I have a somewhat unique outlook on money. I don’t like a lot of it sitting around for fear of becoming content. Money, to me, is a tool. It’s a tool that can lead to freedom, but it’s a tool that I have control over. It’s doesn’t own me. It gives me no meaning in life. It’s a measuring stick for how well I do my job, a currency by which I’m able to take care of the ones I love, and a means by which I’m able to build a self-reliant life.
Where many run into problems is in seeing money as their purpose in life. In doing this their happiness becomes dependent on a thing. If that thing is taken away, their meaning is as well. Maybe this has to do with how I’ve learned about money; through trial and fire.
When I decided to start this business for real, I did a few things that helped me long term but made it a very bumpy and difficult road in the short term. To start making this my ‘be all end all’ I gave up and gave away all other sources of income in my life. That is, I gave away my training business and a few other things I was doing on the side so I could feel the real fire that comes from having to start all over from an income standpoint. To start with nothing and from nothing.
I wanted to create a sink or swim scenario where there was no bottom too deep for me too fall, nor ceiling too high for me to ascend to. It worked, and it’s working. However, if you’ve started a business from scratch you’ll know that the funds don’t come all at once or immediately. On average it takes 3 years for a business to create a profit, and the vast majority of companies don’t make it to that mark.
So as my savings were disappearing faster a cake on Rosie O’Donnell’s dinner table, I was forced to learn how to maximize every penny, but more importantly I was forced to ruthlessly determine what was important and what I didn’t need in my life – great lesson to learn.
Fortunately, as the business has grown, I’ve kept that same mentality toward money. It’s not a hoarding or a fear of losing it, but a complete distaste for wasting it and a keen sense of how I want to use it.
Why create a budget?
A budget is important, especially if you want to be a success or build your own business or spend money on things that truly matter. If you don’t budget your money you’re not going to reach your potential.
A guy who’s good with his money is also a rarity and a sign of true discipline. It’s a quality that will lead you to freedom while the small minds who spend it freely and frivolously become its slave.
If you want to be in control of your money, then budget. If you want your money to be in control of you and your fate, then don’t. The budget we’ll look at will be different because of one of the points I’ve always mentioned: I don’t like having too much money lying around, it needs to be working, growing, compounding. This may not be you, but hear me out.
Step #1: Earning More.
Money is a measuring stick, to some degree and depending on what you do for a living, of how good you are at what you do. Money isn’t evil. It’s not the devil. You are evil and weak if you let it control your life. Money has no emotion nor feeling and the idea that “it makes people do bad things” is preposterous, people do bad things and money is merely a vehicle.
It’s important to want to be good at what you do. It’s pride in who you are. Even if you’re a street sweeper, sweep them as if you’re wielding Michelangelo’s brush. So by all means aim to incur the reward that comes with being the best at what you do, not just pride but more money.
The main failing people run into when they begin to make more money is that they spend more money. I’ve run into this problem and in order to stop this, I had to budget.
A few rules for your budget:
Identify what’s truly important to you, and spend your money on that first and foremost. Also identify what isn’t important to you, and leave that to the scraps.
For myself, business comes first. It gets the vast majority of my income is put right back into this site and everything included within it to make it better. Experiences are second. I spend more money on travel and experience than I do on cars or clothes or things.
What I don’t want to spend my money on is where my slip-ups occur, drinking nights with the pals. I love going out with the buddy’s for some pints or fingers of whiskey. The key is to stop the money from flowing out of the pocket. I’ll give you some tricks regarding this as well. I also don’t want to spend my money needlessly on food, and especially not on accessories or clothing. I buy quality with clothing, I may spend more money on a per-thing basis, but I only have a couple pairs of jeans I wear, as an example. My closet is far from deep. It’s just not all that important to me.
Step #2: Don’t rely on things for happiness.
Many a lady has a shopping addiction because of the fruitless habit of expecting happiness from a purchase. They get that happy feeling, but it’s fleeting, it can’t last, it’s not the nature of buying things, and so after the brief bout of elation wears off, something else needs to be purchased.
It works the same as porn addiction. You become dependent on that feeling for its thrill. If you’re feeling down and your natural reaction is to buy something to pick yourself up and you act like it’s a “deserved reward”, stop this useless and senseless behavior and stick to your budget.
Emotions don’t belong in business decisions. Anything having to do with money is a business decision. Man up. Place safeguards to stop your spending. Reduce the max on your credit card. Have someone hold you accountable. But stop fueling the cycle of buying for happiness before you’ve bought your way back into poverty.
Step #3: Determine your priorities.
Your priorities are where you spend most of your money and where you spend most of your time.
Before you work on your budget determine exactly how you’re spending your money right now. Spend a month tracking all of your costs and expenses and write down where you spend most of your money categorically.
Food, clothing, drinking, entertainment, books, business, family, what?
Understand your weaknesses before you can turn them into strengths.
Article worth reading: How to Live an Unrealistic Life
Step #4: Rules of creating a budget.
A few rules for spending budgeting.
