Sleep.
It’s really important, right?
The last few nights I’ve finally gotten enough of it, and now I can’t seem to get my fill. I hadn’t had a good nights sleep in over a week, and I think it finally hit me this week. I’m absolutely exhausted, with no concrete reason I see yet. I don’t feel great, but I don’t have any specific sicky symptoms either. I’m hoping I’ll feel better tomorrow.
Cash Situation
My business’ cash situation is better than it’s been in a long time. I made some good decisions in April, and May is likely going to be the most profitable month ever. I’ll start payments with the IRS this month, so it’s just in time.
But it begs a new question, one that I’ll be thinking about the next few weeks for sure. What do I do with any extra business cash? In my view, it really comes down to either investing or debt repayment. Both have trade-offs. And when I say investing here, I’m talking about investing into my current business, not stock type investing.
I may be the world’s worst stock investor, but when it comes to business investment, I’ve done well the last year or so. Some of my ideas are starting to finally pay off, and should continue too into the future.
I know I’m going to get a zillion comments saying, “pay down the debt!!!”. And yes, I will continue to do that, but that’s a very short-sighted and knee jerk answer to this question. Sure, I could pay more to the IRS, but that could limit my ability to potentially pay off the IRS much, much quicker. Same thing with my other debts, I could pay small amounts off….for 20 years, or I can continue to re-invest in my business and maybe pay everything off much quicker.
As I write this, it’s becoming more clear to me what my thoughts on this are: I need to reinvest (wisely) into my business. While not doing so might be at the short term level less risky, over the long term I believe my only chance of paying this all down quickly is by making significantly more in my business.
I have lots of ideas that I write down all the time on business expansion, it will just be a matter of picking one and executing it well. Or, reinvesting into my current projects and trying to maximize their value. We’ll see.
Oh, if anyone’s interested in my mattress quest, here is my goal chart (getting close!):
{ 9 comments… read them below or add one }
I totally agree with reinvesting in the business. I’m trying to think of a good analogy to illustrate this, but all I can think of now is paying off the debt being a marathon distance. You can try going on foot but that will take a very long time. Effort and money now in developing a car will get you there a lot quicker in the long run – pun intended – as well as get you going far on other races.
One investment you may want to consider is holding onto some of the cash so that you have less stress about cash in hand. It can make a big difference when you don’t have to worry about how the current bills are being paid – you’re free to worry about how to be more profitable rather than how to keep up on the treadmill.
I would set a formula for what to do with additional profits from the business…
i.e. 70% goes to reinvestment, 20% debt repayment, 10% to your salary. As things get more and more successful, alter the percentage to favor the debt reduction side… I would still keep a salary increase in there as a psychological boost.
Wow you’re so close to the mattress! Great job!
A few thoughts on sleeping… Maybe now that you’re unsatisfied with your current mattress and plan on getting a new one, it’s affecting your sleep. You could sleep all day long but if it’s poor quality sleep (and even more so if you’re aware of it) you’re not going to feel rested. Also, are you getting exercise, eating right all of that? It’s all related.
As far as the cash goes, I like the idea of saving a bit of it to cover a month or so of business expenses (and debt repayment) for peace of mind. It seems that it will also be easier to invest that remaining cash back into the business if you feel a little more secure.
Im very curious about your business, can you post something about it?
and good for your mattress! it is coming.
@ Shel – Thanks, yep getting close to the 20 number!
@ Camila – I have a number of different things that contribute to my revenue each month, but the main one I refer to hear is my Alpha project, and it’s commercial/business software related. For obvious reasons, I won’t go into more detail about it, but there you go : )
Why not do a little bit of both? 20% savings, 80% reinvestment?
@ no debt plan @ zintradi – I think that’s a great suggestion. I have a business savings account at ING that I should activate again. That way I can build up a savings account and reinvest….the best of both worlds.
Congrats on your success!
You might consider the following:
1. Save 50% of the excess until you have 3-6 month of IRS and other debt service payments. The theory is that if you have a revenue problem one month you can (unfortunately) limit your labor costs quickly, but you still must have cash to service the IRS payments and others – you cant change those.
2. Invest the other 50% back in the business
3. Set a goal to give yourself a raise. Perhaps once you have saved 3 months of debt service payments you give yourself a 3% raise, when you have saved a total of 6 months of debt service you give yourself another 3% raise.
4. Once you have done items 1 and 3, and you are NOT dipping into the savings for anything, invest 50% of the excess back in the business and save 40% for future business investment and save 10% for a bonus pool for yourself. You pay yourself a bonus when you reach certain business goals. Then you can use the bonus money to personally reward yourself. I used to spend 25% of my bonus money and save 75% of it.