E622 | 3 Steps To Not Mess Up Your Business Finances With Jerred Moon

In this podcast episode, Doc Danny and his CFO, Jerred, discuss the importance of organizing one's finances for both personal and business purposes. Jerred shares his experience of initially mixing personal and business finances, which was stressful for him. He later opted for a more organized model to avoid financial stress and recommends that personal and business finances should be kept separate for asset and liability protection.

They recommend the book Profit First for those who need financial help. 

Jerred outlines a procedure for managing finances that includes weekly and monthly meetings. The steps include paying off credit card bills, payroll, and operating expenses, setting aside money for taxes, and distributing the profit either for personal use or reinvesting in the business.

He suggests using a credit card for business expenses and recommends paying it off in full weekly or monthly to avoid financial issues. Jerred also suggests using 15-20% of incoming funds for taxes and recommends keeping at least 3 months of cash reserves.

The conversation between Jerred and Danny also includes financial advice for entrepreneurs. They emphasize the importance of tracking financial net worth and the value of a business as an asset. They suggest paying oneself, payroll, operating expenses, and setting aside 15-20% for taxes. They also recommend expanding the business rather than retracting it for better financial outcomes.

Finally, they suggest spending less than one makes and keeping a handle on finances for less stress and more financial freedom.

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Podcast Transcript

Danny: [00:00:00] Hey, real quick before we get started, head over to Facebook and join the PT entrepreneurs Facebook group. If you haven't done so yet, we have monthly live trainings going on there. There's an opportunity for you to join in the conversation instead of just listening to what I have to say on this podcast, as well as the people that I bring on.

And it's a really cool place to join about 6, 000 other clinicians that are. Honestly, trying to change the landscape of our profession through these cash and hybrid practices. One other thing that's really cool is we have a guide in there. That's a quick start guide. When you join, you can go and check this out.

There's about seven videos that we've curated that are the most common questions we get in the best case studies that we've found to really help you start, grow, and scale your practice up to seven figures. So if you haven't done so yet, head to Facebook request to join the PT entrepreneurs, Facebook group.

You have to be a clinician. We're going to check you out. We don't just let anybody in. But if you are head there, go ahead, get signed up. We'd love to have the conversation with you in that group.

Jerred: So here's

Danny: the question. How do physical therapists like us who don't want to see 30 patients a [00:01:00] day, who don't want to work home health and have real student loans, create a career and life for ourselves that we've always dreamed about? This is the question. And this podcast is the answer. My name is Danny Matei and welcome to the PT entrepreneur podcast.

What's going on? Dr. Danny here, the PT entrepreneur. Facebook group and PT entrepreneur podcast. And today we get a chance to talk about one of the more boring topics, but yet one of the more important topics for any business owner, and frankly, even person listening to this, cause we're talking about the personal side.

And that's how to get your financial house in order, how to get yourself organized and stop hiding from the numbers that are your business. Potentially your own [00:02:00] personal, financial numbers as well. So this is something that for a lot of people, it makes them feel uncomfortable.

Money makes people feel weird. Especially when they don't feel like they have a good grasp of it. I think it makes people feel very inadequate in terms of. Like they're not in charge of what's going on or they don't have an idea of what's going on. And what we want to do today and Jared in particular is who if we were to say we had a CFO, he would be it amongst other things, but definitely his CFO we want to try to simplify this for you, especially on the business owner side.

I think. To start with Jerred, maybe we can give an idea of what we started with as far as like looking at finance as an entrepreneur and kind of the evolution of that to where we are today. Because I, I feel like it's a pretty dialed in model that we practice that's fairly low stress and simple.

So what did it look like when you first started your business? What was your idea of like financial, organization?

Jerred: There was almost no, no organization when I started. I didn't. That and that was the big part of like [00:03:00] why I'm more involved in finance today is it was the lack of doing it early on the lack of structure it just caused me a lot of stress when I started.

I think I don't remember how much money I made. It was the first like true year of having an LLC and I was just so worried about taxes. I was like, I didn't know what to do with taxes. And then like my I think I still got like a refund that year or whatever. And my, my CPA was like, yeah, you didn't.

Like you barely made any money. Like you don't have to, you don't have to worry about this kind of stuff, but those kinds of things always like not knowing on the business side. And I feel like I had I don't want to say figured out, but I was much more organized in my personal finances, but I felt like business finance just was a whole new realm for me and it scared me.

So when I first started, it was very. Unorganized. It was really just monitoring the overall number in the business account. And to be honest, I had a lot of it when I first started, it was mixed with personal bank accounts and stuff before I eventually opened up a, a [00:04:00] business banking account and stuff, but very unorganized.

And it was really just looking at one number, which was how much is in the checking account.

Danny: That's a good point, man. For me, I would say the mixture of personal and business stuff early on, I think it's, most people are guilty of doing that because you don't really know. And it's, if you're not used to running a business, you just buy things with whatever whatever card you have and and they might overlap and that's actually a really, that's something that you want to try to not do.

From a, from a. Organization standpoint, because you don't want to have personal and business things intertwined because it really negates the benefit of having any sort of business entity in place, like an LLC that gives you asset protection and liability protection from individual, lawsuits.

And if it's like, Oh this is basically somebody just running all their personal stuff through a business. That's a pretty easy thing to, to, they call it piercing the corporate veil. And it's fairly easy to do whenever, when you're mixing everything. So I've definitely did that early on [00:05:00] and was able to, realize pretty quickly that this has to be completely separate.

These are very different entities. They have to have separate bank accounts, they can't all be running through the same place. And for me, I just looked at our. So what I would do is just take, let's say it was like the fifth of the month. I would look at what our bank account had.

So say, if it's June 5th coming up, I would look at June 5th and then I would compare it to May 5th. And if we had 10, 000 in our operating account in on June 5th and we had 9, 000 in our operating account on May 5th, then I was doing pretty well. I was making money. I was profitable. Nailed it.

