Try treating your money as if you’re self-employed and act as if you are running a business.
- You own the means of production — you. So you are in the business of you.
- As a business owner, you are responsible for three key things: generating income, supporting your lifestyle, and creating real wealth. That’s it. Everything else is details.
- Don’t confuse what you do with how you get paid.
Understand how your business works:
- Board of Directors is anyone who gives you advice or counsel necessary to run your business profitably, including your money advisor (or coach).
- Input is anything and everything you do to generate real (after-tax, inflation-adjusted) income.
- Process is your lifestyle — your stuff and what you do to generate true wealth.
- Output is what’s left over after your lifestyle choices that increases in value or generates additional real income. This is the measure of true wealth.
- Feedback from time to time is necessary to gauge how are you doing. What needs to change? Who will make the change?
As in every business, money is critical to your success. You have to find a way to make money (cash flow), and you have find a way to keep as much of it as possible.
Your business needs to have a profit. You need to have more money coming in than is going out. Your ultimate goal is to run your business so that when you stop working, you can maintain your chosen lifestyle. To achieve this, you either have to find a job with a pension that will provide this income or you have to do all, or a part of it, yourself. And the sooner you decide which you want to do, the easier it is.
To live the lifestyle you want in the future, you have to build your wealth now. If at the end of your working career your net worth is negative or too small to do the things that are important to you, you’ll have a serious problem. Your challenge is to make a money decision to live with freedom and dignity in the future, as soon as possible, even though your “feeling” brain likes a shiny new toy much more than adding money to a retirement plan.
Think about it: do you know any successful business owners whose goal it is to work in their business for 30 or 40 years, only to sell it for so little money that they have to go back to work? I don’t. Then why do so many people with jobs think they can spend all their money while they are working and expect to have enough when they retire? And remember, life happens along the way — that also costs money.
Run your life like you are running a business.
You have to make a payroll every month.
You have to pay the bills. You have to market and promote yourself. You have to offer the best “you” possible to your market. You have to invest in your business. Your business has to be profitable. When was the last time you did a complete review of your business and your business plan?
Action Steps:You’re the boss! Take charge of your business:
- Benchmark where you are financially.
- Inventory your skills, knowledge and ability.
Set aside the time to think over these questions:
1. Are you in the right career? Are you good at it?
2. Do you have a passion for what you are doing?
3. Does the career you’re passionate about support your lifestyle? If not, what needs to change — your lifestyle or your career?
4. What things are you doing, time- and money-wise, that take you away from getting the most out of your career? Are these things important? If not, what happens if you stop doing them? If they are important, can you delegate them to someone else? Most importantly, do you have balance in your life?
5. Creating superior results faster requires clarity, focus and execution — do these qualities apply to your business?
“Taxageddon” is a few short months away — don’t get caught with your pants on the ground! Next month, look for tips I brought back from the University of Kentucky College of Law’s annual Estate Planning Conference. There’s something for everybody — promise! Until then, I hope you’ll be hard at work … at “You, Inc.”
Johanna Fox Turner, CPA, CFP, RLP, is CEO of Milestones Financial Planning, LLC in Mayfield. She is president of Johanna Fox, CPA and publishes a free monthly financial newsletter (email advisor@milestonesfp.com to subscribe). Contact Turner at jft@milestonesfp.com, 270-247-0555, 800-991-2721, or at www.milestonesfp.com.
