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Episode 65 – This is Why You’re Broke Part II

Jan 19, 2018

This Episode

Mark Stephenson & Marc Vila

You Will Learn

  • The basics of the ”Profit First” system and how it relates to business and personal finance.

Resources & Links

Episode 65 – This is Why You’re Broke Part II

Show Notes

Welcome to the second part of our 2 part series on WHY YOU’RE BROKE!

That title is only slightly tongue in cheek. We had both just happen to be reading finance related books recently – Marc Vila on personal finance “Why You Need a Budget” – and Mark Stephenson on business finance “Profit First: A Simple System to Transform Your Business..” and discussing how the two were related.

During the next 2 podcasts, we’ll discuss what WE learned from each of these authors and how they might apply to you and your business.

Episode 64 discusses the basics of the Profit First system and how it relates to both business and personal finance.

The next episode will review YNAB (you need a budget) and how that might impact your professional life.

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!

Marc V: Welcome to the Custom Apparel Startups podcast. This is episode 65, maybe.

Mark S: 64, A or B.

Marc V: But joking aside, You Need A Budget program. If you’re curious about it, you can look it up. I’m not telling you to buy the software. I’m not saying it’s going to be great for you, or anything like that. That is up to you.

I am saying that I read the book.

Mark S: Okay, good.

Marc V: And I am also saying that I was entertained by it, and I’m saying that I think there’s a lot of great things that can come out of it.

Mark S: And I’ve seen the app, which is pretty cool.

Marc V: The app is cool, and it’s easy. Once you learn how to do it, it feels good, knowing that you’re tracking your things.

So first, I would like to talk about maybe what this book is about, and the philosophy. The whole philosophy is in the name, You Need A Budget.

Your budget is your budget. It’s not anyone else’s budget. It’s not about telling you that you have to put away a certain amount of money for certain things. It’s not saying that you have to create a college fund, or that you should only live debt-free. It’s not about all of that.

It’s about you being empowered to make whatever financial decisions you want.

Mark S: And keeping track of it.

Marc V: And keeping track of it, so you can go out and spend the money on things that you want, and you can do it stress-free and guilt-free, because you’re budgeted for it.

One of the key things that Jesse says is he says it’s not about the money. Forget about the money. It’s not about the money, because what are you going to do with a big pile of cash that has nothing to do? What’s the point of having $10,000 -?

Mark S: Without a purpose.

Marc V: Without any purpose. The purpose is that I want to have it, in case I get really sick, and I can pay all of my bills for [inaudible 02:44]. Then, it does have a purpose. You just said it has a purpose. So, it always has a purpose.

So, the philosophy about this is you think about what’s important to you, whether vacations are important, or owning cool gadgets, or saving to buy a bigger house, or saving to send your kids to school, or enjoying really cool things and fancy meals, every weekend.

Mark S: Yeah. And really, just to reiterate the reason that we’re talking about your personal money life, we’re imposing into your life – not just in business, but in your personal life – because we’ve seen time and time again where, if you are terrible at personal finances, if you cannot handle your own money properly, or you do not have good personal money habits, then it’s very unlikely that you’ll have good business money habits.

And if you have good business money habits, and you can translate that into your personal life, then you’ll have better both.

Marc V: Yes.

Mark S: But it does no good to have a really successful and profitable business, if you’re going to go bankrupt anyway.

Marc V: Yeah, this is it. No matter how inconvenient you make that money to get, Mark, you have the power to take it.

Mark S: It’s true.

Marc V: Okay? So, if your personal finances are really, really bad, then eventually, you’re going to be backing into a corner, and you’re going to hit it. And when you hit that corner, you don’t care that it takes both you and your husband’s or wife’s signature to do it, because you need it.

So, the point of the personal budget is that when you’re paying yourself, you’re using that money in the right way, so you don’t get backed into that corner, because you will. You’re going to go into it, no matter how hard it is.

So, the personal budget thing is helping to safeguard, I think, in my opinion, to safeguard the business, but also make sure that if you’re managing one well, you’re going to the other well. You’re going to be better at it, in general.

Mark S: I like that. That’s a good perspective.

Marc V: I mentioned forget about the money. The personal budget is not about the money. It’s about what you want your money to do for you, and whatever you want it to do for you is what you want it to do.

So, there are rules, essentially. There’s four rules, and that’s what I’m going to talk about. Then, the rest of it, you learn on your own. But the four rules.

The first rule, and the most important rule, is give every dollar a job.

Mark S: I really like that phrase a lot.