Yeah, exactly. Nailed it. I was just crushing it. And, what's that's a terrible idea because there's a lot of cashflow differences that can happen, or there's delayed payments on things, or you could have money on a credit card that hasn't been paid off yet. So if you're just looking at your bank account, you're missing quite a lot of, in terms of the.

The [00:06:00] revolving sort of charges that happen in a business and they start to build up, right? So you start to have overhead and staff and things you have to pay for on a recurring basis that are technology related. That's where I started and it was very stressful. Because when tax season would come around, I wouldn't actually know what I owed or didn't owe.

And I didn't have the same problem as you. I actually had to pay a decent amount of taxes, at least what I thought was a decent amount of tax at the time, my first my first year. And I hadn't really been allocating money because we didn't know on a quarterly basis, what we were supposed to do was all a guess and we were wrong, so it was like a few thousand dollars more, but that sucked as a surprise when you're like.

Used to getting a refund. Like when I was in the military, I never had, I would love tax season. I'd be like, hell yeah, I'm going to get 3, 000 back. I'm going to go buy a grill or something, I don't know. And that never once has happened to me as a business owner. I've always had to make sure I manage that and settle that up.

Now I think we're quite a bit more. Organized and it's far less stressful. So I think, for people listening to this, [00:07:00] I'd love to know of if you have questions on this, as we go through it, drop it in the chat. Cause we can we can answer some of that. This is a complex topic, but I think we can simplify it pretty well.

And it's something that we do all the time with the people in our mastermind in particular. When we look at how they run their business and how they allocate, allocate things and for most of them, they don't, I don't think it's a huge stress factor the way it was when they were really just not tracking anything.

And I think also you explained this to me one time with your background flying jets. It's there's a lot of data there. There's a lot of information that you're gathering about like decisions that you're making while you're flying and. If you think about a business, it's the same thing. Like you need that information to make sure that you're making the right decisions.

Like for instance, how do you know if you should hire or not? What percent of your patient volume is full on your provider schedules? How much revenue are you generating? How much money do you have in reserves? And then are you ready to make that or not? And if let's say you have no cash reserves and you're like, screw it, I feel like I should hire.

And that person doesn't get busy that fast. You might have to let them go or it [00:08:00] puts you in a really bad financial position. So I think it's all just like. Data to make decisions. And the more organized it is, the better it is for the business.

Jerred: Yeah. I would say what made me dive into finance so much, this is, I think this is just true of me in general, if something really stresses me out there are two, two ways you can go about it, right?

You can shy away from it and just be like I don't talk about that thing. I don't deal with that thing. And this could be any area of your life that causes you stress, or you can go head on and be like. Okay, why the hell do you stress me out so much? I'm going to figure everything out about you So I don't get stressed by this thing anymore That's my approach to most things that stress me out is I just go head on It's going to be uncomfortable painful.

It's going to take a lot of time. I have to learn it all But that's why I have dove so much into business finance and why I recommend other people do as well because I think a lot of business owners, they think that, okay, I can hire a CPA now or someone to keep my books. I don't have [00:09:00] to worry about finance as much.

And I don't think that's true at all. You're having someone do with some administrative tasks that may have saved you some time, but that doesn't mean. You now have an excuse to not know your numbers or your profitability or, what your payroll is that's not an excuse and that's what a lot of entrepreneurs are doing.

So if you are stressed out or you're not paying enough attention, like dive in and it doesn't have to be that complex, like you just, you need to face it and you need to find out why it's stressing you out. And I feel like once you know everything, it's a lot less stressful, even if it's bad. Like even if you're like, Oh wow, I didn't make a profit last month.

At least at least, you were in the hole a thousand bucks and okay we're going to have to structure things differently. Cause if you continue that several months without knowing. You think you're doing awesome. And then you're like wondering why you're having to start putting personal cash into your business.

That's a problem too. So it's always better to know, even if it's good, bad or ugly, you want to know.

Danny: What other things stress you out to the point that you have to go like super deep into it? I'm actually interested now. Cause I see that with [00:10:00] finance, but yeah, what else?

Jerred: I don't know. I'm trying to think if there is anything else that in more recent history I would say I would like, for instance, with my wife, if.

We were to get in like a fight or something like we're going to talk about it. We're gonna deal with it like those That's my approach to if we were to get in a fight like there's no oh We just won't talk about it. And then like maybe it'll go away and everyone be better tomorrow like I don't operate that way.

Like I have to face it and I have to know everything. And that's just how I typically face my problems in general.

Danny: I think it's just good advice in general, to be honest, just, in terms of avoidance of some of these things and, getting back to the finance side, this is something that doesn't just apply to the business finance side.

It's also the personal finance side. And if you're listening to this and you think about the last time you had a conversation about finances with your spouse. Was it a positive conversation? Did it go great? And then you guys, went out and had a great date night after that, or did it [00:11:00] ruin your evening?

Did you, cause there's, Chris, for a lot of people, there tends to be one person in the relationship that's more nerdy about it, more into it than the other, but. Do you need both people to be on the same page and have those conversations? Sometimes it's really uncomfortable.

And you know what Jared's talking about? It's it's better for us to talk about this and know where we're at versus. You have no idea. And then when we start to look at what we can and can't do on financially because we want to, not spend all the money that we make then one person looks like the bad guy and the other person is, feels like they're being talked down to.

So I think that, being able to take that lens and just say, Hey, we do this every month and I do this with. With Ashley every month, I talk about, Hey, this is what we were spending money on. This is how much money we made. This is where it's going. And she doesn't care about it as much as me, but she does care enough to want to pay attention during that time.

And

Jerred: you to listen to you while you want to talk about it.

Danny: Yes, [00:12:00] exactly. And if she knows that we just feel better when we're on the same page about it. And something we've been doing now for a long time versus we didn't. And then. If you don't track it, then all of a sudden it's Oh we owe an extra 10, 000 in taxes.

And, they're like what the hell, I thought we were going to go on a trip. And now that money is allocated to the government, and it's a surprise, it sucks. So it's better to have those conversations along the way. And, the main thing that we were going to get into today and talk about is how do we structure these sort of weekly potentially at a minimum monthly business cadences with yourself, where you're establishing a cadence of a meeting with yourself to talk about, or not to talk about, to organize your finances.

