A Frugal Mindset Is Money In the Bank
For Indies, financial success is about stretching every penny to cover as much as possible, both on the home front and the business front. Frugal principles are not complicated, but because they intersect with our emotional connection to money, they can be difficult to implement.
Growing up, my parents taught me very little about money. In my years as a corporate attorney, money flowed freely from my employer's account to mine, and then on to fabulous vacations, expensive dinners out, trendy clothes and extravagant gifts. Until I became a small business owner, I was never really concerned with the fact that, at some point, money actually runs out.
Fast forward to 2000, when I started this business and officially enrolled in my first semester at the School of Financial Hard Knocks. Since then, I have taken small steps every year to keep more of the money I make. I do this by minimizing credit card use, couponing like nobody's business and keeping track of every penny.
Every time I get a dollar, I do one of four specific things with it: spend it, save it, invest it or donate it. Whatever I do, I have to fit it into one of those categories and I am very intentional about doing so. I make it a point to improve my financial habits every day so I never return to my oblivious days of spending without thinking.
Since I work with lots of people who are trying to make a success of small business, but who have not developed a frugal mindset, I turned to personal financial representative and fellow Indie Chris Buford to tell me 3 things Indie Business owners must do in order to turn from their spendthrift ways.
1. Squeeze Out Every Tax Deduction. Chris says that the corporate tax rate is one of the highest tax rates there is, considering that income, property and capital gains are all heavily taxed. "The best way to offset these taxes is to squeeze out every possible business deduction you can find," say Chris.
My accountant, Robin Herrick, CPA, PA, agrees. She makes sure every single business expense is properly identified and accounted for. In this way, not even a small deduction slips through the cracks.
2. Ditch "Extra Money" Thinking. It's human nature to think that, when we come into some unexpected cash, it's "extra money," and we are free to run out and spend it on some short term fulfillment. This mindset is encouraged by the messages we get daily now, to take our tax rebate checks to the nearest department or home improvement store and spend spend spend.
Chris says that's a decidedly bad idea. "Whether it's a stimulus check or a tax refund, any unexpected cash should be used to get a long term return, either by investing the money or using it to pay down debt." This is especially true if the money is a tax refund. "It's already your money, which the government kept all year long and interest free," he says. Debt directly inhibits the creation of wealth, says Chris, so it's especially important to eliminate it.
3. Cut Costs. With fuel and food costs rising, people are spending less. "This means that small business owners must cut back without compromising the integrity of goods and services," says Chris.
Of course saving wherever and whenever you can should be the goal all year every year, not just in a down economy. "Outsourcing things you don't have to do yourself, cutting down on overnight shipments, cutting down on hours of operation and anything to save resources must be implemented," says Chris.
So there you have it, a sort of Indie Business Mantra. Every day, repeat after me.
- What are my tax deductions today?
- There's no such thing as "extra money."
- How can I accomplish this goal for less?
What about you?
Do you have some savvy small business financial advice to offer, or a money mantra that works for you? If so, please share it in the comments section below.
Chris Buford is a personal financial representative with Allstate. He is a husband, father of 3 and seasoned real estate investor who helps families and small businesses expand their personal and business portfolios by implementing specific strategies to achieve their financial goals.
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