1. No matter how much credit you have, don’t spend what you don’t have.
2. Save your arse off and make sure you have a minimum of $25,000 stashed away for a rainy day. This is a great rule, but not something I necessarily practice. I like my money out there in the market, any market, in my business, growing, compounding, I don’t like it sitting in the bank. It may be reckless, but I have a stubborn confidence in the fact that no matter how much I lose I can always make it back, and to me the risk is always worth it. So it’s up to you. I think it’s a great practice to keep a float of 25K in your bank, especially if you’re not an entrepreneur, but you won’t make more money that way.
3. Calculate your fixed costs and make sure you set money aside for them each day. Don’t be delusional as to think your fixed costs each month won’t remain. Know what you have to set aside set a bit more aside without thinking about it.
4. Tithe. Give money away no matter how much money you have. As little as $20 a month can go a long way if given to the right cause.
5. If you want to buy something wait 24 hours, then make the decision. Take the emotional rush out of buying something by letting it dissipate over a 24 hour span. And don’t rationalize your purchase by saying that it may not be there tomorrow, it always is.
6. Spend money on business first. Forget about your well-being, spend money on your mission, that thing you want to accomplish. You’re feeding your spirit by funding your purpose.
7. Buy quality over quantity where food is concerned. You can adjust your macros according to your training goals, but buying quality food is more important than quantity, and this is where Costco comes in. You may walk in there with the intention of saving money, but come out with a bunch of stuff you don’t need.
Write a damn list and stick to it. Don’t ever deviate when grocery shopping and don’t ever grocery shop when you’re hungry.
8. Reward yourself.
I’m working on a ‘manly milestones’ article, and I’ve had this discussion with my pal’s who’ve accomplished a lot in their various niches or jobs or companies, this idea of rewarding yourself, yet being strict about the reward and the measurement of the milestone that warrants a reward.
Typically I reward myself with a trip, but I have bought a watch as a reward for a goal I set and accomplished where I actually wrote down the watch I was going to buy – more on this in a few days. Don’t be a Scrooge, not even to yourself. If you do something worthy of a reward, make it happen.
The trick is writing down the milestone and the reward before you set out to accomplish it. Don’t be one of those goofs who “rewards themselves” after a workout or for “work well done”. Actually set a milestone and hit it. Then, and only then, should you reward yourself with something that you can very easily afford.
If you said you’d lose 20 pounds, reward yourself with a week long trip. If you wanted to make 6 figures in a year and you accomplish it, buy yourself a watch, a good watch, something that will remind you daily that you can do anything you set your mind to. Just don’t break the bank, spending dollar bills you don’t yet have.
9. Make sure you’re always hungry.
This will fly in the face of most commonly held outlooks on budgeting, and something we’ve already briefly covered, but I don’t like to have a lot of money lying around in my savings. It makes me feel a tad too comfortable. I also don’t like to spend money on useless things, so therein lies a wee dilemma, yet one that’s easily solved: invest.
Invest in the stock market, invest in your own business, invest in your personal development, or invest in a rental property. Just invest in something that can grow. Leaving your money in the bank is a waste of time and a waste of money. Beat the interest that a bank can provide, it’s not hard. It will take some elbow grease and research, but laziness never did anyone any good.
10. Treat money management and earning like a game.
This is all one big game, this money thing, this life thing. Don’t take it too seriously, in a good way. See your money as it is, numbers. Aim to have higher numbers in your portfolio and as a part of your net worth. Treat your budgeting, your saving, your earning and spending and incurring like a game and get better at the game.
Men thrive on competition. If you make this money thing a competition, you’re going to win eventually.
11. Take out $200 at the beginning of every week.
Credit cards provide no sting upon spending. Handing over your hard-earned cash to another human in a transaction, does. Take out X amount of dollars at the beginning of every week for groceries, gas, and everything else that you’d typically buy with your card. That is, if you have a problem spending too much money on your card.
Credit cards can be good for travel. I’ve booked many a trip on points in my lifetime, but before I had the discipline to cut spending down with my card I had to feel the sting of every purchase by doing only cash transactions.
Stay Hungry and Don’t Be An Idiot
That’s basically what it comes down to. Have a firm understanding of what you make after taxes have been ripped from your paycheck – sometimes illegally (technically the government isn’t allowed to tax money that’s already been taxed, yet that’s what they do with capital gains taxes, even purchase taxes on money that will also be taxes by the government). Know what your fixed costs are and what you can afford to do. Reward yourself for hitting milestones. And stay hungry.
Don’t ever feel as though you’ve “done enough”, or that you’re safe and free to take it easy. Keep that fire in your arse by investing what you have wisely, but don’t ever shy away from risk. Get in the habit of taking calculated risks that are at least in some part under your control or wealth of knowledge.
There’s a common misconception about money, that the wealthy are consumed by it. It’s in conversations with people who are worried about money that the subject comes up most. Guys who have enough of it are talking about ideas, not about bills or people or things. Have enough. Treat it like a measuring stick for what you do to earn it. If you make more you’re typically better at what you do, but never worship it. Never see it as the measuring stick for who you are. Treat it with respect and discipline and use it, don’t let it use you.