Marc V: Yeah. I think it’s great. It’s so simple. What does that mean? That you pay your mortgage, you pay your electric, you pay your cellphone, you pay your PlayStation network subscription account, you pay your Netflix account, you go to the grocery store. These are all regular things, that all of your money has jobs.

But typically what happens, and this is normal, just run-of-the-mill off-the-hip budgeting; “Yeah, all of my money does have a job. Then, at the end, I’ve got $500 or I’ve got $300 or $3,000. I save it.” Okay, well, saving it isn’t really just a job, because saving it for what?

What happens is your grill breaks. “I’m going to buy a new grill. I’ve got $5,000 in savings. I’m going to get that big juicy one. It is awesome. It’s $1,400.”

Mark S: He just bought that grill, by the way.

Marc V: I wish I did! I would like to, but I have not. You know why? Because I haven’t properly budgeted for it, and I’m not going to do it until I do. So, grill-less until.

Mark S: I like that.

Marc V: Anyway, back to train of thought. You start questioning about everything that you are going to spend that money on. So, if you’ve saved $3,000, and you say “I want a grill. I need a grill. I grill all of the time. I need a grill! I grill all of the time. That’s how I cook, so I need to go get one.”

You start getting concerned. “Well, I also have been noticing like a noise in my refrigerator that’s weird. So, do I want to replace it? I’ve also had this weird thing in my throat.” Then, it becomes a problem, because you’re not prepared for any of that. You’ve just got this lump sum, with no priorities, and you’re finding yourself having to make these priority decisions immediately.

So, what you want to do is every dollar needs to have a job. That means that you pay all of those bills. Then, you say “I want to save for stuff.” For what? “I want to save for vacation. I want to save for -.” So, everything’s got a job.

What does that mean? What does that go into? That rolls into rule number two.

Mark S: Before we get to rule number two, I want to mention why I like the idea that every dollar has a job. That is because it’s the same kind of thing that you’re going to use in your business philosophy. Like what Profit First was talking about, having one bank account.

It’s difficult to discern which dollar is supposed to do what job. Right? So, you’re looking at the big picture. You’re looking at this big bucket of cash, and you’re randomly assigning it jobs, as it comes in. So, here’s my paycheck. Okay. What jobs do I need it to do right now? As opposed to looking in advance, and saying “Okay, I’ve got this coming in. Here are these dollars. Here are the jobs that I need it to do.”

Marc V: Yes. So, that means – the second rule is you embrace your true expenses. Your true expenses are not those same examples I’m going to say again, from your mortgage to the electrical bill. Your true expenses are also tires for your car. Your true expenses are – your electric bill is going to go up in the summer, if you live in a hot area. Or your gas bill is going to go significantly up in the winter, if you live in a really cold area.

Mark S: So, it’s kind of you’re anticipating.

Marc V: I would say not anticipated. It’s facts. They are definitely coming.

Mark S: Like you know, eventually you’re going to run out of ink for your direct-to-garment printer.

Marc V: Yeah. You’re going to need toner on your DigitalHeatFX.

Mark S: Yeah. You’re going to need thread.

Marc V: You’re going to need it, especially if you’re selling t-shirts. It’s not a surprise.

Mark S: It shouldn’t be a surprise. It is a surprise to a lot of people.

Marc V: Yeah. It’s not a surprise. You’re going to need it. It is a true expense of owning the business. And there are plenty of true expenses in life. If you wear glasses, new glasses are a true expense. There’s always true expenses.

So, what you do is you need to embrace all of these things. You know you’re just going to get sick sometimes, even if it’s little stuff. Even if you just end up with a sinus infection that’s not that big of a deal. You went to the Doctor and if you had insurance, you had a copay. You went to the pharmacy, and you had a copay for there, say $50.

If you don’t have insurance, maybe it was $300. It’s going to happen, though, at some point. So, what you do is you embrace all of your true expenses, and you start budgeting for those always, now.

Mark S: Once again, I really like that, because the analogies hold true. You may be under warranty on your equipment, but you know what? You may need parts, and you may as well just deal with that now, and set aside the money, or give those dollars a job for your true expense, which some day is going to be a part for the piece of equipment that you’re using every day.

Marc V: Yeah. And it can be a little bit, and it can change. That’s where the next rule comes in, if I could.

Mark S: Yeah, go ahead.

Marc V: Which is you roll with the punches. So, rolling with the punches is, your budget is going to change all the time. You’re going to have different months. Different things are going to come up. You’re going to find out rent goes up, where you’re renting your space for your business. You just got a letter.

