Transcription
Budgeting sucks. That's why people have a hard time sticking to it and doing it because if it's always about scrimping, saving, sacrificing. It's a lot like a diet. And the first three letters of diet is die. And most people would rather die than budget because it's all about reduction. And there's only so much you can cut out. And that's not how the wealthy operate. Okay? It doesn't mean that we're going to be reckless with money and just go spend without any consideration. There's two major things that you could do that can help do better than budgeting. One is automation which a lot of people talk about but the second is what the ultra high net worth do that everyone could learn from and we'll go through these different like structures of not only what you can do how you break it down so that it doesn't become so constraining or take too much of your time but you can still get a lot further faster.
So Weston >> why why do you not like the idea of budgeting? >> Look I I was a miser that's what I kind of learned when I grew up. My family budgeted to the point where they had blisters on their fingers. Like my family actually put cash in coffee cans and buried it in the cellar because they came over from Italy and my great-grandfather was separated from his wife and didn't meet his daughter till after she was born because they couldn't put food on the table. And so he comes to America, becomes a goat herd, you know, and because there's a coal mining disaster when he thought he was going to be a coal miner, eventually gets in the coal mines, eventually is able to leave a tent that he was living in and get a house. And because of money feeling so scarce, the only thing they knew to do was, "Hey, I just got to hold on to what I I've got because if I don't, I might not be able to see my loved ones. We might might not be okay." And that led to my great aunt applying for welfare, even though she had $550,000 in savings. Poverty is a state of mind. [laughter]
And and ultimately, I I adopted that. So when when my wife and I when we were dating in college, like, you know, nobody really had a lot of money in college. And I had more than most because I was already starting in my financial career. And I was thinking like I was amazingly smart by getting people to just not spend money. Like how hard is that as advice? There's a lot of other things you could do. It's just really kind of rudimentary advice. And I had bought into that. So once we moved in together after we were married, I was so miserly that she didn't even know who she'd she's like, "Who is this guy?" Cuz I just thought, "Oh, we've got to save every dollar. We got to save at least 50% of every dollar that we make. We'll live in this crappy apartment so we can put more money away." And so that's what I had heard and that's what so many gurus say. You know, there's this this notion and it's such BS. It's like, oh, if you just save $100 a month for 40 years, the market will make you a billionaire. No, it won't. Because even if it does 12% like it did over one of the best times in history, um, you still have fees, you still have taxes, you still have volatility, and you have inflation. So that million dollar is going to be more like $100,000 40 years from now. Congratulations. You're barely ahead of what you put in. didn't enjoy life because you just thought it was all about what you could save instead of what you can create.
>> So what why do you from your perspective feel like you transitioned from kind of not being a miser but then when you got married you became a miser. >> I think because now I was responsible for providing for our family and I took this like okay I'm the one that's making the most money. I've got to protect us. And you know, we thought about, well, we're going to want to have kids one day. And I'm like, okay, we better have a bunch of money saved up because if we don't have enough money saved up, what could happen? And so it it was that provider role had kind of kicked in. And that like I thought that's how I could create safety, security, and stability was just budgeting our life away. I we fought over, hey, why is this heating bill so high? Why are you buying materials for your classroom? She was a teacher. I'm like, you're supposed to get paid, not pay for these things. And it was even I just it was it was a it was a sad state of affairs. I mean even her dad was like hey if you just want to live in our basement you could live there rent free and my wife's like sex free if you think that's where I'm living you know. [laughter]
>> Yeah >> because it was this I went from being a romantic and you know all these dreams to being a miser and always about saving. It like consumed my mind and that's what happens to people when they're misely mindset is it's like every dollar has to have a name. every dollar counts. Every, you know, penny could be compounded. I remember lecturing my wife one time. I'm like, "Hey, she ordered like a glass of wine with dinner." I'm like, you know, that's $6. If we compound that over the next 30 years, that's going to be, you know, that's really $224 that you're costing this family. [laughter]
