Financial Peace University is mainly for individuals and families but the principles apply to business as well. There must always be a budget, and money is kept in separate accounts (personal vs company). At least 25 percent also must be set aside for taxes, in a separate account that will not be touched.
Debt: The borrower is always a slave to the lender (Proverbs 22:7)
- Borrowed money always increases risk.
- Borrowed money always magnifies mistakes.
- Borrowed money always hurts and even destroys cash flow.
Myths about Finances, Debt and Credit:
Myth: Borrowed money is needed to start or expand a business.
Truth: Starting or expanding gradually increases cash flow and reduces risk. Dave reminds us that the tortoise always wins. Build your business with a crock pot rather than a microwave.
Myth: A line of credit is needed to cover cash flow fluctuations.
Truth: Cash flow fluctuation can be predicted with forecasting and budgeting, and having cash saved will help cover your needs. If you have a seasonal business you can plan for fluctuations in cash flow, and still not go into debt.
Myth: A credit card is needed for online and phone purchases and travel.
Truth: A debt card will do everything that a credit card will do, except create 18% debt.
Myth: A credit card will help me keep my expenses organized.
Truth: Use an accounting system, so a debit card does the same thing.
Myth: Large purchases require a business to use a credit card.
Truth: Avoid risk and mistakes by renting, outsourcing, buying used and paying cash.
Kids and allowance? Children learn about welfare with an allowance but they learn about a paycheck when they work. When the son comes to you and says he needs money, Dave says that he doesn’t need money, you need a job.
Never by anything that is not designed to make a profit. Don’t rationalize your wish list. Never purchase anything because you think you need a tax write-off. It’s a myth.An item that costs $10,000 that is an allowable deduction saves someone in a 30 percent tax bracket $3000 in taxes. So buying something that isn’t needed is like trading $10,000 for $3000. If your CPA suggests buying something you don’t need purely for the write-off, fire them.
Dave says that 60 percent of all small businesses start up with $5000 or less. Never make your decisions based on fear. Caution is OK, because that can bring peace.
In Good to Great, the author advises that we get the write people on the bus, then get the right people in the right seats on the bus.
A worthy goal in business is to shamelessly make money to benefit others. Churchill said that we make a living by what we get, but we make a life by what we give. In a book called, Thou Shalt Prosper, the author says that business is serving; work is a higher calling.