How to Pay Yourself as a Birth Worker (Or Service Based Solopreneur)
One of the biggest financial challenges birth workers face isn’t just making money—it’s figuring out how much to pay themselves in a way that’s sustainable and stress-free. I see this all the time in my consulting work, and recently, I had a conversation with a few birth workers that I’ll smoosh into a composite here for storytime.
Cassandra is a homebirth midwife in Maine that perfectly illustrates the struggle.
Cassandra isn’t bad with money on the surface—she keeps track of her business income, saves paper bank statements, and even works with a CPA. But like many birth workers, she doesn’t really know how much to pay herself or how to structure it properly. She’s making good money ($100,000 last year) but isn’t sure what exactly to do with it beyond covering expenses and taxes (which, let’s be honest, she’s sometimes behind on).
She doesn’t have savings or retirement and knows she needs both sooner than later. Her money seems like it comes in and leaves and she doesn’t know where it really goes. And at tax time she gets a big bill and she is back to square 1.
If this sounds familiar, you’re not alone.
Step 1: Separate Your Business and Personal Finances
If you haven’t already, open a separate business bank account. This is a non-negotiable first step. Cassandra has one, which is great, but a lot of birth workers are still mixing personal and business expenses. Keeping them separate makes everything so much easier and above board.
Step 2: Decide on a Pay Structure
How you pay yourself depends on how your business is set up:
Sole Proprietors & Single-Member LLCs: You can simply transfer money from your business account to your personal account as needed—this is called an owner’s draw. There’s no formal paycheck, but you should still plan for taxes.
S-Corps (Like Cassandra’s business will be once she has it set up on my recommendation!): If you have an S-Corp, you must pay yourself a “reasonable salary”. The IRS requires it. This means setting up payroll and withholding taxes from your paycheck. You can also take distributions/owner draws (extra profit beyond salary), which are taxed differently.
Cassandra is going to run her business as an LLC taxed as an S-Corp because I suggested that she talk to her CPA about this (a good CPA would have already brought this up, but I digress), so she will have to be on payroll, paying herself a set salary every month. PS I help people set up payroll through my partnership with Gusto and I can get you a good deal :)
Step 3: How Much Should You Pay Yourself?
This is where most birth workers get stuck. There’s no magic number, and it warrants a conversation with your CPA but here’s a simple formula to start with:
Look at your total income – How much are you making per year?
Subtract business expenses & taxes – How much do you need to set aside for these?
Decide on a baseline salary – What’s the minimum amount you need to cover personal expenses?
Take profit distributions as a bonus – If you have money left over after expenses, taxes, and salary, you can take additional distributions. My CPA suggested that of the money I pay myself, 60-75% should be salary and the rest would be in owner distributions.
For Cassandra, who made $100,000 last year, a reasonable approach might look like this:
Set aside 25% for taxes ($25,000)
Deduct business expenses (let’s estimate $10,000)
That leaves about $65,000 for paying herself
As an S-Corp, she could set a salary of $40,000 (about 60% of the $65,000) and take additional owner draws for the rest.
“Ok, Margo, but I have no effing clue which money in my account is for taxes, upcoming expenses, or paying myself. I just pay myself when I am up against a bill deadline and cross my fingers.”
Ya, don’t do this anymore! This is so stressful and is not the way a healthy or sustainable business is run. There are tons of tools out there but my favorite really truly is YNAB since this will help you get your shit together faster and more effectively than anything else I’ve seen, and you can turn around and also use it 1) for your bookkeeping if you want to DIY it, and 2) for your personal life which likely needs some straightening, too, if we’re being honest right?
This is my bread and butter as a YNAB coach so if you try to set it up yourself and need support, I’m your gal and will help you with your personal budget, your business budget or both. I love helping people figure out out what they actually need to be paying themselves and then getting the cashflow system set up. Which brings me toooooooooo…
Step 4: Set Up a System
The easiest way to stay consistent is to automate your paycheck BUT the only way to do that is to also have a savings buffer in place to smooth out the high and low months since more business owners have variable income (sometimes wildly variable). A good first goal is to have 3 months of business revenue set aside in your business checking account.
Use payroll software (like Gusto or QuickBooks Payroll) to pay yourself automatically if you’re an S-Corp - then take the additional owner distribution chunk at the beginning of the month, too, unless you don’t have enough in your account to do this at first. You can use my Gusto link to get a good deal and give me kickbacks for helping you save a bunch of money this way, please and thanks :) Or we could work together and I can help you get it all set up.
If you’re a sole prop or LLC, schedule monthly or biweekly transfers from your business account to personal account, or do it manually, but you MUST pay yourself
I use YNAB to plan, assign and track all of this and teach others to do the same like I mentioned up above ^^
Step 5: Plan for the Future
Beyond paying herself regularly, Kara also wants to buy a house and build savings. That means she needs a strategy for:
Saving for a down payment inside her personal checking account at first and eventually in a high yield savings account
Retirement planning – She has a SEP-IRA started, but needs to understand how much she should be contributing and what to buy (spoiler alert its Target Date Index Funds)
Building an emergency fund – At least 3-6 months of income in BOTH her personal and business accounts for a total of 6 months is my suggestion
Final Thoughts
Birth work is unpredictable, and cash flow isn’t always steady, but paying yourself shouldn’t be a guessing game. Having a system—whether that’s payroll, scheduled transfers, or a mix of salary and profit distributions—can help you feel more in control of your money.
If you’re a birth worker struggling with this, I’d love to help. Whether through my upcoming course or 1:1 coaching, we can create a plan that works for you. Hit reply and let me know—what’s your biggest money challenge right now?