Your local municipality passed a new law, and taxes for business-owned property went up 12%. It’s going to change.

So, what do you do, at that point in time? If all of a sudden, if you buy a brand name of shirt, and that brand name gets bought out, and they used to be all shirts, $2 flat. Let’s keep it a simple example. Now this new company is “That old $2 flat doesn’t work for us. Some are $1.75 and some are $2.25.” Now, all of a sudden, you’re like “Oh, man. The shirt that I buy went up a quarter. I’m doing $1,000 a month.”

You start doing all this stuff, and it’s a couple hundred bucks a month. Now, you need to change your budget. And it’s going to happen, up and down.

Mark S: On the personal side, what if the cost of a good cup of Starbucks coffee went up? I would have to adjust my budget. It’s a significant percentage of what I spend every month.

Marc V: Yeah. And I used an example of a business one. I should go more personal, for the examples. But such and such. Anyway, your budget is going to change. What’s going to happen is your taxes go up on your house. Sometimes it’s bad. Your taxes go up.

Mark S: Car insurance.

Marc V: Your car insurance goes up. Sometimes it goes down, right? Maybe you decide that it’s a really good opportunity for you to do a refinance on your mortgage. All of a sudden, you’re going to pay it off faster, and your bill went down $100 a month.

Maybe you decide to switch cellphone plans, because you weren’t really using that plan a whole lot. You save $50 a month. That $50, you roll with it. You take that $50, and now you can move it to another priority. Where? This is where the decision-making comes in.

“I’ve got an extra $50.” So, you pick up your budget, and you say “Where do I want to put it? What’s the highest priority that I can put it?” Because you kind of should work top down.

Mark S: Right. So, you’re talking about like maybe food is your first highest priority. Here in Florida, air conditioning is your next highest priority. And you continue to go down the line.

Marc V: Yeah. It’s like “Do I need $50 more food?” You – not you – might say “I love food, and I would love to buy higher quality steaks. That’s what I really want to do with my $50.” Good for you!

You might look at it and say “I’m cool with my food.” You might go down, go to my cellphone, and “I remember that $9.99 plan extra that they offered me. Nope. I don’t want it there.” Then, you go down to the vacation area, and you say “You know what? If I can put an extra $50 a month toward vacation, that means I can upgrade to the suite.”

Mark S: You’re doing a great commercial for reducing your expenses!

Marc V: Yeah! And that’s part of it, but what the expenses are, it’s not – I would say this, because you made a statement that got me thinking about something. It’s not about reducing your expenses, because everything on your line item budget is an expense, whether it’s the luxury vacation.

Mark S: I see. I know where you’re going.

Marc V: Everything is an expense, so the luxury vacation is an expense. You get to determine where you want it. Then, your expenses and movement change. If long-term financial security to you, is a good priority, then you would add that. You would increase the expense of investing into a mutual fund, and decrease the expense of, say, your cellphone bill.

Mark S: That makes sense. And like you said, and we’ll keep going with this,  just because you’re thinking about these things and you’re paying attention to them, you’ll get better at money. You’ll get better at all of it. You’ll find yourself more secure in your business, because you’re paying more attention to your personal finances. And you’ll find if you’re paying attention to how you handle your money in your business, you’ll benefit in your personal finances on that side, as well.

Marc V: Yeah. It’s going to all work together. In this book, and it’s something that I personally believe in my general life philosophy, which is why this philosophy resonated well, and Mark and I were talking about it before, but I think everybody should get to make their own choices on what is good for them and their budgets.

That’s what is important about budgeting your money, is do not let – you can read advice from everybody, and you can listen to all of your friends. And you should take good advice, and learn your own lessons. But realize what is important to you, because some folks might not just be big vacationers. They just don’t care about going anywhere. It’s just not fun.

They would rather spend the time at the bowling alley.

Mark S: Honestly, I am always happy to come home. You know what I mean? When you’re on a vacation, and you spend a lot of time, oh, my God. It’s nice to be home.

Marc V: And some people they’re not into gadgets. They don’t want a newer cellphone. They kind of hate that they have to replace it, ever. They don’t really want a new computer. They don’t care about that too much.

Or your home. They don’t really want any fancy upgrades to their home. They just want it to work.

All of these things, all of the priorities are fine, for you. Take the knowledge of what’s a good financial decision, to say no. [inaudible 17:57] when you could save.

