She had recently transferred from company secretarial work into the finance department where she was responsible for the income and expenditure of the business, and which was well up into the hundreds of thousands.
Being the diligent soul she was, she began her new job researching files, following up calls and contacts, and generally opening doors that hadn’t been opened for very long. Unfortunately (or fortunately, depending on your view) the result of this was that the doors were opening onto a can of worms. And being full of integrity, she couldn’t help but open up the can of worms to see exactly what type of worm was in there.
This organisation was a telephone marketing company, and hence dependent for their success on the use of hundreds of telephone lines, much like the call centres of today. However, one of the tasks this young woman had to do was to negotiate every Friday afternoon with the owners of the telephone lines, British Telecom, regarding huge sums of money owing. Threats of cutting off the lines were not unusual. Another worm was discovered in the form of hundreds of thousands being owed to the Inland Revenue – with whom she managed to negotiate a payment plan. As you can imagine, none of this was very pleasant, and for this woman in particular, who prided herself on high standards of integrity, honesty and openness, it was particularly distressing.
The crunch came when one month, there was just not enough money to pay the salary bill. A meeting was held. The young woman offered to defer payment of her salary for a few days if that would help. Fortunately that was not necessary, as an injection of cash was found at the last minute.
Shortly after this, the woman in this story began to question out loud the management of the company in many different meetings; she stirred up questions in others too. Was it a surprise then when she, amongst many others, were asked to take redundancy? No.
A big shock, but it turned out to be a saving grace for our heroine.
This woman was me, in my twenties. I thought back to this time as I was thinking about this idea of paying yourself first. Clearly in the example above, I was willing to be paid last! Although this story is about me when I was an employee, I think it illustrates the mindset behind the idea of paying yourself first – and the mindset is very often that you come last.
When you’re running your own business, it is really easy to think that all the bills have to be paid, and then you can see if there is any left over for yourself. That’s assuming you even get that far, as many self-employed people I have come across have the attitude of ”when I want something, I just take the money and hope it works out later. Usually it does more or less, so it’s OK’.
I’ve heard quite a few variations on this statement, but they’re all stating the same thing – the person involved is not valuing themselves enough to treat themselves seriously in their own business. And if you don’t value yourself enough, who else is going to?
Paying yourself first is based on the same principle as in aeroplanes when you’re instructed to put on your oxygen mask before helping others put theirs on. If you don’t look after yourself first in terms of payment, then there likely won’t be a business that helps others! It’s that simple. So why don’t more people do it?
Because when there’s a pressing need to pay the credit card bill, or the gas, or as in the example above, the salaries, the temptation to do this to ‘take care of them’ and put yourself last can sometimes be overwhelming. And yet none of these people will get their payment unless you do. After all, you have to live and eat, have holidays, buy presents, save for your future, don’t you?
But it’s at this point when there are other bills to be paid that it is so easy to fall into not valuing yourself.
The very first step in this is to make sure you have at least two bank accounts – one that is personal, and one for the business. This is the bare minimum, but it’s amazing how many people just bung everything in together to the one account and hope for the best. So if you haven’t separated out your banking, then please do it!
In the RichThinking Way we go into exactly how to do this in detail, because as you can imagine, although it sounds easy, because of the thoughts such as ‘I can’t do this, what about all the other people?’ or ‘I’m muddling along OK, I don’t need to bother’, or ‘I just can’t put myself at the top of my payments list, it feels too much’, it sometimes becomes impossible to take this simple but challenging action.
So if you don’t already pay yourself first, have a think about it. What do you do? What’s getting in the way of doing this? If you do, are you happy with the amount? Could it be raised? How much do you dare to pay yourself?
By asking these questions, and being willing to act on the answers, you’ll be beginning to put into operation one of the most crucial aspects of growing your own business.