You can talk to yourself if that makes you feel better, whatever. I actually to, I will whiteboard stuff out and then I'll put it into an Excel sheet. So I actually like to do a bit of actual like writing, and then I'll put it in a, in a. Electronic, form. Why don't we do this, Jared?

Why don't we talk about the structure that you like to use with your businesses to actually make sure that, [00:13:00] finances are clear and understandable on a monthly basis. Yeah,

Jerred: so typically are what I recommend is most people go read the book profit first There's a lot of great things that come from profit first, but there's also a lot of cumbersome Unnecessary like the number of accounts like it's If you've ever read any of or listened to any of Dave Ramsey stuff, he's very strict on no credit cards at all.

Don't ever have a credit card. And I get that if you're in need of like behavioral change because you are someone who gets into too much debt, then you might need to go like behavioral change and then we can talk about tactics. And it's same with like profit first, like you might have to do the six different accounts and open them all at different banks because you have some behavioral issues where you overspend or like whatever.

But I don't really have those behavioral issues. And so I just try to make it very simple, clean. And so here's what I do. I would say I, I have a weekly meeting. I did it weekly [00:14:00] forever. Now I do a weekly, like quick check in just to make sure and really it's only about 10, 15 minutes at the beginning of the week, but then once a month, I'll have a longer financial meeting.

That's about an hour where I'm really diving into stuff more. But what I'm looking at in this meeting, very simple. I take the money that comes in. So there should be a deposit into your bank account, right? That's what starts the meeting. It's okay, the money has come in from there. There are three steps that I'm looking at.

And the first is I'm going to. Pay everyone, pay operating expenses, all that kind of stuff. So payroll that includes yourself. And this is where I'm going to like be different than profit first because I just, I look at it a little bit differently. So I'm just paying everything. Everything that needs to be paid happens first.

So all my people get paid all of the credit card, which is typically where a hundred percent of my business expenses go. The credit card gets paid off. People get paid, I get paid. And what I'm getting paid is just like what I think is like the minimum fair [00:15:00] Salary for what I do in the company.

It's not like this massive amount of money because where I and all of us business owners get, can get more money is off the profit, right? We can do that quarterly or annually or however we want to, but that's not where we're at now. So I'm talking about I pay myself the minimum amount when in this phase.

So it's paid credit card, paid payroll, all that stuff is good. That's step one. And then step two is I set aside tax money. Which to be honest kind of goes as like what step one is like paying people you have to pay. That's paying the United States government what they have to pay. That's typically 15 to 20 percent just off the top of whatever that bolus of money that came in.

So I'm going to set that aside in an actual different account. So I have one other account. It's a savings account. For each company. So I'll just transfer that money out of the checking into the savings. That's tax money. You don't ever touch that money. If you touch that money, it's very unfun when it comes to pay taxes, cause you're gonna have to find that money from [00:16:00] somewhere.

Now, the third step is whatever you have left over is your profit. And you have two ways that you can go with profit. You can distribute 100% of the profit to yourself if you want. You or business partners depending on how your company is structured. So you can distribute all that money.

Or this is the number that you look at for reinvesting into your company. And I think that's where most people need to be looking because I get question, ask questions all the time. Like how much can I spend on marketing or when can I hire those kind of things? That step three is going to help you answer those questions when you are able to reinvest in the company and hire new people, spend more money on advertising or marketing or whatever.

It all comes to step three after we've paid everything, set aside our government money okay, how much do we have left over? You could just always take a hundred percent of that money, but I don't recommend doing that. Because yeah, you might, have a, [00:17:00] an awesome like personal income year, but if you're not continually reinvesting in the business will not continue to grow.

So some of that money typically needs to be set aside for just the growth of the business. And that's that's it. We could jump into like percentages of some of those things, but that's the basic. Financial structure, those three steps from whatever came in and I do recommend people set up that money coming into their bank account, either weekly or monthly, like for all of the companies I'm a part of on Monday, it gets deposited from our payment processor.

So I know what number I'm dealing with and then we can base everything off,

Danny: off from there. Yeah. And I think maybe. We can touch on the credit card part because I think for a lot of people, myself included coming, out of going through school, having debt and paying debt off a credit card was something that.

I never used like just not at all. And there's a big difference between [00:18:00] personally, you can use credit cards or not. There's pros and cons, whatever it's up to you. But in a business, I think it's very recommended that you use a credit card and have it specifically for that business, for the things that you're doing with that.

So maybe you can touch on like the importance of. Why someone should have a credit card and then, like best practices with using that. Cause I think it's also a way people can get themselves in trouble.

Jerred: Yeah. That's where we go to the behavioral thing is like you, you have to know yourself and can you be trusted with a credit card?

Because for my personal finance and for my business finance like a hundred percent of my business expenses and nearly a hundred percent of my. Personal expenses are put on credit cards and it's not put on credit cards because I'm living a lifestyle I can't manage. It's because I want the additional benefit of one credit card protection that it can offer in some cases and then two and really the main reason are just credit card points.

Like I, I just want the points for spending all the money that we [00:19:00] spend and everything else. So that's a, the big reason I would definitely consider it, but you don't want to get yourself into any situation where you're overspending. And that's why I think the weekly meeting is the best best place to like gauge, like whether or not you should be using a credit card.

Because if I had 5, 000 come in on a Monday, And then I'm like, I said, step one is pay credit card and pay people, right? So if I have 5, 000 that came in and my credit card is sitting at 3, 000 and I'm a week into the month, that's not gonna feel so great. You're like, oof, that's a huge hit. But the rule is, and my rule you pay 100% of the credit card.

There's no, ah I'll pay 50% of it or I'll pay 25% of it or 75% of it. You, because I've done that, I've made that mistake of nah, who cares? You'll have a small balance on there, but then you realize you're just paying interest for no reason at all, at a very steep rate. So it just, you pay the credit card off [00:20:00] either every single week or every single month when you're running this finance meeting.

