I understand the feeling completely: you feel like your hair has electricity running through it. All day long until you go to bed, it is the only thing that runs through your mind. When you wake up, it starts all over again. Your neck hurts, you’re grouchy and can’t seem to smile. I can still feel the tension, the anxiety, that never-ending pit in your stomach. The question looms: “How am I going to pay my bills? I am broke.”
It’s no secret. For many, this is a hard game we play. It seems like only a handful around us make it to the big leagues, while many others struggle and fade away. Some are mega-producers and start teams, and some can’t sell an umbrella in a rainstorm.
But why do you think that is?
There can be several reasons really, but one thing I know for sure is a lack of business management experience. With that comes a lack of financial literacy. Sure, we all understand how to spend money. But as a business owner—which you are—it is vital that you understand the flow of money within a business.
Taxes and business expenses equate to about 50 percent of the take. Failure to understand this concept will slowly back you up, like one log getting stuck in a river, then another, then another, until you have a full-on log jam, and you are screwed.
It is the same thing with credit cards and the taxes. They suck, but they do exist, and you need to make sure that those things are accounted for, first and foremost. Otherwise you find yourself in debt. The stress that comes with that? The extra $3,500 a month for credit cards and tax payments? With a little more discipline in the flow of money, you could have that accounted for.
Playing catch-up stinks, but it is possible to get back to even. And when you do, put safeguards in place so that it never happens again. It might require that you skip a few nights out a month, or maybe skip a 3-day weekend here and there. But you are capable of doing it.
Some believe that another market correction is in our near future. Do you want to have money in the bank, no debt, and survive the correction? Or do you want to have to bust your hump twice as much, just to make it? Maybe even need to do some BPO’s to buy groceries? No, thank you.
BREAK IT DOWN LIKE THIS:
Start to get into the habit of putting away 25 percent for taxes. If you owe, it will not be much more. If you get a refund, then rejoice!
Put 10-20 percent away for business expenses.
Put 10-20 percent away for savings.
That which is left, is income.
Change the whole way you look at things. Focus on your savings goals and reverse engineer your whole year based upon it.
I know this is uncomfortable, first-hand. I had that journey myself, so I can relate to any pain. But shift your thinking. Now that you know you only get 40-50 percent to the bottom line, make your business plan and goals around those numbers. Many of the agents I coach have become financially literate and understand this, and that is why they set higher goals. You can’t make $150,000 Gross and live like you make $150,000 net. They are positioned to weather a storm better now than ever before.
Strive to have at least three months of reserves, but try for six months. I put 20 percent of each check away into a reserve account. When that equals one month, I transfer it to my main savings account. I continue to do this until I reach my savings goals for the year. If I am able to stash three months away every year, then after four years I have one year banked. After 12 years, I have four years of bills saved. Adjust for your goals and lifestyle.
THIS DOES NOT INCLUDE RETIREMENT STRATEGIES
That is another discussion totally. Look at retirement as long-term, and your rainy-day/savings strategy as a get-out-of-jail-free card. It is there for emergencies, slow markets, goose eggs. Plan ahead to have it, but hope to never use it. This actually reduces stress, since it removes the never-ending need for the next sale.
Caution: do not think for one minute I would ever slow down! That is why I have goals, and I will not rest until I hit those goals. I track my business so I know where I am at any given time. What are you doing to track your business? You must track it. There is not a successful company out there that does not track their business.
If you want to stop feeling that pain, if you want to stop that anxiety and stress, put actionable goals in place now. These include not just financial goals but also a financial blueprint for how they will be achieved. Simple spreadsheets that show what you need to accomplish, and where money is allocated, will work well. Then plan to do it. Put it into action and have the discipline to follow through and do it. By tracking the results, you build accountability. And ultimately, accountability is what failed agents are missing.
Be Accountable. Be Successful.
Till next time,
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