>> And if you know about the first mutual fund ever created, the Massachusetts Investor Trust, if we just invested a dollar at its inception, that would now be worth $1,27 if we're alive 100 years ago. you know, like I was just so in that mindset and she was smart enough to be like, "Hey, what if we just looked at our budget and we see if there's anything we can cut out?" And we went through that so diligently. We cut out $170 per month. And by the way, that was like a massage envy thing, if you remember those. And so, man, we weren't getting massages anymore. And it was cutting cable back when there was a cable and 1,000 apps. And it's things that we actually enjoyed and provided benefit to our life. So, we cut out 170 bucks. The next day she's like, "What do you think you could do to make more than $170?" And so we came up with this idea because I was young, but I was actually producing a lot of money um in finance and all these people didn't understand like what I was doing. And I was like, "Well, I could have them shadow me and they could just come and see what I'm doing." And it was pretty cool because I'd be like in my early 20s, like I'm a 24 year old, 25-year-old kid. and these financial people that are like 30 years in the business would come and sit in on my meetings and these clients would I'd be like, "Oh, this is so and so and he's just gonna watch what we're doing." He might pipe in or ask a few questions. Uh, and the you want to tell him why you're here? He's like, "Oh, I just want to see what Garrett's doing." So now the client's like, "Oh, this guy's awesome. He's got these older people coming to watch him." And by the way, I'm just making more money doing the thing I was doing anyway. And then we started this like study group that we ended up charging 170 bucks a month for. So what we saved in one month we were charging per person within 18 months that was produ producing 100 times our savings of what we were saving with cutting out massage envy and everything. So it was all about production more than reduction. And the biggest problem I had was in that first year I wasn't investing enough into myself. So that very first year it was all about what we could do to reduce and save. And once I broke free of that I was like all right I'm going to join strategic coach which was instrumental for me learning about business. And I started joining other masterminds. I started to pay for like any Simon someone said this is a good book. I just buy it because I'm like this is an investment in me and then I can grow and add more value, build a bigger network, have more ideas and insights. And even that study group, I learned so much about tax because all these people would show up and I would debate accountants during some of the study groups. And then and then they [snorts] would end up telling me other tax strategies after the debate like, "Well, have you heard of this and that?" Because most of our argument was, "Hey, you don't really save money in a retirement plan from tax. You just delay it." And they were so caught up in, no, it's savings. I'm like, okay, it's stuck in a plan. It's not in my pocket, and there's a 10% penalty if I want it out. And if I make more money in the future than now, which I plan on doing, I'll probably be in a higher tax bracket. And if the government raises the taxes because the tax brackets could go up. From 1944 to 1981, the top tax bracket was over 50%. And we've been relatively low from the time I started in the financial services industry. So, it was a thought of value creation and expansion, not reduction.
>> for you. What is the alternative? >> Okay, so the first thing is instead of budgeting, I believe in mindful cash management. Mindful cash management is this simple. We're going to categorize expenses into four categories. The first one is a destructive expense. Destructive expenses would be like vices out of your control. And so this would be like they say one of the biggest reasons people are getting divorced is because people are addicted to video games. So, if you can't create parameters and you just lose your life to video games, then maybe you shouldn't be buying those kind of things. Or if you borrow to consume, that's a destructive expense. Or if you're paying for things you don't utilize. So, you just go through and you eliminate destructive expenses. The second thing is you figure out what your lifestyle expenses are. And you just pay cash for lifestyle expenses cuz a lot of times when people hear the word expense, they think of it as a negative thing. Like expenses are bad. But it's the only way we utilize our money is through an expense. So if expenses didn't exist, money would have no value whatsoever. And by the way, your expense is someone else's income and vice versa. So if we stop villainizing expenses and start looking at them as just something that is the way that we enjoy and utilize money, then we say, okay, for lifestyle, let's just not borrow to consume and just enjoy that. Then the third is a protective expense. Protective expenses are like insurance obviously, but also like setting up the proper corporation or a proper trust or even education so that you can be more informed with what you're doing with your money. But the fourth one is the game changer. It's the productive expense. It's a dollar goes in more than a dollar comes out. We run ads for some of my books and when people buy those books, we make more from the ad than what it cost us by selling the book. So we want to keep doing that as long as that's productive. We don't have a budget for it. It's just is it still working? And so productive expenses, you don't budget those, you increase those until they're no longer productive or they start minimizing their return. So by simply classifying these four types of expenses, it helps you out massively.
