here's why your bank account isn't growing

Summary

if your business is making more money but your personal bank account isn’t, you’re missing one of these three habits.

1. weekly finance meeting. 30 minutes a week with whoever runs your books. pay the cards, move money to savings, move money to investments, look at every line item. weekly. not monthly. weekly.

2. net worth tracking. monthly cash flow is the wrong scoreboard. net worth is the real one. I’ve watched entrepreneurs refinance themselves into a higher monthly check while their net worth quietly fell. don’t be that person.

3. personal take home. track what you actually pay yourself, not just business revenue. this is the number Profit First by Mike Michalowicz is built around and it’s the one that decides whether the business is making your life better or worse.

you don’t grow a bank account by accident. you grow it on purpose, every week, by paying attention.

Transcript

introduction to financial growth strategies

The most impactful business is the business that genuinely improves another human, a better human business. And to grow a business like this, you have to continually improve yourself. This podcast is a documentation of that thesis, scaling businesses and also personal growth. My goal is for you to shortcut this journey. So if you’re ready to try hard, subscribe. If you like what you’re hearing, please share and enjoy. All right, let’s talk about why your bank account isn’t growing and maybe how we can fix that.

This is the Better Human Business podcast. I’m Jerred Moon and welcome. If it’s your first time, you know, we do short. We I, I do 10 short 10 minute episodes here, five to 10 minute episodes really on the most impactful ways to move you forward in your business, but also as a person, because it turns out they go hand in hand. We have got a lot of new listeners recently, so I thought I’d give a quick intro if you didn’t figure it out by now.

That’s what we do. A couple of other things. If you want to interact with me more, check me out on Instagram. Jerred Dot Moon is the handle J.E.R.R.E.D. Dot Moon M.O.O.N. And then lastly, you can go to Jerred Dotcom J.E.R.R.E.D. Dotcom. Sign up for the newsletter. Would love to have you. But let’s dive in. Let’s talk about why your bank account’s not growing. It really it comes down to one thing. You’re not paying enough attention to your finances for them to grow.

importance of paying attention to finances

That’s it. All right. We will wrap it up here. No, I’m kidding. Honestly, you’re not paying enough attention to them. So it’s never going to grow. What gets measured gets managed, right? So whatever you are measuring, whatever you are paying attention to, you will have standards. You have KPIs. You have metrics. So let’s get into the three things that you can do to get your bank account growing, because I know it was a lot of stress for me until I figured out some basic, basic strategies around finance that kind of started to alleviate some of that entrepreneurial stress.

And I’ll go ahead and give you one quick book recommendation if you are in that boat like I was, because this one book, normally it’s a lot of books, a lot of books to solve a problem. This is one book, Profit First. Go check out Profit First and read that book, implement everything it says, or at least your own version of it, and you will feel a lot better as an entrepreneur. But I’m going to tell you the three things that you need to do to make sure, or to get your bank account moving in the right direction.

The first is you have to start a weekly finance meeting. This is something I implemented after I read that book, and I’ve basically been doing a weekly finance meeting ever since. So probably like four, six, six years, yeah, probably six years I’ve been doing a weekly finance meeting. Sometimes I do skip a week, as things are a little bit more automated than when I was first trying to get everything under control. So you need to have a weekly finance meeting.

benefits of a weekly finance meeting

And if you’re wondering, hey, what do I do in this weekly finance meeting, well first pay off your credit cards. I recommend paying off credit cards weekly. It gives you a good pulse of what’s going on. You can transfer money that comes into tax accounts, savings, you can put stuff in investing accounts. And yeah, you’re doing all this weekly. A lot of people like to do it monthly, but I found if you do it weekly, it forces you to pay attention a little bit more to things that are going on.

And another reason I did this is because our payment processor, and I set it up this way, would deposit all of our funds every Monday. So any payments that came through the previous week got deposited into my bank account on a Monday. So I have the finance meeting on a Monday, and you can set that up with your payment processor. And so that way I’d be like, okay, this much money came in. Here, this money is going to go to paying off the credit card.

how tracking net worth can influence financial decisions

This is transferred to tax accounts. I’m going to save some of this money. I’m going to invest some of this money. But what I’m really doing in that process is I’m getting a pulse on my finance. I’m understanding where all the money is, where it’s going. Because if you like got paid $5,000 on a Monday, that’s all the business revenue that came in and your credit card’s $6,000 and it’s only been a week, boom, that’s a problem.

Probably need to fix it. And you’re going to fix it right away. You’re not going to wait three additional weeks or a quarter or whatever, you’re going to fix that stuff right away. So faster adjustments always make for faster progress. So that’s the first thing you need to do is have this weekly finance meeting. It is going to be huge for you. Now the next thing, track your net worth. Most people do not do that. Most people are making monthly payment decisions and not net worth decisions.

the impact of monitoring personal profit from business activities

So an example of this is if you own a home right now and say you want to refinance your house and a lot of people only ever look at the monthly payment. So they’re like, okay, it’s going to save me 500 bucks. That’s awesome. I’m saving so much money. But a lot of time there’s a bunch of fees associated with a refinance and they just roll it back into the loan, right? So it balloons your loan up a little bit.

