Episode 55: Financial Planning in Your Business With Paul Adams

On this episode of Bella in Your Business, Bella spends time with Paul Adams, President and Founder of Sound Financial Group. Paul Adams, President and Found of Sound Financial Group They discuss:  The roles finances play in our business Why it is so hard for the self-employed to pay themselves What happens when we don't focus on being financially fit Steps you should take to get yourself financially fit  How Luke 16:10 pertains to building business & wealth. Paul Adams is President and founder of Sound Financial Group where he and his team help clients maintain healthy balance sheets, stop forfeiting money unnecessarily to the IRS, and to build and protect their plans for the future. The cornerstone of his advice relies on the belief that people should always make their financial decisions based upon indisputable math and independent scholarship, not based on media hype, hearsay, or trend. Paul is also an accomplished speaker and the of author two essential financial guides – Stop Burning Your Money and Sound Financial Advice - < and in 2016 was interviewed by Forbes, Entrepreneur and Inc. magazines. Links Sound Financial Group - http://www.sfgwa.com Sound Financial Group Blog - http://SoundFinancialBites.com Moments of Wealth Blog (with Paul and Kristen Adams) - http://momentsofwealth.com Episode 44 of Sound Financial Bites podcast "Why a Wealth Coordination Account" - http://www.sfgwa.com/blog/sfb044-why-a-wealth-coordination-account Also, Paul has made available a PDF copy of his book Sound Financial Advice.  E-mail Bella at [email protected] for more information. Subscribe To The Show: Transcript: This is episode 55 of Bella in Your Business. Welcome to Bella in Your Business, where Bella will discuss anything and everything about your pet sitting business to help you land on target. So get ready, Bella’s got your chute. Let’s jump. Welcome to Bella in Your Business. My name is Bella Vasta, and today I have Paul Adams with me. Paul and I actually met at Social Media Marketing World in March, and I’m so excited to have him on here because we’ve never really actually talked about finance on the podcast yet, and we’re over 50 episodes now. So it’s about time to sit down, relax, and get your mind blown because we’re going to really get into it. Paul is actually the president and founder of Sound Financial Group, where he and his team help take clients and give them healthy balance sheets, stop forfeiting money unnecessarily to the IRS, and build and protect plans for their future. The cornerstone of his advice relies on the belief that people should always make their financial decisions based on indisputable math and independent scholarship—not based off of media hype, hearsay, trends, or what your friend on Facebook is saying to do. Paul is also an accomplished speaker and the author of two essential financial guides, Stop Burning Your Money and Sound Financial Advice. In 2016, he was interviewed by Forbes, Entrepreneur, and Inc. magazines. Bella: Without further ado, welcome to the show, Paul. How are you?Paul: I’m so good—and so much better. I gotta tell you, I want to just bring you with me everywhere I go. That is the most well-spoken introduction I think I’ve ever had. Thank you so much.Bella: Let’s take our listeners back. Can you tell us who you are and how you’ve built the freedom in your life to travel? Because what people don’t know—and I’m sure you’ll tell us about—is that you live a minimalistic life and get in your RV with your family for weeks around the country.Paul: I’d say the thing that separates us most is we talk a lot about cultivating contentment, not just with our clients but also in our own lives. My wife and I made it a priority because there’s high social pressure in my occupation. High-pressure occupations—like doctors, architects, attorneys, and financial advisors—tend to spend more money because society judges them based on what they drive and how “successful” they look. But that mindset rots the inside of their balance sheet. About five years ago, I read Stop Acting Rich by Dr. Thomas Stanley. Before that, my wife and I had already made some changes. I had a mentor who made seven figures a year, was a great husband and father, but lived in a very normal house—2,400 square feet for a family of four. It was nice but modest. He had a paid-off car and van for his wife. Sure, he had some luxuries, like an old Cessna airplane, but it was all paid for. Seeing that reset me. I realized I didn’t have to live the way everyone else did. But I still felt “less than” when I went from driving a BMW to a Camry. Reading Stop Acting Rich changed that. My wife and I decided to live as an example for others—earning top 1% income but living humbly. Bella: That’s incredible. My podcast listeners are huge fans of just podcasting. Paul, what’s your podcast?Paul: It’s called Sound Financial Bytes. You can find it on