There it was last week: the Blue Screen of Death. I freaked out. My computer was down for the count and I couldn’t bring it back. So off to the repair shop we went. By the time it was fixed (data transfers, larger hard disk inserted, rush fees) it cost me over $600. Holy Crap. (Is crap every holy?)

This is the type of expense that would end up on a small business owner’s credit card faster than you can say “For everything else there is MasterCard.” It’s a legitimate business expense after all. And it is tax deductible, of course. But I work with tons of business owners who are carrying too much debt—debt that didn’t come from “investing” in their businesses, if you know what I mean. Drag drags you down. It is hard to earn what you’re really worth when a ton of money is going out the door servicing your debt! It doesn’t matter how much you earn. It matters how much you keep.

How do I avoid nasty credit card debt in my business? I have a “five percent fund”. At the end of every month, I count up my total revenue (the total amount of money that came I into my business) and I multiply by 5%. Then I transfer this amount into a savings account attached to my business checking account. I use this for business “periodic expenses”. Periodic expenses are all those irregular business expenses that hit you from time to time. Some we know about: yearly membership dues and travel for business conferences. Some we don’t know about: the Blue Screen of Death. A sudden advertising opportunity. These are the type of expenses that reek havoc on a business owner’s bank account. The beauty of a five percent fund is that it is a percentage. If I have a great month, five percent is a larger chunk put into savings. If I have a down month, five percent is not that much money. But the point is this: I was able to pay the $600 periodic expense and not put it on a credit card. I just used my business debit card and transferred the money out of savings. (If you use a credit card, than you just transfer the money back to make the payment.) Beautiful. Besides, debt really sucks.