When you open your balance sheet and see the number staring back at you as the healthiest your business bank account has been all year, do you feel an immediate sense of unease? You pause before buying yourself that £50 software subscription and agonise over whether to get yourself a gift or pay it towards company savings. If this sounds like you, you may be suffering from Financial Dysmorphia.
Think of it like the financial equivalent of body dysmorphia when someone looks in the mirror and sees a distorted version of reality. In financial dysmorphia, the mirror is the bank balance and the distortion is that gap between your psychology and reality. The gap that makes you feel financially unsafe even when you have more than enough. For help from Gloucester Accountants, contact www.randall-payne.co.uk/services/accountancy/gloucester-accountants
Why do we fall into this trap and how can we escape?
The first culprit is called the Phantom Liability Trap. A business owner isn’t thinking of their money as a balance, just as an opportunity for all kinds of ghosts to come and claim it as their own. They mentally subtract next month’s payroll from their cash, add in the upcoming tax bill, subtract the cost of that inventory restock … before long, the £20,000 cash in their account is zero minus ghosts. They’ve mentally ‘spent’ that money before it needs to be spent and are left living in defence mode against these ghosts and liabilities.
The second culprit is something called the Founder’s Survival Reflex. It’s that ingrained memory of eating rice every day for three months straight, not knowing if you were going to make payroll. It’s the sound of cheques bouncing and the crippling fear that grips you at 3am in the morning. That survival reflex gets burned into our nervous systems – and it takes far longer to turn off, even when we’re profitable.
Your brain doesn’t hear the update: ‘Hey, you’re profitable.’ You’re still running on fear. You’re stuck because the part of you that’s scared is convinced that the only reason you’re alive is because you never stopped worrying.
To break free, the key is to untether your emotions from the raw data. This means taking your money out of the general population and giving it some privacy. As soon as that money hits your bank account, it goes into one of those pre-allocated buckets – tax money, profit, operating expenses. This is like giving each ghost its own room so it leaves you alone. Think of these rooms as separate accounts.
By sending the money to their designated rooms, you can now look at your operating expense account and realise that you’ve already taken care of them. And when you look at your profit, you’ll see that it’s untouched and unspoken for.