Episode 64 – This is Why You’re Broke

Show Notes

Transcript

Welcome to the Custom Apparel Startups podcast, your best source for information, news, tips and tricks to get you off the ground running, and earn success with your custom apparel decorating business. So, get ready to soak up some knowledge!

Now, here are your hosts, Mark and Marc!

Mark S: Hey, everyone! It’s Mark Stephenson, from ColDesi. Thanks for listening to the CAS podcast. This podcast went a little long, so we decided to break it up into two pieces. Make sure that you listen to both episodes 64 and 65, to get a complete picture of the concept that we’re trying to get across!

Mark S: Hey, everyone! Welcome to episode 64, I think, of the Custom Apparel Startups podcast. My name is still Mark Stephenson, from ColDesi.

Marc V: And Marc Vila, from Colman and Company. Today’s podcast is on “This is Why You’re Broke.” We’re talking about budgeting.

Mark S: It was really kind of interesting. First of all, the reason that I had an idea of doing like the business finance kind of a podcast, because one of our great customers on DTG is a member of the Custom Apparel Startups group, Shelby Craig. He talked about this book called Profit First. It’s a great book by Michael Michalowicz, and I’ll put the name in the show notes.

He’s got a unique view on business finance. Right around that time, I know that you were also talking about what you’re doing, as far as personal finance goes.

Marc V: Yeah. I had heard about this company a while back, who has a finance app. Then, I listen to a lot of audio books, and I had stumbled on the owner, the developer of this software, of this company. He wrote a book about it, about his financial plan called You Need A Budget. So, people listening might hear both of these things.

First of all, please don’t turn off this podcast, because it’s going to be about a lot of boring money stuff. You’ve tried budgeting, and it doesn’t work, unless you’re an Accountant. These methods that we’re talking about here, that are from these two different people that wrote two different books, have written things that, if you agree with me, that anybody can do. It’s not that hard of concepts at all. They’re easy.

Mark S: Right. It will make a difference. First of all, Marc Vila and I, we really are experts on a lot of things. If you want to ask us about Facebook advertising, Google ads, marketing, website design, video production, podcasts; perfectly comfortable saying “You know what? You should follow our advice. We’re pretty good at that.”

Now this, we are in a lot of ways, just like you. So, we found a couple of great sources for some great information. We want to talk about them with you, because they strike a chord with us.

We hear about people on the CAS group and out in the small business community, that have real financial problems. They’re not profitable, and they don’t know why. Or they come down to needing another couple of liters of white ink, and they don’t have enough money in the bank. They’ve been working at a business part-time for a while, and they’re just not able to pay themselves.

Or, like for example, the guy Michael Michalowicz, who wrote the Profit First book, he’s built entire multi-million dollar businesses, and never shown a profit for it.

So, you may be the same. You may be working 40 hours a week, or 60 or 80 or 90 hours a week, and at the end of the year, after you’ve paid your salary, if you’re lucky, and your taxes, you don’t have anything left over in the bank to show for it. From a business perspective, that means you didn’t make any profit.

By the same token, on the personal side, you may be getting money in from your business, and it’s running, and you do have money left over in the bank, or theoretically you do. But you can’t find it, because it’s all eaten up in your regular personal expenses.

Marc V: What got me thinking into all of this, as you mentioned – and you mentioned we’re not experts on it, necessarily – is that Mark and I, when we’re discussing the Custom Apparel Startups group, we talk about the group, we talk about our customers. We start looking at trends, all of this stuff. We’re talking business all the time.

And we begin to relate to our personal struggles in our own lives, our customers’ struggles in our own lives. Then, we realize “You know, if I work on fixing this one struggle in my life, or something I want to get better on, or just a hobby I’d like to study, that relates a lot to customers.”

Mark S: We’re in the same boat, in a lot of cases.

Marc V: We’re in the same boat. It’s the same thing that we do with our friends. Right? Like if you have a good friend of yours that you just talk about everything with, and you start learning all this really cool stuff about cooking, how to cook this one particular food, you tell your friend about it. Why? Because he eats.