And then again, stress levels go down, you can manage. It's also like a test. You're like, okay, I'm spending too much. What do I need to cut? It helps you look in reverse so you can use a credit card and if you are paying it off every single week like I'm recommending, you're going to be fine.

Just making sure that you actually can't. If you can't, then maybe we switch to a debit card or go make more money. Yeah.

Danny: Yeah. That's a different conversation. I think there's a difference between trying to cut every expense possible. And I like to look at it like as a percentage, for me personally I like to spend no more than 20 to 25% of what we make.

And that might sound very low to people and it probably is in comparison to many, to, to many people. But part of that is because we have increased what we make and we haven't really we haven't changed our lifestyle that much, right? Like our lifestyle has definitely changed.

Like we live in our house is [00:21:00] nicer than it was like. 10 years ago. And we definitely go on a lot more trips. We travel a lot more. But other than that, like I try to keep that percentage really low. So what Jared's talking about is yeah, if you're, if you have these expenses one thing would be, do you need those are those necessary?

And if they are, then maybe the percentage of what you're, it's costing you versus what you're making is is too low or it's too high of a percentage of what your your revenue is. So you can always increase that. And that's where, what's cool about a business is you can increase your.

Income substantially over a period of time. You can't really do that in a W2 very easily, unless you have some sort of. Startup job where there's maybe there's equity tied to it and depending on how that business does. But either way, it's still dependent on how a business does. I see that as something that's really hinders people quite a lot, but going back to the, operating expense, paying yourself, I think this is one area, especially for people early on that they get really confused with when to do [00:22:00] it, how to do it.

And, maybe we can just give some best practices there because At least for us, I know like the way I do it, I pay myself once a month and for some people, they have a hard time with that because they may struggle with budgeting that out or whatever, but I do that beginning of the month.

I pay myself a salary. That's consistent. It's the same salary. And then if you're running this through, maybe your practice, you, maybe you're doing this twice a month or every two weeks, you can really decide what you want to do. But when you're doing this monthly meeting and you're talking about operating expense, paying yourself, paying the credit card off or I'm sorry, weekly meeting.

How do you recommend people start to pay themselves? If they're, let's say they're like a solo provider, or maybe it's them in an admin and they haven't hired somebody besides that yet.

Jerred: Like the actual amount.

Danny: No, just do you think it's best to do that? Like once a month? That's the way I do it.

But I prefer to do that. Cause I'll just manage the cashflow myself. Or do you think it's best to do a weekly payment? Twice a month payment. What do you think is. The best for someone starting yeah, I

Jerred: think for If you don't have a lot of financial [00:23:00] discipline, once a month is going to be very hard so I think the first and the 15th is a good cadence like you weekly if I mean if you're really struggling then And just struggling to stick within a budget You could go to weekly paying yourself like off the top kind of in this weekly financial meeting But I think it Builds better habits to be able to pay yourself once a month or twice a month and then just be able to allocate that money as, as needed.

But if you did actually look at, and I think, I know you've had like different opinions on this, but like from the profit first numbers, they have a chart of what your owner's pay should be. And again, I stay away from that because. I just look at how profit is used a little bit differently.

Like I think that you should have just a fair salary for yourself when you're setting that amount. And that's something I struggled with is I never knew what to do with leftover money. I was always scared of leftover money. As funny as that may sound like I wasn't. Again, it came just down to IRS and like taxes.

I was scared to spend it, I guess is what I should [00:24:00] say. I was like scared to touch any additional profit because I didn't actually know what the taxes were going to be or anything. So what would, and this caused a lot of stress personal stress, it would be having a large sum of money. I'm just like.

setting aside, right? But I'm not letting my family touch it. We're just like, no, we're not gonna touch. Cause I don't know. I don't know what, and then come April, taxes are paid. And then it's giving yourself your own refund if you had extra money, but it made for just like a shitty lifestyle, to be honest, because I would only ever pay myself in retroactively from the previous year.

Basically, plus that small salary I was paying myself. And that just caused a lot of stress to have it's like putting yourself under unnecessary financial pressure when you have money just chilling in the bank, it's just unnecessary. So knowing your percentages and knowing what to pay yourself, I think are definitely some something you want to spend some time on.

Danny: You're right. And I think that's that's something that is very common. To see [00:25:00] with these cash based practices because typically they're Pretty profitable. There's, they're fairly low overhead. So when we look at something like a profit first, like a lot, it's definitely a good book.

I do think there's a lot of moving parts to that are unnecessary. We actually just took what we liked from that and some other approaches. And we put together something called a clinical cashflow system, which is basically what we. Teach our mastermind members how to use, which we really comes down to these three accounts, right?

So you have your operating account, Jared talked about that with where you're paying things out of, you have your tax account, which, 15 to 20% you're allocating to that based off of whatever's coming in. So if you had 10, 000 come in that month, then you're going to take 1500. You're going to put it in that account.

If you're at that size of a business is probably going to be closer to 15%. As you get bigger, that number percentage goes up. And then you're going to have, your personal account. So you're going to have where you're actually [00:26:00] putting. Your own personal income that you're using for life every month.

So those are really the three things that you need to be able to organize this in an effective manner. What you have to decide though, is challenging is how much of that do you pay yourself and what do you do with that? Cause you're right. It's there's other decisions that you can make and not knowing, what you're going to owe is really.

That's, that is a stressful thing and definitely better to be in a position where you have more cash. We see a lot of people that work with, financial groups that we recommend that are planning for taxes. And all of a sudden tax season comes around and they've been planning for that. And they've got tens of thousands of dollars left the day.

Don't owe in taxes. They can reinvest in the business. They can buffer their cash reserves. That's another big thing is making sure that you're trying to keep three months at a minimum of cash reserves of your actual overhead, including what you pay yourself in the business. I think is really important, especially if you're looking to go to hire anybody.