So in the next piece of mindful cash management is automation. So this is automation is nothing new. The richest man in Babylon is a book that's basically a century old and the whole premise is you pay yourself first. One of my good friends, Michael Mallowitz, wrote a great book, Profit First. I was just talking to a client today that said that they have way more cash now because two years ago they started the profit first methodology. So it's you pay yourself first off the top and I call this just you get a sweep account. So wherever you're banking at, you say, "Hey, I'm going to have at least two accounts. I have my regular account that I spend money out of and then I have my what I call a wealth capture account. Money that I'm going to pay myself first in. So I automate. So, if I make a deposit, let's say it's simple, $1,000 deposit, I want 18% or $180 to go into the wealth capture, and then I want the rest that's, you know, basically going into the to the to the other account. I want my uh $820. So, I' I've taken the 18% off the top um to go in the wealth capture account. And then I know in the regular account, that's money that could be spent. But this is now money that's separated. Because if we don't separate our money, it's a lot like if you have a glass of milk and you add chocolate to it and then you stir it, that's now comingled. You can't unring that bell. It's now chocolate milk. So, a lot of times there's a thing called Parkinson's law, which is originally a study about time. It says if you give someone something to do by Friday at 5, they often work on it Friday at 4:00 or 4:30, even if they had a full week, because time expands when there isn't like a structure to it. Same thing happens with money. If you have an increase in income with no plan, the expenses will rise to meet or exceed that increase because the money's just kind of there. Business owners know this. Businesses have an insatiable appetite. So, it's good to get the money that it's business wealth into personal wealth through some type of structure and just make sure that it's not there to be spent. So, that paying yourself first through automation. And by the way, do not collapse investing and saving. They are two very different activities, but people collapse these and they go, "Oh, I'm saving money in my 401k." No, no. 401k is not a savings plan. It's a retirement plan that's fueled by investments. It's not available the next day without penalty. It's got all sorts of restrictions. It's usually in stocks that go up and down in value. So, there's a lot of volatility in those little short period of time. Wealth capture is I know it's there. I know it's liquid. I know it's safe. I know it's accessible, but it's not comingled. So, the wealth capture account is really instrumental.
So, we have you look at your mindful cash management. Let's say even once a week you can just go through and say, "Are there any destructive expenses to eliminate?" There's tons of really cool apps now and AI that can support looking at this for you. I mean, something rudimentary like even Rocket Money can show you where your subscriptions are and whether they're, you know, being used or not, so it's easy to cancel. But now there's ones that will do a lot more uh with AI that'll kind of reach out and do a lot of the work for you. But that that would be one example. Then you're going to say lifestyle expenses. I don't have to budget if I paid 18% off the top, as long as I don't go out of bounds, right? So, even if you're an amazing athlete, if you're out of bounds, the play's over. So, this the same thing with your money. If you go out of bounds and you spend more than what's in account, then I guess you're going to have to be shamed by Dave Ramsey and start budgeting. So, budgeting is for people that spend more than they make. They're train wrecks that need to get on track and they have no conscious plan of what's going on. I believe in automating this looking at it weekly to say is there anything to eliminate or to increase because when I look at the the you know classification of expenses I go all right I want to eliminate destructive I want to manage lifestyle I want to address protective and I want to increase productive expenses expand your means everyone here is to live within your means but there's three ways to do it one cut back budget that kind of sucks two be more efficient that's where we're expert how do you save on tax. How do you save on interest? How do you save on non-performing investment fees? How do you design insuranceances so that you don't have lost money? Those four eyes, IRS, interest, investments, and insurance are the one of the best ways that people can get to this 18% because it's money that's slipping through the cracks and that they're unintentionally losing because they don't have the eyesight for it. But we have the glasses for that. So, and then increase the productive expenses because that's the game changer. You no one shrinks their way to wealth. Wealth is a game of expansion and value creation, serving others and solving problems. So automate, differentiate, that's the different expenses, and then think about living within your means as being efficient or expanding your means.