So, I think that’s what we’re doing today here, too, is we’re taking something and we’re sharing something with you. Also, when we’re talking about the YNAB philosophy, which is You Need A Budget – YNAB – You Need A Budget. We’re talking the YNAB philosophy and we’re talking about Profit First.

When we’re talking about these two things, first of all, neither of these people are paying us. So, I’m not going to tell you to buy anything from them or not. I’m also not going to say that either of these two things are flawless or perfect, because it’s not what I do for a living.

And really, the importance of why you should maybe read both of these books or not has to do with something I believe I’ve mentioned before. I know I’ve at least told you, Mark. I had read about, someone had said “What’s the best parenting book?” I don’t know if you remember this story.

“What’s the best parenting book?” It’s like you can get this method, that says you should do this with your kid. This says more discipline, and this one says they should be more like your friends, and this one says blah, blah, blah, blah, blah. All of these things. There are a hundred different philosophies.

The point is that if you’re willing to pick up a parenting book and read it -.

Mark S: You’re a better parent.

Marc V: You’re a better parent. If you’re willing to pick up books on financing, even if it’s neither of these two, you’re going to help to get yourself to do it better, because it becomes in the forefront of your mind. Also, you can read a book like the You Need A Budget book, and you can read the Profit First book, and maybe you read two or three other books. There’s Rich Dad Poor Dad, you had mentioned.

Mark S: We talked about The E-Myth.

Marc V: The E-Myth. There’s a ton. If you read all of them, the way I see it is it’s similar to a very good mechanic. A very good mechanic, and I relate to this because I worked in auto parts when I was younger.

Somebody brings me something that’s from a vehicle I’ve never seen before. I’ve never seen this vehicle before. I have no clue what it’s from. He didn’t tell me what it was. It looks really weird. But because I’ve seen hundreds or thousands of starter motors, I know it’s a starter motor.

It’s why children, you can hand draw a really bad picture of a dog, and a two-year-old will be like “Doggie!”

Mark S: Right.

Marc V: Your brain starts to put all of this stuff together, in a way that’s good for you. The other thing is, I believe he mentioned it either on a podcast or – Jesse Mecham. I hope I’m pronouncing it right. I tried to look it up, but I didn’t find the right answer.

The point being is that some of these financial methods, you’re going to read, say this You Need A Budget book, and just be like “I don’t want to do that.” Right? Or you might read another one of these philosophies, and say “That’s annoying to me.”

Or you might read You Need A Budget and Profit First, and say “This is how I think!”

Mark S: “This makes sense!” Yeah.

Marc V: So, start thinking about these things. These are two examples. If not, read other ones. But whatever it is, my thought on this is get into learning a bit about it. The more you learn about it, you’re going to be able to put something together that’s going to make you better.

Mark S: We’ll just continue to make a pitch for what we’re going to talk about in the podcast.

Marc V: Sure, yeah.

Mark S: I’ll also say that the idea that you’re always getting better, I see this all over the place. You’re always getting better at doing embroidery. You’re always getting better at printing t-shirts. A lot of people have spent years getting better at doing vinyl or sublimation, or creating graphic design. It’s a skill that you build up.

It makes you a better artist or a better practitioner. You should be applying that same kind of passion and effort into running your business, because we’ve said it a bunch. You can be the most amazing designer, and give away free t-shirts. But no one will ever hear about you and you’ll never be successful, if you don’t know how to run a business. Right?

So, running your business and running your finances are equally as important as running your equipment.

Marc V: You like to pitch old podcasts. I like to pitch old podcasts, too. But this philosophy that we’re talking about right here, works for everything. So, understand marketing, understand sales, understand what are your strengths. We’ve talked about strengths and weaknesses, and what should you do, and what you should hire people to do, and things like that.

So, go back and listen to other podcasts, if this is your first one. Because this one is talking about one area of your business that’s very important, but there’s a lot.

Mark S: Yes, there is. And us, we’re preaching to the choir. Because if you’re listening to this podcast, you’re already thinking about the business side of your business, and not just how to use [inaudible 11:20] better.

Marc V: Exactly. So, if you listen to this podcast and you read these books or others, you’re going to be a step ahead of all of the folks who don’t, and then who complain about it and never get anywhere, and give up.

