Mar 23, 2020
EPISODE 13- WHY YOU NEED TO HAVE AN EMERGENCY FUND
So far in this series "Getting your Financial House in Order", we've discussed establishing a budget for your business and personal life and how to figure out baseline costs of goods you are producing. Now that you are beginning to create a different mindset when it comes to how you run your business its time to start thinking about putting money aside into an emergency fund for both your business and personal life. DOWNLOADABLE PDF
Small businesses can experience seasonal down turns that they have to be prepared for and one way they prepare is by creating a "squirrel fund". Like the squirrel, a business has to set aside and save up funds in order to survive the slow times of the year. Like the squirrel who stores nuts away for the winter , we need to take on this similar approach and be prepared for the slow periods in our business or worse case we become ill or injured and are unable to work at all.
If the body is injured it is unable to perform at its highest ability hindering the artist from being productive and losing the ability to create their income. Has this ever happened to you? Have you cut or burnt yourself so badly that you were unable to use your hands for more then a day? I have!! About 10-years ago while working late one night, trying to wrap up an order of inside out hand pipes. Instead of being in bed there I was, groggy, exhausted from the long hot day in the studio and lacking the focus that I had when the day started. As I finished laying the last few lines of stringers inside a section of tubing ,I heard a crack in the glass and before I knew it the section of tubing fell off of the blowpipe in my left hand exposing my naked fingers to 4000 degrees of unforgiving fire. The flame made a direct hit across the three middle fingers on my left hand with pointer and middle finger receiving most of the blow. My nail beds were severely damaged as were the first knuckles just below my nails. The became the most severe burn and injury I had received in the first 10-years of my glass career and still the worse to this day. Fortunately I had just finished a large commission that had allowed me to put a little extra cushion in my bank account and if it wasn’t for that I would have been screwed. I spent the next few weeks doing very little work allowing my fingers to rest and heal only because of the financial luck I had on my side. I was able to pay bills and survive. After 3-months my fingers were back to about 90% and so was my production speed.
This brings us to the importance of the emergency fund. The emergency fund isn't just there for the business to survive. It is also to help continuing to paying your personal expenses while out of work..
Ideally you want to have a personal emergency fund of at least 3- months of expenses(food, water, shelter, etc) which by keeping a budget you can then see exactly how much you should have set aside to cover the essentials. If you currently do not have anything put aside for emergencies then what do you do? This episode isn't about solving that problem. My goal is to help you get proactive and understand how simple this can be as long as you are managing your finances like the CEO we talked about in the previous episodes. If you know how much it costs to run you studio then you should know how many pipes you need to sell monthly to be able to not only cover your studio costs, but also pay your business back the expenses in material that were spent to manufacture the items , pay yourself a little salary or piece work as well as have some left over that can be allocated towards an emergency fund.
When it comes to paying
yourself you would know how much you need to make if you figured
out your personal expenses and how much extra you would need to pay
yourself so your not just making ends meet but also having
leftovers for your emergency fund and living the lifestyle you want
to live. Now this isn't just going to happen over night. This will
take some time if you haven't started yet but all you have to do is
start. Start with the personal budget first. Then once you’ve
figured that out figure out your studio budget. Once you have that
done then figure out your baseline costs to manufacture
everything you create and then, only then can you truly be able to
start putting funds away for that necessary squirrel fund. So
lets figure out how to do just that.
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