The following transcript features Clay Clark, US Small Business Administration Entrepreneur of the Year, and Tim Redmond on Thrive15.com, a leading-edge Ohio business college.
Clay: Principle number two says ˜know where you are’ and the idea is know where your money is, know what’s coming in, what’s coming out.
Tim: Right.
Clay: Tim, Socrates once said ˜an unexamined life is not worth living.’ What is he talking about it and how does that relate to this concept of knowing where you are?
Tim: All right, so unexamined life is not worth living … You could probably say and I’m sure Socrates probably said this next statement was ˜your unexamined finances is probably not worth sustaining you.’ We want people to thrive. Thriving is the whole concept of growing and increasing, not just with stuff you own but your influence and your peace of mind and the relationships you have. If we don’t know where we’re at and this is a unexamined part of our life here, it’s really a place of irresponsibility that how can we know, how can we get to where we want to go if we don’t know where we’re at. It’s like if we have a map, and we want to get to a place, and the map is wrong, and we don’t know where we even are to start with, we’re going to get lost along the way here. The power we have is if we’re going to take responsibility we’ve got to know where we’re at.
Clay: Are you saying that every entrepreneur needs to set up some kind of financial tracking system? Is that what you’re saying?
Tim: Yeah. It’s something that I recommend with everybody in your business, even in your personal life to set up some kind of tracking system like an electronic system; Quicken. Some people use a spreadsheet, some people use old ledgers that they write it down manually. What I recommend nowadays is they have programs like Quicken, or Money or there’s all kinds of different…
Clay: Is there one in particular that you would recommend?
Tim: I personally use Quicken. That’s the company that ended up buying the company that I grew up, and we sold it to them and so I’m preferential towards them. We want to get a system plan, it’s very important, that automatically pulls in our transactions from the bank, and the credit card. That’s where most of our transactions are. So to know where’s our money coming from and where’s it going to, if we can have it automatically pulled in for us instead of having to keep track of all these things manually … Most people aren’t detailed minded. Most of my clients are brilliant business people but they’re not detail minded towards that, and so we want to create some kind of tracking system in this.
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Clay: Tim, I know that you’re a big proponent of automating the transactions when possible. Why is that? Why wouldn’t you just want to manually take care of bills?
Tim: Automating there’s two aspects. One is the thing we just talked about here. When we have transactions from our credit cards, or debit cards and the bank transactions those are automatically coming into our tracking system. What I have is, as much as I can, I want to reduce the number of decisions that I make.
The most effective people that I know become effective because they stay creative on the most important problems to solve, and they try to automate or reduce the number of decisions they make. Really setting up a system is setting up a series of decisions that you want to have made every time. That’s what a system is. If we set a system to automatically get all of our bills, utility bills, our mortgage payment, even the income coming in, direct deposit, which is an automatic deposit process for your pay. Even if you have your own company you can set up direct deposit where things are automatically done. Even money that you have come in you can have your bank set up a percentage that goes into a savings account for every dollar that comes in. You want to do this just so you that you pay your bills on time, you don’t have to think about it, you’re not worried about it, there’s no anxiety there because you know it’s been taken care of.
Clay: Is there a specific … Quicken is the software that you use. Is there a deal where you with your bank … Is there a certain process … If I’m watching this and I’m totally unfamiliar with this idea of automatic deposits, or automatic withdrawals or how to do that, is it all within the Quicken Suite; I can do all this or what do I … ?
Tim: They may have all this stuff that you can do within Quicken. I think they’ve come up with those features. Most banks now will have a bill pay process and most vendors like your utility company, you can actually set up a an arrangement where you provide them your bank account, or your credit card and they get direct access to that. You set this up, they test it to make sure it’s really you, and then once it’s set up it’s automatically taken care of.
Clay: That’s an action step anybody watching this can do. This is something that you can do.
Tim: Right. Either using your bank or going directly to the vendor that you owe and say, Listen, I want to set this up where it’s automatically paid. They love that because they get paid on time, you pay on time, everybody’s happy, and you’re not wigging out about what’s being paid, or what’s not being paid.