"You cannot buy it – it is not for sale."
I put the shirt back on the stand, disappointed.
I wanted some school clothes from Polo Ralph Lauren. The 13 year old wanted to look cool with one of those tiny horse logos on my shirt.
My mother was not on board.
"Is it for sale?"
No, polo was never available from Macy's. I already knew that, but a boy can dream, right?
My parents and my culture have always focused on that save money.
It's not cool to talk about how much money you've spent on something. Instead, you get more props that talk about how much money you saved.
Saving money is virtuous. Waiting for a sale or negotiation shows that you can outsmart the system.
This belief is not terrible considering how wasteful most people are. Having this as the only metric is restrictive.
Have you ever heard of the sentence: "Penny rich and pound stupid?"
(Note: At first I had problems understanding this sentence because I am American and this is a British sentence. Pounds do not refer to weight like pounds. Pound refers to the British currency in this context. 100 pennies = 1 pound.)
It means you're economical with saving small amounts of money, and you're stupid when it comes to making bigger decisions with money.
Photo credit Pixabay from Pexels.
Here's an example:
A mother spends an average of 5 hours a week trimming coupons to save money. It saves about $ 30 a week.
It's rich in penny.
It's time for them to buy a car.
She does not do research and is eventually pressed by the car dealership. They add extended guarantees, give it a low trade-in value, it has a high APR%, etc.
In the end, she pays $ 12,000 more than if she were prepared. You could have spent 5 hours in one day Doing research, and that would have saved her more money than cutting coupons year.
It is stupid.
This penny-rich and pound stupid mentality has hurt me over the years.
I remember spending almost six digits on my dream car in 2009. In the same year, I insisted on doing my own bookkeeping to save money.
I've tried studying personal finance, but most of the thinking is focused on being frugal. Your average person doesn't have much Leverage.
It took a lot of experience and mistakes to find my perfect balance.
For this week I'm going to tell you some stories from my past. I will tell you what I have spent money for and what it is not worth spending.
What is it not worth?
There are some things I've spent money on over the years that I thought weren't worth it.
Maybe they are worth it to you. We have different value systems and goals. The stories are meant for you to see different perspectives.
1. Any luxury designed to show off
We all play the status game to a certain extent. One of the life forces 8 is, according to Ca $ hvertising, “Be superior, win, keep up with the Joneses. ”
It is in our DNA to bow.
Here's the problem: Trying to play the status game is a lost fight.
Do you have seven digits in your pension account? Try to show a screenshot of it on social media. It is socially unacceptable. You're an idiot if you do that.
Photo credit from Szelei Robert from Pexels.
But post a picture of a luxury car and talk about your "struggles" to get here. Or post a picture of a luxury vacation with a cute caption. You get hundreds of likes. Praise and admiration.
Your brain is flooded with dopamine and so many feel-good chemicals.
Isn't that ironic? Social media rewards us the more financially irresponsible we are.
There is nothing wrong with luxury. You should reward yourself once.
It boils down to that purpose. Do you buy it because you want it or because you want to prove something or impress someone?
It is a losing battle to impress others because haters don't let you win.
Do you have a Lamborghini Huracan? Ah man, does that mean you can't afford a Lamborghini Aventador? Ohhh, do you have this new Aventador? It has to be leased.
You win the status game by not playing it. Instead, focus on building true wealth.
2. Spend as efficiently as possible
There is a popular quote that says "Culture eats strategy for breakfast".
What IS Corporate culture then? It's hard to define, but you can imagine working at Pixar different from working at Uber or WeWork.
Culture is a set of shared values.
It is the personality of a company.
Culture is a big buzzword these days and it seems cool to build or buy a corporate culture.
Here I was inspired to take team building trips for my companies. I've always worked as a remote team and some of my team members were scattered around the world.
Let's spend a week together and get to know each other better!
I would all fly to a central location like Belize. We would rent an Airbnb villa. And we would have planned so many different activities and trips.
You can imagine that the costs quickly added up. I would estimate that a typical trip is between $ 10,000 and $ 20,000 depending on the location.
Here's what I learned about culture:
Culture is not a free lunch.
Culture doesn't get your dog to work.
