Build a Simple Financial Strategy with Perry Jeffries

On today’s podcast episode, I’m chatting with Perry Jeffries. He is a follow Profit First Professional, and he’s joining us today to drop some truth bombs. He has a wealth management and real estate background and helps small business owners with cash flow. 

The Definition of Wealth

With all of Perry’s incredible knowledge, let’s start with this definition of wealth. Wealth is an accumulation of assets that can be converted into passive income to cover lifestyle expenses. That doesn’t necessarily mean stocks, bonds, and things like that; it can be real estate, growing businesses, and passive investing. Once you’ve accumulated those assets, you can convert them into passive income over time. Passive income means you can have income you don’t have to work for. 

This definition allows both entrepreneurs and non-entrepreneurs to connect with it and measure their success in time. The question is, “If you were to stop doing what you’re doing today, how long could you maintain your quality of life?” That’s a simple way to measure wealth. Perry’s job is to work with individuals to create strategies and change their mindset around money. He wants to work to close the wealth gap, one relationship at a time. 

Building wealth is fundamentally easy in theory, you need to do three things: make money, live below your means, and save/invest the rest. But many business owners fall apart after step one. Profit First Professionals (PFPs) know that 87% of small business owners live paycheck to paycheck, making it hard to follow those three steps. 

Perry and I see it simply as giving every dollar a job and leaving no dollar unemployed. Some people save too much, and others are living above their means. Your financial intelligence DNA comes from your parents, and you inherit the food, the bad, and the ugly. Sometimes, that determines your money story, and you might have to revamp your mindset around money.

How to Define Passive Income

Social media has a way of “teaching” people about passive income, but it creates a lot of confusion about the concept. It is taking your earned income and converting it to income generated that you don’t have to do anything for. It’s not publishing a Substack, creating a membership site, or putting a podcast behind a paywall. It’s making money while you’re reading a book in your pajamas with a cup of coffee.

An example of passive income is dividend income. It’s money that was already earned, and then it was invested and is now making more money for you. Financial literacy means you understand the language and can cite different examples of it. If you don’t understand finances, gaining control over your own is hard.

How Profit First Professionals Help Small Businesses with Wealth

Non-Profit First accountants and professionals believe in general accounting principles. Sales minus expenses equals profit. For PFPs, the equation is sales minus profit equals expenses. No matter your business size, you can use this model by putting profit first. 

Many people get confused with this concept at first. According to their tax accounts and statements, they will say that they’re profitable, but where’s the actual cash? Others might say that they live off the profits, but they are actually living off the owner’s compensation. Those two things are not the same. Business owners need to pay themselves from the gross profit, and then whatever they have left over is the net profit. 

With Profit First, we talk about having a profit account, which is anything left over once you’ve paid yourself, your bills, and your taxes. It’s the cherry on top and the extra. PFPs help businesses figure out how to pay themselves first twice. 

Importance of Having a Written Financial Strategy

Life has many different stages, each with challenges and financial responsibilities. Whether you’re in a stage with child care expenses and a new home or a recent empty nester with some disposable income you’ve never had. It’s important to know the cycles and where you are to make the best investment decisions. 

Perry’s father-in-law is a great example. He raised kids through his 20s and 30s and couldn’t invest much until he reached 40. He had his own business and was saving, just not investing. He started a 401k in his 40s, and Perry became his financial advisor when he was in his 60s. They learned that his father-in-law was putting money away and building a nest egg, but he didn’t have a strategy. 

Having a written plan is key. Perry worked with his father-in-law on a bucket strategy. They figured out how much money he needed in the next year or so and kept that as cash. They created a “soon” bucket to help with the first ten years of retirement and a “later-on” bucket for at least ten years out. This strategy helps people understand how a plan can help make the most of your dollars. 

Another piece of the puzzle with Perry’s father-in-law was the business he built over decades and what to do with it when he retired. His plan was to shut it down, but Perry helped him realize what a strong asset he was holding on to with clients, builders, developer relationships, and an incredible reputation. That ended up being additional cash he wasn’t planning on receiving. 

Is Your Business an Asset?