And I'll tell you where it really made a [00:27:00] big difference was during COVID. Like we, we would buy a six months of cash reserves at our at our cash practice and. For those of you that didn't run a practice during that time. You just couldn't see anybody. So you went from making money to zero.

Like it was all of a sudden nothing. And it was very scary. But for us to have six months of cash reserves, it made that time far less scary for us than it did for a lot of other people. And so I think this sort of like fiscal conservative approach. It has its benefits in a lot of ways, especially if something really negative unforeseen happens.

Managing that it is tricky though. What do you spend it on? And when can you like have a little bit of fun? Cause that's the other thing I think for a lot of people, they like lean so hard to, never spending any money that they almost feel guilty when it's like. Oh, okay. I am going to take my family on a vacation and they just start counting every dollar and it's you're ruining your vacation, man.

Just go have fun. You've earned it. So how, what do you think with people? Cause I know we've both gone through something [00:28:00] similar, to that, where we struggled to actually spend money that we, that we earned and how, how would you recommend people look at actually enjoying?

Spending money once they get to a point where they have success in the business.

Jerred: Yeah, I definitely struggled with that for a long time. Just not spending every time I had a dollar, like I just wanted to make it useful, like whether that was investing in something or whatever. And I've actually changed quite a bit.

More recently and, to be honest, a big part of the change for me not to bring the conversation down, but I just had some friends pass away too, in a relatively short time period that I was in the military with, and I was just like, what we're not promised very long, it didn't, it didn't make me like, Want to go spend all the money I have, but it made me just reconsider this whole, like idea for, of like retirement and like financial security and stuff.

I think as a business owner, those definitions are a little bit [00:29:00] different for us. Like I want financial security, but I also will probably work and do things that I love until I die. I'm not looking to just go play golf one day. Like I can go play golf today. If I want to play golf, like it's just different when you're an entrepreneur, and you have some freedoms already.

So anyway, I think the best way to go about it is to set up some sort of like target percentages, and this is what's helped me. Like you mentioned Hey, I don't want to spend more than 20 to 25% of my income on like just my life and things that we're doing. That kind of, those kind of like restrictions, I think are good.

That way you're following your own rules and your own path and not just. Because what I would do is if I didn't have those kind of rules, it'd be like, okay I'm going to try and live off of 5% of my income and 95% of it's going to go towards smart decisions, right? Whether that's investing or like buying assets or whatever, that's what I would do if just you left me to myself.

And but I've changed that a lot to where, yeah, I don't have [00:30:00] target percentage someone else could hit, but I think just setting those percentages similar to like you have okay. Here's what I'm willing to spend on my life, my lifestyle, and just be completely okay with spending that money, like all of it, even, if you want to buy some new toys for yourself or you want to go on a vacation or you want to buy a new car or like whatever you want to do, if you want to upgrade your lifestyle, that's okay.

So long as it. Fits within that percentage that you said was okay. And then the rest of that money can then be targeted towards these other things, like whatever you want to allocate towards investing or making smart decisions or whatever else.

Danny: Yeah. And I think it's also I think understanding what you really value and by value, I don't, it's just, I, what I mean by that is what gives you like joy.

What do you enjoy in the world if you're super into cycling, and you're like, man, I love cycling and you want to drop the amount of money that somebody would spend [00:31:00] on a motorcycle, on a bicycle, go for it, right? If that's what you love, pick the things that you really love and that you enjoy.

And spend your money on those things. I think some of it is just deciding what is it that you really like, that you want to do more up? I, the one big thing for us was. As a family, like we, where we live, I'm used to moving every couple of years. And if I don't, every, like every few years I get this weird desire that I need to break everything and I need to change everything.

And it's just because that's, I did that every, I did that my whole life. And the compromise that. We've made with Ashley and I, and for our family, to have consistency of where they're at is we're not going to move, but we're going to travel a good bit. Because I love experiencing new places.

I like change. I like, and I like to do that with my family and for them to be able to see other places too. I think a big element of education for people to understand that not everybody's the same, [00:32:00] that people live in different places, that people make decisions differently. They look different.

Travel can give you a lot of that if you're going to stay in the same place. And so we spend a lot of money on travel, like a big percentage of what are like sort of family budget finances are is allocated towards travel. But I look at that more as like an investment in our family and our kids and for their sort of world perspective.

As, as much as I do as just like enjoyment of just wanting to go and check out new places. That's what we lean hard into. But I may not, but I may not care so much about a vehicle or whatever it is. Other people are really into, so I think you got to figure out what you really you love, and then double down on that.

Go hard on the things that you like, what would you say? Like for you guys is like maybe what you spend more money on than other people, cause you just really enjoy it. I

Jerred: would say travel is definitely in that bucket. I personally don't love travel as much as everyone else does.

Danny: But yeah, you just stay at your house, yeah, you're just a shut in. That's what Ashley, she's you [00:33:00] gotta get some, a shut in business partner. You'd stay there. I know, dude, I would come visit you, but you would just stay in your your office. Yeah.

Jerred: Like I don't hate travel. I just.

Yeah, if I went to the same places over and over again, I would actually be fine with that, too. Yeah but my family loves travel. So I, we still go on a decent amount of trips per year and do those things. But I would say travel, I think we definitely like having certain things in our home.

So I think we're building a new house right now. That's really important to us. And for our kids, you talked about like an experience and investment we think that it would be really good for them like long term, good for the family to have like this place where people can come back to and hang out and that, that's my house is that way when I was growing up is everyone came to my house to hang out and it wasn't necessarily because we had this this huge house, like whatever, when I was growing up, but we had We had a cool setup in the backyard and like a pool and like those just like some of those smaller things that you know make a difference and we were always the hangout and I always loved that growing up and I want the same kind of stuff for my kids [00:34:00] so I'd say we probably are willing to spend a little bit more on Kind of real estate that we're going to live in than most people.

Just because we're willing to do that. And I don't, I also think that Emily and I are so interested in it. I don't think that we will ever be done. I don't like we're building a house right now, but I have no. Misconceptions of this is my dream house that I'll live forever. This is what I'm building right now.

