Blog - How To Fund Any Financial Goal With A Profit First Mentality

How To Fund Any Financial Goal With A “Profit First” Mentality

Accomplishing a goal can simultaneously be one of the hardest and easiest things to do.

When a well-thought-out plan is created and executed, it can be just like following a clearly marked route – all you have to do is occasionally check the signs and markers, watch out for any speed bumps or potholes, and eventually you’ll arrive at your destination.

But we all know it isn’t always quite that simple. There is a huge road block that we all sometimes run into, and that barrier is our own minds.

NEGATIVE SELF-TALK IS HOLDING YOU BACK FROM YOUR GOALS

Be honest with yourself. When you are contemplating a goal, you will sometimes start coming up with excuses for why you might not attain your objective.

Maybe you’ve been meaning to build up an emergency fund, but every time you try, something seems to go wrong.

Maybe it’s because there always seems to be some unforeseen expense that comes up. Or maybe it’s because you’ve been paying off debt. Or just maybe, it’s simply because you don’t make “enough” money.

Whatever it is, you’ve been using the same excuses for years for why you haven’t moved any closer to your goals.

While I’m not going to condone this, you shouldn’t feel bad about it either.

On some level, everyone engages in negative self-talk. The difference between you and the people that are out achieving their goals is that they are able to reframe the voice in their head, and change it to one of positivity.

[4 Ways To Stop Beating Yourself Up, Once and For All – Psychology Today]

HACKING YOUR SPENDING TO FUND YOUR GOALS

Another way to get around your own roadblocks is to use mental hacks.

A mental hack, or mind hack, is a way for you to cheat your brain into doing what you actually want. It’s a way for you to circumvent the negative aspects of the way human brains are wired.

For instance, if you want to make sure you don’t forget to bring something when you leave the house, you can put it right in front of the door. This way, you literally cannot leave without seeing it, and thus reminding yourself to bring it with you.

The key is to find ways for you to circumvent the behaviors and rationalization inside of your head for why you don’t need to make the necessary changes in order to reach your financial goals.

Yea, but how…?

THE “PROFIT FIRST” MENTALITY USED FOR PERSONAL FINANCE

Michael Michalowicz is an American author, entrepreneur, and lecturer. He is known for his numerous business books, including one that I am currently listening to (Audiobook) called Profit First.

Yesterday I was bouncing all over town accomplishing a bunch of business errands that I had been putting off. As I crisscrossed Albany for the umpteenth time, I listened to Michael outline his strategy for how small businesses can take their profits first, when planning their business’s finances.

It sounds counterintuitive, but as I listened to Michael outline how this is possible, I felt an immediate connection to what he was saying.

I had a flashback to my article titled “How To Save More Money” where I wrote that the easiest way to start saving more money is to just begin saving more money.

I know, it sounds stupid. But the point is that if you just set an auto deposit into your savings account, and slowly increase it over time, you’ll start to squeeze out other non-essential spending.

By putting money into savings FIRST, you won’t even give yourself the chance to spend it on the countless unnecessary things you do each month.

So, as I sat in my car listening to him describe how business owners should just automatically allocate some of their revenue into a “profit” account, I found myself talking to the speakers saying “YES! That’s exactly what I’ve been saying!”

PROFIT FIRST EXPLAINED

To give you the quick summary: Michael advises that businesses, even businesses that have been LOSING money should start putting a portion of their revenue into a profit account, and that should be the first account you allocate revenue toward.

Not your monthly operating costs, not your future tax bill – profits!

Begin with just 1% of your overall revenue, and over time you’ll work your way up.

The idea isn’t that you just magically create profit out of thin air.

As you begin with 1%, and then slowly increase it over time, you’ll begin to force yourself to weed out the unnecessary spending that has been going on.

Slowly but surely, your business will get leaner and leaner, and you’ll only be spending on the most vital and beneficial things.

Also, if you are running a business on $10,000/month, then you’ll be fine running it on $9,900. That $100 really isn’t going to make or break you.

HOW EVERYDAY FINANCIAL GOALS CAN FLOURISH WITH “PROFIT FIRST”

It’s the same for everyday financial goals.

If your goal is to save up an emergency fund, or to save for that family vacation you haven’t been able to go on, you need to just start allocating money toward it. Start small, and then slowly build.

As you begin to automatically save for your goal, it will force you to take away from something else.

Maybe you’ve been meaning to cut down on the number of times you eat out each month. Or maybe you suddenly realize you don’t need 5 magazine subscriptions when you never have time to read through half of them (most likely because you are out to dinner with friends all the time.)

Whatever it is, you’ll be forced to make cuts.

It won’t be easy, at first, but it will make you prioritize the things that are important in your life. Or better yet, the things that are NOT important. And then you can eliminate those that you’ll do just fine without.

Capably Yours,

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