Mark S: Yeah, that’s true. I will call issue for one thing that you said, when you first opened. You said “boring money stuff,” and I don’t even understand that question. I don’t!

Marc V: We’re talking to humans here.

Mark S: I don’t think there’s any boring money stuff. Any time you want to talk about money, I’m in!

Marc V: The reason why there is – I’ll tell you why this is true. I’m going to prove it to you right now.

Mark S: Okay.

Marc V: Because if that wasn’t true, we wouldn’t need to have this podcast conversation.

Mark S: See, I think that if people were better at it, then they would love to have this podcast.

Marc V: Then they would love it. And that is actually the marrying of the two things, that when you understand it and you think about it in a certain way, it’s not boring. It’s not just number crunching. It becomes a lot of things. It becomes fun, it becomes rewarding, it becomes exciting, it becomes a game.

Mark S: That’s my philosophy.

Marc V: Yeah, it’s a game. And really, this is it; how awesome would it be if you work so much right now, and you’re just trying to get to a new place? You might not even know what that place is. You want to get to a new place, and now you switch your philosophy around, and you switch how you’re moving your money and how you’re handling your money.

All of a sudden, you’re actually planning for a vacation that’s going to happen in this fall. And you’re like “Wow! With all of this, this is really going to happen!” And then, it’s going to happen again and again, with all different things. It’s not just going to be vacations. It’s going to be anything.

Marc V: So, this conversation is for you and this podcast is for you if you’re one of those people who works really hard at their job, who works really hard in their business, spends a lot of time in their business, and either at the end of the month or the end of the year, they go and they do their tax return or they talk to their Accountant for their business, and you didn’t make any money. There’s no money left over at the end of the year.

Or maybe like the guy, Michael, from Profit First, you sat down with your Accountant at the end of a quarter, and they said “Congratulations! You made $5,000 in profit!” You go to the Accountant and you say “Okay, cool! Let me write myself a check for that.”

And it turns out that you may have made gross profit of $5,000 theoretically, but you can’t find that anywhere. That’s been taken up by your life and your expenses, and things like that.

So, on the business side of what we’re talking about, the goal of any business, in the end, to be a successful business, is profit. And profit is the money that’s left over after everything.

I’m not talking about the money that you have at the end of every month in your business, in the bank, so you actually get to write yourself a check for a paycheck. That’s after you pay yourself first. After you do that, after you pay all of your expenses, after you set aside money for taxes, after you set aside money for everything else. Or before you do that, actually.

The money that’s left over, the money that you have in the bank is your profit.

Marc V: I guess on the personal side, to tie it up, really, the goal of your personal finances from a very high level, is that you’re not stressing about money, and the money that you bring in is doing the things that you want. And that you have plans or the ability to do other things that you want.

Mark S: Profit First, and I’m going to do a poor job explaining this, but I’m going to give you the general idea of what the book talks about. If you think about the way most entrepreneurs do business, what they’ll do is they’ll put all of their money in one account. They get a check in. They look at their bank balance every day.

They figure out what bills they have to pay. If you get in a check for $5,000 for a decent-sized order, what you’re going to do is you put that money in the bank. You finish the order, you look at the bills that you have to pay, and you write everybody checks, until you don’t have any money left.

Does that make sense at all, Marc?

Marc V: How many don’t look at their account every day, their business account every day? And they’re not really writing checks. They’re just using whatever card they have with a number on it, that’s got some money to pay for this bill. It’s like you’re dancing.

Some folks are dancing a lot, to the point where they’re like “I’ll use this card for this $100, use this card for this $100. I’ll use this one for the shirts. I’ll use this one for the ink. I’ll use this one to pay the electric bill, because it gets turned off in three days. I’ll use this one to pay half of my cellphone bill, because they said if I pay half, I could pay the other half in two weeks.”

So, there’s that dance. That’s really stressful. That’s like high level stress.

Then, there’s the one you talked about, where it’s like “This is where I pay bills. Here’s my checking account. I’ll pay all of them. I’ve got some money left over.” Then, I think sometimes, it gets so less complicated than that, because they pay their business bills, but then like they pay their car payment with their business card.

