For entrepreneurs, there’s usually only one way to measure success: what’s your bottom line? The bottom line of your financial statement is where your net income appears. After working with hundreds of entrepreneurs to strengthen their finances, I know that most attempt to improve their bottom line by growing the business. That makes sense — more profits means more net income. But the truth is, it’s often easier to improve your bottom line by getting efficient with your finances. Instead of just trying to make more money, increase your net income by keeping more of what you make. So here are 3 quick ways to grow a little bit richer with greater financial efficiency:
#1: Do You Have Any Underperforming Investments?
Over and over again I see business owners with investment accounts that are either losing or earning a small return, and at the same time, they’re paying down credit cards at 15-18% interest. It’s been drilled into our collective consciousness that we need to stick money away and let it grow without touching it — especially with 401k and IRA accounts that penalize early withdrawals — but this scenario doesn’t make financial sense. Why hold on to an investment that’s averaging a few percentage points per year — or even 10% per year — when you’re making payments on a balance that’s growing at 18% per year? So don’t be afraid to cash out an investment to pay down expensive loans. You’ll save on interest and improve your bottom line.
Also, it can even make sense to cash out of an investment to invest in your business — where double-digit returns are more common — if you can be reasonably sure that the investment will pay off. As I mentioned in Killing Sacred Cows, my friend, Philip Tirone, dipped into his investments to access $500,000 to fund his business, 7 Steps to a 720 Credit Score, and it’s paid off several times over. The key is to make sure you’re investing in what you know, and not gambling on a business “opportunity” that has never seen success.
#2: Do Your Insurance Policies Make Financial Sense?
Insurance policies are about as exciting as watching paint dry — until you need them, of course. And that’s why you ultimately buy insurance. But how much time do you actually spend making sure that you’re not paying for duplicate coverages, coverage that you won’t use or coverage that’s unnecessarily expensive? That’s why it can be a good idea to meet with an insurance professional to look over your policies.
One of the first things we do when working with a business owner is get all of their insurance policies out and look for ways to save. If you have several different policies, but with different insurance companies, you can usually get a multi-policy discount by consolidating into one company. Or, if your deductibles are so low that it doesn’t make sense to make a claim — like a $250 deductible for car insurance where it’d be smarter to just pay out of pocket — you can save by raising the deductible on the policy. And sometimes you can save big by reducing the coverage for your auto and homeowner insurance policies, but then getting an umbrella insurance policy to increase the coverage of both policies. One of our members implemented just these 3 tactics and saved $1,038 per year.
#3: Do You Plan To Meet With Your Tax Accountant This Quarter?
With tax season over, now is a great time to make an appointment with your accountant. I know, most people don’t think to meet with their accountant until January or February. But that’s when your accountant is the busiest — you can’t expect to get the best tax-savings ideas when your accountant has no time to be creative. So set up a time to meet with your accountant now to find some creative ways to save on tax.
For me, I discovered that when I host clients or employees at my personal home, I can actually rent the house to my business and I don’t have to pay taxes on the income. And I can do that up to 14 days per year without ever triggering any taxes. I also discovered that I can hire and pay each of my two sons up to $6,300 per year, and it’s tax-free income for them and a tax write-off for me. I would never have learned about either of these tax strategies if I only met with my CPA during his busiest months.
There are many more ways to get efficient with your finances. I could go on for hours (and even days), but just these three tips will go a long way towards improving your bottom line — and you can start the next month a little richer.
