Business ownership is a hectic occupation. On top of all the expenses of daily operations, there is always something else that needs to be paid off or financed, such as a new business opportunity that, if you play your cards right, could end up bringing in more revenue, which you will use to fund your next venture, and so on…
So what’s wrong with this picture? You’re bringing in money but not really keeping any of it, which kind of defeats the purpose, doesn’t it? This doesn’t mean that you should stop putting money into your business; that’s not the point. The point is that it is possible to keep feeding your business while giving back to yourself. It just takes a conscious, deliberate effort to pull it off.
This article offers a couple of suggestions that can not only promote the advancement of your business, but pay yourself at the same time.
Promoting your business vs. investing in your personal growth.
There is a certain misconception that can hurt a business owner, or anyone, for that matter. The misconception is that when you pay the bulk of your profit back into your business, that this investment is actually paying yourself because it will ultimately generate more revenue, in turn putting more money in your pocket.
The only problem is that, even though this practice will definitely promote the success of your business, the money never ends up in your pocket—it just ends up rolling back into the business.
So obviously, putting the money back into your business allows for greater growth; that’s a good thing. This, however, is not the same thing as paying yourself. Paying yourself means keeping some for yourself, devoting a portion for the sole purpose of improving the quality of life for you and yours.
Straightening out your priorities.
The essential element here is how your priorities are set. Many business owners spend revenue in this order:
1. Pay overhead, wages, etc.
2. Pay a large sum back into growing the business.
3. Save the small remainder for personal savings & spending.
That is just a very basic summary, of course. The main problem here is that there is no deliberate amount of money devoted to personal savings. This is the opposite of what you should do, if you want to build your own personal wealth because what you’re basically doing is making your savings the last priority.
Many business owners would argue that this is how your priorities should be ordered, but you can take a different approach to managing your revenue. Here’s a proposition:
You decide how much you want to save.
So, taking the aforementioned approach to saving, wherein you only save the scraps after spending most of it, will significantly limit the amount that you are actually paying yourself.
To consistently and properly pay yourself for all your hard work, you can actually decide how much you are going to save, from the total revenue that you take in. The strength of this strategy is that, since you are setting aside a certain amount for yourself beforehand, you are truly paying yourself.
What does it mean to pay yourself?
This term, “pay yourself” can be problematic because many people confuse this with the money that you spend on things that you want, as in frivolous, discretionary spending. That is not paying yourself because you’re actually losing money.
To pay yourself means to save money for yourself, to put it away for things that will enrich your life and secure your personal future, and the future of your family. It’s important to make this distinction. Save what you get; spend what you have left.