They’re “I write off my car, because I use it.” Everyone feels very fancy about writing off your car, as if it makes you rich now. But all of these things, you’re just kind of paying bills and money is coming.

Then sometimes, you have to do something that’s fairly important, and it’s not there. I think that’s where it comes in, is it’s not one type of person doing one thing. It’s everyone takes their own method of doing it, which are mostly all wrong.

Mark S: Right. Because mentally, what most entrepreneurs do is they’ll take whatever they made last month, or their best recent month that they can remember, and they will fantasize that that’s what they’re going to do every month.

Marc V: In You Need A Budget, he talks about there’s no normal month. That’s what you’re saying.

Mark S: Yeah.

Marc V: There’s not necessarily normal months, which is important on why this philosophy, this Profit First philosophy works. From the way you described it, it accounts for the fact that every month is different.

Mark S: Absolutely.

Marc V: Why? Tell us some of the premise of what is the method, or a brief version of the method, and then people can read the book, if they want to.

Mark S: We’ve already talked about the first premise of the book is that a business should generate profit, and kind of semi-define what profit is. Well, Michalowicz’s approach to the rest of business kind of matches up with food a little bit. It’s the idea, if you see all of this money in a single bank account, then you’re going to spend it.

If you were growing up around the time that I did, if you were served a plate of food, you definitely ate everything on it. In the 50s, there was a movement in dieting that encouraged people to just buy smaller plates, because they recognized the fact that you’re going to eat everything on your plate anyway, or as much as you possibly can. So, if the plate is smaller, then you won’t eat as much.

The Profit First method is to divide up your money into different small plates, into different bank accounts, so you won’t see all of that food, or all of that money, at the same time. And you’ll be able to allocate your diet, or your financial diet, properly.

So, the basics are that you will set up these five different accounts. One is your main account, that is for all of your income. Every check that comes in gets deposited there. The other accounts are kind of distribution accounts, in the same bank.

You’ll have an account that’s called Profit, an account that’s called Taxes, an account for Owner Compensation, and an account for Operating Expenses. As money comes into that main account, as people write you a check into that main account, as you take revenues into your business, you immediately allocate some of that money to your profit section first.

That is now untouchable. You can’t do anything with that profit. You immediately take some of that money, and you put it in an account that’s labelled for taxes, so there’s no surprises at the end of the quarter, when it’s time for taxes.

This is kind of the philosophy that he puts out there to run your business, is at the end of the quarter, at the end of the year, at the end of your business life, the idea isn’t to maintain a certain lifestyle. Because then, you just have a job that you enjoy.

The other side of that theory is that whatever’s left, that the expenses that you normally spend are going to be variable. Like he said, he’s never been in front of a business that could not reduce their expenses by 10%.

I’m sure, if you looked at that after you do the YNAB system, if you looked at what your expenses were, and you wanted to knock 10% off, you could probably get rid of Netflix, as you move around your priorities.

It’s the same with this. You can look at your expenses over the past year or the last quarter, and you look for the software subscriptions that you don’t actually need. You look for things – maybe you were going to paint the interior of the space that you’re in, that you don’t actually need.

Whatever those expenses are, you can reduce them by 10%, and use that percentage going forward, to put into your profit account, to put into your tax account, to put everything in the right place.

Marc V: I would be willing to bet that if you started to separate your finances that way – he said it was profit, your own personal pay -.

Mark S: Owner compensation.

Marc V: Owner compensation, so your paycheck, taxes, and business expenses. I would be willing to bet, before you had to even go too deep into dissecting how you have to reduce everything, I’d bet just the act of the separation causes a degree of scarcity in the money in those accounts.

This is the idea that came into my head. I put them all in here. Now, it’s expenses time, and I’m paying my bills. What might normally happen? This is what might normally happen. You get the cellphone bill. It comes in, and you go to pay it. As you’re checking out, the job of every single company is to get you to spend more money with them.

So, you’re with Verizon or AT&T, and they say “Hey, upgrade time! If you get this new phone, and we also have this new unlimited plan, and you get close to the threshold. For only $9.99 more a month, you can get this and this and this, and we’ll send you a free phone case!”