See, if you invest money like most people do or save it, which is to go, okay, I've earned this money, most people are told 10%. Now, 10% was kind of the days of richest man in Babylon. Why? Because we didn't have the inflation that we have today. We have inflation because we're printing a bunch of extra money. There's other things that we could talk about that are a little bit deep like fractionalized banking and what the Federal Reserve is doing, but ultimately we could just say they're adding more dollars and because of adding more dollars, we're watering down the soup. So think of money like a iPhone. You have a battery life on that iPhone and even if you don't use the iPhone, the battery starts to slowly lose the charge and that's what happens to our money. It just loses its charge over time because we're printing it. So, we it's better than, you know, better to have 18% than 10%. And let me break that down because there's a few categories. We need 3% because taxes could fluctuate, right? Taxes go up and down. We need 3% because things break down. Might call that, you know, planned obsolescence, but just like, you know, when we first moved into our last house, we had a Viking dishwasher. I thought, dude, that's amazing. That's a good brand. Well, it never cleaned the dishes. I think it was just like Vikings in there licking plates, [laughter] not quite cleaning it. So, we had to replace that. You know, we just today we replaced an air conditioner. How fun was that? That's things break down. You have to replace them. We need another 3% for my favorite, which is uh a luxury once enjoyed becomes a necessity. I mean, when I was dating my wife, she ate at five. She had five food groups. Pizza, tacos, burger, you know, like corn dogs. I mean, we were in college. You know, you got the crazy metabolism when you're that young. Then one day we went to the French Laundry. Thomas Keller restaurant, Michelin rated. You can't go back to a corn dog after that. It just doesn't work. Your taste buds have changed. You they're in the delight of 17 butters they bring out with all these crazy breads that are all really warm and salted perfectly. So, so a luxury once enjoyed becomes a necessity. I want you to live a better quality of life in the future, not a worse quality of life. Most retirement planning is preparing people for a worse life. Oh, you can live off 70% of your pre-retirement income because you won't have to save money or pay for your kid's school. I'm like, what are you talking about? Dairo just had another kid, you know? I mean, he's going to have he's going to have to be paying, you know, like [laughter] so did MC Jagger. I mean, these guys, you know. So, another 3% um is just because of technology. I mean, even though technology makes certain things more efficient, I'm spending more on technology right now than I used to because these AI tools that I'm paying for are amazing and powerful, but they're expenses I didn't even have 2 years ago. You know, I don't even I have this iPad, but I have a couple other iPads. I have more than one computer partially cuz I spilled water on the last one. You know, there's just technology that's advancing. I don't want you to if we if we ever get to what they would said it was going to be like with the Jetson. Remember the Jetson? We were going to be flying around in saucers. We're still driving on rubber tires. Well, I don't want you driving around on rubber tires of the Jetsons are right one day. You know, we need money for technological change. We need another 3% just for basic inflation, right? I mean, they say the CPI is usually around 3%. But we also know I'm giving you these other percentages to be more realistic of why we need uh 18, but I've only added up 15%. Right? Because the last 3% is the good news. The last 3% is your living wealthy account. A living wealthy account says you are your greatest asset. Your energy matters. Your quality of life matters. So if you're doing really responsible good things like paying 15% off the top, why not just have a 3% that goes into account for guilt-free spending?
>> The things that people might, you know, in your family might judge you for buying. Like why do you need that? I don't buy certain things because I need it. I buy them because I want them. I was just complaining before we started this that, you know, I was supposed to fly first class on this flight and it got cancelled and then all of a sudden I was in the middle seat and I it's been a week and my back still isn't recovered, which is just me being a baby. I know, but you know, it's just like I I would rather just pay for the lay down seat. I'd rather just pay for certain things that for me make me feel better, that help me enjoy a higher quality of life. So, it's a reminder that you're doing the right things. So, that's where the 18% off the top comes from. So really, let's be honest, we need at least three accounts. You know, your regular checking. Then you want to have your wealth capture, which is just another checking account that's separate. And then you have your living wealthy account, which is money that you can spend any time there's money in there. And this has been one of my favorite things to do with clients is people that are financially welloff but don't live wealthy. Benjamin Franklin said, "Wealth isn't just the man that has it, but the man that lives it." And I've had plenty of people that they're doing really well and they don't enjoy their money because they're so addicted to saving like I was early on in my life that they don't they feel bad for ever spending it. There's so many cases where we'll go in and find someone save them some tax for example, but they're so misely. I'm like, "Look, we're going to help you save this tax if you promise me you'll just spend some of it. It can't just go in the savings account. It can't just go to the next investment." And they'll be like, "Well, I don't know what to spend it on." I'm like, "Great. I know how to spend money really well. Let's brainstorm. You know, one guy's like, "Dude, you need new clothes. Let's uh get you a Nordstrom shopper. It's going to be awesome." And he did. He's like, "There's wrinkle-free shirts." I'm like, "They've been out for a very long time." Yes, there is. But, you know, sometimes it's be because of the mindset. And as soon as it's expanded, like, oh, it doesn't take a lot of money to feel better. And when you feel better, you're more productive. You enjoy life along