Pay Off Debt Faster with Profit First

Ready to ditch debt faster? Learn how to use the Profit First method to take control of your cash flow and crush your debt without starving your business. Simple tweaks. Big results. Let’s get after it!

**Debt Snowball Worksheet
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**FREE How To Implement Profit First Packet
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John Briggs | Tax Genius
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Chapters

• 0:00 Introduction: How Profit First Helps with Debt
• 0:15 Principle 1: Smaller Plates
• 0:31 Principle 2: Eat Veggies First
• 0:54 Principle 3: Remove Temptation
• 1:18 Principle 4: Rhythm Days
• 2:18 The Debt Snowball Method Explained
• 3:18 Accelerating Debt with Profit Distributions
• 4:15 Extra Funds from the Tax Account
• 4:50 Addressing the Good Debt vs. Bad Debt Debate
• 5:51 Final Thoughts + Free Guide Offer

Transcript

How can the Profit First system help me pay off debt quicker?

Profit First is a cash flow management system, and there are four core principles that form the foundation of its guidelines. These are meant to be just that—guidelines. Pick the things that make the most sense for you. Here are the principles:

1. Smaller Plates
If I use one giant plate, I tend to overeat. But if I switch to a slightly smaller plate, I naturally eat less. The same goes for managing money. Instead of one big bank account where all your money comes in and goes out, have multiple bank accounts for specific purposes. You allocate funds into each account, so you’re not tempted to overspend from a single pot of money.

2. Eat Veggies First
If I eat my delicious air-fried broccoli first, I’ll likely have less room for the carbs and less healthy things. With money, it's similar. Focus on the healthy financial habits first—paying yourself, setting aside money for taxes, and allocating funds for profit distributions. These are your financial veggies. Handle them before getting to the “junk food” of unproductive spending.

3. Remove Temptation
Some of these smaller bank accounts will build up a decent amount of cash over time. So instead of being tempted to use that money on unproductive expenses, keep it out of sight and out of mind. Removing temptation helps ensure you stick to your plan.

4. Rhythm Days
Think of a horse and a bear. A horse grazes throughout the day; a bear eats one large meal. Both are strong animals, but the horse is leaner. Similarly, having regular rhythm days to manage your cash flow—rather than waiting until tax season—keeps your business lean and well-managed. When you only look at finances once a year, you may realize too late that you owe more than expected and don’t have the cash on hand to cover it.

Now, when we’re talking about using the Profit First system to pay down debt quicker, these four principles help you first stop the financial bleeding. It doesn't make sense to aggressively pay down debt if you’re still racking it up. Profit First helps cut unproductive expenses and gets you in control of your cash flow, which is the first step toward tackling debt.

We recommend the debt snowball method. Here’s how it works:

List all your debts in order from the lowest remaining balance to the highest—regardless of interest rate. The smallest balance goes at the top, the largest at the bottom. Focus on paying off that smallest debt first. Each debt usually has a minimum monthly payment, which you'll make from your operating expense account.

As you pay off a debt, take its minimum payment and roll it into the next debt on the list. This creates a growing "snowball" payment that gains momentum as you go.

I’ve done a detailed video with a worksheet walkthrough on this, which is available in the comments below.

So how does Profit First help you pay off debt even faster?

First, by trimming the financial fat in your business. You start by making minimum payments on all debt through your operating expense account. Then, Profit First lets you accelerate those payments in a few ways:

• Quarterly Profit Distributions: Your profit account gives you a distribution every quarter. If you're in debt, instead of spending it on lifestyle upgrades, use 90% or more of that distribution to pay down debt principal. You can still celebrate a little, but most of it should go to crushing that debt.
• Year-End Tax Account Surplus: If you’ve been setting aside money for taxes and end up with more than you owe, use the extra to pay down debt. That’s bonus money you weren’t counting on.
• Owner’s Pay Surplus: If your personal income from the business is more than comfortable, you might choose to use a portion of that to further accelerate debt repayment.

One important note: don’t try to accelerate debt payments out of your operating expense account. If there’s too much cash building up there, it’s probably a sign you need to revisit how you’re distributing funds to your various “smaller plates.”

That’s how Profit First, when used correctly, can help you eliminate debt quicker—by controlling your cash, prioritizing the right things, and building smart systems.

Now, I know some people out there—maybe even some popular finance influencers—believe in doing everything with debt. If you're in that camp, this strategy might not be for you, and that’s totally fine. Just know that even most pro-debt advocates agree there’s such a thing as bad debt—things like credit card balances, auto loans, and possibly student loans.

Those types of debt don’t create wealth or income. They just drain your resources. So, at a minimum, use this method to eliminate bad debt faster. As for the rest, it's up to your personal preference. I prefer having as little debt as possible.

If you want help implementing the Profit First system in your business—if this sounds like something you want to try—we have a free guide that walks you through the 7 steps to get started. Download it today. We’d love to help.

And remember: Profit is a choice. Have the courage and wisdom to choose it.