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You're listening to the Profit First for Real Estate Investors podcast. This show is all about helping real estate investors and entrepreneurs bring clarity and structure to the financial side of their business. In these sole episodes, we focus on practical financial strategies that real estate investors and business owners can actually implement, whether it's profit, cash flow, forecasting or mindset.

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The goal is simple to help you run your business with more confidence and less financial stress. Enjoy the episode. I'm David Richter. I wrote the book Profit First for Real Estate Investing. If you haven't read that, I am telling you, I want you to be able to get your dollars where you want to go. Today in this video, I'm going to do the overview of profit first.

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What is profit first? If you're out there and you're like, oh my gosh, I clicked on this video. I have no idea what this is about. What is this about? It's about putting money in your pocket. Profit first is literally a cash flow system for business owners for you to know where every dollar is going. How do you do that?

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Profit first is also an offshoot of Think of Richard, poor dad. How many times does Robert Kiyosaki say the words pay yourself first? Or maybe you've read The Richest Man in Babylon that says A portion of all you have is yours to keep. Maybe you've read the book The Seven Habits Highly Effective People by Stephen Covey, where he says, put first things first.

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Profit first is nothing new. That's basically this book is a culmination of all those other sayings with a system behind it. And that's why I have this whiteboard here, because I want to show you this system. I don't just want to talk about it, because if you're an investor and you're like, I hate the finances, I hate numbers.

00;01;42;03 - 00;02;02;20

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I had one guy I talked to one time on a call and he's like, I'm allergic to spreadsheets. That's where if you're feeling like that right now. Profit first just deals with your cash that flows through your bank account. It's very simple. You cannot mess profit. First up and you say, really? I've known lots of people that maybe started it or it didn't work for them or whatnot.

00;02;02;25 - 00;02;22;18

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Even if you do or don't know people like that, profit first only doesn't work in two cases. Number one, you never set it up. And number two, you make it so complicated that you stop it. It needs to be simple and you use it consistently. That's how you make profit first work. So what is the system behind profit first?

00;02;22;23 - 00;02;41;17

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If you've ever heard of the envelope method, Dave Ramsey has made that super popular in the personal finance space. There's other financial gurus out there that have made it popular, but you put an envelope in your personal life for all the different expenses you have in your personal life, like you might have gas, utilities, groceries, mortgage, all that stuff.

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I want you to not have a bunch of envelopes in your business, but I do want you to have the envelope system. But with bank accounts, you're going to name these bank accounts specific things. And that's what I want to teach you. Here is the practical system behind profit first, because a lot of people have bad habits with their money, they put profit last.

00;03;02;04 - 00;03;20;14

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I could probably write its own book. Their profit last with all the stories I could tell about entrepreneurs and business owners, where the profit is an afterthought, where in a for profit business it needs to be protected. That doesn't mean that you have it first at all costs, and like you're just going to screw everyone out of their money and do everything.

00;03;20;15 - 00;03;37;16

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Know what I want you to do is have a system that protects the profit that you bring in. What I want you to do is have it where every dollar has a name, and your intentional with every dollar, versus let me throw money at this marketing channel. Let me throw money over here, let me hire someone, let me do this or that.

00;03;37;16 - 00;03;52;14

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But you have no intention behind it. You don't have any intentionality of like, I know the numbers, I know I have this cash. I know that I could still pay myself because at the end of the day, if you can't pay yourself, you don't have a business. I need you to start paying yourself. So here we go. Here's the system.

00;03;52;14 - 00;04;15;25

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It's not very complicated. I'm going to start with the income account. This is where all deposits would come into. So you've got the income account I'm going to put I for income. So let's just say you sell you sell a property okay. A little house okay. And kitchen. The money is coming in to income. So you've got the income account.

00;04;15;26 - 00;04;42;07

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The money hits the income account. And there's three accounts that I would have underneath that income account. These are all business checking accounts. I would have profit. I would have an owner's comp account. So owner's comp OC and then over here a tax account and owner's tax account. So you have this income account. So the money comes in from the sale of a property.

