It’s done! You’ve filed your income tax return on time and now you’re taking a long hard look at how much you’ve earned during the year and what’s left in your bank account. Not a pretty picture? Help is on the way.
Peter Mahoney, president of Summit Salon Business Center, has been bringing his financial expertise to salon professionals for over 25 years. His down-to-earth approach combined with his ability to transform potential into reality, has gained him a reputation as one of the most effective trainers in the industry. And, according to Mahoney, there are some very specific steps you must take if you want to take control of your finances and grow your career smartly.
Track every penny
“To take a good picture of what’s going on with your finances, you first need to track all your earnings and expenses—say on a monthly basis,” says Mahoney. And, yes, that includes those coffee overindulgences and the questionable online shopping habits, too. “There really are no two ways about it: You should have a personal budget to sort things out first,” emphasizes Mahoney. There are a many templates available online for free that can help through the process.
Put your money where it pays
It’s probably not the first time you’ve heard advice that says pay yourself first, but there’s value in that phrase. There’s a big payoff to your discipline. Mahoney says, “You should automatically put aside 10 per cent of your gross income [before taxes] and use it to get rid of credit card debt first, then create an emergency fund that can cover three months of living expenses, such as rent, car payments and other essentials.” The more you do it, the easier it becomes.
Give yourself a credit limit
Temptation is always right around the corner. You see something you fall completely in love with and, the next thing you know, you’re at the cash, credit card in hand. Try to curb your appetite if you can’t pay cash. According to Mahoney, “All wealthy people live on cash. By never paying interest, some people can save tens of thousands of dollars during their lifetime.” Think of all the education or tools you can purchase to advance your career instead.
Increase your income
Because of the nature of the salon industry, if you are a stylist, colourist or nail artist and want to increase your earnings, you need to do a few things. You have to either raise your prices, bring in more clients each week, sell more products or find a way for your clients to leave bigger tips (think premium service).
According to Mahoney, in terms of earning potential, you’re in the top 20 or the bottom 80. But that becomes relative because “you can be at the top 20 at the beginning of your career and then slowly go down,” says Mahoney. “If you look at your pattern, you should be seeing a $10,000 increase per year. You stop growing because you have less guests and your average service price has flattened out. Don’t be afraid to increase your prices by three to five percent each year. This should be done consistently to avoiding having to do so suddenly.”