But for me, an example in my own life, my mobile device is an important thing to me. I use it for work. I use it for fun. I communicate. Most of my really, really close friends are not people who live next to me, so I am on video chat with them. We trade pictures. We trade our lives via our mobile devices. It’s very important to me.

Someone else in this building that I’m sitting in might look at my mobile bill, and say “What? Why?” I would say “I really value this, though.” I do Facetime and video chat with my family, every single day.

Mark S: I’ve seen that.

Marc V: So, I’m going to spend it. It’s good for me.

Mark S: And on the other side of that, I really like big piles of money. I really do. I really am definitely into big piles of money, so I would prioritize big piles of money over the best phone that I could possibly have.

It’s the same thing, when you go back over to the business. What is your priority for that? It’s a business, so the natural priority is profit, but maybe you are going to take that profit, and instead of putting it into your personal budget, maybe you’re going to put that somewhere else.

Maybe you’re going to start another business with it, or maybe you’re going to give it all away. Maybe you’re working extra, and you get a chance to put a new category in your YNAB app, that is just tons of money for your church.

Marc V: Yeah, and that’s fine. That’s what’s great about doing all of this. Because if you want to tithe more to church, if that’s it, this is a great reason to do it. If you want to get more computers for your house, so you can talk to everything, and that’s the life that you want to live, because you see the benefits of that, spend the money on that. You have a choice.

You don’t have a choice, when you’re constantly trying to figure out which credit card you can spend this on, and you are turning down offers to go on, “Hey, do you want to come to Orlando this weekend, with me and my buddies? We’re going to do a little thing.” And you have to turn it down.

When you turn down that trip, because you look at your budget and you look at your priorities, and you say “I would love to go, but I don’t have anything of a low enough priority to pull from, to pay for that,” then you get to feel really happy by saying no, because you’re saying no, because everything else is more important than that.

However, now, this is where I don’t want to lose you. In a different scenario, all of those other things, because this is the same life – this is you, in a different timeline. All of those same things are still more important than the trip. This is you, in just a different financial world. But the knee-jerk thing is not all of these other priorities.

The knee-jerk thing is that you look at the bank account and you look at your bills, and you say no, because of the money. That makes you feel uncomfortable and stressed, and jealous, maybe, of them. “Why do that get it, when we have the same job? I could never do that!” So, you get to do this.

There’s one more rule, but before we get to it, I’ll just complete a philosophy, that this is something that anyone can do right now. And their philosophy is you just start right now, with the money that’s in the bank. Start right now. Take the money you have in the bank, and just start with it. Just go forward.

Don’t feel guilty about any of the mistakes. Don’t take out – theirs is for the personal one on this philosophy, and I’m not saying – again, I’m not going to say this is the right way to do it or the wrong way – this is the book. Don’t do a 12-month average of your electric bill, and figure that in. You kind of know how much it is.

You have rule number three, that you’re rolling with the punches.

Mark S: Yeah. Don’t use numbers analysis paralysis as an excuse not to get started.

Marc V: I’ll tell you what. For an experiment for myself, I downloaded the app. I’m telling you, I spent maybe 90 minutes, if that, including interruptions, setting up all of my categories. Now guess what? Almost every day since then, I’ve made a change to it, or I’ve added another category, because I’m not done. I’m not done yet.

Mark S: But you started already.

Marc V: I started. I got it started. And then, I was like “How did I not even my pets as a category?”

Mark S: I remember that.

Marc V: I had to go to the store and spend $100 on pet stuff. So I said “I’ll add the category.” Then, my low priority things, I had a bunch of stuff budgeted there. I was like “I don’t need that much in there, but it’s got to go somewhere.” So I pulled it up, pulled it up, pulled it up, and I’m balancing it. And I’ll get paid again, more bills and things I’ll forget, will come up. And over time, it’s going to even out, because I’m going to roll with it, as it goes.

Mark S: And you get really relaxed and comfortable about your money, eventually. You’ll identify things that you’re spending on, that you really just can’t afford. You just can’t do that. Like there’s just not enough money at the end of the month, for you to do that on an ongoing basis.

If you don’t, once you have control and once you realize what the job for every dollar is, and you know the dollars that are coming in, it’s just really relaxing. It’s almost the same as having piles of money. It doesn’t happen – there’s no emergency during the middle of the month. There’s no panic. There’s no sudden realization that you don’t have enough to pay something that you need to do.

You broke your glasses, but there’s nothing in the bank. The transmission dropped out of your car, but there’s no way to pay it. Because after you’re doing this for a while, you’ve got more control.