the way. You're not just deferring life to one day because we don't flip a switch one day. We don't go like, you know what? I'm never going to spend money for 30 years, but that day I retire, I'm not going to have the deep pockets and short arms. Like, I I have a friend who's masterful at going to dinner with us, and when the bill comes, he always has to use the bathroom just at the perfect time. You know, his arms are too short to reach that bill. T-Rex at the table every time. [laughter] That's fine. I just pay for it. But like, you know, that's some people just have that mindset. But if they just had a little breathing room where they have this permission to spend, hey, you've got this money. don't spend it on anything other than what you really enjoy. And just that just can transform someone's life and they can make a lot more money. I just I know that happened with me when I went from telling my wife, uh, yeah, let's live in this crappy apartment. At first, I told her we'd have this $400 a month budget and I found out there's places in Utah that no one would want to live cuz they're too dangerous. Like I was like, wow, I didn't realize that there's a place where there were kids running in the streets in diapers and people smoking blunts and drinking 40s at 2:00. I was like, this is kind of crazy, you know? Oh, and she's like, "Oh, $400. That's where you want us to live?" I'm like, "Okay, 600." I was still miser, right? But, [laughter] but as soon as it's like, "All right, we're going to have this living wealthy account, and now we have this guilt-free spending." It's kind of fun to just what do we want to spend it on? We're going on a trip to Hawaii. We're like, "Yeah, what where do we want to splurge? What do we want to go a little extra? What's something that would be a little special?" Like for us, if we're going to go see something, I never want to be in a group tour. I would do anything other than go to a group tour. I'd rather stare at a wall. like group tours. Like I remember we went to the coliseum and we were on a group tour and it was nighttime and me and my sons were kicking rocks and like you know we because they're talking about the architecture of one arch for an hour. I'm like tell me about the murders that happened in here. Come on. [laughter] Why are we talking about this arch still? So we like to have one personal guide. We like to skip lines. Like that's our living wealthy account. We don't have any guilt or shame for it because we're doing responsible things to let us know we can spend that money. There's no budget to it. We've already automated our savings.
Now, there's a second layer to this that's bigger. If we want to upgrade, the upgrade is what I call the command center. So, command center is most people kind of have fragmented finances. They have an attorney that they talk to, but that doesn't that attorney doesn't talk to their accountant and they've got a business that there's money in, but then they don't necessarily put all the money like they don't have a good structure of how to, you know, put that in their personal account. And a lot of times it just gets sucked out by the by the business. I remember um talking in New York City once and I I I was in a mastermind and at the end of it I was going to go to the car and get to the you know airport. The driver was waiting for me and they're like, "Hey, these people want to talk to you about your program. They really want to hire you." I was like, "Okay." And so I end up staying an extra two hours. We did a lot of business from that event. And I had to fly out the next day and my business just got the money. I I didn't get I'm not a salesperson for the business. It just happened that that happened that time. So, the business makes six figures and I made no extra money. So, one day I was like, you know what? If I'm coaching or in sales or anything, I'm going to be the most expensive so nobody comes to me in the business. And all of a sudden, we just set up a separate account and out of out of just one year, we had $252,000 in that account at the end of the year. money that could have just been lost in the black hole or spent by the business, but it was like valuing what I was doing because sometimes business owners are the cheapest labor. You love your business, you love your clients, so everyone comes to you with the problems and you can always solve them, but sometimes that's the problem is that you're always the one solving it rather than letting other people kind of grow up or that you get paid for it so they start getting more efficient and on their own. So a command center is we have this one with technology that everybody uploads their documents. It's in one place. All communications are through there. So everyone on the financial team, attorneys, accountants, investment advisors are all working from that same page, looking from that same piece. So they see the whole puzzle because the wealthiest people when they have that comprehensive coordinated team, they pay less in tax. Like I see all the time where someone's got an attorney that doesn't talk to the accountant and therefore they aren't set up as the right corporation. They're not paying themselves properly. Like just today I was talking to a client where I was like they were mad about how much money they were they spend for their kids' health that they can't write off. And I was like well why don't you just have a Ccorporation for your family make your business pay that Ccorporation for certain activities that you're doing and then you have a medical reimbursement account in there that you could pay with the kids and then if you sell a CC corp you could sell it taxree for up to $15 million after 5 years. I mean they knew none of this and they were just blown away and I'm like yeah but that's because they have fragmented advice until they came to us. They had different people that didn't work together. So, everyone's got their own opinion, but nobody's looking at the whole picture. So, when it's a whole picture, now when there's money in there, there's a purpose for the money. Like, what do you want to do with it? How much do we want to invest? How much does want to go to lifestyle versus just having it be in one simple account of the business or one simple account of the individual? And that money often gets spent. Now it's in this command center that then deploys to those different places so that the intentional choice happens first and everything's looked at.
