The document outlines six principles for financial success, emphasizing the importance of spending less than you earn, paying down debt, and avoiding new debt. It urges individuals to prepare for future expenses and highlights the necessity of proactive financial planning to benefit one's future self. Additionally, it stresses the critical role of having a good bookkeeper to maintain financial health and make informed decisions.

1. 5 Principles for
Financial Success

2. Over the past 15 years we have worked with businesses
from a huge range of industries. The decision makers
within these businesses also come from a vast
background of financial experience and literacy, but
regardless of their background or industry, there are
some common factors that appear to be shared by all
successful businesses. For the purpose of this article, I
am defining a successful business as one where the
business owner is not financially stressed, so they can
focus all of their attention into building the best
possible business.

3. Principle #1: Spend Less Than You Earn
Whilst it sounds pretty straight forward, this can
become a bit more complicated in reality when
payment terms vary between your customers and
suppliers. Depending on your industry this varies. In
most hospitality, your suppliers require payment up
front and you’ll also receive immediate payment from
your patrons. In retail, this requires good bookkeeping
to track the actual cost of your purchases and assigning
them to each sale as it is made down the track.

4. You should be striving for this over any period of time
as long as or longer than a single pay period. It should
be true over a pay period, a month, a quarter, a year, a
decade — no matter how you slice it, you should be
spending less than you’re earning.

5. Now, this is tricky to actually pull off and almost no one
is perfect at it, but I will say that whenever you fall
short on that principle, there’s almost always a financial
problem lurking there that you can solve. It might be a
problem of inadequate planning or a problem of too
much impulsive spending or a problem of inadequate
emergency preparation. Even if you do come across a
problem, the more you do this, the better you will
become at planning.

6. Principle #2 — Paying Down Debt is Never a Bad Idea
It is never a mistake to pay off debt. If you are unsure
as to your next financial move, paying off debt is always
at least a good move. It may or may not be the absolute
best thing you can do, but it’s always a worthwhile
choice.

7. When you pay off debt, you’re reducing the future
interest you’ll have to pay on that debt. This has a
snowball effect on improving your cashflow as it
reduces your monthly obligations. When a debt is gone,
you no longer have that bill coming in the mail and you
have the freedom that comes with less money that you
have to spend each month. This gives you options with
that money, a power of choice that you didn’t have
before.

8. Principle #3 — Try To Avoid New Debt
While paying off a debt is always a good thing, actually
taking on a debt is often not a good thing. The reasons
for this mirror the reasoning above.
First of all, it means that you’re saddling yourself with a
new required regular bill. This means that even more of
your income is tied up in required spending than
before, which means that a higher level of income is
required from you just to keep the bills paid. If you
want to be tied to your job, the best way to do it is by
pulling out the ropes of debt. Your life’s flexibility is
reduced.

9. Second, almost all debts come with interest, which
means that you’re going to be paying back more money
than you borrowed. That’s not a good financial choice,
as over the long run it comes down to overpaying for
something.

10. Principle #4 — Prepare Early for Future Expenses
If your business is making a profit, then you’ll be up for
income taxes in the not too distant future. If you can
find the discipline to put away some funds early on,
you can earn some interest and it won’t even be a
stress down the track when it’s time to pay.
You know you’re going to have to replace that car in a
few years. Start saving for it now so that you can just
pay cash for it rather than taking on a car loan.

11. You know you’re going to pay for at least a part of your
children’s college education. Start saving for it now so
that you can just pay cash for some portion of it rather
than taking out on a loan.
You know you’re going to need to pay for insurance at
some point, property taxes at some point, and so on.
Again, save for those things now so that they’re not
even a slight concern later on.

12. Principle #5 — Help Your Future Self
Many adults, particularly younger adults but a
surprising number of older adults, assume that they’ll
just take care of some issue down the road instead of
worrying about it now. My “future self” will handle
retirement savings. My “future self” will handle that car
repair. My “future self” will actually do some
professional development.

13. Here’s the truth. Your “future self” is going to be you.
Just older. They’re going to have less energy than you
do. They’re likely to have experienced some kind of
misfortune. They’re going to look back at the most
wasteful moves in their life with regret.
Right now, your life is quite likely in a better state than
it will be for your “future self.” Rather than adding even
more burdens to your already tired future shoulders,
choose to shoulder some of those burdens now when
you’re young and can handle it.

14. Principle #6 — Get a Good Bookkeeper
(I know the title says 5) … but none of the 5 principles
are possible without a good bookkeeper who keeps you
informed every step of the way. A good bookkeeper
gives you the confidence to have a pulse of your
business. They will help you make better financial
decisions wether it is prepare provisions or debt related
decisions or on how to manage your expenses.

15. A good bookkeeper is difference between financial
success and failure!
A business mentor once told me that if you have a good
bookkeeper, then your business will be able to weather
anything that it is faced with.
This counts in personal finances as well. I strongly
encourage business leaders to get a good bookkeeper.