What are some essential money management tips for individuals as well as business owners?

[00:00:00] Ralph Estep, Jr.: Have you ever wondered if there's some kind of secret sauce to managing money, both in your personal life and also as a business owner? You know, I once met a business owner that kept all his cash in a shoe box under his bed. Now, while that might seem a little wacky to managing money, it got me thinking about the creative and sometimes unusual strategies we can use to keep our finances in check. Well today, we're going to explore some tried and true methods, as well as some outside the box ideas that might just revolutionize the way you handle your money. Today, we're getting into some essential money management tips plus we're going to explore some unconventional ways for business owners to manage their cash. So stay tuned.

[00:00:45] Ralph Estep, Jr.: Before we get into today's show, let's take a quick look back at yesterday's show where we explored the future of artificial intelligence and its impact on our Christian faith. If you missed it, remember you can find all of our episodes at askralph.com. We have a wealth of resources for you there, so I encourage you to visit the site before you make any big financial decision.

[00:01:13] Ralph Estep, Jr.: Now I received a message from Joe. He's a long-time listener of our show.

[00:01:17] Joe: "Hey Ralph, let me get right to my question. I've been running my small business for three years now, and while business is good, I'm struggling to manage my cash flow effectively. Some months I feel flush with cash, and others I'm scraping by. As a Christian business owner, I want to be a good steward of my resources

[00:01:38] Joe: but this cash management is hard work, and I sometimes wonder how I could do it better. What advice can you give me for managing my money more effectively, both in my business and personal life? Are there any unconventional strategies I should consider? I love your show, and I learn a ton from it every day.

[00:01:58] Joe: So I thought I would reach out to you and see if you can help. Thank you, Ralph."

[00:02:03] Ralph Estep, Jr.: Joe, thank you so much for your question. I can certainly relate to the ups and downs of cashflow in a small business. In fact, it reminds me of when I was first starting out as an accountant. I just opened my own practice and let me tell you, those first few years were a true roller coaster. My wife and I had two young boys at home, and we were working together to make it work. One month I'd have more clients than I can handle and then next it was like crickets. I remember one particular month when I had to decide between paying myself or paying my office rent. Talk about a stressful situation. So I get it. But you know what, that experience taught me some valuable lessons about money management that I still use today. And I'm going to share those insights with you today and all of our listeners.

[00:02:47] Ralph Estep, Jr.: Well, welcome to The Ask Ralph Show, where we're mastering your finances from a Christian perspective. I'm your host, Ralph Estep, Jr., And I'm thrilled you've joined me today. Whether you're a business owner like Joe, or just looking to improve your personal finances, I've got some practical tips and maybe a few surprising strategies that can make a big difference in your financial life.

[00:03:09] Ralph Estep, Jr.: Before we dive into the meat of today's topic, let's ground ourselves in scripture. The book of Luke 14:28 tells us, "For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it?" It's powerful. The verse reminds us of the importance of careful financial planning and foresight in all of our endeavors, whether that'd be personal, or business related.

[00:03:36] Ralph Estep, Jr.: Well now, let's get into those essential money management tips, shall we? Whether you're managing your personal finances or running a business, these principles can help you stay on track.

[00:03:47] Ralph Estep, Jr.: Number 1. Create a budget and stick to it. Yes. Here goes Ralph talking about those budgets again. It's like a broken record. This might seem basic, but I'm surprised how many people in businesses operate without a clear budget. Track your income and expenses meticulously. This gives you a clear picture of where your money is going and helps you make informed decisions. Joe, even in my early days of my business, I had a bare bones budget and some goals. I wanted to be able to objectively measure my success and I'm going to strongly encourage you to do the same.

[00:04:21] Ralph Estep, Jr.: Second thing. Build an emergency fund. Aim to save three to six months of expenses. This buffer can be a lifesaver during those lean times or unexpected emergencies. Now I understand you won't be able to do this when you are first starting in business or even in your personal finances. But you've got to start the process of building that emergency fund. Even if it's just a few dollars a week. It's going to add up over time.

[00:04:45] Ralph Estep, Jr.: Number 3. Prioritize debt repayment. High interest debt can be a major drain on your finances. Make a plan to tackle it systematically. If you've got to take on debt to get started in your business, the goal needs to be to pay it off swiftly. High-interest debt is like a heavyweight on you, and I've seen it destroy both businesses and people's personal families and their personal lives.

[00:05:09] Ralph Estep, Jr.: Another thing you got to do is invest wisely. Don't just save, invest. Look for opportunities to grow your money over time. Always consider your risk tolerance and long-term goals. It amazes me just how many people in business and in their personal finances to some extent keep large balances in their checking accounts, which generally pays little to no interest. If you've got extra money in your account, invest it, whether that be in a money market account, a CD, or even with a professional broker. Use your resources wisely and don't allow them to sit idle. Put them to work for you.