I'll probably build another one in a couple of years. I don't know. It's just, it's like a, actually something I enjoy doing.

Danny: Yeah. And I think that's the whole point, right? It's what do you enjoy and lean into that, right? If that's the thing that you're going to spend your money on, you might as well do it on the stuff that you really and be intentional about it, versus other people, they look back and you're like, what the hell I'm spending like thousands of dollars a month on.

Food. I don't even or something like that. I think it's it's really important to just focus on that. And then it's just shift gears a little bit on the personal side. So once you get your, once you get your business in order [00:35:00] and you have some predictability of what you're. Making what you're gonna bring home, what you're paying for taxes or paying for as far as taxes is concerned.

I think it's really important to keep an eye on what your finances are on a on a monthly basis. And this is something that I started doing about three years ago. And what's cool is like I tracked this like fairly in, in decent detail. Like I, I'll kinda explain what I do and, but what's been interesting is to watch.

back over the last three years and just see where we are now and where we were three years ago. And in business, I've always noticed the things that track the most directly are the ones that change the most. And you can apply this to anything. This could be your physical health. This could be, you start weighing and measuring every, Food that you eat during the day and your health probably is going to increase, right?

It's like tedious stuff. No one wants to do but it will make a difference. So on the financial side, just [00:36:00] to give you an idea, like a basic sort of setup that you can look at on a monthly basis. Is just looking at your assets. So like the things that, have value, that could be your bank accounts.

That could be your house, that could be your car, that could, anything that you can assign value to, you put it into one sort of bucket. And that would be essentially what your your net worth is. So if you're looking at net worth is somewhat arbitrary, but it is just an easy thing to track.

So all that together is like basically your net worth. That's the top line you have to then subtract what debt you have. So if you have student loans, if you have a mortgage, if you have a car payment, if you have whatever other outstanding debt that you have, then you want to know what that is too, because if you have a mortgage and your mortgage maybe goes down by 500 every single month because you're paying it.

At least you want to know that you want to track that. And now you're a plus 500, cause you paid that down with where you live. And so once you have your sort of all your assets and then you take your debts or your liabilities, that gives you your actual net worth. And some of [00:37:00] you might be a negative net worth.

And I've been there too. And, you go from red to green as that goes up and it trends in the right direction. The other thing aside, if you just do that, you're probably ahead of most people. The other thing I really like to do is track expenses and there's some technology out there that makes it easier.

So I use Mint which is, I believe Intuit owns it, which is like a tax software and it just tracks your accounts and it tells you exactly what you've spent. And you can categorize it. It takes some time to go through and categorize it, but that'll give you what your actual like expenses are each month.

And then I like to look at that in comparison to what our income was that month and keep it within the percentages that I explained between 20 and 25%. So that's what I do on a monthly basis. And it takes me about, it probably takes me an hour or sometimes more depending on the month to really sit down and look at everything and organize it all.

But it's such a, I feel so much better after I do that. Like you talked about. Leaning into things and not stressing you out. I feel so [00:38:00] stressed if I don't know what we're doing or if we're treading the right direction, but that hour just makes me feel so much better for the whole month until the next month, and then I'm stressed while I'm doing it.

But then afterward, I feel better. It's so that's what I do. Did you say anything similar

Jerred: to that Jared? So I got burnt out on budgeting and tracking personal finance. So I, I did Dave Ramsey stuff to get out of debt. So yeah, I definitely, I started with a negative net worth, 10 years ago or whatever, and eventually got out of that.

But anyway, I got so burnt out on that stuff. I think I do exactly what you do just in a different way. So if I'm going to. Say I want to live off of 20% of my income. What I would do is I would actually just transfer 20% of the lump sum that I got paid or whatever from the business into our personal checking account.

And then I don't look at anything after that. I don't care what we're spent. I don't care what happens. If that number is zero by the end of the month. Cool. What did we buy? I don't really care. You know what I [00:39:00] mean? That's how I look at it now. And if we run out of money which we don't typically, because we both, Emily and I both look at the number, right?

If, and Emily will actually adjust her spending based off of what that number is quite significantly. So if I were to throw a lot of money in there, she might be like, I want a new car. Cause she knows I've like completely Just cleared that money like we need it to live but it's just spend it on whatever like I don't care This is and it's typically like within that percentage, so I don't track anything Group wise but I've done that for a while like and it's worked at every income level.

I've been at once I because That the budget tracking did cause me a lot of stress. So anyway, that's how I do the personal side But then the net worth I think is so important I don't do it monthly, but I think every decision you make should be a net worth decision this is why I try to stress to all entrepreneurs or anyone trying to get into investing because Especially with real estate people like to [00:40:00] they like to ask me about like cash out refinances and all this crap But I'm just like you're just going into more debt Like, what are you going to do with that money?

If you take it out, like it has to go into another investment or you're just being really stupid, and so any decision you make any big financial decision, do like a net worth projection based off of that decision. So if you're like about to buy a car or you're about to buy a house and you're going to put money down or whatever, if you can forecast net worth of that decision within the next two years, in the next three years, are you making a good net worth decision or a bad net worth decision? And the more good net worth decisions that you're making, that net worth will go up over time. Of course, you're going to make more money and that will help you increase your net worth as well.

But if we're talking specifically about like buying assets or whether or not, you should. Buy a new home or there's really hard to justify buying a car. There's not really a good net worth decision. But you need a car, right? So like typically those things just end up happening, but I think the net worth thing is huge and always [00:41:00] looking at your decisions based off of what is this going to do to my net worth and that'll help you like make sure that you're making pretty good decisions throughout your financial life.

Danny: Completely agree. And I actually didn't even really. What net worth was until a few years ago, I really started to look at it and understand. And as a business owner, one thing to keep in mind too, is you're, you are building a, an asset, your business is an asset, and it's only a true asset if you move past the stage where you're, you have to do everything.

