Often when we think “I need more money!”, but what we are really craving is wealth and freedom. Wealth is the passive cash flow that funds the amazing lifestyle that we desire. And, freedom is represented in time – having the time to do what we want, when we want and with whom we want. Krisstina Wise knows all about the desire for this type of financial freedom.
She has been through the financial ringer and come out on the other side as a self-made multi-millionaire, international speaker and award-winning author of Falling for Money. She made it her life’s work to master money and now helps entrepreneurs and small business owners find financial clarity through her Financial Freedom Formula aka The Wise Money Method. A prescriptive money technique and financial system for the creation of Wealth and Freedom.
One thing she knows is that for some people the idea of looking at finances can be intimidating and scary. The truth is, some business owners like the financial aspects of business, but the truth is, most entrepreneurs do not. Most who Krisstina coaches are super quick starts with creative personalities. They will look at sales and client numbers (and love to boast about them), but they never look at a P&L. They focus on creating, teaching, sharing, selling, helping and growing, but don’t ask them about their numbers.
This is what she calls the entrepreneurial trap. The more they sell, they more they have to work. And, the more they create, the more money the business has to spend for the next growth. They will hire more people – more expensive coaches and consultants that somehow will “fix” the money problem. But, nevermind the profit. Because they make so much money top line (revenue) they don’t think about profit. Thus they reinvest everything back into the business for more growth while going deeper into debt or robbing Peter (their home savings) to pay Paul (their business growth).
At the end of the day, this trap leads to burnout because the harder they work, they less they have to show for it. And, personally, they are not getting (financially) ahead. Bottom line, some are great at making money but bad at keeping it. And some are operating on the misguided notion that in order to achieve the financial freedom you need to continuously scale and grow, in perpetuity.
Wise knows that many business owners just need basic financial guidance. How do you know if you’re one of them? I recently met with Wise, and she shared with me her list of 10 questions for finding that out.
- Do you know how much money you need to make in your business to be financially free?
Most business owners are working too hard toward too big of a number. As Wise has proven in her own life and career, it’s possible to create $10 million net worth with a six-figure income. She gives another example of a client named Mike, an entrepreneur who was making $2 to $3 million year after year. He thought he needed to scale to $10 million, but working at that pace drove him too hard, to the point where he lost it all and had to start over. After Wise’s CURBs program, he learned that a $2 million business was right where he needed to be to achieve his goals. Wise calls this finding your Happily Ever After Number.
2. Do you know what your net worth is?
When you know your net worth and your goal, you know what to start working toward. Wise explains this with the metaphor of weight. If you say you want to weigh 130 pounds but you don’t know your current weight, it’s impossible to know which direction to move. Similarly, you need to know current net worth before you can start moving toward a target.
3. How much did you pay yourself last year?
Do you pay yourself whatever is left over after you pay everyone else? Do you just cover your bills and expenses? If you’re not paying yourself, you’re just revolving on a hamster wheel and you’re never going to reach your Happily Ever After Number. Freedom comes from regularly paying yourself (and investing a good portion of that money outside of your business). ).
4. How much have you invested in your business?
How do you capitalize your business? Do you use your own money or nest egg? Take the example of Amber, who had no idea how much she was putting into her business, akin to filling water into a pool with a hole in it. Each dollar you put into your business should be treated as if it’s an investment from an investor — with a plan to pay that capital back. When Amber created an investment and payback plan, she started meeting her Happily Ever After goals.
5. What was your profit margin last year?
Many people simply do not know how to look at the numbers of their business. They focus on scale instead of profit. They spend $1.1 million to make $1 million and don’t know they’re running at a loss because they’re only looking at the top line. You need to know your profit margin in order to make good decisions.
6. What percentage of your income do you invest?
This number is non-negotiable. Wise recommends investing 20 percent off the top. This keeps you from falling victim to the natural money law of “lifestyle creep.” . Wise learned the hard way over 20 years of trial and error and has since perfected the formula of percentages of what to spend on investment/lifestyle/taxes so that her clients can have all the things they want in life.
7. If someone gave you $1 million, what would you do with it?
If you don’t know, you’re not thinking like an investor. Someone with an investor mindset knows exactly what to do with each dollar that comes in. The key is to run through the percentage formula (see question 6) and leverage all income into Wise’s percentages.
8. When is the last time you looked at your P&L and balance sheets? Do you know the difference?
It’s OK to not have an answer. It’s nothing to feel ashamed of, especially if you did not go to business school. What’s not OK is to continue to remain in the dark. This information is important because it’s where you look to increase profit. Looking at your P&L statement for both your business and household can help you strategize and ensure that you aren’t spending on meaningless things at the expense of investing.
9. Do you have someone in your business who is COO, CFO, CEO or CMO?
If not, it’s time to get real in your business. One person can’t do everything. You have people for marketing, fulfillment and sales and you need someone on your team making decisions based on financial numbers and data.
10. How much money is enough?
You need a concrete number, a roadmap, to get you to the life you have designed. A hard number allows you to set intentional targets with your future in mind, and Wise says it’s usually less than you’d expect. As an example, Isabelle was living in Colorado making great money and living in a big, expensive house, but she didn’t know how her money worked for her and she worried about making enough to maintain her lifestyle. She crunched some numbers, moved to Montana and bought a less expensive lake house near her grandkids. She paid off her debt, made wise investments and doesn’t worry about money anymore.
Wise has helped thousands of people answer these questions. She makes money and finances fun, something to look forward to instead of dread. Her free video and Happily Ever After Financial Clarity Map help business owners start generating cash from investments and passive income instead of operating a business where they’re caught in a cycle of selling and delivering all the time.
The place to start? Take her Money Quiz and see how well you can answer the most important financial questions you need to know the answer to. And, she’ll send you a worksheet that will help you calculate your “Happily Ever After” numbers – to be able to live a life happily ever after – financially anyway! And, if you are ready to get your financial house in order once and for all, check out her money course, Wise Money Method.
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