom, boom. You know, it was happening like clockwork. And then one day she called me up and she said, hi, I just had a huge budget cut. We're no longer doing the newsletter. Like.

We'Ve all been there.

Yes. So how are you supposed to save? And then it put that money into, have it automatically pulled out if your client pays late, if something gets canceled, if a, if a project you thought was going to go through doesn't go through. So now you have to pay expenses on this money that you're supposedly supposed to be saving. And you know, like, you may have to pay your groceries, you may have to pay your mortgage. So this, these are all the problems that I was running into trying to quote, save this 10%.

And I totally get that. Nobody has ever answered that question as far as I know. It's like, where do you take that 10% from? And by the way, are you saving like in a savings account or is that retirement or.

Right, exactly. And then the Retirement thing too. So again, you know, save for retirement. Like, retire from what? And when you put that money into retirement, so the financial, personal financial experts or the advisors, they're telling you to put that money into the retirement account because you're going to have all these tax savings. Well, what they don't tell you is that you tie up all that money. So like one year I made a good chunk of change, I put all this money into the 401k, and then the next year I didn't make as much money and I'm like, oh man, I could really use that money right now. And if you take it out, you get a big, you know, tax, you know, you get hit on it, 10% or whatever it is. And you know, so tying up all that money where you can't get at it, I mean, it sounds good, but as when you're a freelancer and your income is so variable, it's not a good thing.

Yeah. And I think there's, and I'm sure we'll talk a little bit about this. There's room for all of these things. It's just they seem to be very specific rules or laws or advice. It's given to everybody.

Right.

And Right. So we're not saying, hey, don't, you know, don't. We're not saying don't save for retirement. We're not saying don't put money away.

Right. But it's, but you have to do it in a different way and you have to approach it in a different way.

Gotcha. So savings, the retirement, any others that come to mind that have been really annoying.

I would say those, those were the two biggest ones. And then, you know, I read all of them. Sue Orman Ramsey. You know, Ramsey was, I think, the one who annoyed me the most when he said, you know, to begin paying down your debt, you know, put $1,000 aside. And I'm like, a thousand bucks. That's because no one, what bothered me the most about all this advice was no one talked about if you had a business, they only would advise you to turn your hobby into a side business, especially so you could pay down debt or so you could put money aside for retirement. But no one ever talked about, well, you have this real business and, you know, you have expenses associated with it. And, you know, and that was the other one. So save three months of savings. Well, you know, when you have your own business that you have to think about your, about what you're saving for in a very different way. So you should, you have three Months of savings? Well, I wouldn't call it three months of savings. I would say make it so that you can weather the ups and downs of clients paying late, projects getting canceled, blah, blah, blah. And however much you need to weather that, it could be only a month, it could be two months, it could be three. It depends on your own circumstances. Do you understand what I'm saying?

Yeah, totally. Totally. You know, what I'm hearing here is that, honestly, in a perfect world, the way to go freelance would be to start with $100,000 in working capital, Right? Just have magically, you know, magically make appear $100,000 in your checking account, and that would basically cover. It'd be like your line of credit, if you will.

Right, Working capital. Exactly.

But let's face it, 99.9% of us don't have that luxury, right? We either decide to start one day or, you know, we. We started because out of a need, we got laid off or whatever. We may have some saved away, but it's not going to be like a ridiculous amount of money. So the question is, and the frustration I'm hearing from you is, you know, what happens when you don't have the ability to, like, stash away all this cash over the next six months or three months? How do you do it when you have to make it happen on the go? It's like you're building the car as you're driving.

Exactly. That's exactly it. So it. You. You know, I would read these books and they would say, start a side business. And I'm. And I would be like, well, I already have a business. It's my life. I can't start another side business in order to generate this extra cash you're telling me I need to generate. And then you see things like, you know, sell stuff on ebay, and I'm not. I'm not a big purchaser, so there's not. I don't have any extraneous stuff that can be sold. And I'm, you know, just all this advice that just. It just didn't work. So I just stopped reading all of it.

So let's talk.

Oh, go ahead. Sorry.

So let's. I think people can relate here. I know I've talked to a lot of my colleagues, and, you know, this comes up quite frequently. It seems like nobody's really figured this out completely. I have some ideas. I've talked to other people who have ideas, but I know you've also been thinking a lot about this and come up with some very concrete steps. And strategies. So let's run through some of them and, you know, I'll let you kind of guide us through this and, you know, through. Through what you suggest.