So if you're. Treating all the patients. If you're taking all the calls, if you're, if your business doesn't function without you, like we talk about this idea of the hit by the bus test. If you got hit by a bus, does your business keep going, right? Does it continue to fulfill make money, get new clients, all of that?

If it doesn't, then you don't have a. Business, you've just created a job for yourself and maybe it's a job you like a hell a lot more than wherever you're at, [00:42:00] but it's still not, it still doesn't have what we'd consider, enterprise value or sellable value, right? now if you grow past your Those stages where you take yourself out of the business and you have a team of people that are Employed and running the business then what you have is enterprise value and that enterprise value is something that It should be added to your net worth.

You have to understand that your business has value. We know we've, we've all we've both started businesses, sold businesses. And I think that you don't realize it cause it's hard to see. As that, that grows, not like a portfolio of like stocks or something like that. And it's Oh cool.

My Apple stock went up by 10% this year. It's not that simple. It's based off of what the business would be valued at and sold. But it's something that you should track because one day you might decide that you want to exit your business. And when you do, you may very well have a substantial amount of money that you can get because you've built this thing.

It has value to other [00:43:00] people. So something to keep in mind as you're looking at net worth, we talk a lot about it with like real estate. It's a very easy, tangible thing to see, right? You buy a house for. 200, 000 and it goes up to 250, 000 and you've paid some of that debt down and your net worth goes up by 50, 60, 000 because you, you bought this property, right?

The same thing with appreciation of equities like stocks, but your business is this thing is, I don't, it's just not as easy to tell. But it is very valuable and something that you should you should track an easy way to do that. If you're thinking, okay, how do I value this? If you're thinking of a service based business I was just sign a multiple of one X top line revenue.

It's not the most accurate valuation of a business service based business, but a lot of them will trade somewhere in that range of 75% to maybe one and a half to two X depending on the business. But if you just take one and you say, okay, my business made 500, 000 last year it's probably worth roughly 500, 000 if somebody was to buy that business.

So I would add that to what you're tracking and that's part of your net worth. You've earned it. And if you've grown something [00:44:00] that, that has grown past yourself, like it's hard to do, and there's a lot of value assigned to that.

Jerred: Yeah, I think business is like the sneaky. The sneaky asset. It's because we're so active in it that you don't really realize that it's growing and that it is a significant portion of your net worth.

If you want to sell it one day, that's something that you really can do. Yeah. Real estate's easier to track. That's really the biggest one. And that's why I always. I also get, entrepreneurs will ask me about real estate investing, right? And they want to get involved or whatever, but they're just like, it's, they're probably a little bit like too soon.

They're like scrounging up every penny they have for a deal that's just barely going to cashflow. And they asked me for my advice and they never like it when I'm like, why don't you just focus on your business a little bit more. Because it's not like you're not building an asset. That's what you're trying to buy right now You're trying to buy an asset that cash flows.

That's why people buy real estate. You're already doing that and I, I wrote this article a while back, like this [00:45:00] is a financial based article and it was like the tale of two, two people, like the entrepreneur versus like the W2 employee who like makes all the right financial decisions and it's like their net worth charted over time and the W2 employee is just like their net worth is just slowly increasing.

For like for now until the next 20 years. Cause they're like, they're making the money. They're making their mortgage payment. Maybe they have an investment property. They're putting money in the stock market. When you start out as an entrepreneur for a while, you might not be able to do any of those things.

You might have to reinvest in the business. You'll just barely be able to pay yourself. And then you're going to take on an employee and they might have to take a step, step back and like how much profit you were taking home. And you feel like you're behind because you're not playing the same game that your friends might be playing.

Where oh, now they're going on a nice vacation or they have a solid like 401k or whatever. But you're just playing, you're playing a different game. And once you realize that it will take some of the stress out of it because. Along [00:46:00] that same 20 year journey is you're going to be like flatlined maybe for five to 10 of those years, but then you're going to spike up because you've been working on this like super valuable asset for the last decade.

And now you dwarf your friends who took the traditional path, but it takes. That amount of time, it takes the time to build the asset and sure you can buy some other assets and stuff in the process, but if we're looking at net worth, which is a great gauge of like how you're doing, you're going to surpass everyone if you just give it enough time and you keep building your business as an asset.

Danny: One other thing to think about too, if people are interested in, real estate as a longterm investment is that the more time you spend on your business and building that up Early on, it's a negative for lending purposes. Like the banks don't want to lend to new business owners. It's the, you need to show that for a three, four year period before they even are like taking you seriously.

But once you're past that [00:47:00] stage, they look at your business as an asset and it changes what, yeses and nos, you're going to get from a bank in terms of investing into into real estate, if that's really what people want to do, because they look at the cashflow of that and the history of that as a being predictable at a certain stage.

If it really is a direction you want to go, one of the best things you can do is actually grow a successful business that's been shown to be Profitable over, years and years, and that puts you in a place where you actually will get better terms, just more likely financing options that banks are not going to turn you away.

And then they're going to be trying to like. with you as a client and try to give you the best deal that they can. It's a very different place to be. I've been on both sides of it and it's very interesting to see where it's just I couldn't get somebody to give me a loan. And then, now you've got, you can get banks that are just basically competing over terms that they want to give you because you are more lendable is a good way to [00:48:00] put it.

I agree, man. I think one of the. Problems I see is too early entrepreneurs take their eye off their own business, and they start looking at all these other things that they hear about because you can't really see the enterprise value the same way you can see other investments aside from walking in your building and seeing your people and seeing the bank accounts and the revenue that you have and all that, but tracking it, I think just gives them, gives you a more of a tangible feeling to where you see every single month, Oh, this is worth.

This much more or whatever, and you assign value to that versus just you take it for granted if you don't. And

Jerred: If you're investing in the stock market, all you're doing is investing in other people who've started companies as opposed to, investing in yourself. And I trust myself over other people making decisions most of the time.

Danny: Yeah, I would agree. I totally agree. I think. Some of the best advice I ever got was from and, this guy is not an investment guy, but like Kelly's Tourette, whenever I got out of the military, I was teaching for him. And I had been, religiously [00:49:00] investing in retirement accounts since I, the time I was 17 years old, like I was a weird, you talk about your tax your tax story of.