You’re like “Cool!” You hit Go, because you’re paying it out of one giant account. You’re like “I’ve got six grand. What’s $10?” However, when you’re looking at it when you have it in an Expense account, you’re like “I don’t have six grand. I’ve got $780.” Now, $10 is – “I’ve got this and this. I probably don’t want to add $10. I’ll think about that one.” So, you skip it.

Just the act of separation kind of can cause a degree of scarcity. Because you put those expenses aside to pay for everything, and if you have to dip into your profit or your personal pay, now you’re going to say “Do I want to pay myself $10 less, or do I want this upgrade?”

Mark S: And here’s the added part of that, and why I like this kind of multiple account strategy, as opposed to just putting everything in one account and reallocating it, is that you have to go and transfer money from one account to another, to spend it. It’s not like if you’re in the grocery store – imagine you’re in the grocery store and checking out.

You’ve got all of the food that you have to have. You’ve got the debit card in your hand, and there’s an Us Weekly magazine and a Snickers bar. Imagine if you had to call your bank and transfer money over onto your debit card, especially for the Snickers bar and the Us Weekly. Nine times out of ten, you’re just not going to do that. That’s an expense that you’ll learn not to make.

Marc V: Yeah. That’s where there is this philosophy that if you just start doing this – and I don’t know if this author talks about this – but this is something that is a philosophy that works around everything. Once you start doing something, paying attention to it, you automatically win a little bit.

Mark S: Absolutely.

Marc V: Once you start to say “I’m just going to start watching what I eat. I’m not really going to change my diet. I’m not going to go on a diet. I’m going to watch what I eat.” Then all of a sudden, you get one scoop instead of two scoops of ice cream. You decide “I’ll get the salad instead.”

You make these little tiny decisions. You’re not like “I’m going fat free. I’m going sugar free.” No, you just say “I don’t mind the coffee black.” So, that’s what you’re getting into here. You’re going to save some money already, I think.

Mark S: That’s kind of interesting, because one of the things that, as you get into the book and the Profit First method, there actually ends up being two other accounts, called Profit Hold and Tax Hold. You go to a different bank than you’re doing business with, and you’re looking for the least convenient financial institution that you can find, to put this money into.

Because this is stuff that’s made it into your regular profit account, and then you’re taking some of that out, and putting it into the Profit Hold. You’re doing the same with taxes, putting it into the Tax Hold. So, you cannot touch that money, or it’s physically difficult to do that.

What you just said is great, because you start making those little decisions. But this putting it into a hard-to-use bank is like, I don’t know if I’ve talked about this in other podcasts, but I’m a vegetarian. I’m a vegetarian, not because of any moral or religious outlook. It’s because for years, I could not pass a $1 Big Mac.

I had an outside sales job. I would drive around. I would be the slightest bit hungry. Big Macs are $1, so I’d eat two or three a day. I found myself incapable of just going in and saying “I’m just going to get the skinless and boneless chicken breast.” So, I went vegetarian, which is like having that extra account.

Marc V: Yeah.

Mark S: I no longer had access to that food. It just wasn’t in my head at all. I drew a line in the sand and said that. It’s been great ever since, like setting up these extra two accounts. You’re making a commitment when you do Profit First, and it’s a gradual process, to actually make sure, guarantee that there’s profit in your business.

Marc V: That’s great, because the way I see it, then, it becomes both things at the same time. It becomes you – because two things happened with you. For one, you drew a line, which is like “I’m going to put this money in this bank across town, that’s hard to get to.”

Mark S: Yeah. No debit card. You can’t transfer.

Marc V: It’s a savings account, where I have to like walk in and get it type of thing. So, you did that with the meat, so that was cutting that out. But then, in addition to that, every time you and I go to lunch, there is a consideration of where we’re going to eat.

Mark S: Absolutely.

Marc V: It’s automatic. Now, you’re thinking about it. So, two things are happening. You’re thinking about it, which is going to help you to always just get a little bit better. Also, you create a barrier. It’s great that it does both of those things.

Mark S: It’s funny, while we’re talking about it, too. We also did that, financially. My wife and I, when we first started doing serious savings, we put our money in a Vanguard money market fund. It used to be stupid difficult to get money out. You couldn’t write a check for less than $500. You just couldn’t do it. It wouldn’t be accepted.