Okay. Well, the first thing that. So I, you know, I have the new book Cash Flow for Freelancers. And one of the first things, it has exercises in it. And the first exercise I have people do is analyze their own cash flow. So when I did this a couple years ago, my jaw dropped and. And all I could, as soon as I saw the analysis and I did this myself and came up with the idea myself, I just thought, oh, my God, no wonder I'm in debt, and no wonder I'm constantly struggling. And what I had realized. So I had always viewed my income just from the number on the income statement. So I look at each month like, okay, I made this much this month. I had never looked at how the projects were coming in and how long they were to. To do, like, from start to finish and when I was getting paid for them. So that's what I did was I analyzed my cash flow and, you know, I said, okay, here's project A. Here's how much I charged for it. Here's I got. Here's what the deposit was because I asked for 50% up front. Here's how long that project took, and here's when I got paid for it. And I was going in many many cases, 60, 90, 120 days between the initial DEP and when I finally got paid. And I just thought, oh, my God, who can live like that? You know, so all this, again, all this standard financial advice is for people who are getting a paycheck every other week or once a week or whatever. And here I am going 30, 60, 90, 120 days. There is no standard financial advice for that.

Yeah. So you're basically financing the client and the project. And because you're focused, like many of us. Right. On workbooked, not when cash is coming in.

Right, Exactly.

Okay, that's a very valuable exercise. What would you suggest people do? I mean, if you were to kind of do something really simple, it's just go back to the last six months and see if you can figure that out.

Well, yeah, so that's what I did. 12 months, just. But you could do 6, 6, 12. But really get a handle on what. How projects and cash are flowing through your business. Just really start to understand it.

And what were you looking for specifically? Or is there one figure or one metric that was really helpful for you in terms of, you know, maybe number, average number of days to get that.

Yeah, average number of days. Mostly it was just seeing the fact that, that these projects were taking forever. One of the things that I started working on, and this is still an ongoing process, becoming more efficient. And the other thing, the other huge change that I made was instead of billing when the. So I. A lot of these big projects were for website overhauls and I was doing the final billing when the website went live. So some of these projects can take a long time. So what I do now, the change that I made was 50% up front, 50% when I deliver the content. So if it takes another three, four or five weeks for the design to be finalized, that's the designer's problem. I mean, even though I'm still working on the project because I'm project managing it, at least I've gotten paid for the bulk of my work.

Oh yeah, I can imagine that'd be huge.

Yeah, a huge change.

So 50% up front. 50. When you deliver the project, what do you deliver? The content or the, the content net 30 days.

Well, that's another thing. So net 10. So that's so another. And this is not so much, this piece of advice is not so much from financial advisors, but you see it out there on how to get paid faster. You know, do net zero, stop working until the client pays you. You know, blah blah, blah. Well, I have found and I. So when I was the office manager for the manufacturing company, I had to do accounts payable and accounts receivable. I did the bookkeeping as well as the front office work. And I did this for seven years. People, companies pay when they pay. You can put net 30 on the invoice, you can put net 10, you can do balance, do balance due on receipt. They will pay you when they pay you. And I have company, I have clients who will pay me who are like clockwork. They're very, very good. I have no issues. I have other clients where I have to call the accounts payable department. Hello. What are you going to pay me? One with one. I actually had to, I personally had to go to their lobby and sit there until I was given a check.

I've been there.

Yep. So that's, you know, that's a whole other topic in and of itself. But basically what I did was again revised my own terms and I stick to them and I'm, and I'm working, I'm constantly working on being more efficient so that I'm working fewer hours for any given project and I'm going to get paid faster.

So where does the net 10 come in? Because he said companies are going to pay you when they pay you.

Well, I can put net 10 on there, but one, one company, they pay me net 30 on there all the time. And so, you know, that's what I'm just saying, they just pay you when they pay you.

My, my, what I found is that I used to, I started out with, I think net 30 didn't last very long because I read somewhere, hey, ask for net 15, you never know, you might get it. And this is very early in my business. Right. I've been doing that ever since net 15. And the amazing thing is I would say more than half of my clients pay me net 15 and the other end up paying me in 30, 45 days. Now the beauty is I think by asking net 15, you get close to that. If you were to ask net 30, you then get maybe 60, 70 days.

Or 90 or 90.

