Percentage of Income to Reinvest in Your Business and Yourself
Before you read this, understand I’m not someone who looks for any excuse to let money slip through my fingers. I don’t easily enjoy seeing my bank balance drop – even if it’s for the sake of reinvesting. So understand that if I see the merit in knowing how to reinvest – so definitely should you.
Until very recently, my goal was to keep as much of what I earned as possible. If I could get away without spending money, I wouldn’t. I’m just glad I learned the error of my ways while I’m still fairly young.
See, when you have a closed fist, it’s hard for anyone to give you money. I began to realize that without reinvestment, it’s very hard to grow my income. Yes, it was possible but at the cost of time and fairly slow growth.
Time is our most valuable asset. That should be what we protect.
The following post explains how we can use our money to earn much more. The post will explain how much to reinvest in which areas of your life.
Reinvest in Business
Accelerating onto a busy freeway takes a bit of fuel. You must accelerate, match your speed with traffic, merge into the traffic, settle into a lane and then eventually set your cruise. Your instant MPG will be pretty low during this fairly intense driving experience. Especially if you live in Los Angeles. But once you get going and are able to set the cruise control your MPG rises. But it still requires fuel to keep going! This is similar to operating a business.
When you first start a business, it takes startup capital. The business may even turn profitable in a hurry. But if it stagnates, it’s usually because you’re not giving the engine enough fuel. If you want your business to keep purring down the freeway, you’ve got to put more money into it.
I personally say 50%. There’s no hard and fast rule but reinvesting half of the business income back into the business is a good rule of thumb. It’s an easy figure to remember. And it keeps you from cannibalizing the business by taking more than you give it.
I’m sorry if this sounds like a high number. I’m also sorry if 50% of your current monthly revenue is $50. The reality is that means you’ll probably want to reinvest 100% until things get going. That’s why it’s always a good idea to either have savings or another source of income before starting a business. Here are some areas of your freelancing business that could use money:
- Site Design
- Help with Coding
- Faster Hosting
- Writers for the Blog
- A VA/Email Handler
- Social Media Manager
- Attend Conferences
Reinvest in Personal Growth
The magic number for what to spend on personal growth annually is 3%. If you make $50,000 per year, that means you should reinvest $1,500 back into yourself. Reinvesting back in yourself promises growth each year. That growth is meant to flow into every aspect of your life. Here are some ideas on what to use the money towards:
- Personal growth books
- Gym membership
- A fitness tracker
- Dinners with mentors (or who you want to become a mentor)
- Hire a dietitian
- Thank you letters (use good paper and actual send these via mail)
- Online courses about anything that interests you
- Travel to a place where you can learn a way of life, a style of working, anything that will enrich your life
- Dates (Like dinner dates with potential lovers – not the delicious fruit. Although the fruit makes a healthy snack.)
This is hard at first. I know. In regards to my business and my life, I’m pretty new at this whole reinvesting thing. But I see the merit. My income is growing and eventually 50% and 3% will be incredibly large sums of money. I’m going to have to get really creative in order to spend so much.
How much do you reinvest?
Note: Investing in the stock market can be a safe bet. But anyone who’s read this far into this post can surely beat the returns of the stock market. Think about it. If you read one book that gives you one nugget of advice to become better with negotiating – that skill can bring you lots more than the stock market each year.