00;04;42;09 - 00;05;05;17

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And it sits there until you transfer the money from this holding bank account to the profit account, this owner's cop account and the tax account. So then the money goes into these three and you might be asking yourself, what's the difference between these three accounts? First of all, they're different from the apex account which is going to be down here.

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I'm going to put this down here OPCS for your operational expenses. That's where everything's going to be paid from the business. So this is where you pay all your expenses. They're just going out. That's the account you usually start with. This is where most people have one big bank account where all the money is coming in. It's all going out.

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They don't know where it's going. That's this opex account. But now you're going to add these other on top of the optics, because I want you to see how much are you making up here. How much are you keeping. That's the difference between this account and these accounts. These accounts help you keep cash. Profit fuels why you started your business.

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If I ask you right now on this, on this video. Why did you start your business? What was the big driving force? Why are you doing it today? Did you jump in with both feet? Are you doing it part time? It doesn't matter. Why did you start what you're doing? I bet you it's not to have this big cash eating monster where all you worried about is the operational expenses.

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And do I have enough cash? Profit is to fuel your. Why? It's to fuel that purpose. I would take out a profit on a quarterly basis and have fun with that account. Now I will put in parentheses here the word debt. If you have debt like credit card debt or revolving debt, any type of debt that you want to get off of your plate, I would use this profit account first and then use it for fun.

00;06;33;09 - 00;06;55;13

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And like your purpose, profit unlocks your purpose. The OC right here. The owner's cop account is my favorite account. This is the account where you pay yourself on a consistent basis. If I had enough room, I'd put the pay yourself first account, because this is all those other books are talking about, where you should keep some of the money and where you should pay yourself consistently.

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Like Robert says, that's this account. This account helps you to pay yourself consistently. What does that mean? Weekly? BI weekly? Monthly where you are taking money either from distributions or if you set yourself up as a W-2 because your tax is an S Corp or whatever it is, that's where this owner's comp account is going to pay you consistently.

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The tax account is the peace of mind account. That account helps you as an entrepreneur, not have to worry about taxes at tax time, because from every deal you do, a little portion goes into taxes, goes into owner's comp, goes into profit, and then the rest all flows into opex. So that way you can still grow the business.

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But I want you to see why it's called profit first, because you transfer the money to this line first. I call it the Golden trio of Bank accounts. Why the Golden Trio? Because I love Harry Potter and Star Wars. Like I'm a big nerd there, where I love these big epic sagas that have the three main heroes like Lucan, Leia, Harry, Ron, Hermione.

00;07;52;11 - 00;08;08;16

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Like they're making sure good wins in the end. I want you to win. This is your business. This is your epic journey that you're on. You need to protect your money first. Then you can still have optics. I still want you to grow. I still want you to have the business that you want. And I still want you to scale to what you want to go to.

00;08;08;18 - 00;08;27;12

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But you need to protect that money first. So in a nutshell, profit first is first to pay yourself first principle. Then you actually have a system that backs it up. This is when Robert Kiyosaki says, if you ever read that book again, rich dad, poor dad. If you ever read one of those other books that I mentioned, this is the how.

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This is the how do I actually keep more of my profit? And you need to keep it simple. If you said this was too complicated. I would start with this account the owner's cop account. Most entrepreneurs do not pay themselves enough. Sometimes anything, sometimes not what they need. I want you to have a dedicated count to paying you because that's where it starts.

00;08;51;02 - 00;09;11;23

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So if this is too much, even then I would start with the owner's comp account and make sure you're paying yourself. Get into that habit. Get into that rhythm. This is what Profit First is all about. It's about you being intentional with the dollars so you could put more money in your pocket so that at the end of the day, you can say, I love this business and I really am able to get what I want to out of it.

00;09;11;23 - 00;09;30;16

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Thanks for spending time with me today. If this episode gave you clarity or a new perspective. Be sure to like, subscribe, and comment below if you're ready to apply what we talked about today with real guidance and accountability. Visit Prophet Raycom to schedule a free discovery. Call with us to create your path to financial clarity and freedom.