Marc V: And guess what? After you do it for a little bit of time, you actually do have piles of money. A pile is a relative term. Right?

Mark S: It’s true.

Marc V: It’s a relative term. So, what I mean by that is you may have started budgeting all of this stuff, but you didn’t put the glasses thing in, yet. “I just got glasses. I don’t have to add this, yet. I want to add it, but there’s other priorities I’ve got first. I’ve got a spare pair, too.”

You decide to take out all of your glasses at once and clean all of them, and during that process, your hands catch on fire, and you burn every single pair of glasses.

Mark S: That’s a terrible scenario! How does that happen?

Marc V: I don’t even know. That was bad. But realistically, though, you had this emergency that happens. It could be just this weird quirk thing, because you didn’t budget for it yet. But you’ve got a bunch of little piles of money that even only after a few months, you’ve built up, because you’ve put away $15 a month to get a new iPad, and you put away $5 a month to get a friend of yours a gift that they really want for Christmas, and you want to do this for them this year, finally. It’s not that much money, but you want to do it.

You put in all these tiny little things, so maybe you’ve got ten of these little micro-categories; $10, $20, $15; toys. Little gifts, little givings. Then, all of your glasses caught on fire simultaneously. Those things are on the bottom of your priority list, so you get to take $20, $20, $40, $60, $80, boom! You’ve got glasses.

Mark S: That’s a good point.

Marc V: So, you’ve got little piles of money that can fund these little issues. Then, when something big and bad happens, which it will in life, at some point – something weird is going to happen – you’ve got a plan to prepare for it. You’ve got a plan to go back to it.

It’s much less stressful than “What am I possibly going to do at all?”

Mark S: Yeah. Just not knowing, that’s really the most helpless feeling. And you guys know, because everybody has had this moment where you get a bill or something happens, and you just start looking around, because you don’t know what to do. You don’t know where this stuff is going to come from.

“I can pay for this, but I’m not going to be able to make rent,” or “Crap! Where am I going to get the money for daycare next week?” Once you are laying all of this stuff out, you start to get control of it, and you start to feel better about it. You start to feel more capable about it.

And once you do that, if you’re starting with that first, versus the Profit First, then you’ll be able to translate that same kind of thing into your business. Or if all of your accounts are comingled, it will basically be the same thing.

Marc V: Then, to kind of go on that point, it doesn’t mean that you start this, and now you’re financially free. You could have that really weird odd catastrophic event that costs you thousands and thousands of dollars. It could happen at any point in time, and it could be in the middle of this. That would be bad luck, but it could.

But the point of it all is that you’re more prepared to figure out what you’re going to do about it. And then, you’re more prepared to recover, because you started it.

So, if you have this long plan, and you’re six months into it, and something really bad happens, and it costs you $10,000, and you look down your budget list, and it eats up everything [inaudible 28:56]. It eats up the computer and the iPad and the extra toy you wanted to do, and the upgrading of your vehicle that year.

Okay, that wasn’t very fun.

Mark S: That sucks.

Marc V: And maybe you still don’t have the money, and now you’ve got a credit card, or you’re getting a loan from the bank or a friend. All of that can happen, but you’ve got a recovery plan now, because you get to say “I know what to do next. I’ve figured out the problem. How am I going to get out of it? The first priority is I’m paying my friend off.”

Mark S: You move things around the priority list, sell some more t-shirts.

Marc V: The next thing you know, then it’s 2018, and now you’re back to saving up for the toy again.

Mark S: Gotcha.

Marc V: There’s one more rule.

Mark S: Tell me.

Marc V: Okay. This is one of the most important, in my opinion. One of the funnest ones, in my opinion. How about that?

Mark S: I like it. Buy a hot tub. Is that one of the rules?

Marc V: It is actually the fourth rule; relax. No, it’s age your money.

Mark S: Age your money?

Marc V: Age your money. Aging your money essentially is paying all of your bills with money that you earned at least 30 days before, as a start.

Mark S: Okay.

Marc V: So, you are never waiting for a paycheck, to pay a bill.

Mark S: Gotcha. So, you’re not going “I get paid on Tuesday, so now I can pay my rent on Wednesday.”

Marc V: Yes.

Mark S: You’re going “I got paid on Tuesday last month, so now I can pay my rent.”

Marc V: You’re saying “Rent is due on the first, so I pay it on the first.”

Mark S: Yeah. You’re got like this little [inaudible 30:42].

