Benchmarks for Wealth Development
As an entrepreneur you know the importance of generating income and having good margins in the process, so you are truly generating income for yourself and your family not just for today but for tomorrow as well.
“What do I do with these profits to make sure I am keeping the money I make and it’s going to work for me?”
The answer, of course, is different for each of us.
Depending on where we are on our financial path, and where we want to go, will determine the best steps for us.
Having said that, there are some benchmarks for each of us to have in place:
Pay yourself first – you want to be able to take an actual paycheck out of your business.
The structure depends on where you are – for example when you are first getting started (net profits under $50,000) you may take a draw rather than actual payroll. After that, for tax reasons, we will have different strategies.
Once this cash flow management piece is in place the rest is simply step by step.
Contributions – to keep the flow of abundance in your life, give from your over flow.
Where and how you give is up to you. Choose a place that speaks to your heart. The important thing is to do it consistently no matter what the amount.
I always like to see 30 days minimum (depending on your industry) in your checking account (both business and personal) and another 30 – 90 days in savings. Now savings are created in many ways, the key is to have them liquid and protected.
Recently I heard a speaker tell us to “put your money in places that are a part of your life.” For example, if you use Apple products you may want to invest in Apple. If you are new to investing this may be a good avenue.
I personally like to begin with Real Estate. Either way, choose a direct investing model rather than mutual funds (why is a different conversation). The important thing here is that it is something that is not your business, which for most entrepreneurs is their biggest investment. Why? So you begin to develop a secondary stream of income that is not “earned” like in your business. This is your money working for you instead of you working for it. This is the key to growing your balance sheet, the most important report in your financial picture and the least understood. There are so many places to invest the key is knowing the right thing for you at the right time.
Operate on the rest – this is a good rule of thumb both personally and corporately. This is where you want to be watching your margins and make sure you are “structured” well for tax purposes. This can not happen if you don’t have current and accurate financials in your life.
Now, this doesn’t happen overnight for any of us. It is something that is built over time and comes from a good connection with your numbers which informs your money management habits.
Each of us has different strengths and filters when it comes to putting this to work in our life so spend some time getting to know yours.
We are here to help.
Money is the least taught subject anywhere and where you are today is the perfect place to start. Send us an email to get in touch!