Why Business Owners Should Put Their Money to Work

Don’t Leave Your Money Idle! As a business owner, you’ve worked hard to earn your money, but are you making the most of it? Many entrepreneurs find themselves with idle funds sitting in various accounts, from checking and savings to sinking funds for future expenses. While it may seem prudent to have a cushion, letting your money sit idle is like leaving your car running in the driveway — it’s inefficient and costly.

The Power of Velocity in Money 

Just as a car is designed to take you from point A to point B, your money should be working for you, propelling your business and personal finances forward. When you park your money in low-interest accounts or leave it sitting in checking, you’re missing out on opportunities to grow your wealth.

Think of it this way: if your money isn’t moving, it’s not working for you. It’s essential to keep your dollars in motion, whether that means investing in your business, paying down debt, or exploring other wealth-building strategies.

The Hidden Cost of Interest 

One of the biggest reasons to keep your money moving is to minimize interest expenses. Interest on debt is often the single largest expense for business owners, next to taxes. When you have idle funds, you’re essentially paying interest on money that could be used to pay down debt or invest back into your business.

For example, let’s say you have a $100,000 loan with a 6% interest rate and a 10-year term. Over the life of the loan, you’ll pay nearly $33,000 in interest. If you have $50,000 sitting in a low-interest savings account, you could use that money to pay down half of the loan principal, saving yourself over $16,000 in interest payments.

Strategies for Putting Your Money to Work 

So, how can you ensure your money is working for you?

1. Keep money in motion. Many business owners park money in checking accounts, savings accounts or “sinking funds” where it sits idle. This idle money is not working efficiently for you and may be costing you a lost opportunity. Aim to keep your dollars in motion.
2. Focus on minimizing interest expense. Interest on debt is often the single largest expense for business owners after taxes. Look for ways to reduce the interest you pay on loans, mortgages, etc. Paying down high-interest debt can save substantial money.
3. Build equity and liquidity outside the business. Many business owners have most of their net worth tied up in their business. Work on building accessible equity in your home or other assets outside the company. This provides security and leverage.
4. Use strategies like The Shred Method to accelerate debt payoff. By funneling income through a line of credit and making strategic lump sum payments, you can dramatically reduce interest paid and years to become debt-free on major loans like mortgages. This frees up substantial cash flow.

The Bottom Line 

As a business owner, it’s essential to be mindful of where your money is and how it’s working for you. By keeping your dollars in motion and minimizing interest expenses, you can build long-term wealth while paying off debt and secure a brighter financial future for yourself and your business.

To dig deeper into how business owners can utilize The Shred Method to pay down your mortgage or other debt, tune in to this episode of The Progressive Agency Podcast to hear more from our guest, Adam Carroll.