Marc V: Yeah. And Mark, you and I had a little bit of a conversation. You said we should have more than a month. And that’s a whole other conversation. But the point is aging it as old as you can get. That’s really the point.

But an initial goal, if you’re not doing anything at all, a very, very attainable goal – I like short goals I can get to, quick. I like the instant thing. It’s fun. I, you, almost anybody can get to that 30 days quick. “I live month to month. How can I possibly get to 30?” Well, if you’re really trying to get one month ahead, you can squeeze out a bunch of little priorities, because now, max priority is getting a month ahead.

Mark S: Yeah. Listen, I’ve seen the app, and if you’re listing everything out, and you’re prioritizing it the way that you’ve described so far, you can take a look at that list and start at the bottom, and work your way up, and figure out how to get to a month ahead.

Marc V: That’s the cool thing. Getting a month ahead is not something – if you’re living and you’re surviving, then you can do it really fast. Because you just chop all of the low priority stuff out. Even the stuff that you really, really, like you really love that coffee. Or you love Friday night out with your friends, or you love Tuesday night out to dinner, date night.

You just say “There’s going to be no morning coffee, so there is -.”

Mark S: I quit.

Marc V: Not no morning coffee. No $5 morning coffee. So, no $5 morning coffee. We’re doing that 20 times a month, so $100.

Mark S: $100, yeah.

Marc V: So, now I’m getting there. Then, you start chopping away at the things. “No $5 coffee, okay. I did that. Now, we’re going to skip date night, just for six weeks. We spent $150 every time we did that, so there’s a grand.” Then, all of a sudden, you say “I just kind of basically did some math where I got 30 days ahead in like two months.”

Mark S: And honestly, just like we’ve been talking about the whole time, just the idea, putting the idea in your head and making it a goal to get 30 days ahead, to age your money by at least 30 days, you’ll start to see areas where you can improve in your financial life, or in your business life, that will lead you to more money, that will lead you to that situation.

Marc V: Here’s another thing, like more money, because I used some examples way earlier, like half an hour ago. You were short on money, so what did you do? You called your phone company, and you said “Hey, short on cash. Can I get an extension?” And they said “Oh, yeah. We charge a $2.99 fee, and we’ll split your bill in half.” I don’t know if that’s what they do.

You just lost $3. You missed a bill, they charged you a $10 late fee, you lost $10. So, there’s money that way, that you’re gaining back. Sometimes it’s interest, with the credit cards. You might be gaining that back. So, you get to also save these little bits and doodads and bits of money.

So, now you’re a month ahead. You’ve aged your money a month ahead. Then, you get to reprioritize. And since you’ve been living a little more frugally or just changing around, now you get to reset. Then, you get to make the choice again, “Is the $5 morning coffee great, or nah?”

Mark S: I kind of miss it.

Marc V: Or you realize that like getting in the line was annoying a lot, and I kind of learned how to make really good coffee at home. I just don’t want to add that.

Mark S: Or you know what? Another good way to do that is like they talked about in Profit First. A lot of business owners will start this system, and they’ll wonder where they’re going to find the money to put in the profit account, and to put in the owner compensation account, to put in the tax account, and things like that.

I’ll reiterate his observation that 100% of the time, you can find expenses to cut. That’s what always happens. So, if you are reprioritizing your life, to make it to the 30-day aged money, then you’ll find those expenses. It’s doable, almost 100% of the time.

Marc V: Yeah, and that’s what’s cool. One of the analogies that I read about with this is, if you were imagining all of your money not being electronic, and checks and credit cards and the way it is, but if you imagine your money like it was a change machine.

You walk in every day, and you have a pile of coins, and you dump it into the machine. Then, every time you need some, you turn the crank on the bottom, to spit some out. Right?

Mark S: Right.

Marc V: The newest coins go in the top, and the oldest coins are toward the bottom. So, as you add things to the top; the higher you’re filling it up, the longer it takes for you to twist that knob on the bottom, and the coins to come out.

So, the goal is for you to pull out the oldest money you possibly can, over time. That you’ve got this thing filled to the point where you’ve got a second machine that you don’t even touch yet, until that one runs out.

It’s this concept that you’re letting your money get older and older and older. If you want it infinitely older, like Mark does, just to have, when you completely retire, you get to Scrooge McDuck dive through coins.

Mark S: I have found that the older I get, the better I get. So, the older my money gets, the better it gets.

Marc V: Yeah. It’s also just a matter that eventually, the goal is that no matter emergency happens, this is the point of the older money. You start now. Next month, you’re not ready for a $10,000 catastrophe. You might not be ready for a $1,000 catastrophe.