Sometimes it’s not too bad. Sometimes the math works out. So I’m not saying refinancing your house is bad by any means. I’m just saying sometimes we’re looking at that $500 a month savings, but what you didn’t realize was like the appraisal and like the title policy and all this stuff is like, oh, it added an additional $15,000 to my loan. When you look at the net worth side of things, if you’re actually paying attention to your net worth, I call it making net worth decisions.

summary of key strategies to grow your bank account

You will realize like, wait a minute, that decreases my net worth because more debt decreases your net worth. That decreases my net worth by 15K. For what? $500 extra dollars per month. Okay, well, how that maybe that’s fine. Maybe over time to the two plus years it would take for you to make up that money. Maybe that’s worth it to you. But ultimately when you start looking at everything as a net worth decision, how much debt is being paid off or accumulated, because sometimes it doesn’t feel like you’re making any progress, but net worth can really show you how much progress is actually being made.

Like if you purchased your home, you can track what your debt is on the home and then how much that home is worth and you can see that your net worth is going up with every payment you make to principal. As time goes on, it appreciates. You start to see these things, but again, that’s not a part of your financial picture when you’re just looking at budgets and cash flow because you’re not really paying attention to net worth.

And same with like the refinance example or buying a car. What do these things do to my net worth? And when you realize that, Hey, a lot of these things are damaging my net worth, you’ll start to make more net worth based decisions. And that’s going to be honestly amazing for your longterm financial journey is if you’re making net worth based decisions. But the easiest place to get started is just to start tracking your net worth.

I’m going to say Google it if you don’t know how I can give you the basics like you take all of your assets. So let’s say I had $1,000,000 in assets and I have $800,000 in liabilities, debt and other things. Then I have a $200,000 net worth. And if I have $1,000,000 worth of assets and $2,000,000 worth of debt or whatever, then I’m $1,000,000 in the hole, right? So I don’t actually have, I have a negative net worth, it’s possible to have a negative net worth.

And then if you just have $1,000,000 worth of assets and no liabilities, no loans, anything like that, you’re worth $1,000,000, but congratulations, you’re a millionaire. So that’s how net worth works. Again, you can dive into the more nuanced details of that, but that’s basically it. Liabilities would be things like any credit card debt, any car loans, home loans, anything like that. All those liabilities. And then the assets would be what it’s worth, cash assets, investments, those kinds of things.

So anyway, that’s net worth. And then the third thing that you do, and I recommend everyone do this, is a lot of people like to track profit in their business. And I think that’s great. You should. You should track how profitable your business is. But another thing that you should track is what do you actually pay yourself from your business? Because as a business owner, you can really only be paid on what the profit is anyway.

Like that’s the only way a business owner gets paid. But sometimes, like you might have a salary, like, okay, I get paid this much per month. And then you can pay yourself extra if more profit comes in. And that’s called a distribution. But sometimes we don’t get that. We don’t get to take all that money, right? Because profit needs to go back into the business for whatever. You might have new systems, hiring, marketing, advertising, whatever it is.

So you might have to reinvest that money back in the business. And that’s what they call that. So if you have $10,000 worth of profit this month, and you want to put $5,000 back into the business for hiring somebody, yeah, improving a system, whatever, that’s called reinvesting in the business to grow it. If you want to take all the chips off the table, if you’re like, I want all $10,000 into my account, that’s good. Because I think business owners should get paid, take all that money.

You can’t just always take all the money from the business. You have to reinvest it to continue to grow so it can continue to pay you. But track what you’re actually taking home. This will be different than your profit. Like I said, because sometimes profit can be used for the business itself and not just for you. And the reason I think you should track that is because ultimately we want to run businesses to enrich our lives, to pay ourselves, to have a free life, whether that’s time freedom, financial freedom, whatever it is for you.

That’s what we should do. And so I don’t think our businesses should just ever cause us debt and stress and hassle and headache. You should track what you get paid and be okay with paying yourself that money, whether that’s at the end of the quarter or the end of the year, however you want to run those distributions. But ultimately track that because when you start tracking that, you might start making again like net worth. You might start making slightly different decisions like, well, I kind of want to see this number increase.

So how can I do that? Not only is it being more strategic about the profitability of your business, but it’s also being strategic about what investments you would or wouldn’t make to grow your business. It starts to refine your decision making process when you’re doing that. So do those three things, have a weekly finance meeting, start tracking your net worth and start tracking what you pay yourself and try to increase your net worth and try to increase what you pay yourself.

And if you’re doing all of these things, your bank account will not be stalled anymore and it will start to grow. But to do that, you’re going to have to try harder.