The Significance of Private First Method
We’ve all heard the term pay yourself first, growing up, whether it’s our parents telling us when we got our first jobs, make sure we’re paying ourselves first. We’ve heard it through high school, and college, but nobody knows how to do it. And the closest thing that I’ve known that has been taught closest to profit first and pay yourself first is grandmother’s envelope, budgeting methodology. And so what profit first is, is a pay-yourself-first cash flow system that works with human behaviors. It’s not accounting, it’s not bookkeeping. It’s a cash flow.
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Julie Goetzinger is the creator of Abundance Academy, Abundance Activation Workshops, Abundance Breakthrough Retreats, Free to Fly, and Money Intensive. She helps soul-aligned entrepreneurs to create more freedom in their lives in the form of time freedom, financial freedom and the freedom to be fully expressed. She is an Abundant Life Coach, Podcaster, Author, Motivational Speaker and Entrepreneur with seven years of experience in the business.
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Sales Minus Expenses Equals To Profit
Over the years, accountants have been talking to us entrepreneurs in ways that were like, oh my gosh, what are they even saying so much that, you know, even myself were fearful at times to go to talk to an accountant because I had no idea what was going on. And the bedside manner that they had was not very positive. And it was very frustrating. And here’s the thing, you know, entrepreneurs are not stupid. We create jobs. We hire people, we create art, we sell, we market people give us money, all sorts of stuff. Then what’s the problem, right? Because why are businesses failing? Why do 50% of startups not make it to year one? How come they don’t make it to year five? How come they don’t make it to your 10? Because the individuals starting these companies are very smart. Well, the problem is not the entrepreneurs. We’ve been taught every single day since the beginning of time, this formula, and the formula is sales minus expenses, equal profit. Write that down. Everybody’s like, sales minus expenses, equals profit. That’s how you were taught and that’s structurally correct. And what we’re taught is sell, sell, sell, manage our expenses, manage them, and then whatever is left over is what we pay ourselves, but our profit is from a structural standpoint. But from a behavioral standpoint, that’s absolutely wrong and has been harming all of us because what comes first is important, what comes last and an afterthought. So all these years we’ve been putting, paying ourselves profit, all these great things as an afterthought. So what we’ve done is simply flip the equation. So now I want everybody to cross out sales, minus expense as equal profit. What we’re advocating is sell, sell, sell, take your profit and manage the business on everything else. Now we know life is not all about profit.
Pay Yourself First
Beginning business owners, it’s imperative to start paying yourself first. Otherwise, you’re gonna hate your business. We’re not taught how to run necessarily businesses. We might be awesome at creating our products and services, but no one really is teaching us the importance of paying ourselves first. Because if you don’t pay yourself first, how are you going to live the lifestyle that you wanted? How are your staff not gonna be being paid? They’re not gonna be being paid very well. And all startups should implement profit.
First based upon the message in the book, it breaks the doctrine of sacrifice. It ain’t cool to be 30, 40 years old, starting a business, living on your parent’s couch. It’s BS that you can’t be profitable from day one. It’s BS that you can’t pay yourself from day one. But implementing the strategy you can, you’re not gonna be a millionaire right away. This is a very conservative approach to cash flow management.
Move Your Money Into Strategic Bank Accounts
With a lot of independence, solo entrepreneurs collect all of their income and it goes into one operating account, one bank account, and they look at it every day and make business decisions. But what they’re neglecting is that some of that money is not theirs, right? Some of that money should go to profit, should go to paying down that, and absolutely needs to go to Uncle Sam. So by not realizing this, it sneaks up on independence and solo entrepreneurs. And the next minute they know they don’t have any money to pay Uncle Sam because they haven’t been allocating it aside. And they’re reaching into their savings. They’re reaching into maybe a 401k or something like that, simply to pay the taxes that they should have withheld along the journey of the year.
How to Alleviate Your Stress Towards The End of The Year
One of the things is a lot of business owners are not in tune with their finances. They don’t understand the ebbs and flows of the cash flow. They don’t have a system. So one of the beauties of Profit First is once we start implementing a system, we have a plan. That plan now there’s the first time. The first time a lot of business owners have a plan on how to actually use their money. So that’s great. Next with Profit First, we’re moving the money into strategic bank accounts for various different purposes. That’s extremely empowering, right? The first time you move that money, you were probably like awesome. It felt great. And we recommend that you reward yourself with that. That’s a great thing. So it’s often the first time that a business owner may be in control of their money. Next is all right. It’s working, so they have a plan that feels relief. They’re empowered because they are operating the plan. Next is focusing now that you have a plan, you’re empowered, and you’re focused on growing your business. When you know that you’re paying yourself, are taking care of your tax reserves, taking care of your profit. You’re not up late sleeping, how am I gonna pay myself? How am I gonna pay taxes? How am I gonna be profitable? So it relieves a ton of stress from home life.