How to Pay Yourself Without Killing Your Business

You didn’t start a so you could work for free

So why do many fitable small- owners treat their paycheck an afterthought

Fear of failure could be part of it

With roughly half of es closing within their first five years[0]U

Bureau of Labor Statistics

Survival of private sector establishments by opening year

View all sources, some owners might feel pressured to pour everything back into their to keep it afloat

But consistently underpaying yourself isn’t sustainable, and it can sabotage you in the end

In future you should be part of the plan from day one

See Your Loan Optionswith Fundera by NerdWalletWe’ll start with a brief questionnaire to better understand the unique needs of your

Once we uncover your personalized matches, our team will consult you on the cess moving forward

First, make sure your is financially readyIt’s not as simple as starting to pay yourself as soon as money starts rolling in

Instead, the best apach begins with a solid foundation

Helen Dao, certified financial planner and senior vice president of investments at Stirlingshire Investments, calls out two milestones that can help indicate you’re ready to put money back into your own pocket: bringing in consistent fits and having a cash cushion

If sales are steady month over month and you can reliably cover operating expenses with money left over, that’s a good sign your can support a regular payout, Dao says

Have an emergency fund in place that gives you a buffer if your hits a bump in the road

Dao recommends having six to 12 months’ worth of expenses stashed away

But not every owner hits that comfort zone at the same time

It could be a year, it could be five years. “Generally, it all depends on the person and how aggressive they are,” Dao says

Pay yourself a reasonable amountIdeally, you’ll want to pay yourself enough to cover living expenses and personal savings goals without shortchanging your

That means leaving room for taxes, growth and any seasonal dips or big expenses you anticipate

Any leftover fits after that

Consider paying down outstanding small- loans, boosting your personal savings, making a charitable donation or (responsibly) splurging on something that makes you or your family happy

There’s no one-size-fits-all formula to paying yourself

How much you take out will depend on your ’s type, fitability and your personal needs

Pay future you, tooMany small- owners are apprehensive putting fits toward their retirement or other personal investments, says Jordan Rodriguez, CFP and founder of Chagrin Valley Strategies. “When there's excess cash flow or more money that can be spent somewhere, owners are much more tempted to reinvest that in the growth of the because it's something that they're familiar with, something they have control over,” he says

But you have to think of it diversification, he says

Your is the same, he says

What happens when you are ready to stop working

Start saving for retirement early and often, so your future isn’t built on a maybe

Put your retirement savings on autopilot, Dao recommends

Funnel a percentage of revenue into your account regularly, she says

That way, you don’t have to worry trying to find extra cash lying around at the end of the quarter to fill your personal retirement savings bucket

And don’t be afraid to seek expert advice. “Starting a is one of the most exciting and challenging journeys you'll ever go on, but it's also important to make sure that you invest money in the right fessionals to ensure things are set up perly from the beginning,” Dao says

Be flexible when it countsConsistency is key when it comes to paying yourself

It helps you stay on top of personal bills and financial goals

But running a often means riding out financial highs and lows

That’s why it pays to stay flexible

Padding your emergency fund from leftover fits or establishing a line of credit can further help you weather slow seasons or surprise costs

And when things are going well

Don’t be afraid to give yourself a raise

As your grows, your paycheck should grow with it

The authorRyan BradyRyan Brady is a lead writer on the small- team at NerdWallet and authority on small- lending