How to Set Up Your Finances Like a CEO

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Managing finances to prioritize your profitability and long-term goals is something most Fortune 500 companies have in place, so why not you? Join us in this episode as money habits coach TJ Wey walks us through how to set up your business bank accounts just like the pros.

TJ Wey (zhi/zir) helps entrepreneurs take their relationship with money from overwhelming to exciting. If you’re interested in Profit First, but don’t know where to start, zhi is here for you. As a first-generation Chinese-American, TJ spent zir childhood translating culture, language, and mindset for zir parents, and zhi’s excited to bring that skill to making money make sense!

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The episode:

Katrina Widener: Hi everyone. It is Katrina Widener, your host of the Badass Business Squad podcast. Today, I have TJ Wey on. Thank you so much for coming.

TJ Wey: Thank you for having me.

Katrina Widener: We are going to be talking all about your business bank accounts, which I'm really excited to dive into. I know that this is a topic that a lot of people are probably like, "Well, when I started I did X, Y, Z, but I don't really know if that was the right choice or not." So we're going to give you all of the information, but before we dive in TJ, would you mind just introducing yourself to everyone and letting them know who you are and what you do?

TJ Wey: Sure. Hello everyone, my name is TJ way. I am a money habits coach. I help business owners approach their business from a place of abundance and change their mindset in a way that allows them to escape the hustle culture and the toxic expectations that they grew up with around money.

Katrina Widener: Thank you for introducing yourself. For anyone who listens to the podcast or knows me, knows that that is very, very much aligned. I'm very anti hustle culture. So I'm very excited to have you on. As I mentioned beforehand, we're going to be really talking about your bank accounts as an entrepreneur and how you get them set up, why you set them up in specific ways, how this is going to benefit you. And probably even a little bit of just the mental state that you need to be thinking about your banking, as opposed to just autopilot or as if you're a solopreneur. And I'm really excited to dive into that.

So the very first question, I think it's probably best with such a short podcast to just dive right in. How would you suggest when someone is either going in for the first time and getting their bank account set up, or if they're like, "Okay. I've been in this game for a while, but I didn't really have a strategy at the beginning," going in and changing their bank accounts?

TJ Wey: Sure. So first thing to know is that banks can be very frustrating to work with. So bring your patience and be prepared to supply a lot of documentation around your business. The banks want you to already be an incorporated entity, whether or not that's an LLC or a corporation or whatever works in your jurisdiction. Because in the US you need to also then apply for an EIN. So there are a couple of steps you gotta take before you can actually open a business bank account, which you really need because it's a legal protection thing.

If you're intermingling your personal funds with your business funds, if somebody sues your business, they can sue you for everything you personally own. You do not want that. So the little bit of frustration, it usually takes I've seen as long as two weeks to open a business bank account, is worth it because of the opportunity where somebody could try to sue you for more than your business has. That is no fun.

Katrina Widener: Yes. And I will also say for people, like when I first went and got my bank account set up, my business bank accounts, honestly I think I just called someone at my local bank and I was like, "Hey, I want to do this." And he was just like, "Great. Let's make an appointment." And then I went in and we did it. So for anyone who's like, "I hate talking to banks. I hate talking to bankers," Just making the call is the first step, and it gets easier from that point forward.

TJ Wey: Yes, it is probably the hardest step for most people and it depends on their bank. Usually people like to go to the banks that they already have relationships with, and I am perfectly aligned with that, except when they want to charge you fees for every single account you have open. Which when you're just starting out, really sucks.

Katrina Widener: Yes. Yes. I also am able to say thankfully I happen to have someone who is like, "Let's make sure you're picking the right bank accounts. Let's make sure you don't have all of these fees." So I'm glad that you mentioned that because not everyone's going to do it, and it's important information to have.

So someone's like, "All right. I'm going to do this," because nobody wants to get sued for everything they personally own. What would be the bank accounts that you would suggest that they have?