[00:05:47] Ralph Estep, Jr.: Number 5. Continuously educate yourself. The financial world is always changing. Stay informed about new strategies, new tools, and new regulations that could impact your finances. Listen to podcasts, you know, you've taken the first step by listening to this one, watch online videos, read books, and talk to others about what they're doing. Here's the truth. You can learn a lot from just listening to other people.

[00:06:15] Ralph Estep, Jr.: Well now, for business owners like Joe, here's some additional tips. Separate personal and business finances. This is crucial for accurate bookkeeping and can save you headaches come tax time. I've spoken about this repeatedly on this show, and it will not only help you better manage your money, but it will also keep you out of hot water with the IRS.

[00:06:36] Ralph Estep, Jr.: Look, I got many business clients who just use their business account as their personal slush fund and that's just what it becomes a slushy mess. They've got no idea where their money is going in the business. They can't analyze trends and they're setting themselves up for that visit from the IRS and a potential audit that they will lose. If you take action on nothing else today, please work to separate and keep your personal and business finances separate. If you need help with this, reach out to me and I'd build a success plan for you just to do that. Schedule with me at askralphpodcast.com/store.

[00:07:12] Ralph Estep, Jr.: Well, let's move on to number 7. And that's monitor your cash flow religiously. This is a place to use tools to forecast your cashflow and plan accordingly. This can help you avoid those feast or famine cycles. And trust me, I've been there. I've experienced this personally in my personal life and in my business. As I always say, what gets measured gets done. If you aren't paying attention to the details, you'll never be able to make effective decisions. That's just the truth.

[00:07:42] Ralph Estep, Jr.: Let me share a quick story. I was once brought in as a forensic accountant for a Christian summer camp after the board found that their treasurer was stealing money. I reviewed the books, and I was amazed to find that for the past year, and here's the funny thing, as the treasurer was struggling in a terrible divorce everybody knew about, he was actually writing camp checks to himself. But that wasn't even the amazing part. The amazing part was that in the memo line of the checks, he was making comments like I need help, I'm struggling, I need prayers, please take this from me, and many, many more. But the board members never even bothered to look at the checks when they were coming back from the bank, nor did they pay attention to the steadily declining bank balance. They were asleep at the wheel and their lack of oversight nearly bankrupted a Christian camp which had been around for decades and was the work of some really dedicated people who had purchased land to make it happen. So the moral of the story is to pay attention and monitor your cashflow.

[00:08:46] Ralph Estep, Jr.: And moving to number 8. Build relationships with financial institutions. Having a good relationship with your bank or as I always say your credit union can be invaluable when you need flexibility or additional resources. This is one of those core relationships that I feel every business owner needs. And I know that's gotten more challenging in his online world, but I've seen businesses rise and fall all based on their banking relationships and their ability to get those short-term loans at times which have given them the ability to survive during some serious money crunches.

[00:09:19] Ralph Estep, Jr.: Well now, let's get into some of those unconventional strategies for managing cash in your business. It's Wacky Wednesday so it wouldn't be right if I didn't give you some outside the box ideas. And remember, while these might seem a bit outside of the box, like I said, they can be incredibly effective when used wisely. The first one is this. Implement a reverse accounts payable strategy. What does that look like, Ralph? Well, instead of waiting until the last minute to pay bills, consider paying them as soon as you have the cash. This might seem counterintuitive, but it can help you better visualize your true cash position and avoid overspending. If you don't have the cash, you can't spend it. Now, listen, you got to be careful not to overextend yourself and not have the cash ready for those larger expenses like rent or the wages for your staff.

[00:10:03] Ralph Estep, Jr.: And here's the funny thing. You can use this at home as well. So here's a pro tip. Rather than paying your mortgage at the end or the beginning of the month, pay it each time you get your paycheck. Now you might not be able to pay for the whole thing. You can likely pay a percentage of it. This will not only help you better manage your cash, but it could save you some interest along the way. You can do that same thing with your auto loans and even your credit cards. My son does this every week. When he gets his payroll deposit, he pays whatever he put on his credit card. And this keeps him from racking up a high bill and prevents any future interest charges. He's a wise guy.

[00:10:38] Ralph Estep, Jr.: Second thing. Use bartering. Trading goods or services with other businesses can help you conserve cash while still getting what you need. Here's the thing, though. You have got to remember to properly account for these transactions in your books. I would also say this. You've got to be careful and ensure that there's equal value in the trade. I've used this myself at times and it can be an effective form of managing cash. Just make sure you're accounting for. This is not a great way to get into the tax evasion system.