iTunes, SoundCloud, and YouTube. We just started adding video versions. The whole goal is to show that to take good care of your future, you can’t act like everyone else—because most people aren’t taking care of theirs.Bella: Amen! Stop keeping up with the Joneses and figure out what you really want out of life. How do the roles of finances play into our business? Paul: I loved your episode 51 with David on selling the business—that was pivotal. What got us picked up by Forbes and Inc. was this idea: as a business owner, you’ll never build financial independence on your business balance sheet. It happens on your personal balance sheet. People think, “I’ll build this business, sell it, and retire.” But that’s not guaranteed. Whether you work for yourself or Amazon, you have to move income to your personal balance sheet and invest it. You can’t retire on your business balance sheet until it’s converted into personal assets. Bella: So, what you’re saying is, it’s not just about how successful your business looks—it’s about how much actually passes through to you personally, right?Paul: Exactly. That’s part one. The second part is setting aside part of that money for investing. A lot of business owners get caught up in ego—“I have 10 employees.” Who cares? Profit matters more than headcount. I know people with 50 employees who are barely scraping by. Your business isn’t worth much if it can’t show profit. So, number one: cash flow. Number two: invest what’s left. Bella: That’s so good. Why is it so hard for self-employed people to pay themselves and invest?Paul: Because as business owners, we’re always the last ones paid. We cover everyone else first. And when we finally make real money, we hit a “set point”—we’ve never made that much before, so we subconsciously find ways to consume it. You’ve got to design your life before you design your business plan. Otherwise, you’ll always chase more. Build the life you want first, then make your business support that. And don’t feel guilty about making more than your employees—you took the risk. Bella: I love this. We’ve never talked about anything like this on the podcast. It’s such a needed message. People need to define their lifestyle. Now, let’s talk about consequences. What happens if a business owner doesn’t make their business financially fit?Paul: Honestly, it looks good for a long time. That’s the trap. The feedback loop is too long. If you treat your spouse badly, you’ll see consequences fast. Same with eating poorly. But with money, it feels great to overspend for decades—until it all crashes. One day you meet your “future self,” and you owe them a fortune. For every $40,000 of income you want to replace in retirement, you need $1 million in assets. So if you make $100,000 now, that’s $2.5 million you’ll need. And you’re not going to sell your business for 25 times earnings. Not planning now means meeting that future self—and realizing you can’t pay them. Bella: That’s a powerful image. But some people are probably overwhelmed right now. How can they make this practical?Paul: Stop “saving” money and start building assets. Saving focuses you on cutting expenses. Instead, open a separate checking account—what we call a “Wealth Coordination Account.” Put money there solely to buy assets. Don’t spend it. Episode 44 of our podcast explains the step-by-step process. Financial institutions want us to keep spending and borrowing. Stop playing their game—build assets instead. Bella: That’s so simple and clear. As we wrap up, I love Luke 16:10—“Whoever can be trusted with very little can also be trusted with much.” How does that apply to business and wealth?Paul: If you can’t manage your personal cash flow now, you won’t handle it well when you earn more. We see people making $800,000 a year who are still broke because their habits haven’t changed. You must be a good steward of what you have—money runs away from people who mistreat it. Bella: Amen. I learned that years ago at church—it’s true. If you can’t manage $10, you can’t manage $1 million. Paul, this has been incredible. I know you have a freebie for our listeners.Paul: Yes! I want to help your listeners take better care of their finances. I’m giving you, Bella, a PDF copy of my book Sound Financial Advice to share. Normally our clients make $300K–$1.5M a year, but this book helps people at any level start building wealth.Bella: That’s awesome. Thank you so much. Tell everyone how they can connect with you.Paul: You can find my wife and me blogging about living radically within our means at momentsofwealth.com. My financial firm’s blog is soundfinancialbytes.com, and our company is Sound Financial Group, based in Seattle but serving clients nationwide via web-based meetings.Bella: Fantastic. It’s been such a blessing having you on. You might even want to go back and re-listen to this episode—I know I will. This has been another episode of Bella in Your Business. Please subscribe on iTunes and Stitcher,...