TJ Wey: So at a minimum I suggest having two checking accounts. One that's for your operating expenses, the money coming in and out of the door. And the second one is to set aside your taxes. So those are the minimum. If you are familiar with fortune 500 companies and how they bank, they actually have this thing called a Chart of Accounts. And they have multiple accounts. They have one where money comes in. They have one where money goes out. They have one to pay their rent. They have one to pay their taxes, a different one for every kind of tax they need. So it's not unusual if you want to open up multiple accounts. And if your banker makes faces at you when you do that, they probably don't own a company.

Katrina Widener: Yes! Yes. I mean when I opened my accounts, I know you and I have talked about this previously I followed what's called the Profit First method. And if anyone wants any information specifically on that method, there is a book. But I have a bank account for incoming money. I have a bank account for, exactly what you're saying, for expenses. I have a bank account for taxes. I have a bank account for compensation so that I can actually give myself a paycheck.

TJ Wey: Yay!

Katrina Widener: And then I have bank account for profit so that I can actually make profit, right? It's actually interesting because when I think about it, when I actually sat down to get those bank accounts set up, the banker was kind of like, "All right, that makes sense. I'll move forward with it." But even now I'll go in and be like, "Hey, I have this check I want to cash," or whatever. And they're like, "Uhh what bank account does it go in?" And I was like, "Well we'll put it in the one that I said on the thing," right? Any push back you get is normally mainly just because they don't understand, and you can move past that pretty quickly.

TJ Wey: Yes. This is your business, you run the ship. So if you do get somebody who makes faces at you, then either ask for someone else or let them know that you know what you're doing.

Katrina Widener: Yes. So we have the taxes bank account and we have the expenses bank account. Would you mind going into a little bit more detail about why those ones are so important and why you would recommend them first?

TJ Wey: Sure. So I always tell people to set aside the taxes one, because what happens is when you go to do your taxes in April, they will have already spent all of the money in their bank account before they find out what they owe Uncle Sam. So somewhere between January 1st and April 15th, you may have made a lot of money in the past calendar year, but then you made investments in your business. You told yourself you were growing your business and you forgot that Uncle Sam wants a cut of your business as well.

So ideally what you're doing as you have money coming in the door, is you set aside a percentage of that money for Uncle Sam immediately. You don't try to guess how much you owe. Just take 15 to 20% depending on what country you're in, what your state taxes are, whatever that is. Put it into a separate account and do not touch it.

Katrina Widener: Yes. Yes times a million. Yes, yes, yes, yes, yes. Also guys, if you're paying quarterly taxes this is helpful for that too, because then you have a specific place and you can take that from and not have to worry about it.

TJ Wey: Yes, and you can use that money to pay your tax accountant. And if at the end of your tax filing, you discover you have extra in that account, make sure that it's really extra and not taxes that you are due for the first quarter. But you can pay yourself a tax time bonus if there is money left over. So it's not just sitting there languishing in the account.

Katrina Widener: Yeah. Yes. Okay, so how about the expenses account? Why is that one that you would find so important?

TJ Wey: So I like having a separate expenses account because that way at a glance I can tell when I want to make a new investment in my business. If I see a nice shiny offer that I want to take advantage of, I know what is at my disposal to spend that also gives me guard rails to not accidentally spend my personal salary, right? I've got a separate bucket for the personal salary. I've got a separate bucket for an emergency fund for the business. So even though I know that say I had $3,000 come in yesterday it does not mean that I have $3,000 to spend. Because first of all, I owe taxes. Second of all, I want to pay myself. And I do like to maintain an emergency fund. So a portion of the money goes to all of those things, and then shows up in my expenses as my one-time option. So if I don't have the cash for it, I have to make the conscious decision instead of the automatic one, right? You actually have to look at it and go, "Oh, I do not have that money. Can I wait? Or will I steal the money from another bucket?" And you have to consciously make that decision.