Many people think the opposite of Perry’s father-in-law and put all their eggs in one basket, thinking they can sell their business and make money. Usually, those business owners think they’re worth more than they are and, at the same time, haven’t been making investments. If you are a service-based business selling intellectual property (like myself), you will not likely sell your business. I know my business will be easy to run when I’m older, so I plan to continue and not sell. On the other hand, my husband’s business has millions of dollars of machines, employees, contracts, and much more, making his business a valuable asset that could be sold.

I do a lot of work outside of the online business with local companies that are passing from one generation of the family to another. Seeing the differences in generations and how they plan for retirement has been eye-opening. Boomers, through no fault of their own, don’t have much of an understanding of retirement. Many of them planned on having their business be their large asset, but they have overvalued it because it’s their baby. They see themselves as the experts and can’t get off a certain dollar amount. When I’m working with the Gen Xer looking to take over and purchase the business, I often tell them to start their own business because the price isn’t at the right spot. 

Having multiple income streams is critical, and putting all your eggs in one basket (like selling your business) isn’t the best long-term strategy. Plan for your now, soon, and later-on buckets. Another example is real estate. People think they should invest in real estate, but that is far from passive income. You’ll need to maintain the property, find tenants, fix issues, and it might not be the best investment for a certain bucket.

Reaching Financial Freedom Takes Financial Literacy

Business owners need to learn the language. They need to understand marketing, management, financial planning, and budgeting. Leadership is also critical for business owners. You also need to be able to sell because, regardless of the type of business, you are selling something. Having influence is essential as a business owner. 

Another critical piece to understand is that you don’t have to be a master at every portion of your business. Find others who are and bring them onto your team. Perry works with a team of six, which frees up his time to do what he’s best at. 

Generational wealth is the knowledge that you can pass down to your children. Perry references a book, The Jewish Phenomenon: Seven Keys to the Enduring Wealth of People, which says wealth is transportable. It is truly teaching the next generation to make money, live below their means, and save/invest. 

Many wealthy people are afraid of losing their money. Some of them inherit wealth but don’t know how to make money, so they fear losing what they have. They lack financial literacy. Even though we can see that they have plenty of money, they don’t understand how to manage it properly. It’s like people who win the lottery or get a huge professional athlete signing bonus and squander all their winnings quickly because they never learned how to manage their money effectively. 

Financial Advisors Function as Interpreters

We’ve discussed how important financial literacy is, so a financial advisor is a great translator if you don’t speak the language. Many people believe that hiring someone like that is expensive, but they are often mind-blown when they see how inexpensive it can be. Advisors typically charge a percentage of your investment, so it’s not an out-of-pocket expense, and if you succeed, they succeed, but if you fail, they do as well. Others may charge commissions or have a list of fees based on service. 

Financial advisors will help you look at your different buckets, and depending on where you are in the life cycle, they can help you make adjustments to maximize your returns. They commonly find places where people miss out on thousands, if not millions, of dollars over their lifetime. 

The Bold Profit Academy is my program, costing $9,000 for the year. Other similar programs charge as much as $30,000, but I would never charge that because it’s inappropriate for an ROI. Some people in the program have easily made 10x their investment, so I know my program is priced appropriately to help my clients. A financial advisor works with a similar mindset. By building relationships with people, business owners are able to explain their value and earn trust to help shift the mindsets of potential customers. 

Final Advice on Financial Literacy and Investing in Yourself

There are great people and tools out there available to you. Don’t assume you can’t afford something. Start asking questions. Finance can be overwhelming and frustrating when you don’t know the language. Find an expert that will help break it down for you. Remember that simplicity scales; complexity fails. Remember the three steps: make money, live below your means, and save/invest. Keep it simple. If you can’t explain your financial strategy to a 12-year-old, then it’s too complicated. 

Invest in yourself as well. Find training that will help propel you in your field. Work with experts to get a better handle on parts of your business that you aren’t comfortable with. Perry has a private Facebook group called Cashflow Unclocked. It’s free and offers some great resources and conversations. Check it out and tell them you learned about it here.

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