Yeah. So I'm like, I'm going to ask for it and see what happens. Okay, so efficiency, you mentioned the way you bill and when you bill your terms, of course, and then going backwards and then doing that exercise, analyzing your cash flow and not just focus on bookings, but go back six months to a year and figure out when you got paid so you can get a better sense of when cash is coming in. What other ideas or tips have you found?

Well, the other one that was huge for me was determining my break even number. So for the personal financial books, they're all focused on your personal finances. Very few take into account that you have a business and not a hobby, but a real business that has expenses and clients and you work and it's your livelihood. So your business has expenses just like you personally have expenses. And I have found that a lot of people just pull a number out of thin air on what they want to earn. So maybe if you worked a full time job and you were making say $55,000 a year, you say, well you know, I want to make 60, that's 5,000 more than I was making. You know, that's doable. Well, that, that 60 has to cover your personal and your business expenses. So if you don't know, you probably know. A lot of people know vaguely what their personal expenses are, but you might not know what your business expenses are. And so when you have to pay for both your personal and your business, that becomes a big chunk of change. And so it's imperative that you know your break even number and your break even is your personal and your business expenses. And combined so I sort of knew what both of them were. But while I was in this cash flow analysis mode and my eyes were now open and I had my oh my God moment, I started really looking at things and I was sort of appalled at where I was spending money that I wasn't even really aware of. And one of the big things, big wastes of money. I shouldn't say waste, because maybe some of it is useful, but one of the big places where we all probably spend money is just online. Like I was buying books online and it's so easy to just click, click and you order something or apps, click. You know, I remember ordering this app. I think it was like a $35 app and I think I used it for two weeks and then I reused it again. And, you know, so all of this, when I started analyzing where all my money was going, that, that. So the online book ordering, that came to a complete halt. I was spending over a hundred dollars a month on books. I get everything from the library now, all for free. I don't buy apps anymore. I was using Infusion Soft, which is. Was 200 a year. I stopped using that. I just use Nimble 15amonth. 200amonth. For infusion soft, I went down to 15amonth. So I just started looking at everything. So now I have this break even number. I know exactly how much money I need to bring in every single month. So I know where I stand every single day of the month. So, for example, today I've brought in 60% of the income I need to bring in this month to hit my break even. I know I need to bring in 40% more, right? So instead of flailing around and panicking, I'm like, okay, this is how much money I got to bring in. This is how many days I have left. The holidays are coming up. This is my pipeline. Get to it, girl. And when you are able to focus like that, so much good stuff happens. And you know, I've already got a prospect. I'm going next week to visit. I have another prospect. I'm getting to the quote stage with them. I mean, it's just, I'm focused on. So I. There's no airy fairy. There's no let me pull a number out of thin air. It's like, this is how much money I got to bring in. And of course I always want to make more than my break even. But you know, if some, if, if your pipeline's not that full or maybe because December is a short month, it's like, okay, just if I make break even. That's good enough. And, and you have to know what your break even is.

All right, so a couple of, first a comment and then a couple of follow up questions to that just to get a little bit of clarity. So the only place I'll probably disagree with you on is the whole book thing. I'm such a big believer in buying your own books. As long as you read them, of course. But I'm with you, I'm with you. It's easy to get carried away.

Well, also I'm a big. So when I get books from the library, I do read them. And I know you like to write in yours. I actually write in my journal every single morning. So I will write down what I'm meeting about and then write about it.

Gotcha. Yeah, and that's, that's huge because then at least you're, you're retaining that, you know, you're getting your record. So a couple of follow up questions then when you say, hey, I'm about 60% of the way there this month, I need about 40% more to go. So that, that tells me what I need to do. Are you talking about booked work or are you talking about cash coming in?

Cash coming in. And that's one of the things I cover in my book too is, is you have three numbers that you need to pay attention to. Your break even number, which is your personal business expenses combined your, your cash income. So cash income can be, you know, money receivables for that you build the month prior projects that you are going to be billing for that you know, your customers like clockwork and they're going to pay net 10. Yep, I'm going to get that this month. It could be passive income. So if you have like an app or an ebook that you sell and you're generating some income, anything that brings in cash, that's your monthly income. So you, you know, you want to make sure your monthly income is meeting your break even and then your sales number and your sales number is sales. So like when I close a sale, so let's say a customer hires me to redo their website and I charge them 15,000 and I get 50%. So that 7,500, the 50% becomes part of my monthly income for that month, the 7,500, that's future income. But that 15,000 is sales. So I have, I have three numbers, break even my monthly income, making sure I'm at break even or more. And then my sales goal, because without sales, if you're not keeping track of sales, you're not going to meet your break even or monthly income in future months.