Both of us had to sign it. You couldn’t get money out of the Vanguard account, into your bank account back then, unless you wrote a check for more than $500. You’d fill out a deposit slip and you’d drive down to the bank, put it in, and then it would take about ten days to get in there. So, all of it was really hard to do, which caused us to literally never touch that money.

Marc V: You would have to really, really want what you’re doing.

Mark S: Yeah, so same thing. Once you’re past this idea in your business, and there’s a lot of things that are predicated on you doing Profit First. First of all, you’ve got to think about your business. You’re not selling shirts for a 2% profit. You’re making sure that you’re making enough money to pay yourself an hourly wage or a salary.

Your business has to be, or be on the way to being a profitable business. You have to look at it that way. Not that you go to work every day to make t-shirts, or not that you come home after work and do embroidery. You’re running your business.

And that focus will cause you to be in a position where I can go and I can put “Okay, 1% this month is going out to just profit. I know I’m going to have to pay taxes. 2% is going to go out to just taxes. 3% is going to go out to this.”

And the rest is in operating expenses. If I don’t have what I need in operating expenses on a monthly basis, it’s just a royal pain to get that money back out of your profit accounts.

Marc V: And you talked about something a couple of times in here, and I know we’ve talked about it before, about paying yourself.

Mark S: Yeah, absolutely.

Marc V: So many people don’t do that, that own a business. Oftentimes, first of all, there’s an exception to every single rule. So, don’t always look at what your friend did or what your cousin did, or something like that, and assume that – they’re an exception if they don’t, and they’re doing very well.

A lot of – I’ve read this, and you can correct me if you think I’m wrong – but that a lot of businesses that do end up having failure are ones that do not take into account paying the owner of the business money that they need, especially the money they need. That is one of the things that can cause failure.

Mark S: We talk about – what’s a rule of thumb for embroiderers? A lot of embroiderers price their jobs so they can make $50 an hour. But that’s not what is happening. They’re not making $50 an hour. They’re taking $50 an hour in, in revenues. Right? So, they’re going to take $50 an hour in, in revenues, or they’re taking $50 in, that they’re not paying for t-shirts, and they’re not paying for embroidery thread.

They’re really not allowing for how much would it be to hire somebody to do that for them, and the kind of salary that they would make, doing those jobs.

Marc V: Yeah. Another thing about paying yourself for your work, and there’s a lot of philosophies on how you pay yourself. Do you pay yourself a salary? Do you pay yourself an hourly wage? Do you pay yourself a commission on every job you sell? But you should pay yourself. I guess, according to this author, you should actually physically do it in a separate bank account.

Mark S: Absolutely. You have Owner Compensation.

Marc V: Yeah, so part of the philosophy of that, I think in the long run, turns into if you have a business that’s profitable, meaning you’re putting money into an account that is for profit, and you’re putting money into an account that pays you, what do you think? Couldn’t you one day decide that you wanted to venture out from this business? And you could take that salary pay, and pay somebody else.

Mark S: Yeah. That’s the idea. Those were two good examples. If you are an owner/operator, and you spend all of your time, you spend eight hours a day making t-shirts with your DigitalHeatFX, what is that job worth, on an hourly basis? Is it a $15 an hour job? Is it a $25 an hour job?

That’s the money that you have to kind of allocate for that position. If you are spending most of your time as a salesperson. Let’s say you have somebody making the shirts, but you’re actually out pounding the pavement. What would you pay a salesperson? That should be your salary.

Eventually, once you get the Owner Compensation up to the point where you’re paying more and more employees, and you have profit in the bank, now you’re going and you’re becoming the President of the company. And maybe you’re working for eight hours a week, instead of 60 hours a week. But you’re paying yourself like you’re the President of the company.

Marc V: Which is great, and you’re still collecting a paycheck from that company. It’s all personal goals, and what you want to do. But this method allows you to actually achieve them in a way that’s like a tangible way of doing it.

Mark S: Yeah.

