Tag Archives: business budgeting

Spend money to make money

burdenI received a marketing email last week that told an interesting story. It went something like this:

“I was talking with a friend about signing up for a $5000 marketing program that is easy to implement and will quickly make you back your money and then start turning a profit. I was shocked when my friend told me that he wanted to save a bit more money before purchasing the marketing program. This is a concept that so many business owners don’t understand: you have to SPEND money to MAKE money” – Internet Marketer

The phrase “you need to spend money to make money” frustrates me, not because it is not true, but because so many people end up spending money they don’t have to try and make money they really (or desperately) need.

This results in an endless spiral of debt, as people buy programs with credit, struggle to implement those programs, then jump into the next program in the hopes of making money to pay off the debt from the last program AND the new program. Then, they end up buying the next…well you get the idea.

I would love to create a new phrase and mindset for building your business:

You need to SAVE money to SPEND money to MAKE money.

BAM! The spiral of debt comes to a hault. You pause, take some time to save up for the program you want to buy, the ad you want to run, the team member you want to add; whatever the expense. You save first, then spend the money, and then you immediately begin to make money.

No interest payments on credit cards while you struggle to break even on your purchase, because you break even on your purchase the moment you make it, everything else is upside.

This is going to feel like you are slowing down the progress of your business, but there are always other strategies and tactics you can be putting into action while you are saving for the purchase you want to make. And, the reality is debt (especially large amounts of debt) also slows down your business, you are just deferring the slow down in exchange for the “quick fix” of buying stuff now instead of later.

Example – Publishing an ebook

At the moment I am working on writing an ebook for the Secure Entrepreneur, and part of my plan is to have this ebook properly edited and designed, which is going to cost money. I could have used my business credit card, or business line of credit to buy the editing and design services now, but I have no desire to go into debt to create this ebook.

Instead, every time one of my current clients pays me, I take 5% of that invoice and put it into a separate column on my money tracking spreadsheet as “Book Savings”. While I have been saving money I have been writing the ebook and doing my own editing. I have also been increasing the posts I make on this blog. This work has kept me busy, and my business continues to move forward, while I save for the editing and design of the ebook.

This month (May) I have accumulated enough money in my “Book Savings” account to pay for the editing and design work up front. The ebook will hopefully be ready to share at the start of June, and any business that this ebook brings in will immediately be adding money to the business, NOT paying off the debt I incurred to create the ebook.

Is the No Debt Plan for you?

moneygraphIf owing money to others:
– stresses you out and keeps you up at night
– drains your energy and focus
– blocks your creativity
– makes you alter your strategies
– changes how you speak with prospects and clients

Then try making the shift from the original phrase: “you have to spend money to make money” to the new phrase:

You have to save money to spend money to make money

And let me know how it works.

Resisting the spending urge – use the Four Purchasing R’s

nobl wheelsI was sitting on a stool in my local bike shop, waiting for a work order for tune ups to my wife’s and son’s bikes, when the conversation started:

“What would you recommend for a new wheelset for mountain bike?”

The mechanic’s eyes lit up as he started to talk about the latest carbon wheel rim from Nobl, and the dependability and “bling” factor of Chris King hubs. Soon a second mechanic had joined the conversation and I had one of the carbon rims in my hands, and we were discussing only using top end spokes for a wheel build like this.

In moments, my innocent question had resulted in a super cool new wheelset worth $2500 Canadian.

Understand, I WANT these wheels. I love my bike. I love new gear for my bike. I especially love new carbon gear for my bike. This hand-built carbon wheelset would be perfect.

But I didn’t do it. I didn’t order the wheels. I walked away (for now, I have some money building up in my Choice Account).

Walking away

Walking away from purchases, both big and small, can be a difficult task, especially in today’s world of credit cards and making payments. Just five or six years ago I probably would have just made that purchase and worried about the consequences later because, well, because I really want to own those wheels.

I am guessing you probably have been in similar situations, both in Life and in your business, and sometimes you have made that purchase and then regretted it afterwards, promising yourself that you wouldn’t make the same mistake again (and then, later, made a similar purchase).

How can you (and me, and my wife, and my son) stop making purchases on the spot? Purchases that lead to guilt, stress, and panic?

Use the “Four Purchasing R’s”

This is how I avoid making these types of purchases now:

1. Refuse to buy something in the moment: Always go into a store, or on a shopping trip, or read a sales page with a clear decision of whether or not you plan to purchase. If you end up in a situation where an opportunity to buy something pops up, stick to window shopping, walk away, and take some time to make a proper decision on whether or not you need the item.

