Three Numbers for Financial Clarity

Hello All,

Prior to starting my own business, I would receive a regular paycheque that was more or less predictable. This became the baseline for my spending decisions. And while I wasn't overspending, I also wasn't saving or contemplating my financial future.

Once I embarked upon small business ownership, one thing became immediately clear: I needed a much firmer handle on my finances. My income was suddenly less predictable, and I needed an actionable plan to mitigate the anxiety that came with that uncertainty.

After thinking about it for a little while, I settled on three things I could do, regularly. It was essential that they were simple and repeatable, as otherwise I would procrastinate and not do them.

Today, I’m sharing the three simple, repeatable actions I settled on. While these are essential for business owners, they apply to anyone who wants better control, less stress, and ultimately, greater wealth.

1. Monthly Spending

Understanding how much you spend each month is one of the best ways to gain clarity and reduce stress around money.

By assessing your living expenses (both fixed and variable), you get a clear sense of the minimum your business needs to bring in, what you can realistically cut if necessary, and how much is available for saving and investing.

Once you know this number, you have a much better understanding of your financial flexibility, and the uncertainty that comes from never having done this exercise starts to dissipate.

2. Emergency Fund

Your emergency fund essentially gives you breathing room.

As a business owner, income can fluctuate from month to month. Having a cash cushion allows you to make decisions from a place of stability rather than stress.

Thinking of your emergency fund in terms of months (not just dollars) instantly tells you how long you’ll be okay and helps you avoid making short-term decisions out of fear.

The general recommendation is 3 to 6 months of living expenses. But even if you don’t have that saved, simply getting access to a line of credit (if possible) can also help to reduce the anxiety of not having access to money when you need it.

Tip: If you have TFSA room, keeping your emergency fund in a high-interest savings account means the interest is tax-free.

3. Your Net Worth

Net worth is the big-picture view of your finances and is arguably the most important measure that I believe everyone should be tracking.

Net worth is simply everything you own minus everything you owe. It’s one of the most useful indicators of your overall financial health and gives you a baseline to track your progress from year to year (or month to month). It can also be deeply gratifying to watch it grow over time.

The benefit of tracking your net worth is that it replaces guesswork with real numbers, shows whether you’re moving forward or falling behind, and helps you make better decisions about saving, spending, and paying down debt. This in turn helps you feel much more confident and in control of your money.

Ronika