[00:11:06] Ralph Estep, Jr.: Another thing you can do is negotiate everything. Let me say that again. Negotiate everything. From supplier terms to lease agreements, don't be afraid to ask for better terms. You might be surprised at what you can achieve simply by asking. As my grandma had always said, if you don't ask, you'll never get it.

[00:11:24] Ralph Estep, Jr.: Another thing to consider is invoice factoring. This involves selling your unpaid invoices to a third party at a discount. The truth is you're going to get less than the full amount, but you get that cash immediately, which can be crucial for managing cashflow. Now, this is another area to proceed with caution as this can get really expensive and can lead to some long-term poor decisions. But in a cash crunch, it could be a true lifesaver. You just got to be sure to develop a plan to get away from the practice in the intermediate term. I've got a few clients who use this and those cash advance loans, and many have honestly gotten themselves in over their head. And while they don't realize it, they're actually really creating super high interest long-term debt. I might do a show on that in the future on that topic.

[00:12:06] Ralph Estep, Jr.: Another thing you can do is implement a cash only period. Designate certain days or weeks where you only make purchases with cash. This can help you become more mindful of your spending and identify areas where you might be overspending. It's a little harder when you take those dollars out of your wallet than just flashing that plastic to get them. I think that's a really good idea.

[00:12:25] Ralph Estep, Jr.: Another thing you could do is use the envelope system. I know a lot of people who do this. This old school method involves allocating cash to different envelopes for various expense categories. You might have one for groceries and one for utilities and so on and so forth. And when an envelope is empty, you've reached your limit for that category. I sure hope it's not that fuel envelope when you’re at the gas pump. So even using the envelope method requires some basic budgeting, but this can work both in your personal and small business finances.

[00:12:53] Ralph Estep, Jr.: And finally number 7. Practice the profit first method. This is about setting aside a predetermined percentage of your revenue as profit before paying any other expenses. It ensures you're always prioritizing profitability. Sort of that old montage of paying yourself first method.

[00:13:11] Ralph Estep, Jr.: Remember this, Joe. The key to successful money management, whether personal or business, is consistency and adaptability. What works for one person or business might not work for another.

[00:13:23] Ralph Estep, Jr.: So don't be afraid to experiment and find what works best for you. I've given you a lot of ideas, but not all of them were going to work for everybody.

[00:13:30] Ralph Estep, Jr.: To recap, we've covered some essential money management tips like creating a budget, building an emergency fund and prioritizing debt repayment. For business owners, we expanded, we talked about the importance of cashflow monitoring and separating your personal and business finances. We've also explored some unconventional strategies that reverse accounts payable using the bartering system, and even talked about the envelope system. And I hope these tips and strategies give you some food for thought, Joe, and help you navigate the financial challenges of running your small business.

[00:14:02] Ralph Estep, Jr.: Listen, running a small business is not easy. It's hard work. It's not for everybody. So you've got to take the time to educate yourself, learn new ideas, and always be investing more time in your business. Remember this. Being a good steward of our resources isn't just about maximizing our profits. It's about using our finances in a way that honors God and serves others.

[00:14:26] Ralph Estep, Jr.: Thank you for tuning in today. Don't forget to join us tomorrow when we'll be discussing where should you pull money from first in retirement to optimize your taxes? It's going to be a barn burner.

[00:14:36] Ralph Estep, Jr.: So you don't want to miss it. And if you found value in today's episode, I'd love you to visit our website. That's at askralph.com. In fact, I'm going to encourage you to do it right now, so you don't forget. Join our community and share this episode with others who might benefit from these financial insights. And here's a special offer for you. When you join our community, you'll get a free copy of my book, mastering your finances. Now this normally sells for $10 on Amazon, but it's yours absolutely free when you join our email list.

[00:15:04] Ralph Estep, Jr.: And Hey, if you're feeling overwhelmed by your finances and need some personalized guidance, why not schedule an appointment with me? I'd be more than happy to help you better manage your financial life. Just head over to askralphpodcast.com/store and book your session. Do that right now.

[00:15:22] Ralph Estep, Jr.: And before we wrap up, I want to encourage you to send in your questions for the show just like Joe did. After all, answering your questions is what Ask Ralph is all about. You can email me at ralph@askralph.com or visit our website. Like I mentioned three times already, askralph.com and click on the microphone icon at the bottom left. And you can record your message. If you've got a question or want to schedule time with me, why don't you do it right now while it's still on your mind? I'm certain I can help you navigate your finances and bring you some financial peace.

[00:15:55] Ralph Estep, Jr.: Remember this. My passion is to help you achieve financial success. I want you to live out your dreams and grow in your faith. So until next time my friends. Stay financially savvy, and God bless you abundantly.