A brand-new financial viewpoint - pay yourself first

With the economic downturn and boost in joblessness, you will find more individuals than ever trying to make a living off their hobbies. Smaller businesses have always been and could be the basis of American recovery. A cottage industry, though, might not be a good idea to get into. The treadmill of economics is a tough one to run. Unless thousands work towards learning the financial lesson of having to pay yourself first, it’ll be a rough recovery.

Exactly what is a profit margin?

Buy things for low prices and selling them for high prices is what a capitalist business needs to keep in mind. For numerous businesspeople, including craftspeople, making something and then selling it for any profit is a good thing. Smaller businesses have one slight problem. The cost of the product is not the only thing that needs to be considered. If the yarn to knit a hat costs $6, then many consider selling it for $10 a profit. A profit is what the $4 represents. That is typically what individuals determine as the profit.

Time in business is valuable

When trying for making money, most small business owners forget to pay themselves. The 30 to 90 minutes used to knit and finish the hat is not being accounted for when considering the $4 in profit that originated from the sale. That means, at best, the person selling it makes $8 an hour — less than minimum wage in some states. By not valuing time as a cost equal to all others, businesspeople end up working themselves to the bone but not making a living. The American dream isn’t, and should not be, working to stay at zero.

You have to pay yourself also

Paying yourself first needs to be a priority. You ought to remember this when in any kind of business. Think about what the time or cash was that went into what you purchase. Do this before getting or selling anything. What kind of hourly rate is needed to make a good living? This is something you ought to use for making judgments. If that cheap toy will break in two weeks, then is the cost really that much better than a toy twice the price that will last five years? Is giving yourself a $4-an-hour pay rate really worth the work you put into selling it? Whether you are trying for making a living or pay bills, you really ought to pay yourself first. It’s the only way to make a smart living.