2. Remember, and use, your core value statement: When buying something, it should be supporting either your Life or Business Core Value Statement (depending on the situation). If it does not support your Core Value Statement then be honest with yourself: why do you feel you need it? Is this purchase going to resonate with you and your values in a few hours or days?

3. Review your current money goals: Sit down and review what your current money plan is. What do you need your money to be doing for you right now? Does this purchase support your current money goals? If not, why are you making the purchase?

4. Repeat the process at least once: After following the first three Purchasing R’s, if you feel like the purchase makes sense, and you can afford it, then…

Wait a few more days and start at the first “R” one more time.

What I have found is, when I use the “Four Purchasing R’s” one of three things will happen:

1. I will realize I don’t need whatever it is I am desiring to buy, and I forget about it.
2. I decide to delay my decision over and over again before finally deciding one way or the other (usually I decide not to buy)
3. I make the purchase and feel good about it because I have made an informed choice about spending the money.

The “Four Purchasing R’s” versus the Carbon Wheelset

If I run the opportunity to buy expensive wheels for my bike through these filters it looks like this:

1. Refuse: The wheels sounded cool, and I desired them, so I got up off the stool and left the store, wallet intact.

2. Remember: My Core Value Statement is “Provide the Security my Family needs to have amazing Adventures together”. Carbon wheels would assist with having amazing biking adventures with my family, but they are not necessary. In this case my Core Value Statement didn’t give me a clear “yes” or “no” answer.

3. Review: My family and business are currently both debt free except for our mortgage. However, we are within five years of paying off our mortgage, 3 years if we start putting extra money on it, which is one of our current money goals. $2500 would take a nice chunk out of that mortgage and towards our money goal.

4. Repeat: I haven’t ended at a solid “no” about the wheels yet, there may be ways, using my Choice Account, to accomplish getting the wheels and paying off our mortgage. For now I am in a cycle of repeating this process every time I walk by the bike store, or consider buying the wheels. Until I get a strong “yes” with all four R’s (and discuss with my wife and son) I won’t be buying the wheels.

If you decide to give the Four Purchasing R’s a try, I would love to hear how it works for you in the comments below.

Beware the automatic payment

bank machineScanning my email account I spotted it “Your Statement has been created”. I popped open the email and scanned, my eyes stopping at “Your credit card will be automatically charged”.

The automatic, recurring payment. One of the big challenges to successfully tracking your money and staying on budget (whether in your life or business).

Why?

Because the automatic, recurring payment prevents you from being in control of the flow of money through your life or business. By setting the payment on autopilot money comes in, and money goes out, without it ever passing through your hands (even digitally) and your decision making process. You no longer get “a feel” for how your business is functioning. You are no longer clear on where money is going, where it is being wasted, and where it can be saved.

Even worse, you will eventually forget (or ignore) that the automatic payment is even happening. It is as if that payment no longer even exists, and you can end up paying for it, even if you no longer need the service or product you are paying for.

I know because I have done it

Almost two years. That is how long, at one point in my business, I paid, every month, for a webinar account that I wasn’t using. The payment came out of my account every month. I would make note of it. Tell myself that I “might” need it next month, and let the account continue.

Over that two years, I used the account, maybe two or three times. But it was just easier to keep the account open, with the automatic payment, than take the time to close it, and reopen it if I needed it later. (And yes, I know how ridiculous that sounds, but it is true, and you may be doing it too)

Making an automatic payment for that software had disconnected the money from my brain and from the money flow in my business, and I had stopped paying attention and making intelligent choices with that money.

What can you do?

There is one quick solution to prevent yourself from falling into the automatic, recurring payment trap:

Disable the auto-payment function on all recurring payments, and make those payments manually


Recurring payments are a fact of life and business, but in many cases making the payment automatic isn’t required. So turn off auto-payments.

This will bring the money back under your control, and you can start making intelligent choices with that money again. Now, you get to make a choice about spending that money when:

  • you open and read the statement
  • you login to the payment site
  • you enter your credit card information
  • you submit the payment

The automatic payment leaves you zero chances to make a decision about where your money is going. By turning automatic payments off, you now have (at least) four spots in the process where you will need to review your decision on how to use your money.

More control leads to more and better choices, and a better understanding of how money moves through your business and life.

Give it a try. Turn off all of your automatic payments, directly interact with that money, and see the difference it makes in the choices you make in your business.