How Overspending Can Affect Your Small Business

We tend to think of overspending as a personal issue. A scene from Confessions of a Shopaholic might come to mind when you read the word – we think of this behavior as relegated to emotionally-motivated shopping sprees. But the truth is, emotional spending, and the resulting overspending, can easily happen in our business finances too.

What Does Overspending Look Like in Business Finances?

Overspending in business can show up in a variety of different ways, but there are two keys to recognizing it:

1)The spending behavior is emotionally motivated.

The emotional landscape underlying overspending is often one of insufficiency – we feel like there’s something about our business (or ourselves) that is lacking, so we rush to spend to make up for it. This can manifest as easily-labeled emotional issues like impostor syndrome, or perfectionism, or the myth that you need to “spend money to make money.”

As a general rule, it can be helpful to do some emotional inquiry around your finances. When making spending decisions, try asking yourself, “What emotions are coming up around these decisions?”

2) The spending on one area of the business is detracting from others that may also need some monetary resource.

This can be hard to spot. Especially for small business owners, there are often not clear industry standards for how much a business “should” spend on a particular category, and even if these do exist for your niche, they may not be helpful or accurate. However, if there is a clear difference between the amount you’re spending in one area and others, and there is an emotional component to that spending, then it may be overspending.

How Can Overspending Affect Your Small Business?

This is the interesting paradox of overspending – it creates deprivation. Karen McCall summarizes this idea beautifully in her book Financial Recovery when she explains how overspenders are likely to spend it all on “pretties” while neglecting the “necessaries.” This can show up in a business in situations where certain pieces, like aesthetic branding or top-of-the-line equipment, are easily prioritized, but there isn’t enough cash on hand to pay for a business license or save for tax expenses.

The result is not a financially functional business. While there are some elements covered, without a money system that prioritizes important logistics and gets you paid, the business will soon become draining to run and simply eat cash.

You Know Best

It’s important to remember that when it comes to your business, you are the best expert. Nobody can decide that you’re overspending on a certain category except you. A good bookkeeper or a money buddy can help observe financial patterns in your business and give you some advice, and this can be an extremely helpful resource! But ultimately, you call the shots around spending in your business – it’s important to remember that and to stay confident in your choices.

If you liked this article, you’ll probably enjoy my free EBook, Reach Your Life Goals: A Business Owner’s Guide. Download a free copy here.

How Your Relationship With Money Affects Your Finances (and What You Can Do About It)

Your relationship with money can make the difference between a steady stream of income and a trickle. How so? Because the way you relate to money, the beliefs you hold around it, etc. – these things affect how you pursue money and how you make decisions with it. Today, let’s dive deep into how your relationship with money affects your business and personal finances, and what you can do to improve that relationship.

How Do You Relate to Money?

If you want to get a quick pulse on your relationship with money, think about money or say “Money,” out loud to yourself, and then keep track of what emotions come up. More than likely, there will be several that come up in a quick succession: anxiety, avoidance, excitement, compulsion or repulsion, etc. The goal with this exercise is not to suppress or judge any of the feelings as good or bad. Simply take note of them as they come up. Try this several times to get a full emotional picture.

How You Relate to Money Affects Your Finances

If you’re anything like most of us, anger, shame, and elation may have made an appearance during that exercise. Other common visitors are anxiety, avoidance, and a vague feeling of worry. All of these emotions influence our behavior around money. They dictate whether we’re an over-spender or an over-saver, whether we’re bold with our investments or cautious. In our business and personal finances, if we feel strong repulsive emotions like shame and stress, we may avoid looking at our money all together. This can lead small business owners to live in a state of perpetual vagueness around their finances.

Many of the emotions we’ve examined are negative ones, but your relationship with money can also include positive emotions that can be leveraged. Elation, for example, can motivate you to take action and claim financial agency. Personally, when I think about money, one positive thing that comes up is the way that money gives me choices in life. Associating choice with money has long helped me maintain a positive relationship with my finances.

For many of us, the goal is to simply reduce the stress involved in our finances, so that we can begin to handle them from a more rational place. Acknowledging all the emotions housed in our relationship with money is the first step.

How to Improve Your Relationship With Money

Now that you have a good idea of your “emotional money picture,” and an understanding of how it effects your financial behavior, let’s talk about how you can start improving your relationship with money. This process involves looking at your life over the longterm, and examining what experiences and people shaped the way you feel about money today. There are a couple different ways to do this:

  • Journal prompts are a great way to dig into this and examine your past with money. To get things started, I suggest trying out the prompt “People with money are _____.” You can fill in the blank, and then write about the experiences or people who informed this opinion. Try not to edit yourself. Just observe the feelings and memories that come up. After you’re done, you might take some time to examine what you’ve written and see if you can find examples from your life that contradict those beliefs.
  • If you aren’t the journalling type, talk to a money buddy, confidant, or coach. Make sure this person will hold nonjudgemental space for you. Try doing the exercise above, or shape your conversation in such a way that you can really get in there and see the roots of your money beliefs.
  • Reflect on how your financial situation has changed over the years, and in recent times due to COVID-19. Sudden changes in financial circumstances can trigger new emotions around money, and bring up old ones. This interview I did with photographer Jennifer Graham makes a great example of how the pandemic has effected people financially in the short term, and what coping strategies can be employed around that.

A Note on Money Beliefs vs. Societal Circumstances

Before I wrap this up, I want to acknowledge the current state of our society and economy. While more aid for small businesses has recently been approved, we are living through an economically damaging pandemic. There are likely many systemic factors effecting your experience with and relationship to money, including race, social class, gender, etc. I believe it’s important to take this context into account when working on your relationship with money, while not letting it discourage you from claiming financial agency.

I hope this has been helpful. If you’d like to have these conversations with a nonjudgemental accountability partner, I offer as-needed personal financial coaching sessions, or 3 and 6 month business finance coaching engagements. I have guided many clients through the process of working on their money beliefs, and would love for you to set up a free Financial Self Care Consultation to find out if we could work together well, too!

☮

Angela

Image: Natalie Breeze

 

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