As you probably know about me by now, I’m obsessed with helping business owners build real sustainable financial success that will one day lead to them being financially free.
But I see a lot of business owners spending hard earned profits on things to make them look “successful” to the outside world, often when their business can’t really afford it. You know, the cars, the clothes, the holidays, the gadgets.
The classic is when I go to meet a new client, pull up beside the gleaming big cars, and then discover they’re struggling for cash and not making enough profit.
Being Intentional with your money
It’s easy to get swept up in spending money when things feel good, or when we’re trying to keep up the image of a successful business owner. And before you know it your business and personal overheads have increased and you need even more money just to stand still. Over time those fixed overheads can creep up as we constantly raise the bar on all the things we now consider to be essentials.
So we need to be fully intentional in how we choose to spend our profits, knowing that money spent today is money we can’t invest in our business or pension for the future. And if being financially secure is the name of the game why would we want to spend in any other way?
So here’s a scary scenario
Cars is an area where a lot of money can get spent over the years. Say you were spending £500 a month on your car – if you invested that money instead you could have £79k in 10 years-time (based on 5%). £79k goes a fair way to building your security for the future. Or consider what that money could have been invested in to grow the value of your business.
Someone said to me, not so long ago “when are you going to get a decent car, you know, one befitting your position?”
Now I’ve no idea what sort of car befits a maverick recovering accountant like me, but in any case I’m really not interested. I drive a Golf. I like it. It’s safe. And it’s paid for!
I don’t need a flash car to tell people I’m good at what I do, and if anyone wants to judge me on my car then I wouldn’t want to work with them anyway. (So there!) I always used to have a new car every 3 years, on finance, because that’s what I thought was expected. Now I don’t give a damn; that money goes into my pension!
And I’m not saying don’t have a nice car, just be intentional about it and know what the long term cost of that car really is. And how that decision impacts on the money you’ll have for your future
So my top tips for focussing on long term financial security and freedom
- Remember you can only spend money once – when it’s gone it’s gone
- Get clear on why you’re running your business and what financial security or freedom look like for you. If it’s an abstract concept you’re unlikely to find it.
- Stop worrying about what you think “other people” expect you to wear or drive, or where you live or go on holiday – your financial future really isn’t any of their business
- Be really intentional about where your money goes
- Guard your fixed overheads – keep them as low as possible – it’s easy to add a few grand a month to your business and personal overheads without noticing
- Build cash buffers at home and in your business
- Spending to look successful is not the same as being successful
Financial freedom doesn’t happen by accident and there’s a reason that only 2% of people are financially free at 65 – it takes concentrated intentionality and knowing exactly what you want. And that’s more difficult than mindless spending.
Stop your future wealth creeping out of your business and your life. Start creating the future you’d hoped you’d have and really want.