>> So are you applying kind of the same 18% strategy to some degree but then you just have other ideas and other people helping out with some of the other elements? Is that kind of the the idea behind the command center? >> Yeah, the command center is like we look at money as a thing to grow, not as a thing to save. Budgeting looks at what you can save.
>> Yeah. So now we're like, this is capital that could be used to grow and invest and be efficient versus everything's kind of like siloed. And so when it's siloed, just things, you know, I think there's eight different places where lack of coordination costs serious money.
>> Yeah. in the studies they've done, >> I think if you look at the people that Dave Ramsey is often targeting who are struggling with money. Um, a lot of the struggle with money is because they feel trapped and then they, you know, we we spend when we feel trapped.
>> I've struggled through my life with my weight. I carry it well, but like I would go in phases where I'd be pretty lean and then I would not, you know, plan well enough and all of a sudden I would be too hungry at the end of the day and I'd eat too much and I' i'd be emotional about it. And so it was kind of up and down because there was no plan.
>> Yeah. >> Now I'm I'm having the opposite issue. I'm trying to eat more food to put on more weight because I'm eating so clean because there's a plan. I have someone that makes the food on here's what the food list is and I eat anytime I'm hungry with no calorie restriction. So the same thing happens with money is when there is no plan it gets you know it just gets sloppy. You might do really well with discipline for a minute but then you get a little fatigue with the discipline. And you know, I would really hate to be in that budgetary mindset where you're like, "Ooh, I love comedy and my f let's say my favorite person's coming in town for comedy and I'm like, "Oh, the budget I get to be in the rafters or I don't have the money for this, you know, but I'm like, hey, if I've already put the money in the living wealthy account and I've already taken the other 15%. If I've got money, I just enjoy that money instead of when I was in my early 20s, it was like, no, we're saving 50% of our money." But the problem is we're saving in things that don't get that good of return like because that's what savers do. They put it in things they think is completely safe and stable but it loses to inflation and then they lose because their mind is so addicted to what they can save that they don't think about what they can create. That's the difference between a saver and investor. Savers save. Investors grow. Investors think about expansion. They think about like think about like a three-dimensional asset. When you're in a savings account, it's onedimensional. you put it there, it gets a minimal interest rate that's taxable. But let's say that I buy a piece of real estate. That real estate could grow in equity. I don't pay tax on that growth until I cash out, but I don't need to cash out because I can borrow against it. Or I could even do a charitable trust when I sell it to avoid the taxes on the sale and I still get cash flow for my life.
>> And then the charity keeps at least 10% when I die. Um, that's another area. But it also creates cash flow and then also has tax advantage. So I get tax advantage, cash flow, and equity. So that's a threedimensional asset. And wealthy people often will have businesses and real estate that they could borrow against. Pay zero tax on that borrowing. And then when they die, it passes on to their heirs and it goes up to whatever the value is at the time of death as what the basis is. Meaning they don't have to pay based upon the gain. They get to inherit for the full value with no tax against it. So, it's a completely different mindset.
>> Another component with like the guilt-free spinning account is it it seems it's it's aimed at the investing in yourself element that you talk about a lot as well. >> More quality of life than than >> actually personal growth >> but quality of life will lead to personal growth. Like look, me traveling to different places in the world has created experience that I can't get in reading a book.
>> Yeah. >> You know, even taking our kids for a summer to Europe, they just lost their fear of the world because what they knew before was the news, which is, you know, every place is scary and every place is not free and it's like all of a sudden like, wait, this is really nice. I mean, you sure it was Italy, so it's pretty nice, you know, pretty pretty peaceful country. But but I also do think where a budget might make sense is budgeting how much you're going to invest in yourself.
>> Actually being intentional about the allocation towards masterminds, towards coaches, towards those kind of things. You're like, "Okay, you have money set aside so when something comes up, it's there for you to deploy towards something like that." You know, I've had friends that text me like, "Hey, I've got money that I want to invest in myself with. What are the best masterminds you know of? What are the places you like you do if you want to learn this?" And I had good advice early on in my career. Someone said, "If someone you trust tells you that you could learn something quickly or you could get good value in something you're trying to learn, pay for it."
>> Yeah. >> And I like I like to pay extra money just to get directly to the source and save the time cuz then I don't have to watch the video.
