We’re all human. Humans make mistakes. Therefore, we all make mistakes. As you can see, I took logic in college. Don’t worry though, you can recover from (and maybe even prevent) mistakes.
Here are the top mistakes I see streamers making in their business and personal finances. If it’ll make you feel better as you read it, everyone makes the personal finance mistakes and most business owners, regardless of industry, make the business mistakes.
Business Mistakes
Not separating business and personal accounts.
If you’re running a business you’ll make your life worlds easier by keeping it separate from your personal finances. They are of course tied together but they are separate in important ways.
First, you pay taxes on what the business earns, less what it spent to earn that income. This means that tracking business expenses is key. Unfortunately, you can’t write off your personal expenses. If you run everything through one account then it’s a lot harder to separate business and personal expenses come tax time.
Next, if your business is to the level of forming an LLC then you risk losing limited liability protections. One of the things you need to do to maintain them is avoid “piercing the corporate veil”. Part of avoiding that is not mixing business and personal expenses!
Finally, it makes the next mistake a lot worse. It’s harder to track business stats if they’re mixed with personal ones!
Not seeking data (include relevant stats including income statement and balance sheet)
You need to know your business stats and have ready access to them to be a good business owner. Those stats include your company’s income statement for each month, quarter, and year and your balance sheet. Your business will also have other relevant metrics which are up to you to come up with. For example for a streamer, it’s good to know things like your average concurrent viewership, your engagement level for sponsored content, and your conversion rate on affiliate details.
Not only do you need to know this information but you need to be able to access it quickly and effectively. This means using software that will keep track of it- one good example would be accounting software. You should take the time after each sponsored campaign to compile your stats and should re-evaluate your affiliate deal stats at least quarterly. It’s work that sucks to do but it’s important to you securing future deals. Your potential sponsors care about this kind of information so you should as well.
Not spending to grow + protect
It sucks to spend money on something you could do yourself or that provides a mostly intangible benefit. However, as a business owner it’s up to you to find way to run your business in the most effective way for your goals.
Often, this means spending to outsource things you don’t have the time, interest, or knowledge to do. This could be paying a lawyer, a contractor to do video editing, an accountant to do taxes, a manager to source and vet deals, or a planner to handle your finances. This can help you grow by freeing up your time to do the most important part of your business- streaming!
Similarly, it’s a big mistake to skimp on protecting what you already have. Here, you’ll want to look at things like insurance (health, auto, disability, renter’s/homeowner’s), legal fees to protect your business, or someone to manage your business relationships. It would really, really stink to lose your streaming business because of healthcare expenses you can’t afford or legal trouble you didn’t predict.
Personal Mistakes
Not having enough cash on hand.
Cash is king. Even if you’re earning a lot of money you need cash on hand to manage the timing of income coming in and expenses going out. This is especially important if you’re self-employed since you rely on yourself for your income. That’s because something that could cost you money (healthcare expense or auto accident) could also reduce your ability to earn income.
If you’re self-employed I highly recommend keeping between 6 months and a year of expenses in cash. It’s a lot, and it doesn’t really grow which stinks, but it’ll help you deal with bad times. It also gives you the flexibility to put cash into an unexpected and promising opportunity.
Not starting to invest now (even if it’s a little to build the habit)
First, it takes a lot of time to build good habits. The earlier you start the earlier you have the habit built. Therefore, you should start investing, even if it’s just a little bit. Set up an automated transfer to an investment account each month, have it automatically invested in a reasonable investment, and check back in a year. You might be surprised at how much is in there.
Second, the earlier you start the longer your money has to grow. Check out this article on why you should start investing early but the difference can be staggering. Trust me, read the article.
Not tracking things
This is the same as tracking for your business but on the personal side. You should know your income, expenses, and balance sheet. Sites like Mint are great for helping you to do it for free. If you want something a little more robust (and still free!) then you can get free access to my planning software.
Being under insured
This is quite similar to the business mistake. It’s understandable to want to spend the least possible on insurance. After all, it provides protection against potential expenses but doesn’t actually give you something tangible. Regardless, it’s important to have enough of the right kind of insurance. I won’t belabor the point on the types of insurance you might have but it’s worth paying to secure what you’ve already accomplished.
Conclusion
Mistakes happen. There’s no shame in it! Your chance to dramatically improve your business and personal finances comes once you’ve realized there’s something to fix and the you actually fix it.
You don’t have to figure this out alone. This is what we do- help streamers make great money decisions. If that’s something that sounds interesting to you reach out me or schedule some time for a free consult. You can check out what I do here.