Just not wanting to pay taxes on whatever, and not knowing that you made such a little amount of money when I was a lifeguard, when I was between my senior year in high school and my freshman year in college that, I made two or 3, 000 and I didn't want to pay taxes on it. So I go to this local Wachovia bank, which doesn't even exist anymore.

And. I remember I was like, Hey, I wanna put this into a traditional ira. And the lady laughed at me and she's like, why? And I go, I don't wanna pay taxes on this money. And she goes, you don't even need to make enough money to get taxed , so you're good. And it's just different when you start like looking at what you're doing long term and understanding like what basically stacks on top of each other to get you to the point where you want to be.

And in the business, it's It's definitely looking at as where can you reinvest? And if you think of some of these other companies, let's say they're getting a 10% return. If you only get a 10% return annually on your [00:50:00] business, you suck. That's no, no offense to anybody that's doing that, but you could do a lot better because we see a lot of these businesses that in many cases they will double year over year for the first three years.

And then maybe they'll start to slow down a bit from there. So you're talking about a hundred percent. Return on investment versus a 10% return on investment. And that's why we see this hockey stick change that people can have in their own businesses, because it is almost like leveraging, an investment, but just doing it through your own vehicle.

So it's very powerful, especially if you can make a successful business out of it. Dude let's do this, man. We'll wrap it up here and summarize here real quick. So will you name the three? Three main things that are checklist stuff for the business accounts and I'll talk about the personal stuff.

We'll wrap it up there

Jerred: Yeah So the basics of a financial meeting when the money comes in you pay yourself you pay payroll you pay your operating expenses in full so you pay that credit card a hundred percent then the second thing you do 15 to [00:51:00] 20%, you're going to set aside and put in a text tax account.

That way money don't touch. You can give it to the government when it's time. You don't have to worry about it. And then leftover, you will have profit step three. And with that profit money, you either reinvest to the business or you distribute to yourself or maybe a portion of both but that's ultimately what you're going to want to do those three steps.

That's what I do pretty much weekly, monthly in multiple different companies. And it works out pretty nicely.

Danny: Yep. And on the personal side, look at your assets. So things that have, value bank accounts investments that you have your property, maybe you own vehicles, things like that.

Subtract what you owe on those things. So any liabilities you have and assigned value to your business too. If you have a business and that gives you your net worth, and then you can start looking at, of what, Okay. I made this month what you paid yourself, what percentage of that are you spending?

And then you can try to, at least figure out what percentages that you're in. I really think people should, if they can stay under 50%, it's huge from a [00:52:00] investment. Snowball standpoint, it just builds so much faster. If you can do that, it is tough. And I get it, especially if you have a young family and there's different phases of this don't feel bad if you're starting a business and you're like, man, we're spending like a hundred percent of what we make.

Cause we got daycares, 2, 000 a month. And all this, like there's different stages of your life that are gonna be more expensive. I remember when our kids when both of them got into. School where my daughter was in like the state pre K program. We called it free K cause we were, we stopped paying for daycare.

And then my son was in the public school here and he was like, dude. It was three, 4, 000 a month difference. It's crazy, and but for that time Hey, whatever, do what you can, it is what it is. Don't be too hard on yourself. And just track this stuff, keep an eye on it.

And what you track is what you're gonna, is what will change and what you'll be more aware of. And it's going to decrease stress. Jared said, in particular, if you stress out about it, [00:53:00] man, get organized on it. And if it sucks. At least, that, and if it's good and it's turning the right direction.

So anything to leave them with before we end

Jerred: it there? No, I'll say that I've been in every situation you're talking about where I'm probably spending 95% of my. Income just to live my life, just to survive to, having a lot more cushion, but the, as an entrepreneur, it should always be, how do I go make more money?

Like not to a point like stressing you out, but expansion is always a better mindset to take than retraction. Like just trying to like, how much smaller can I get? How many pennies can I pinch? Like it's a bad mindset. It causes a lot of longterm damage. Just take it from me. So always be looking for expansion to be able to make more money, more opportunity and trying to stay in that mindset when you're in the financial realm.

Danny: Yeah, that's such a great point. I think that's probably the most important thing I've learned in the last 10 years in particular [00:54:00] is just you can't. Cut spending so much, you can't achieve financial freedom by just cutting spending exclusively. You could, but you're probably gonna be miserable.

Let's be honest, you're going to be miserable and you're not going to be able to enjoy anything in the world with the people that you enjoy being around. Being able to be fiscally responsible. And understand that you have the capacity to increase what you make. And it's ultimately up to you and what you decisions you make.

That's super empowering. I don't think people even really look at it that way where it's like, Oh no, I can actually increase my income. I can increase what I'm making and my value to the, to the economy, to the people around me in the world. And when you do that, then, you'll see what you're making go up.

And if you don't move the goalpost, this is the key. Like most people, when they start making more money. Then they just, everything changes with it. And they're in the same damn place from a net what's left over every single month. So if you don't just move the goalposts constantly and you're increasing what you make.

You're going to end up in a far better financial position and the difference in [00:55:00] stress when you have a good handle on your finances and things are trending the right direction versus when they're not. And like I said, we've both been there and it sucks. Like the amount of fights that we used to get in, like Ashton, I would get in over some money stuff, like this doesn't happen anymore because we don't stress about that the same way we were.

It's far better tracking it. We make more than we spend every single month and. Life is just less stressful when, you, you have the money to do the things that you want, in, in life. And as an entrepreneur, you get a chance to decide what that is. So anyway that was awesome, man.

Thanks for sharing all this stuff. As always, you guys can tell Jared, we don't get to share Jared's a wealth of knowledge as much. Maybe maybe we should in the comments, if you want more Jared, just type Jared and we'll go ahead and we'll petition to get him on here a little more, but anyway, man, thanks for your time today.

I really appreciate

Jerred: it. Yeah, thanks

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