>> Yeah. Which is interesting because I think there's a lot of us who try to do the DII DIY approach, right? It's like, oh well, instead of paying for their coaching, I'll watch all their videos or read their book and stuff like that. But it slows down that process a lot. Yeah. What's even what's great too is I've spoke for a lot of years now. I get to go speak at events that I would pay to attend and I get paid to be there. It's really cool.
>> Yeah. Yeah. I mean we get paid. >> That's how you turn an expense into a profit center. But yeah.
>> Yeah. That it's awesome. >> So that's that again. But how did I get there? Investing in myself when I was first married being a miser that first year. I would have never built the value and be able to create the value that I do if I would have stayed in that mindset because it would have just been about like any dollar spent is a dollar that wouldn't go to savings instead of what if I take the money and I put it into my mind first and then so this is supposed to be a person. So this would be my mind right I put my money in my mind and then I can create more value which would make more money and then put it into some type of investment. Yeah,
>> this detour is actually a way that you accelerate results. In the short term, it looks slower, >> but in the long term, it goes further.
>> So, what about things like, you know, if someone has um some debts and you know, they have the option of doing like a velocity banking or something like that versus investing themselves, do you feel like one path over the other will accelerate faster?
>> Well, the first thing we have to consider is peace of mind. You know, if you've got a 29% interest rate credit card and you're in fights about it and you're losing sleep.
>> Yeah. >> You don't need a lot of personal development to know that any money that goes towards that is a great return. [laughter]
>> Yeah. Gotcha. >> Right. But on the other hand, I know people, they're like, I'm going to take every dollar and pay off this 5 a.5% mortgage and then once that's paid off, then I'm going to invest and then I'll go do these other things. It's like, man, this is going to be a huge detour for them. a huge delay in their development
>> um just because >> they're worried about a mortgage. I mean, yeah, if that mortgage was 15.5%, that's a totally different ballgame. But, you know, it comes down to like how much value can you provide by investing in yourself? What would be the measurable return? just what I know about tax has created so much return for me over time that all the dollars I spent learning about that have way much it's just such a big payoff versus if I would have just been like yeah let me let me pay this loan off let me um you know get more money into my savings account. I think it's important to have enough like runway you know like I think that 40% of Americans can't come up with $400 in in 24 hours. M
>> that's you know that's going to put you in a deep amount of scarcity which is probably going to get you on the treadmill of hard work without enough return because you feel forced.
>> Um >> especially if that like $400 is like a ticket that you have to pay for or a medical expense or things like that. Yeah.
>> And like you know some people might watch this and go oh like yeah that's easy for you to not easy for me to say I grew up in a small coal mining town. You know I I didn't have a bunch of money that I started with. Sure. When I was 15, I started a car detailing business. So, I had some money and I did win the Young Entrepreneur of the Year, which came with $5,000, which I immediately when I was in college. When I was 19, I deployed in software and financial training. I took the five grand and then that started my career. And look, that career's paid off creating an Inc. 500 firm, selling a business. So, I think it was well worth it where other people might have wanted to take the $5,000 and do something else. But there was no mutual fund that could produce that return. There was no stock that was going to produce that return. Yeah. But I we have to have enough faith in ourselves to invest in ourselves to take that leap of faith to figure it out because what happens is people go here's my ability right now and to get where I want to go I'd have to have more ability. So they judge themselves based upon today's ability not their future growth.
>> So I'm looking at like if I want to accomplish something in the future and I don't have the capability I know that could I invest to get that capability? Could I hire to get that capability? And you know, no major company goes, you know, we're sitting on a bunch of cash. Let's put this in an index fund. [laughter]
>> Yeah. >> Never happened.
>> Yeah. >> They'll sit in the cash. Some of the major companies sit on tons of cash and everybody's like, "Oh, that cash is getting destroyed by inflation." No. You know what destroys cash? Bad investing.
>> Yeah. >> You know what destroys cash? Locking money away. Creating no cash flow. You know what destroys lives? having no skill set because you were so afraid of growing yourself that you just concerned about growing your money but you don't know why your money grew because you count it to strangers and hope for the best.
>> What is a example from your life where you spent money in like a guilt-free way and it actually helped you unlock something in your life or um perceive a new direction to go? when when we lived in that crappy apartment and then I had this epiphany that I was a miser and someone asked me what it was like living in the financial prison I had built for my wife and I was like oh damn I'm an a-hole
>> and that like shifted my thinking and so I was like well why don't we get a home
>> and within like 6 weeks we found this home and it was $321,000 home at the time
>> Mhm. I was making more than that.
