Tax Season 2022 Is Here, and Pandemic-Related Complications Remain
The importance of a separate checking account, set of books, and financial statements for a small business.
Think of a car engine. It runs on 4, 6, or 8 cylinders. Each cylinder must pull its own weight or the engine dies or does not run correctly. The small business can be thought of as one of the cylinders. If you own multiple small businesses and each one is a separate cylinder, it’s easy to see which business is making a profit and which one is dragging the others down.
A farm silo is another way to think of it. Each silo would hold a separate business. Revenues in, expenses out, and profit flowing out the bottom to the owner.
I also believe the owner should have their personal income and expenses in a separate cylinder or silo. If the owner’s personal expenses are run through any of the business accounts, it distorts the results of that business. You can’t tell if the business is actually pulling its weight.
Transparency and clarity are the results of doing this. The owner knows how much they need on their personal side, and they can see how much each business is contributing to that figure.
There is great freedom in living debt free.
Who doesn’t want to spend more time doing the things they love to do? Time with our loved ones, family, and friends. Time to be outside hiking, biking, golfing, and hunting.
Who would intentionally sell their future for things? That is what we do when we go into debt. We mortgage the future for the thing we just have to get now.
Honestly, who can predict the future? We tend to project our current income into the future, then make the leap into debt. We justify it by saying, “I can make the monthly payments.”
Then life smacks us in the face. You lose your job, your spouse loses her job, a pandemic hits and changes everything. A hurricane, flood, or tornado destroys your home. You get sick, she gets sick, all unpredictable events.
When you’re out of debt, it’s easier to save up an emergency fund for these unpredictable events. This fund will act as a shock absorber, cushioning you from these events.
The rich rule over the poor, and the borrower is slave to the lender. Proverbs 22 vs 7
It is for freedom that Christ set us free. Stand firm then, and do not let yourself be burdened again by a yoke of slavery. Galatians 5 vs 1
It is a wise person who gets out of debt and remains that way. After all, it’s about freedom in my eyes.
If it’s not broke don’t fix it.
I am often asked what is the best system for managing my small business?
The best system I have seen is the Dave Ramsey EntreLeadership program. It is an all encompassing program with the ultimate goal of running your business with no debt.
What about the personal side?
Dave Ramsey’s financial peace program and the seven baby steps is the best program for personal finance.
An individual business owner using these two programs can build their business and personal net worth quickly and safely.
I don’t make any commissions or fees for recommending these programs. They are the most effective plans I’ve seen for unlocking the power of your business, and growing your personal net worth.