Katrina Widener: I absolutely love this because I talk a lot with my clients, and on this podcast, about being proactive instead of reactive. And this is just a great example of how you can really be proactive with your finances instead of being like, "Oh I have this money come in, and now where did it go? I thought I was making X amount a year, but it looks like I only have Y amount in my bank account. So what happened?" And so I really appreciate that it's just another way that we can be proactive in our businesses.

TJ Wey: Yeah I love doing this because it forces you to slow down. Because another thing I've heard, is you have money coming in the door and for businesses that have business debt, the business owner immediately goes, "Oh I made a sale and I've already spent the money. So it's like I didn't make a win at all."

Katrina Widener: Yes.

TJ Wey: Which is very depressing and no good for your mindset. Because suddenly you are in this grind hustle culture where you're trying to pay somebody else off. Versus, "Hey I made a win. Let me celebrate that. I am amazing at what I do and I can keep doing it." And then after you've taken the time to digest that you've had that win, then you can take a portion of that revenue and pay down your debt.

Katrina Widener: I do also really appreciate that you're making that comment too. This is something that I've even worked with, with coaches in the past where it's been like, "Oh you made this client sale," right? And instead of allowing yourself to celebrate that, in your head that money has already gone to compensation and expenses and taxes, et cetera, et cetera. And so it really is aligned with some advice she gave me which was, "Give yourself a percentage. Maybe it's 5% of every single sale, and have that 5% go to something fun for you. So then that's also another way to incentivize yourself to go out and market, or to go out and make sales." Because you're able to say, "Well I really want this thing just because it's fun. So if 5% of my sales is going to go toward that thing, I'm going to go get another sale." And then you're like, "Oh I got this thing now. I'm so excited."

TJ Wey: It's the positive reward instead of the negative scarcity model where you're trying to pay someone else. That's really part of the problem, is your goal should be to pay yourself first because you're the one doing all of the work in your business. You just made that sale, so you deserve something for it. And it is not selfish to get yourself a reward, even if it's just that expensive latte that you don't normally get, right? It's important to recognize that you are what makes this business run and you deserve to be able to enjoy the fact that you've had a win.

Katrina Widener: Yes, I 100% agree and I absolutely love that. So when you are working with clients on setting up their bank accounts, what is normally the mindset that they need to step into? What would you say is one of the biggest mindset, maybe barriers or blocks? Or whatever language you might use, that would really be in their way or be the first thing that you guys are gonna work together on?

TJ Wey: So usually it's "Why do I need this many bank accounts?" But that's part of my methodology. We actually talk about what your financial goals are for your business and in your personal life first, and review the types of goals you have that you want to be able to set aside money for. So when I approach it from that perspective, if say I'm working with somebody who prioritizes their retirement. Then we go, "Okay if it's such a priority, would you not allocate a bank account to that money?" and usually after that question is an easy yes, because suddenly there's a reason. You're not just opening six, seven bank accounts just because a book told you to, or because other people said, "Hey, this is a great idea but I'm not going to explain why." You have a personal reason that fits into your financial picture.

Katrina Widener: I absolutely love that. It's just a really intentional way to go about business as opposed to like, "Well this book told me to do it." It's like, "No this makes sense for me, this makes sense for my goals. This makes sense for what I wanted to do with my life." I absolutely love it.

TJ Wey: Yeah, and it also provides a clarity and guidelines, right? It gives you some bumper rails. Because most of us come into business without realizing what we've just signed ourselves up for, and it's nice to be able to say, "Okay but now I have a structure that I at least I'm not making decisions willy-nilly and feel like I'm flying by the seat of my pants." Because this is how large corporations run their businesses, is with the multiple bank accounts, with the intentionality, with making sure they have the funds in the right place to pay their bills. And there's no reason that we can't at least learn the parts we like from larger corporations and apply them to our small businesses.

Katrina Widener: Yes. Okay, so we have talked about bank accounts for taxes, for expenses, for retirement you mentioned. What are maybe some of the other common ones that people, depending on their needs and their intentions might add?

