You should aim to put at least 20% of your net pay toward paying down your outstanding debts. If you cease to add to your short-term debts today, you will find that you can pay off most of your short-term debt anywhere from 3-7 years.
Business owners often say they don’t have time to plan. In reality if they don’t their chances of failure increases by 1000 times. Business owners go nowhere fast without a plan. Just ask one of the million business owners who fail each year. Also their chances of failing increase dramatically because there is no direction and the business owner is just winging it. A written plan is necessary. This should be in the form of a strategic/business/marketing plan. It is necessary regardless of business type.
The first column heading is “Wealth Building Activity”. What do you want to accomplish this year? Write down 3-6 wealth building activities. These can include items that you already have in process, are incomplete, or haven’t been started yet. For example, you can list “Develop a lead generation process”, “Buy a duplex rental property”, “Invest in the stock market”, “Outline tax strategies for my business”, or “Put together my personal financial statements (balance sheet, cash flow examples, income statement)”.
This used to be more common: a business would do monthly payroll, and do a payroll advance mid-month. If your company does this, the advance does not show up on the profit and loss statement (again, on the balance sheet as a prepaid asset). So, be careful about when you are looking at statements. The profit will be high (and cash low) after the advance, but will correct itself when payroll is run.
Limit the fundamentals – the Paper Poker Game. The psyche of investors behind Supply and Demand is expressed in price, beyond fundamentals alone. Investors sold off fundamentally sound stocks, after the unfortunate 9-11 incident and it was repeated with the financial pandemic of 2008, going into 2009. Benjamin F. King: Market and Industry Factors; Journal of Business, January 1966: ” Of a stock’s move . 20% is peculiar to the one stock.” A fundamental Analyst fusses with paper (Balance Sheet, Income Statement & Cash flow Statement), only to explain 20% of price behavior. As valid as all the FA work is, would you gamble against the house armed with only 20% of the odds with paperwork done by Analysts?
There is another useful measurement you should take a look at. That measurement is Net Worth. Net Worth is exactly what it sounds like. If you add up the commercial value for all the things you possess, then subtract all the obligations or debt you owe, that is your Net Worth.
Depending on the country and even the state in which you buy your property, a significant amount of your money may be spent on purchasing fees. In Germany, for example, you may pay up to an additional 20%-25% of your house purchase price in fees and other charges. Knowing how much it will cost to purchase your income property will help ensure its profitability.
Understand the payment patterns in your industry. If it is standard for customers to pay 60 days after receiving an invoice, it is unlikely that you will be able to convince your customers to pay upfront.