The next month after that, six months from now, you might be ready for a $1,000 catastrophe or a $4,000 catastrophe.

Mark S: Or just let me reframe that. You might be ready for a $4,000 opportunity that you weren’t expecting. You might have that $4,000, and your buddy comes up and tells you about bitcoin for 50 cents, and you have the opportunity to get in on something at the ground floor.

Or you might have that person offer to take you to Orlando for the weekend, if you buy the tickets to Disney. Or any number of things might come up, and you have the opportunity to invest in a new business, re-invest in your existing business, take a bigger order than you normally would, or buy new equipment.

Marc V: Yeah. We talked about late fees and charges and stuff. The opposite is also true, because you get to buy the shoes when they’re at a really good deal, rather than just literally waiting until they’re worn out, and then having to buy them. It’s all part of the budget.

If you’ve got clothing as a line item, and you put $50 a month or $200 a month, whatever your number is, you put in your clothing. That little thing is piling up, and you look at the balance of it, and it’s got $400 in it. Now, all of a sudden, you know you’re going to need new shoes soon.

You haven’t changed your shoe size in 20 years. So, you’re going through the mall, and you see your favorite shoe store has a replacement pair.

Mark S: Man, I’ve got a much better example.

Marc V: Yeah?

Mark S: What’s the shelf life on vinyl.

Marc V: Now, we’re talking business.

Mark S: Yeah. What if you have all this opportunity money? It’s aged ahead, so you’re not worried about your expenses for the next several months. And Colman and Company puts a standard red vinyl on sale for a great price.

Marc V: Which we just did.

Mark S: Yeah. So, you could get 25-yard rolls of red vinyl for a great price, and you know it doesn’t wear out. It’s red or white or black or blue, so 100%, you know you’re going to use it. There’s no better time to buy it. So, take a little piece of that aged money. Take a little piece out of your profit account, to take advantage of that opportunity and buy ahead, and just save tons of money.

Marc V: Yeah. You could have just saved $150. Also, in quantity, like the rhinestones are an example. They don’t really age, that they’re going to get old and not work. It takes a long, long time.

Mark S: Yeah, yeah.

Marc V: So, you buy a large bag that might cost you $150, compared to buying a small bag that costs you $25. And you get to do this with everything. You get to shop at Costco. If you use ketchup a lot, you get to buy three bottles, and save. Basically, you get a bottle for free. You get to buy, when you buy your – have you shopped there?

Mark S: Yes.

Marc V: The amount of paper towels and toilet paper.

Mark S: I don’t even want to get into that!

Marc V: Having lived alone for a while, I buy that toilet paper, and it’s like an infinite amount!

Mark S: Yes, yes.

Marc V: Like I filled up a closet!

Mark S: But you’d better put that in your app, because one day, you’re going to need it, and it’s not going to be there.

Marc V: I didn’t even mention the bidet.

Mark S: Don’t Google that, please. Don’t Google that.

So, I love this. We talked about the four rules, which is give every dollar a job; I like that, just from a general perspective that you’re looking at the money that’s in your bank account with purpose. Or you’re doing the Profit First method, and you actually have purpose bank accounts that you put that money into.

Marc V: Yeah. The whole concept of everything having a purpose is great.

Mark S: And embrace your true expenses; I like that a lot, as well, because you’ve got the future in mind. This is money that you will spend, but it may not show up this month or next month.

Marc V: Toner and ink and tires are all actual things that you will spend money on.

Mark S: Yeah. It’s going to happen. You’re going to need that stuff.

Marc V: It might be tomorrow. It might be in one year.

Mark S: If you’re not taking a little bit out of every sale, or making sure that that extra margin is built into a sale, if you’re in the custom t-shirt business, or if you are running your personal life on the edge of your finances, and you don’t consider the fact that your A/C or heater may need repaired one day, you’re going to be unpleasantly surprised.

You said roll with the punches, and that was just kind of a flexibility. Right?

Marc V: Yeah. Just realize – don’t be afraid to change things. The problem with a budget, oftentimes, is you put $200 or $100 – it’s much like a schedule at work. 9:00 to 1:00, 12:00 to 1:00, and you know that the time fluctuates. So, rolling with the punches means if an expense goes up, you’ve got to change somewhere and don’t add. If the expense goes down, you add it somewhere else.

Move around. Pay attention to your budget, and realize that what you like changes, too.