TJ Wey: So the one that comes up to mind for me is I actually have real estate. So I have a rental property. It's a little different with real estate, the types of buckets you might want to set aside. So the way I do my rental property is I have the operating expenses, but then I also have the capital expenses. So operating is for the regular maintenance, the AC checks in case something breaks, needing to call the plumber. That's where that bucket comes from.

And then I have a separate bucket where I'm literally saving up the money to do a remodel. And I actually talked to my tenant about it like, "Listen, you're paying this rent and a portion goes into the cost of remodeling your bathroom. So when this gets to the number where we can reasonably remodel your bathroom, we can go ahead and do that upgrade for you."

Katrina Widener: That's awesome, that makes a lot of sense. And it's interesting cause it's one of those things that I'm sure people are like, "Oh now that you say that, that makes so much sense. But I would have never thought about that on my own." I mean it's basically just saying, "The money for this is here. The money for that is there, et cetera, et cetera."

TJ Wey: Yeah.

Katrina Widener: So for anyone who is listening who is like, "Okay you sold me. I want to have all these bank accounts, but what is the first step that I should take? How should I go about planning for this or figuring out what I need?" What would be the first step you would recommend for that?

TJ Wey: So I would go to whichever bank you already bank with personally, or if you already have a business bank account, go to their website and double check what requirements they have for opening bank accounts.

And then second, I would check to make sure what it takes to maintain that bank account without hitting fees. Some have transaction limits, some have minimum balance requirements. All of those things factor into whether or not you should really bank with that bank while using the multiple account model.

Katrina Widener: So when they're sitting down trying to figure out which bank accounts to create, what would you recommend for that point in time too?

TJ Wey: So I want people to think about where they spend their money and what's important to them, right? Especially if you've already been in business for a while, you can go back through your bank statements and see where your money has been going and put them into high level buckets of what makes sense for you. So you can say, "Oh I spend a lot of money reinvesting in my business, or I spend a lot of money in training myself on how to run this business. See what those are and if they are meaningful to you, if they're important to you, then consider opening a separate account just to make sure you have funds for that particular activity.

Katrina Widener: That makes so much sense. I mean obviously I'm a business coach and my mind immediately goes to that. But for me, I work with business coaches myself or group programs and to be like, "Oh well this is something that I want to be intentional about. I want to have that income, or I want to have that money in order to be able to spend it in that way." Maybe opening up a bank account just for education, right? And you can put a little bit toward that every single month, and then when you have an amount, then you can spend that on your education. So that makes so much sense, cause I can see how very clearly combing through your back expenses will be a really, really clear map to where you're going to be spending your money in the future.

TJ Wey: Definitely. One fun thing I would suggest though, in terms of things that maybe people haven't been able to spend money on yet is payroll. So what I like about having separate bank accounts is if you open a payroll account and just put yourself in the practice of putting money in there as if you were going to hire that VA for five hours a week at a set rate. Do some hypothetical math and say, "How much would this cost me if I were to go ahead and hire somebody for this number of hours at this rate?" And put yourself in the practice of filling up that bank account. You don't have to leave the money in there, but doing it will prove to yourself that you are financially stable enough to be able to afford that VA that you really, really need. Because most of us need a second brain in our business at some point.

Katrina Widener: It's just again another example of how we're thinking proactively, right? How we're getting ourselves ready and feeling confident, moving forward making decisions. As opposed to just being like, "Ah I need a VA, I'm going to make this work somehow." Well thank you so much TJ, for coming on here, this has been very very helpful I'm sure. And I think a lot of people are going to be going to their banks very shortly.

So before we end the episode, would you mind sharing with everyone where they can find you if they're looking for more help or have any questions after they listened?

TJ Wey: Sure thing. So the best way to find me is on either Instagram or Facebook, you can also find me on LinkedIn, that is an option. On all platforms, I am TJ Wey. So that's TJ and my last name is W E Y and on Instagram there's a period in between, but for the other two platforms it's just my name.

Katrina Widener: Perfect. Thank you so much for coming on here, I really appreciate it.

TJ Wey: Thank you for having me.