MBA1229 How Paying Yourself First Puts Your Business First

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Foreign. Welcome to the $100 NBA show your personal business coach every day with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of the Hundred Dollar mba, a couple of business training and community online. And in today's lesson you will learn how paying yourself first puts your business first. Personal financial stress is a killer. It affects how you feel, how you perform and how well you can run your business. Your first job when it comes to building your business is being able to pay yourself first. Paying yourself a reasonable salary to pay your personal expenses in life. And this comes pretty natural when you're getting started with your business because you're not paying anybody else. But as your business starts to grow and you start to have more people on the payroll, sometimes we pay ourselves last. We want to make sure that not only do we pay our other employees, pay all our other outstanding bills, invoices from our suppliers, from our service providers, whether that's inventory or office space or server power. Of course we want to make sure that we budget so everybody gets paid. But who gets paid first? Well, in my opinion, it should be you. And I'll explain why the first check that gets cut every month should be to yourself. We'll get into the reasons in today's episode. So let's get into it. Let's get down to business. We all have basic personal necessities. Paying our rent or mortgage, food transport, paying our personal bills. If these things are not in check, if you don't know for sure that these things will get paid month in and month out, this is going to be a huge problem for you. You need to make sure your personal finances are totally taken care of and you have no doubts that you can pay those bills.

Why?

Because if you don't, you're gonna be sent in a panic state where you're gonna make the wrong decisions in life and in business. Your business will suffer. If you're totally stressed out about paying your rent, you're gonna be coming from a place of discomfort. You really need to have a clear mind and minimize your personal stress as the leader of your company. Now, we're only talking about financial stress here, but there's other aspects of stress in life. Whether it's family stress or relationship stress, or with your friends or your health, these are other aspects we're gonna have to take care of. But today we're gonna be talking about financial stress. And it's one of the worst stresses you can have. And you wanna kind of just take care of that whole section in your life. And that's why the first person you're gonna pay as you're building your business and every month is yourself. Ultimately, the business relies on the decisions you make. Let me say that again. Ultimately, your business relies, whether it makes it or breaks it, on the decisions you make. And the decisions you make are influenced by the way you feel and your state of mind. One of the biggest ways to really negatively affect your state of mind is to have financial stress. Now, of course, of course there is stress involved when it comes to the finances of your business. As many of you know, as your business grows, so does expenses. You get more traffic to your website, the more hosting you're going to need. And of course, you want to make sure you budget so you have more than enough to pay everybody that needs to be paid on your payroll, as well as paying all your expenses and bills. But let me ask you a question here. Which one is worse? Not paying yourself and not having enough money to pay your mortgage or rent, or not having enough money to pay a bill, let's say your hosting provider. Now, no one wants that situation to happen, but with your hosting provider, you have options. You can call them up, get an extension. Most companies will give you a longer grace period. Of 60 days, you can switch providers and save some money. But if you don't have money for your mortgage, there are zero options really other than getting into debt like borrowing money. What we're talking about here is the lesser of two evils. Which one is going to cause more problems? Now maybe you're listening to this like, man, this is an extreme example. Somebody can't pay their mortgage or pay their rent. This is a reality for a lot of entrepreneurs who put their business first and don't pay themselves first. Even worse, some people use their own home as collateral for a business loan and then they don't pay themselves first and they don't pay their mortgage a couple months in a row, they lose the house, they lose the business. Yeah, I know it got ugly fast. But that's the reality for a lot of entrepreneurs who are trying to grow, at least by paying yourself first, you create some sort of stability in your life as well as your family's life, your support network. All other issues can be solved. They can be managed. There are other ways around them. One of the easiest ways to do this is just to set up a direct debit into your account. So if you have payroll set up, you could do this. Or even if you don't have payroll set up, you can, you know, call your bank and say, every month I want a direct debit from this account to this account of this amount. It was totally out of your hands. And it happens every month at a certain time. Another issue that happens when you don't pay yourself first is that for some reason we don't consider ourselves an employee and we misjudge our budget, we misjudge how much money we have every month. And we over hire, hire people that we can't afford, basically people that will take our own salary. And we think, hey, this new hire is going to help me bring in more business and I can take that money later on. Thin, thin ice. Super dangerous. You always want to operate from a position of strength. And you're only strong when you feel financially sound. When you feel like, hey, the roof is not, you know, gonna fall in, I have shelter, I can eat, I can pay my bills, my family's not stressed out. You wanna operate from that position at all times. But most importantly, your business relies on you, relies on your leadership, relies on your health. And of course stress will affect your health. And you can only be your best self when you're in a good state. So you're actually doing your business a favor by paying yourself first. Now you don't have to pay yourself a lot. You can pay yourself enough to to keep profits high in your business. This might even be a tax advantage depending on where you are. Because in some countries, in some states, corporate tax or business tax is going to be less than personal income tax. So make it your top priority when it comes to your business finances to pay yourself first.

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Been running a business for some time, you know, business is hard, it's tough work, it's a lot of work and it could be stressful. So we want to minimize all other stresses in our life, including our personal finance stress. And this is the point of today's episode. Creating an environment so you can succeed as a business. Creating an environment so you can succeed as a leader. You need to create this environment. No one's going to create this for you, so you need to prioritize the right things. The thing about being a business builder and a business owner is that you got to build the system as well as the products and services. The system that works for you and your personal life as well as your professional life. This is one of the things you need to build in that system. Paying yourself first. All right, thank you so much for listening to the $100 MBA show. If you love this podcast you want to hear more episodes, make sure you hit subscribe by hitting subscribe on whatever you use to listen to podcasts. You automatically get your episode right on your device and it's there ready for you when you're ready to listen. Before I go, I want to leave you with this. I mentioned this a whole bunch of times on previous episodes, but getting a part time freelance accountant can do wonders. He or she can help you set things up for you. Take a look at your income, your revenue, your costs, and make sure that you're paying yourself properly. And it doesn't have to be that expensive. There are accounts that start at $3 to $400 a month and you're going to pay an account anyway to run things during tax time, so you might as well have one every month. And they'll take care of your taxes as well as stuff like this. Alright, thank you so much for listening. I'll check you in tomorrow's episode Q and A Wednesday. I'll see you then.

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