Back in March I wrote about my family’s Debt Freedom Plan. We adapted Dave Ramsey’s 7 baby steps to reflect our lifestyle as self-employed small business owners. I added a few steps (our total is 12) to cash flow some upcoming business expenses and to celebrate the huge milestones along the way.
Our plan is going to take us several years and I think celebrating will motivate us when the going gets long and tough.
Today I am proud to say that we have completed our second step: Increase business emergency savings to a specific number. Being self-employed, we need to have a cushion for business expenses in the event that something happens, such as a tough sales month or our furnace/AC breaks.
Over our 14 years in business, we have had to rely on our savings a few times to help cover expenses during tough months. It happened in 2006 and again in late 2012 to early 2013. By summer 2013, our savings was at an uncomfortable level. We tightened our budget, got laser focused on turning around our business, and shoveled any extra cash into our savings. Our current savings is not at a true emergency fund level of 3-6 months, but further down our plan, we will save up to that level. Our current amount is enough where I sleep much more soundly at night.
We are now on to our third step: Cash flow necessary business expenses. The server in our office is about 10 years old and has reached capacity. Unfortunately they’re not cheap. We also have some renovations and equipment that cannot wait and we need to cash flow.
The good news is our business is trending up, so we will continue to transfer any net profit at the end of every month towards our third step.
My husband and I were so excited to finish our second step. It felt like it was taking forever to get to that point and to be honest my husband was feeling burned out. But reaching #2 has given us new motivation to keep plowing away at our business and our Debt Freedom Plan.
What financial goals are you working towards? Are you making headway with those goals? Let us know in the comments.