It’s all about balance

Imagine this:  you’re on a roller coaster, wind rushing through your hair.  You can feel the anticipation as you climb towards the top, and then grip the seat restraint in fear as you plummet towards the ground before zooming back up again.

Need see what this looks like?  Take a look at this video of Kinda Ka at Six Flags, NJ.  http://www.youtube.com/watch?v=HN8nv4tVFuA

Now some people may find this thrilling while others feel their stomach in knots simply thinking about this.

But what does this have to do with personal finance?  Well, there are 2 sides to your business life – the business itself and your finances.

All businesses, to some degree, have highs and lows - just like a roller coaster.  Some will vary based on the time of year.  Some businesses will even vary based on the time of day.  But the highs and lows can really strain your finances.

For example, during the slow times, you might have to dip into savings or use debt to supplement your cash flow.  The same thing can happen during busy times when you’re spending money producing product but awaiting payment from your customers.

In order to protect yourself and business, the more your business varies the more conservative your finances need to be.

(You see examples in companies where the “business” and finances balance the other.  Utilities, for example, are fairly stable businesses and can afford to take on a lot of debt.  Airlines are highly cyclical, and carry virtually no debt and lease all of their aircraft.)

This is important because businesses have ended because of slow times just as businesses have ended when there isn’t enough cash flow or cushion to sustain the good times.

Ultimately, striving for balance helps minimize risk.  Most people think only think of risk when dealing with investments.  But that’s only one part.  As a self employed individual or small business owner, your finances are more integrated than the average worker because your income and wealth are from the same source.  How you handle your finances (e.g. debt, cash, and insurance, etc.) is just as important to your long term success as managing your business day to day.

Ask yourself:

How do you finance your business?  Are you handling your debt in a conservative and tax efficient manner?

How much of a cash cushion do you need to carry?  How are you maximizing return on that cash cushion?

How are you offsetting the risk due to concentration in income and wealth from one source?

How are you protecting your most valuable asset?

When was the last time you took a look at your overall financial picture?

Each month, I’ll write about topics faced by the self-employed and small business owner and the impact on business and personal finances.

Also check out my personal finance blog – the Financial Coach’s Playbook - at merjfinancial.blogspot.com

I provide families and business owners with peace of mind when dealing with their finances.  I do so by helping find ways to save more, often by thousands of dollars per month, without reducing lifestyle spending.  Clients are then able to properly protect, then grow their wealth.

See you at the next event!

Let's visit! Use this link to schedule a time with me:  https://tungle.me/thejackwang

T. Jack Wang
M.E.R.J. Financial Group 
voice - 877-226-4157

fax - 877-226-4157
Email: jack@merjfinancial.com

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Blog: http://merjfinancial.blogspot.com/