A business owner should split available cash roughly 10% to debt payoff, 10% to investable assets, and 80% to operations. But the interest rate matters most: low-rate debt around 3% can wait while you grow, but debt at 7-10% should be paid down fast, even if it cuts into investment cash.
You know, 10-10-80 rule is great for someone that works for McDonald's, for instance, and I use that example a lot, but it doesn't matter who you work for. Uh, but what if I'm a business owner and I've got debt that I've established to grow this company or to build this company? How do you pay— you pay off debt first versus building a financial plan and growing these assets? Well, I think you could take you know, that could be split into a 10-10-80 rule, but it looks different, right? 10% towards debt, 10% where you're growing your net worth in these investable assets, then 80% for the company. Yeah, you know, and so I think you've got a— you got kind of a fine line for entrepreneurs. Yeah, as to what's the most important thing you can do. You know, if it was, oh, we're borrowing money at 3% like we were a few years ago, I'd tell you not to worry about it. Yeah, but if you're going to the bank and you're borrowing money at 7, 8, 9, 10%, then I think you do want to start paying that stuff off as soon as you can. And that could reduce how much money you got or cash flow you got to put into your investment strategy.
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