The past 3 or 4 years have been extremely challenging financially for me. over the past year I have become determined to change that. I realized how poor of a relationship I have had with money and have drawn a line in the sand. A big realization for me has been that being an artist requires business savvy. So I’ve been reading a lot of material written for entrepreneurs and business owners. I found this book #profitfirst by @mikemichalowicz from a podcast with @mastinkipp. It’s chock full of interesting ideas about running a business. and allocating funds. I think its special because a lot of what he says applies to personal finance just as much as it applies to business.
The idea is simple: it’s that you take your profit first. Most people think of accounting like this income – expenses = profit. But this book proposes the opposite income – profit = expenses. The problem with the first more traditional approach is that when we get income and look at the expenses first we will find more expenses that we need and we will inevitably use up all of our revenue or income on expenses and thus never have any left over. this is why most businesses, although they generate a lot of money, are never profitable. What the book proposes is that you set aside a small amount for your profit as soon as you get your income and you put it in a bank account that is not easily accessible. this is your profit. and if you realize that after you do this you don’t have enough money to cover expenses, well then you need to cut your expenses. by using this method you naturally build up a storehouse of money even while you are paying off debt. this makes it easier to save and to cut costs because you know that you are taking care of yourself and not being a martyr for your finances.
There is a lot more to the system which involves creating a several different bank accounts and allocating your money as soon as you put it in to taxes, operating expenses (bills), owner’s compensation (your ‘salary’), in addition to profit and income. if you’d like some more details on how the system works I’d be glad to share my notes on the book with you. I plan on integrating this system into my life this on monday and creating all these accounts and really getting my persona finance under control. I’ll keep you all in the loop as to how it works I’d like to pay off my debt and actually start saving money this year. this is just one step in cultivating abundance in all areas of my life. I think it is so important for artists of this generation to master money and finance so that we can actually change the system let’s stop starving and let’s start thriving!