Mark S: It’s the same thing in a business environment. You should understand that the kind of design that you’re doing now, or maybe the type of embroidery that you’re doing now, or the fashion that’s happening right now, is not going to stay the same. You’ve got to be flexible on what you are budgeting your money on.

You’ve got to be flexible on what you’re running your business on. For example, ten years ago, no one was decorating performance wear, because there wasn’t any. Unless you were actually playing basketball, you did not own performance wear. Everyone did not wear yoga pants, like five years ago.

Marc V: If you did yoga.

Mark S: That may be the time. So, it may be that embroidery is very popular and consistent now, but it may be that in three years, vinyl is a must-have, you have to do that.

Marc V: It’s going to go. They work in favor, in both directions. You don’t make an answer too automatic. Like “The price of my shirts went down. Automatically, more profit.” Time out. Evaluate everything. Is it more profit, or is it doing something else? I don’t know. I’m not even going to give an example.

Mark S: Yeah. Are you going to put that in the bottom line, or are you just going to put a little extra on the shirt? Are you going to offer bigger designs? Are you going to offer upgraded shirts for the same price, in order to get bigger market share, or attract different kinds of customers? All of that is a decision.

Marc V: The same thing goes with your personal budget. If you get a bonus, if somebody gives you a scratch-off for a present, and you get $100 out of it, “$100! I’m just going to use it on nothing,” or just say “Do I have a priority that I would rather? I actually do have a priority, because I’m $100 away from getting that iPad.”

Mark S: We should ask [inaudible 45:30], our Sales Manager. We got lottery tickets, scratch-off tickets, for Christmas from ColDesi. He won $500! I wonder what he did with that.

Marc V: He probably did some extravagant upgrade to his house. He’s been doing fun things to his house.

Mark S: That’s true. We shouldn’t talk about him. Okay, so I liked where this kind of ended up. I like the philosophies that we talked about here. Just the act of paying attention. Please don’t be afraid of your business finances, and how they’re organized.

Look at Profit First. I love this book! There’s a list of others – maybe I’ll put it in the show notes – that I also like. But the act of paying attention to that on a regular basis, and having goals, and having rules that you set for yourself, will give you a better business. Not today, but it will eventually allow you to, or encourage you to be successful in your business, just because you’re paying attention.

Marc V: Yeah. And the one thing in the You Need a Budget book, that he writes, he says when you’re doing all of these things, I mentioned it a minute ago, but you’re creating scarcity everywhere. And scarcity is when you start to make – you don’t waste, when things are scarce. You create a lot of scarcity, so naturally, you won’t waste.

You’ll think about it, and you’ll do with less, when you can. I like in life how it’s very interesting that any time you pay attention to something, you notice it. I used to know what it was called. There’s a phenomenon for it. But if you are shopping for a Toyota Camry – or let’s go more obscure. A Triumph motorcycle.

You decide “I want to get a Triumph motorcycle. I want a Triumph.”

Mark S: And a scarf.

Marc V: And a scarf, naturally. And everyone has experienced this; you’re going around and you’re like “There’s a Triumph! I’m seeing them everywhere!”

Mark S: Yeah. “I didn’t realize there were so many of them!”

Marc V: “Did everyone all of a sudden just buy one of these?” Or it’s another one, where if you’ve heard and learn a new word, you’re likely to hear that same word three or four times, I think, within a week, or something like that. It’s because it’s on the forefront of your mind.

Mark S: You notice it.

Marc V: You notice it. So, that’s something to think about. When you’re doing all of this with your finances, you’re going to notice everything. You’re gong to notice that when you pull out your card, and you realize that – this could just be anything. You realize that this one particular store that you shop at, you don’t even like shopping there. You do it lazily.

“I’m thinking about my money. I’d rather put it somewhere else.” It works everywhere.

Mark S: Pay attention to your money. In the end, what we hope for you, and what we do or plan to do for ourselves, is pay attention to your money enough that your finances are not an emergency anymore.

Then, after you do that for a while, it won’t just be that it’s not an emergency anymore. It will be that it’s profitable and fun and useful and productive for you, more than just paying your grocery bill.

Marc V: Yeah. It’s stress-free. Or at least, significantly reduced stress. Then, understand that your goals are different than everyone else. If you want to be a millionaire, you go for that. If you just want to make sure that you and your family are happy all of the time, and you’ve got things tucked away, and a modest life, and you don’t want more, then you get to manage that.

No matter what it is, you’re more free.

Mark S: I like that. 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!

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