>> So, it was less than my year's income. So, I was well within my means buying this house.
>> What was your Because you were paying rent before. What was your rent amount to the your mortgage?
>> It was our rent was less than $1,000
>> and the mortgage um I don't know, maybe the mortgage was like with, you know, insurance and stuff and taxes maybe like $3,300.
>> Okay. So, it was a it was a bigger jump on the monthly.
>> Yeah. I don't I don't remember exactly, but it was definitely higher.
>> Yeah. >> But guess what? We started to host um study groups there, retreats with our team.
>> We had family events. I started having like a poker night in the basement once a week, having friends over. Like I just started making way more money cuz I was just so much happier.
>> My mind wasn't so addicted to like how much does this cost and how can we save here and what if we didn't spend money there? And like some people get so caught up in like, hey, we we'll just borrow that from someone and they take all the time to go borrow it and then take it back and it saved them 50 bucks, but it was probably $30 in gas and $300 in time spent, you know, because they know how to save money, but they spend time.
>> Yeah. >> The wealthy know how to save time by spending money.
>> That's the difference. M >> and I get that there's a necessity for certain people to beat this drum of budgeting because people otherwise might just be completely reckless. But I think the majority of people could handle mindful cash management without a budget.
>> I I read in Time magazine long ago like 71% of budgets don't work.
>> Yeah. >> Just like it's like a diet again. You're restricting for so long that you eventually rebel.
>> Yeah. >> You're like this sucks. life sucks. And then when you feel depressed and down and like you can't go do anything, you know, they say that the biggest reason for divorce is money.
>> Money is not the reason that people are getting divorced. It's cuz they no longer dream and the future doesn't seem exciting because they're so stuck in like holding on.
>> That they don't let go enough to grow.
>> Yeah. >> You got to let go to grow. If you're holding too tight to it, it's the it's the monkey that's like holding on in the cage and, you know, won't let go of the food.
>> Oh, yeah. Of the banana. Yeah.
>> Yeah. How would you sum up the the importance of it? Basically directing money back towards what matters to you most?
>> If you don't, then what what does money matter? I mean, it's kind of like a false warm fuzzy blanket. You've got money in a 401k that you can't spend at the grocery store. You've got net worth that nobody knows about but you. Um, you know, there was a woman that died in Harlem once that they found $5.5 million of bear bonds, but she died cuz she froze to death. She didn't turn on her heater.
>> Jeez. >> And one of the coldest winters on record. So, it's like, you know, wealth is a state of mind more than a state of having. And net worth is helpful. Can help you get loans. It can, you know, make you feel good. It's seeing your progress. But I if it's just that money is a good companion but it's a terrible solo artist. If money is the goal, there's never going to be enough and then but I look at it as like what do I want the money for? What what about money is important to me? What can money do for me? Not just having it but using it. And if we don't know how to utilize money then money can corrupt people or it becomes an obsession. uh this guy Dale that um I was working with his dad and his dad always wanted him to you know come and talk to us and be a client and Dell didn't want to. He was an engineer and he was the best miser in the world. He ate peanut butter and mayo sandwiches cuz jam was a luxury you know [laughter]
>> and his wife one day was like all you do is talk and think about money and like he had four kids that he spent $5 at Goodwill on for for holidays. I mean, you know,
>> and so he comes to this event that we do cuz there was free food and his dad paid for the ticket.
>> And at the end of the event, like something switched to him. He's like, you know, I want to come financially independent because everything he was doing was saving and accumulating. And I was like, "All right, how you going to do it?" He's like, "In a year, I'm going to get there through real estate." I'm like, he's pretty ambitious, but I I should have known he lived off food storage for the year. [laughter] He worked an extra 20 hours a week on the real estate portfolio, and he got there in 362 days. But this was the biggest game changer. Once he was financially independent, he quit his job because he hated working. He smelled like airplane fuel at the time because they were designing airplane engines and he hated it. And then he said, "Hey, I want to come work for you." And I was like, "Well, I don't really have a position open." He's like, "Well, I've written this analysis on how to improve people's cash flow." It was brilliant. He's an engineer. So, I was like, "Okay, cool." So, he came to work for me and made 10 times more within 2 years. Started traveling for the first time. started like buying his kids real gifts like has a beautiful home now. Like he broke free of that miser mindset of just saving to producing adding value to thinking about efficiency instead of thinking about like sufficiency to the point of like you know suffocation. YEAH. [applause]