That's awesome. I love that, I love that you're keeping track of these three metrics.

So it's right there on my wall right in front of me. So I have a chart right on my wall. December 2015, income I have listed what all income I have right now. I have where I got to get to and I have my sales goal.

And you know what, that's so key because that was my next question. How are you tracking that the moment you start trying to buy software for this? Oh, no, that, that's the moment you're going to lose.

Paper and pen, baby.

Yes, Whiteboard paper and pen on the wall. I love it. That that is absolutely the way to do it. I rarely see someone who, when it comes to simple things like this, succeeds in getting to where they want to get to by buying some app or implementing some software. This kind of stuff. It's got to be very low tech.

Yes.

Okay, so another follow up question regarding break even and expenses. So when I think of expenses, personal expenses and business expenses on the business side, it's kind of straightforward, right? Because you know, you got recurring monthly costs like your web hosting, then office supplies, whatever, right? Those things, we all know what they are and you can get an average for that. But when it comes to personal, we're talking about the money you need to live, right? So all your bills, your mortgage, a little bit of money for fun, savings, that sort of thing. And so first of all, let me stop there. Is that accurate?

Yeah, and I would say, I would be careful with the word savings. So what I do now and this, I've learned this all the hard way, Trust me. So like for. So we all have just what you said, we all have expenses that we know about. We have our mortgage, we have our grand groceries, you know, clothes for the kids, clothes for us, whatever. Maybe you're saving for a vacation. But then we have expenses that happen, but we don't know when they're going to happen, but boy, do they happen. So like last year here in New England, you know, we had the gargantuan winter when we had like three feet of snow. And I had so much snow on my roof and I had this huge ice dam and it was cracking my gutter and it was leaking into the porch. I mean, it was a mess. And I had to call a snow, a roofing company to come out and remove all the snow because I wasn't going to go up there. And shovel off snow. And the guy came out and he said, oh, that'll be twelve hundred dollars. I'm like, twelve hundred dollars. Oh God, hyperventilating, you know. And then like my dog, one year, he couldn't walk. I took him into the vet and well, he had torn his, his ACL, you know, that was $2,500. It was like a two inch piece of fishing line that they used to replace his ACL, his ligament. $2,500. And then two years ago, I was driving and I hit a pothole, cracked my front axle. Fifteen hundred dollars. So we all have these kinds of expenses and those are what drive us into debt. And especially because we're freelancers, we may not have that much cash lying around. And especially when you have a family and, you know, so you have to, instead of just quote, savings, what I do is I have different funds. So I have the house fund, the car fund. And so, yes, I'm, you know, putting aside whenever I can, 22 bucks so I can make sure I have the money for my in, for my service when it comes up 5,000, 6,000 miles. But also I'm trying to save a little bit here and there for when these big unexpected expenses occur. So even if I don't have all the cash, at least I have some of the cash. And maybe I can borrow from here and borrow from there so I can pay it and not have to resort to putting thousands of dollars on my credit card. Because then, you know, what happens is you say, well, I have this client check coming in and I'll just pay that credit card when that check comes in. But then by the time that check comes in, something else has happened and you go, oh, oh, and then your taxes are due and then you don't pay the credit card.

Why are taxes due? Like at the worst possible time ever, right?

Or something's due, right?

Yeah, life insurance policy, which bills annually, whatever.

Or your kid comes home and you know, oh, dad, I want to go do this with my school. And you know, whatever it is, and you pay it.

So let me go back to that. Then the savings and your exposure expenses and your break even. Just to make sure I understand this, let's say it's $5,000. But that doesn't take, that takes into account those things that happen twice a year. Like, or like your life insurance policy, for instance, let's say that's 500 bucks that comes due only once a year, right? But you have to kind of annualize it. So you put money away, you Know, a little bit every month.

And that's, that's part of my book is. So actually, in I. In the book, I recommend that everybody use this wonderful application. It's called you need a budget. Have you heard of it?

No.

