The Money Advice Your Business Deserves
When your business has profit, you're choosing one of these three options: Pay yourself, pay down debt, or reinvest.
It's an important question to answer, and you want to be intentional about it.
But most of the time, owners make a gut call and then backfill a reason later.
How do you know if you should pay yourself with it?
How do you know if you should reinvest?
Where do you get the most bang for these bucks?
It shouldn't be something that you feel like you’re guessing at. There should be a clear answer.
If there isn’t, then chances are a big part of the problem is that nobody advising you is actually looking at your whole picture.
Your CPA is working your tax bill.
Your financial guy is working your personal accounts. ~
Both matter, and you need them.
But your business is the biggest asset you own and the thing that's supposed to fund the rest of your life, and neither one is standing back to look at it that way.
I just published an interview with John Barnes where he paints a really clear picture of the problems this causes for business owners.
John is a CFP who's spent 25 years working that seam between the business and the personal, and he treats them as one system instead of two.
He learned the cost of that gap firsthand.
Early in his career, the owner of his firm died in an accident with no buy-sell agreement and no succession plan. Eighteen months of expensive cleanup that two sheets of paper with a signature would have prevented.
It's why he's so pointed about the line he dropped near the end of our conversation: tax advice is not financial advice.
If your planning is driven entirely around lowering this year’s tax bill, it’s likely going to cost you in other areas.
My qualifier for guests who want to come on the show and talk about finances is that they understand that the money is a byproduct of the thing you're trying to do.
If they don't view it like that, we're not a fit. John's a fit. He doesn't start with the money, he starts with what you're actually trying to build. He knows that when that's clear, then you have a basis for making sound financial decisions.
I really like the way that John talks about pay-yourself-vs-debt-vs-reinvest. Most importantly, I appreciate how much clearer he makes what to look for in the person helping you make those calls.
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