Marc V: When you get to go, and if you have somebody that helps you pay your taxes, and then helps to make sure you’re doing things like that, you have a method and an answer to these things.

Mark S: What I’m going to encourage you to do is there’s an instant assessment in the book. There’s something that you can print out, and you actually fill it out with formulas, according to the Profit First method. You do this analysis that probably takes about 30 minutes, on your existing business. It does not matter how long you’ve been in business, or if you’re just starting. And you can get an idea of how good or how bad your business does.

It gives examples of people in the book that have been working – one lady had been working what she thought was a pretty successful business for like 11 or 12 years. That’s the way she approached him. In the end, she confessed that really, she had been doing nothing but working and pouring money back into the business for growth, but she was near bankrupt.

So, when you see business owners or you see your neighbors, actually in personal finance, driving around in BMWs and big houses, that doesn’t mean that they have any money. That just means that they probably have debt.

So, you need to know your numbers properly enough, and I think that assessment is a great place to start, so you can figure out how can you get from “I don’t know how much money I’m making. I can most of the time pay my bills at the end of the month. But at the end of the year, I don’t have any money in the bank to show for it.”

Marc V: Yeah. And there’s something we mentioned earlier, that we didn’t talk about here on the podcast. But some folks look around and they’re in this little bit of a trap, where like “I’m doing good. I’ve got a few company credit cards. I never carry a balance on any of them. I get to go out and do nice things. I do have some cash. I’ve always got cash in my pocket.”

And you’re dancing around, moving a lot of money in a lot of different places, and it feels very good. But sometimes, what you could be doing is you’re using credit cards as a way to finance yourself ahead of time. So, you don’t have the money.

Mark S: Right. That’s next month’s money.

Marc V: Yeah. You know and expect you will have the money next month. You know that you’re going to sell. You’ve got jobs coming up. You’ve got income coming in. “I can take this credit card and swipe it, and spend $3,000 on something. The check will be here in three weeks, for $4,000. I paid my credit card, and I’ve still got $1,000. I’m doing good.”

Yes, you’re doing better than somebody who is not paying their bills, for sure. However, you’re setting yourself up for a possible failed situation. That’s when you hear about a small business owner that everything was going great, and then it’s a house of cards that you’re building.

It’s beautiful and big and tall and beautiful, and really nice. But you pull out one piece. Hopefully, the piece is in a spot where it doesn’t crumble the whole thing, where you’ve got to rebuild that. But if it’s in a certain spot, you can crumble it all down.

What happens is you charge a big thing for $5,000, a big customer. You buy $5,000 worth of shirts and supplies and all of this stuff. You do that, and then right after that, another big customer. “I’m killing it! I’ve got three big customers in a row!”

Two of them don’t pay. They disappear. You didn’t take a deposit, whatever it is. Now, you owe ten grand. “Well, I don’t have that!” So, that’s like a trap you can get into. I think that the assessment probably, I assume it would diagnose something like that.

You probably know now, listening to this, how well you think you will assess. Most people will say “Oh, when I take this thing, I am not going to look good.” Okay. You know it. It’s okay. Admit it.

If you’re out of shape and you want to lose weight, you admit it. If you drink too much and you want to stop drinking, you admit it. If you smoke and you don’t want to smoke, you admit it. That’s what the first thing is, just admitting that there’s a problem.

Mark S: Did my wife put you up to saying that?

Marc V: Wait a minute.

Mark S: I’m avoiding the scale for a very specific reason. I don’t want to know. I don’t want to take the assessment, or get on the scale!

Marc V: Everyone hates it. You don’t want to do that. You don’t want to see that you’re bad.

Now, I think we’ve decided you’re going to pay yourself. Right?

Mark S: Yes. Not only are you going to pay yourself, but you’re going to set aside money for actual profit that you can point to, and hold in your hands, eventually.

Marc V: Okay, good.

Mark S: Alright, thanks for listening, folks! This has been Mark Stephenson, from Custom Apparel Startups and ColDesi.

Marc V: And Marc Vila, from Colman and Company.

Mark S: Have a good business!

Mark S: Don’t forget that this is a two-part series, so make sure that you listen to the next podcast in line, to get more information about personal finances and the YNAB software and app.