Budget tips for private practice lactation consultants
Your money, your problems
When you’re just starting out in private practice, you may wonder if you’ll ever get big enough to need a budget. Trust me—it’s never to early to set up good budgeting practices. Here are some tips that will help you get your money organized so you stay on top of the health of your business.
Pay taxes first
Yep, that’s right—before any of that money gos to you, you’re going to need to set aside some to pay the taxes you’re going to be required by law to pay. Those could be federal taxes set at an income-based percentage, state or provincial taxes, possibly sales taxes if you’re charging your clients for physical goods you provide to them, and some places even charge you a lovely little thing called self-employment tax, a penalty for trying to work for yourself.
While your individual tax burden is going to depend on so many different factors, like your expenses, deductions, and applicable tax laws, a good rule of thumb is to take 30% right off the top. Take that money and put it where you can’t touch it. Come tax time, you may need to add more, or you may find that you’re able to give yourself a refund. But don’t leave this up to chance—set a substantial amount of money aside right now.
What do you consider a reasonable hourly wage after paying taxes? For example, if your home visit fee is $100 for two hours and you pay $30 to taxes, you have $70 left. Should all of this then become your take-home pay? Maybe not. You could tell yourself that your hourly rate is $20, and that leaves you with $30 for the next category.
For a deeper dive into this concept, I highly recommend Profit First. I’ve read a ton of personal finance books, and this was the first one that made sense for the way money flows (or doesn’t) for entrepreneurs. I’m also a big fan of Worth It by Amanda Steinberg.
Set something aside for future expenses
Even when things are slow, even when you’re just starting out, consider setting aside some of your income towards future expenses. This isn’t a reserve fund, by the way—that’s too tempting to dip into now. Instead, create buckets for your money so that you’re giving it a future job. For example you could take $10 and put it towards the next two months of G-Suite. The next time you see a client, put $10 towards physical supplies.
I personally love the online tool You Need a Budget, which helps you move your money forward to prevent being surprised by unexpected expenses. I’ve been failed in the past by other budgeting methods that presume that you always know how much money you’re going to make. And even if your private practice income is still supplemental, you can get started on healthy habits that might even make your money go farther. I use it for personal and business budgeting.
Pay your expenses and make necessary cuts
So you’ve got $20 left. How far does this go to meet your business expenses? Remember, you’ll need to pay things like:
Charting platform fees
Second line for business
Physical supplies like exam gloves
Recertification fees (save a little every month because 5 years will fly by)
If these fees add up to more than what you’ve got left for expenses after paying taxes then paying yourself, you’ll need to make some decisions. Do you cut down on a service? Or do you raise your fee?
What you’re not going to do is set aside less for taxes or give yourself a cut in pay. You chose that hourly rate for a reason, and you shouldn’t work for less than what you’re worth.
In order to maximize your tax deductions, link your business account to Quick Books Online. You’ll be able to do your own bookkeeping and link a professional bookkeeper and tax accountant if you need to.
If you have anything left
And I hope you do! It’s time to start attacking debt and saving for your retirement. I know from experience that these things may feel like extras, and you may be tempted to kick them down the road. But by organizing your income to cover your taxes, your salary, and your expenses, you’re going to see what’s possible. And again, if you’re not making enough money to get out of debt and plan ahead, consider raising your rates or reducing your expenses.
Find out what essential expenses can be paid out of your business account
You may have some necessary or essential expenses that you might be allowed to pay out of your business account. An accountant is the best person to consult on this, to find out if you can use your business account to pay things like mileage, health insurance, loan payments, or other expenses where it might help you to bypass your personal account. Laws differ from state to state and from year to year, so be sure to ask a professional. These expenses would come out of what you pay yourself.
Your money, your freedom
When you tackle your personal and business finances head on, it might be a little terrifying. You might have to make tough choices and you might not always like what you learn about yourself. But just like you know it’s worth it to persevere through early breastfeeding struggles, it’s worth it to invest in yourself by getting your money organized.
ABOUT THE AUTHOR
Annie Frisbie, MA, IBCLC is the creator of the Lactation Consultant Private Practice Toolkit, a collection of books, resources, legal forms, training manuals, and workbooks designed to help private practice lactation consultants build a private practice that’s ethical, profitable, sustainable, and enjoyable.
In 2018 she was honored with the US Lactation Consultant Association's President's Award. Through her popular blog, online store, podcast, and one-on-one coaching, Annie has helped thousands of lactation consultants grow their businesses with simple systems that make their lives feel easier and more joyful!