I had a chance to sit down for a couple of hours with my friend David Richter. I want to share with you some of what we talked about that can have a tremendous impact on your financial situation. We all love control. Even young children want to push the boundaries of their world. Whether it is brushing their teeth or buckling their car seat, they like to feel that they are in control of the situation. This is often the case with adults as well. We want to be in control of when and how we do things rather than have someone tell us what to do and when to do it.
What about your money? Are you in control of your cash? We all have emotional ties to money. Watching your money come in one day only to go right back out the next day can be stressful. I’m sure we can all relate to feeling frustrated when standing at the gas pump. If you are a real estate investor, rising interest rates can certainly cause some anxiety. Those are things that are completely out of your control.
When you jumped into real estate or started your business, did you say to yourself, “The money part will just work itself out as long as I keep bringing money in”? Maybe that’s worked for you so far, or maybe you feel like you’re stuck in the grind, living deal to deal, wondering where all your cash is going.
As a fellow real estate investor and business owner, I want you to know that there are actionable steps you can take to get control of your business and your money. My friend David shared with me that those who feel financially out of control have the same underlying problem. They’re making one mistake that is costing them their sleep, sanity, time and money, and here it is…
They are running their business (or life) with only one bank account.
What?! That probably isn’t what you were expecting the big mistake to be, but it is. When you have only one account, you don’t really have control over your cash. Money flows in and then flows out based on what your banking app tells you your current balance is. Too often, decisions on spending money for your business are made based on your bank balance without considering if that money is yours to spend or if it is owed to someone else.
When all your money flows into and stays in just one account, you are creating what David calls a “cash salad”. Your money is tossed together and then thrown about with a swipe of a card or a signature on a check, hoping as you swipe and sign that there will be enough in the account for tomorrow.
If you see yourself in this scenario, you are not alone. That’s how most people handle both their personal and business finances. The good news is that there is a better way. More on that in Part 2 of this series! If you want to learn more about this, check out David Richter’s book Profit First for Real Estate Investing which can be found on Amazon.