Oh, it is awesome. So you need a budget. It's 60 bucks. Although they are going to an online version, but it's a desktop application. It's 60 bucks. And they only charge you again if they, like, do a full update. And you don't even have to buy the update. You can just stick with the old version. But it's basically instead of forecasting money, what you do is you budget. You only budget money that you have. So what? And you. So I have, I have a budget for my business and I have a budget for personal. So just like you said, your insurance policy is due once a year. So if it's 500 bucks, 500 divided by 12 is what, 60. So you have to put aside, you have to budget 60 bucks that month to save for that insurance policy, and that becomes part of your break even because you have to make sure that your break even covers your weekly, monthly, and annual, quarterly and annual expenses.

Gotcha. And does it take into account then the other category you mentioned, the life's, you know, happy.

Yeah. Well, you can set up all your own categories.

Okay. So you could have one for. Hey, just things that could break, right?

Yep, yep. And like for. So I'm going to New Zealand in March. And so what I did was I had a category New Zealand trip and I just saved money every month until I could afford the ticket, and I just bought the ticket and now I'm saving so I can make sure I can actually do something once I get the. There.

Yeah. Yeah.

So.

So basically, by having everything annualized, you can factor all that into your personal expenses.

Right.

To come up with your personal break even is what I suggest.

Your personal. Well, your, your break even period, which is your personal and your business.

Gotcha.

Yeah. And then the other nice thing about doing it this way, so say you're, you're clicking along and. No, no, life things have happened, you know, like a tree hasn't fallen over in your yard. Everything's been running smoothly for a couple of months and. Or even a few months or more months. And so you've built up some balances in these different categories. So say you've built up $300 because, you know, you have to pay the accountant coming up in March or April. So you have some money set aside. So let's say something does happen. Well, now you have this money in these categories that you can borrow from to pay for this unexpected happening, knowing that you're going to have to refurbish those categories as money comes in, but at least you're not using your credit card.

Gotcha. So that was actually my final question is, what are your thoughts on the best use of credit cards as a freelancer?

Well, seeing as how I have debt, I personally don't like them. I know a lot of people use them to get going, but it is sure hard to get out of debt. And it's a slow process. And I know lots of people say, use them because you can get free this and free that. And I would say if you're really good with paying off your balances every single month, then credit cards, fine, go and use them. I've never had good. I've never had good experiences with credit cards. So right now, on the business side, you know, I have, like, things like basecamp and all that stuff. You have to pay with a credit card. I pay those charges as soon as they come. You know, they get charged to American Express. And then, like, once every week or every two weeks, I just pay the balance. You know, the pay the charges. So I don't let it build up.

Gotcha. It sounds like your preference is to do it this other way, where you are kind of sending money aside to these little accounts, right. And doing it every month so that you're covering those things that only happen once or twice a year, and then you're as prepared as you can for life's unexpected events, right?

As much as I can. And this doesn't happen overnight. So this whole process, it takes a while. It takes a while to build up a cushion, you know, Like, I. This month, you know, I had a lot of my categories funded and then. But I've been waiting for work to come in, you know. You know how it is. You know, client. Prospective clients will call, they're all hot and heavy, and, you know, you give them a proposal, and then nothing. You hear nothing. So. And that's what happened for, like, two or three of things that I quoted on. So, you know, I had to use money that I'd set aside. So. But now I know, like, I know, okay, I borrowed, you know, $200 from this category. I have to pay that $200 back to that category. So I know exactly where all my money is going. And there's none of this nebulous, save 10% kind of thing.

Well, and what I love about. We shared earlier, too, is you hit on something that. I don't know many people. I don't think many people do. I don't know anyone who does this, which is instead of focusing on just sales. Oh, you know, My goal is 8,000 for the month, and I'm at 6. And Christmas is coming up, or whatever you are, you're focused on cash flow.

Yes.

And the beauty of that, guys, is that when you do that, you can. There are many different ways to get cash. It doesn't necessarily need to mean bringing business in the door, new business or a new client. It could be, hey, let me call Susan because they still owe me $3,000. She said that check was going to go out on the 1st, and it's already the 10th and I haven't seen it.

Exactly. That's right.

You have receivables out there that you could start getting on the phone and take care of that 40% shortfall that you're. Like you mentioned earlier, very, very quickly. Which is a lot easier than trying to book 40% of your sales goal for the month in a week or two.

Right? Exactly.

Excellent. This is great stuff. So you've mentioned the book a couple of times. I want you to tell us more about it and where people can learn more about and where they can.

My book is so actually, in I. In the book, I recommend that everybody use this wonderful application. It's called you need a budget. Have you heard of it?

No.

