If you’re worried about money, you’re not alone.
Financial worry is one of the most common worries of all humans.
Let alone, entrepreneurs who are trying to increase revenue, pay taxes, save, and put food on the table.
The thing about money is that it’s easy to overcomplicate it, which will add unnecessary stress.
Becoming wealthy is actually a very simple formula: earn money, spend less than you earn, save and invest the difference.
That’s it.
But because there is so much psychology attached to money, we come up with all kinds of reasons, both conscious and unconscious, to make our finances more difficult.
I was watching this documentary on Netflix about money, hosted by Ramit Sethi.
Ramit helps people get a handle on their personal finances.
One man he interviewed had something like 10 different bank accounts.
The reason? The man said it was the psychology of spreading his money around that made him feel like he had more of it.
But what ended up happening, as Ramit pointed out, was that this man was overcomplicating his finances such that he was losing track of his expenses and overspending because of it.
Financial management can be difficult and feel overwhelming, but it doesn’t have to be that way.
We have to get a handle on our psychology.
Overcomplicating the process can be an unconscious way of clouding the financial picture so we don’t have to be accountable to how much we are making vs. how much we are spending.
It doesn’t need to be that complicated.
And to become a man of wealth, you must face any fears about money dead in the face. You must gather the facts. You must accept the reality of it. And you must make wise decisions accordingly.
Unless you own ten different businesses (which is a problem if you’re struggling to be profitable at any one of them), you really only need a small number of bank accounts.
I have a business checking, a business savings for taxes, a personal spending account, and a personal savings.
That’s it.
Any more, and I would be struggling to keep track of where my money is going.
If this is you, it’s time to stop muddying your financial picture, whether you’re doing it for some unconscious psychological reason or simply because you’ve been negligent in watching your money.
Simplify your accounts.
Then you can more easily track your expenses by category, which you can do for free in a spreadsheet (or use a software like Intuit’s quickbooks and mint).
What gets measured gets improved. So if you want to improve your finances, you have to look at your money every day and watch how much you’re making, how much you’re spending, and how much you’re saving.
Most accountants recommend business owners save 20-30% for taxes.
So depending on how much you want to save into your personal savings account, where you can keep 3-6 months living expenses for emergencies, and invest anything over that amount, you likely will have to be earning 2 to 3 times the amount of your monthly expenses.
Which can be hard to do, if your business isn’t very profitable, or if your expenses are high.
Simplify, track, reduce expenses, save for taxes and personal savings, and watch your wealth begin to grow.
Paul Denni
P.S. If you need accountability, insight, coaching, and further advice on finances, I can give you all that and more through my Wealth Man subscription. But first, you’ll have to sign up for my daily emails, where I give tips and insights on business and money: