The Debt Sandwich: Where to Start When Both You and Your Business Owe Money6 min read

If you have made a debt sandwich for your life, it's normal to get stressed by the perilous situation you are in. Debt has burdened you with both your personal finances and your business finances.

How does THAT happen?

Business owners may find themselves in this place by personally guaranteeing a business loan or credit card. You will need to make changes fast because you have more than a business to lose. The bank may come after your belongings, even your home if you fail to make payments on a business account.

That should be enough motivation to make a change.

Even a single debt is an issue difficult to manage. Every new loan you take on adds more risk to your life. Surrounded by debt on all fronts, you’ll have to make tough decisions, so you can protect your future as much as possible.

If you noticed signs your business may fail, get your company back on track to prevent an incoming disaster. Don’t let this sandwich eat YOU.

Which Debt to Start With?

People who carry huge debt balances may become so overwhelmed that they want to bury their head in the sand.

Ignoring the problem will not make it go away, and inaction increases the severity of the condition.

You must first assess the situation by analyzing your personal and business finances.

When you carry personal debts, not paying yourself is just not a choice. It’s true, your business could use the extra money to pay down debt faster, but you need a workaround in this case.

Focus on saving your company first.

It can be a long, hard road to end debt, but you can be successful with significant effort and the right strategy. Click To Tweet

On a personal level, cut your costs until the business stabilizes and gains a positive financial momentum.

Embrace Frugality

Speed up your debt reduction by being more frugal. Stop wasteful spending and only buy the essentials.

Find ways to save money:

  • through promotions
  • couponing
  • buy groceries on sale and plan meals based on that
  • put a stop to clothes buying
  • bulk sales
  • reduce energy and water usage to lower utility costs
  • eat at home
  • redefine commuting
  • buy used instead of new
  • cancel club memberships

The family should come together to find ways to cut back on spending at home. Talk to your spouse about this new lifestyle, so you can take a reduced salary for a few months if needed.

In hard times, motivation is key. If you think you cannot save, read frugality and debt free stories. Research what others did, you will get inspired and find new ways to reduce your expenses.

Here are a few ideas:

  • Use shower water to flush your toilet- and reduce water consumption.
  • Dry clothes naturally; use your patio, fireplace or any sunny areas - and reduce electricity usage.

Frugality doesn’t have to be limited to your personal life because it’s also important for your business finances.

For both your home and business, sell items that are no longer needed to put extra cash toward debt reduction.

Know the Real Numbers

Many business owners struggle because of poor accounting and financial management. Most of them are not aware of how bad the situation is, and they fail to make prompt decisions.

Sit down with your accountant and analyze everything; your income, expenses, payroll.

Be on top of your business operations.

What’s the bottleneck in your business? Sometimes a wrong division is sucking too much of your money.

Run different projections and always include the worst-case scenario.

Make the Cuts

After you go through the numbers, you will know where you can make cuts. They can be done quickly while new customer acquisition and profit increase might take more time.

When emergencies happen, time is the biggest problem. Click To Tweet

Getting rid of everything non-essential is critical, whether it’s a software or an employee.

Don’t reduce salaries as this can lead to discontentment across the board and end up detrimental to your business. Rather lay off non-essential people who are not efficient or who do not offer true value to your company.

It is better for your business, and it will keep your necessary team members around.

This is the long-term strategy, so keep your focus and go through these times with determination.

Drop all tools, equipment, and software programs that are not essential to your business. Try cheaper versions or free replacements.

  • Replace task management programs with Google Sheets
  • Save money on communication with cloud computing

For marketing, avoid cutting back altogether, but find helpful ways to trim back on this front as well.

Build It Back Up

After you lay off a few employees, you have to rely on your remaining team members to take on more responsibilities.

Figure a plan for handling work without creating unnecessary burdens on your remaining team members. Perhaps you will need a different division, new angles, and other creative ways to make things work.

Restructuring may be necessary to keep the work evenly distributed.

You also need to keep a solid customer base. Engage with them personally and go the extra mile.

Confirm that each client is satisfied and ask if there is anything you can do to help them even more. Provide more VALUE.

Nurture existing relationships so you can get repeat business and referrals.

Every month counts when the time is your most precious currency. Each billed account is one step further from insolvency. The process of building your business back up and producing a more positive cash flow may take many months to complete.

As challenging as this may be, it is well worthwhile. You can prevent financial disaster at home and in your company.

After you put out the fires and find the time, consider debt refinancing options for your business. See if you can reduce the monthly rate, so even if your client base drops, your business keeps the positive cash flow.

Wrapping It Up

When business and personal debt situations make you feel like you are suffocating, you need to make any changes necessary to tread water and to stay afloat.

You need to buy time while you work on debt reduction. Make cuts where possible, and this includes minimizing expenses at home and at work.

Forget about keeping up with the Joneses and your lifestyle so far; needs are detrimental to financial freedom. Click To Tweet

With a few right moves, the support from your family and your valued team members, you enjoy the best chance of success.

Are you ready to finally take control of your finances? Let my budgeting spreadsheets help!

Just fill out the form below and I'll send you the link to get the same exact budgeting spreadsheets that I use each month!

Included in the workbook:


  • Monthly budget form
  • Breakdown of savings form (for your sinking funds)
  • Overview of your financial plan

I've been using these same forms since August 2011 and have grown my family's net worth 500% tracking our money using these forms!

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Michelle Laurey

Michelle produces stories on finance, entrepreneurship, and productivity. She works as a virtual assistant for a few SMBs. Having a few loans and credit cards forced her to become financially literate and change her perspective on money. Now she enjoys living below her means and she is slowly reaching the financial independence. Outside her keyboard, she enjoys a good book, healthy food, and bike rides.
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