Inflation is here — and it's here to stay for a bit. Obviously, we have to deal with it, but how? We will discuss some things you have to think through to shield yourself from inflation, or at least mitigate its impact.
Hindsight is a good teacher. And so, if you can capture those lessons and put them in your plans for the future, you're going to be better prepared when the next cycle comes around because there will be another cycle.
Hopefully, you will also learn to figure out what specific information will help strengthen your ability to predict as a leader, so you can steer clear of those blind curves in your business. We are all in the middle of the same hurricane. But there is hope. Inflation is going to come down and things will get better. Just do the things you need to do to get through it!
The impact of inflation
The big impact that inflation has on us and small business owners is cash flow. At this point, everything that you budgeted or planned for has increased.
We've had some interesting things happen. It hasn't just been the cost of things, it has also been labor. I think labor has taken a hit like I have never seen.
Inflation has even captured the labor market with a fury just vying for talent, and we're seeing what's happening. They throw money to get the talent, and then the revenue's not there to fully support it at the level that they attracted the talent to.
Looking at your cash flow
Cash flow is definitely a big deal to look at, especially now. We need to reassess those expenses inside the business and outside the business and how they are impacting your family.
The first thing that you have to do is look at what X cost last quarter versus what X costs now. You've got to start prioritizing things now because it's really difficult to make the income match the increase.
I think it's important to not only look at the expenses side but also on your sales side because costs have gone up. Evaluate your sale prices as well.
What to do with your savings, retirements, and investments
The big thing I would say about savings, retirements, and investments is to not look at them.
If you can leave it alone, don't even look at it, because you're just kind of waiting for the economy to recover, and it will recover. But, it can drive you nuts looking at that stuff and seeing how much you've lost from this quarter to the next quarter.
I just wanted to add this disclaimer, this is our perspective and opinion. You probably have your own consultants and advisors you need to tap into to figure out what your best strategy is for you.
Why compartmentalization is both a blessing and a curse
Compartmentalization is both your blessing and your curse, from my perspective. And it is really beneficial in your ability to compartmentalize those things, and you're able to really prioritize financial things really well.
I think that that definitely helps people when they're dealing with such a volatile market right now. Like, what can I actually do something about versus what I can't? We talk about the Bridge of Spies movie, where the attorney says, “You're facing the death penalty, aren't you. Why aren't you acting more worried?” And he was like, “Would it help?”
We're trained to worry, not wired to worry.
Managing asset and debt issues
Most of society is riddled with debt, unfortunately, especially in the United States.
Don't even be afraid to go talk to those people you're in debt with, to see what impact you might have on it. Whether it's refinancing it or structuring it differently, just start a conversation. This conversation is going to take time and the energy is going to feel way more impactful than the time.
As a business owner, if you're not keeping good financials or good records, you don't really know how you're doing. One of the first activities you should think about doing is getting clear on what your debts and assets are. Put them on a single sheet of paper so you can see everything together.
The value of getting a plus-one
If you're too scared to look at debt or assets by yourself, don't feel strong enough, or you don't exactly know where to start or how to do it because you haven't been keeping up with it, then you may benefit from having a plus one. Partnerships can almost remedy and cure every issue with a plus one.
With every question that we ever deal with in business, what we ask is where is your plus one? Your plus one should be involved. It is going to be extremely valuable to have the right person in the right seat. It's always important to have the right partner in the right conversation with you.
Things to consider when it comes to taxes—before tax time!
Make sure you have the right partner. Make sure you're doing tax planning because tax prep and filing your retirement is not tax planning. You can't do tax planning in April when the taxes are due. So I will tell you, don't be that person. Please, do whatever you have to do to start thinking about taxes before it's tax season.
You have to build this muscle to stop procrastinating about taxes and then being upset about taxes. Don't stress everybody out because you wanted to stick your head in the sand and not deal with your taxes until two weeks before they were due.
Don't be that person. Don't blame your tax preparer. Don't blame your accountant. Don't blame your spouse. And when they tell you to wait, don't be mad.
Even if something comes up with your tax accountant and they need you to wait, don't be mad. I'm being real bold right now. You're in a market where people are not going to put up with that behavior anymore. If that's how you behave, they'll just let you deal with it on your own. So, this is where we've got to be more proactive and prepared for sure. And, if you're not with the right person, get with the right person.
If you want to learn more about dealing with high inflation, check out Episode 106: Key Areas to Consider When Dealing with High Inflation for Goals-Based Planning.
