Part 3 of Eryn’s Methodical Money…
Golden nuggets of cash flow goodness.
We are so excited to have her part of our team.
To recap the past 2 parts…
You should have an excel file at this point..
That has your bank and credit card transactions from at least the last 3 months…
Where you added a column called “category”…
And you’ve given each transaction a category.
The last part provided our recommended categories.
Where are we going with this?
Let’s talk about my relationship with sugar.
It is what most people would refer to as a bad relationship.
When I eat Oreos…
And I see that a serving size is 2….
2 sleeves maybe.
And then there are Reese’s Peanut Butter Cups…
Did you know they come in half pound version?
The best way to eat a Reese’s…
Is to fill up a plate.
Then you put them in your mouth…
A simple change that would be slightly healthier
Would be to just use a smaller plate.
And this strategy works with any food category.
Using smaller plates leads to eating less.
So we take the same concept and apply it financially.
This protects us against Parkinson’s Law. (from part 1)
Too often we think about our revenue and our business expenses.
We don’t go further than that.
But your revenue needs to support more than just operating expenses.
It also needs to support paying you (owner’s pay)….
It needs to provide a return on your investment as the owner (profit)…
And it needs to cover Uncle Sam’s pound of flesh (taxes).
So let’s group some of your categories from last week.
You should already have your owner’s pay amount.
This is anything you pay to yourself on a w-2…
Any distributions you’ve taken to cover your lifestyle costs…
And any expenses that are really just for your benefit,
Which are expenses the gym wouldn’t have if you were not an owner.
Owner’s pay is one of the small plates.
The next one is tax.
This is for your income tax.
Payroll tax and sales tax is not part of this plate.
If you set aside money to cover your income tax burden…
That would go under this group.
Most of the affiliates that work we’ve worked with did not do this before working with us.
So it’s possible your tax number is zero.
And that’s your “tax” small plate.
Your “profit” small plate…
Is if you have set aside money…
Or distributed money to yourself…
For the purpose of rewarding you for taking the risk of being an owner.
If you took a distribution that was needed for your living expenses…
That is owner’s pay.
Many affiliates would also have a zero in this category too.
The rest of the expenses should fall under the group “operating expenses”.
We now want you to find out how much of your revenue is supporting each of these categories.
Let’s say our sample gym has the following monthly revenue and small plates.