Oh, it is awesome. So you need a budget. It's 60 bucks. Although they are going to an online version, but it's a desktop application. It's 60.

Grab it.

Oh. So the book is cash flow for freelancers.

And.

And they can get it@gum gumroad. So the URL is HTTPs://, slash, slash, gumroad g u m gumroad.com Thoughtful books.

Thoughtful books. Cool. And we'll include a link to that in the show notes. But, guys, I encourage you to do this. You know, I. I know a lot of freelancers out there. Very few of them think about this stuff at the. At the level that Diana does. Everything she puts out there is awesome. Just in full disclosure, she sent me a review copy of what she has up until this point. As of this recording, she is putting the finishing touches on it. It is fantastic.

Oh, thank you, Ed.

This is. This is something we all need. I know I could learn from you, Diana. And I plan on. Actually, don't send me a copy. I want. I plan on buying my own.

Oh, thank you so much.

Check it out. This is great stuff. She doesn't put Mickey Mouse, you know, fluffy content out there. So check it out. And Diana, where can people learn more about you and your work? I think you mentioned your website a little earlier, but tell us again, Huff.

I'm Huff Industrial marketing, but my URL is dianahuff.com and that's Diana with two N's. And then you can also follow me on Twitter. That's DianaHuff. And don't try and link to me on LinkedIn because I'm not a big LinkedIn user and I only connect with clients anyway, so just fair warning.

Awesome. Well, hey, thank you so much, Diana. I really enjoyed this discussion. I know it's, it's really going to help a lot of people. So thanks for sharing these ideas with us.

Oh, well, thank you so much for having me.

Well, I hope you enjoyed that interview. I hope you got a lot of. Of practical ideas from what Diana shared. And I wanted to remind you that you can grab the detail show notes for this episode at b2b. Launcher.com forward/episode92 and this is my last episode of the year. So I wanted to wish you and your family a very happy and safe holiday season and a healthy and prosperous 2016. I want to thank you so much for being a loyal listener of the show over the years.

Bucks. And they only charge you again if they, like, do a full update. And you don't even have to buy the update. You can just stick with the old version. But it's, it's basically instead of forecasting money, what you do is you budget. You only budget money that you have. So what? And you. So I have.

And for all the income, incredibly nice emails, comments, ratings and reviews you sent me throughout 2015, you have no idea how much these mean to me. It's incredibly rewarding for me to put this material out there every two weeks and I'm just thrilled to hear that it's making a difference. So thank you for allowing me into your car, into your home while you do chores, while you mow the lawn. And thank you for sharing this show with friends and colleagues. Again. Have a great holiday season. Happy and safe new year. Have an awesome day, and we'll talk again soon. The High Income Business Writing Podcast is a production of B2B business launcher. Learn more at B2B launcher.com.

I have a budget for my business and I have a budget for personal. So just like you said, your insurance policy is due once a year. So if it's 500 bucks, 500 divided by 12 is what, 60. So you have to put aside, you have to budget 60 bucks that month to save for that insurance policy and that becomes part of your break even because you have to make sure that your break even covers your weekly, monthly and annual, quarterly and annual expenses.

Gotcha. And does it take into account then the other category you mentioned, the life's?

Yeah. Well, you can set up all your own categories.

Okay. So you could have one for. Hey, just things that could break.

Yep, yep. And like for. So I'm going to New Zealand in March. And so what I did was I had a category New Zealand trip and I just saved money every month until I could afford the ticket and I just bought the ticket and now I'm saving so I can make sure I can actually do something once I get there.

Yeah, yeah. So so basically by having everything annualized, you can factor all that into your personal expenses.

Right.

To come up with your personal break even is what I suggest.

Your personal. Well, your, your break even period, which is your personal and your business.

Gotcha.

Yeah. And then the other nice thing about doing it this way. So say you're, you're clicking along and no, no life things have happened, you know, like a tree hasn't fallen over in your yard. Everything's been running smoothly for a couple of months and, or even a few months or more months. And so you've built up some balances in these different categories. So say you've built up $300 because you know you have to pay the accountant coming up in March or April, so you have some money set aside. So let's say something does happen. Well, now you have this money in these categories that you can borrow from to pay for this unexpected happening, knowing that you're going to have to refurbish those categories as money comes in, but at least you're not using your credit card.

Gotcha. So that was actually my final question is what are your thoughts on the best use of credit cards?

Well, seeing as how I have debt, I personally.