Culture doesn't do "team building" exercises.
Culture is how you deal with each other.
Culture feels comfortable enough to address problems.
Culture is the employees' feeling of being valued.
All of this costs nothing.
Does a business trip make sense? Sure there is.
But what is the goal and what are the alternatives?
What is the most efficient way to achieve this?
For example, one of my goals was to "reward" my team with experience. I wanted to show them how much I appreciate them.
What if I lean back and think about all the options?
What if we skipped the trip and distributed $ 10,000 in cash as a bonus? And then could I reinvest $ 10,000 in growth?
3. Find the point at which the yields decrease with every purchase
You can spend $ 10 on a pair of Payless evening shoes. Or you can spend $ 1,000 on a pair of handmade Italian shoes.
How's it going?
Here is part of my philosophy.
Be careful when doing something too cheap. "Buy nice or buy twice."
I bought a kettle for about $ 10 a few months ago. It broke a few days after the warranty expired. I spent more on someone else to make them last longer.
I am always looking for the "sweet spot" when I buy things.
Yields decrease with every purchase. Here, more money does not necessarily mean a higher quality.
- $ 100 evening shoes don't last long. You have to buy new ones every year.
- In my opinion, $ 300 is the sweet spot for evening shoes. You can have it repaired at any time.
- After $ 300, you mainly pay for the brand name. Pay for the quality and not for the brand name.
I am addicted to Costco. I love their Kirkland Signature products. I pay for the quality and not for its marketing or branding.
Gucci evening shoes cost around $ 1,000. I guarantee that you can find shoes of much higher quality at half the price. The other $ 500 goes to Gucci's marketing and retail stores.
I will never buy a new car again. As soon as the car leaves the lot, it loses 30% of its value.
The "sweet spot" for me is a car that is two to three years old. The depreciation cost part of it and is still under warranty.
I prefer to buy a used car and invest this 40% difference to make more money.
I remember talking to my chemistry partner in Ga Tech one day. We talked and she said she was accepted into MIT.
I asked her why she chose Ga Tech.
Your: Ga Tech offered me a full ride. MIT would cost me at least $ 40,000 a year. In twenty years it doesn't matter where I did my undergraduate degree, but I will probably still pay these MIT student loans.
Damn, I wish I was so smart when I was 18.
What is the money worth?
You should read about my productivity flywheel philosophy to better understand my spending philosophy.
The money is best used to invest it. Invest it in assets to make more money, or invest it in more resources like time or health.
1. Good employees and contractors
When you hire someone, you hire them for work. It's easy underestimate the value of their knowledge and decision making.
Suppose you hire a virtual assistant for $ 5 an hour to book a trip for you. I've made this mistake before.
You spend so much time with delegates. It's a back and forth with every little decision. It is the death of a thousand paper cuts.
In contrast to hiring someone who is more qualified.
You tell them the vision and they execute.
Let's say I want to hire someone to build a funnel for me.
I don't want to hire someone who just executes. That means I have to sit down, research which funnels I want to build, and give them specific instructions. Then they execute.
I'd rather spend more money to find someone who knows More about funnels than me. I want them to tell me that my shit is shit and that they build one better than me.
When you hire someone, you hire them for work. It is easy to underestimate the value of their knowledge and decision making.
There is a border how much you can save, but there are big advantages when it comes to adding value.
I will give you a real example when it comes to virtual assistants. A few years ago I started with cheaper virtual assistants.
They weren't that experienced and were afraid to make decisions.
I would tell them to book a flight to Asia for me. I would have to break down the project and delegate every detail. I would have to take a screenshot of the exact flight I wanted. I had to tell them that I need a visa for certain countries.
The delegation was exhausting. It was the death of a thousand paper cuts.
Finally, I got a much more qualified assistant.
I would tell her that I want to book a flight to Asia.
She had created schedules for me. She researched various flights to business class and sent me YouTube videos of the passenger cabins.
She gave me the choice and I just said yes. Over time, she started making certain decisions for me because she already knew my preferences.
It was more expensive, but how much time, energy and frustration did it save me?
And these resources were made available to make more money.
You can only make so many good decisions a day.
Don't just hire someone who can work for you. Hire someone you can trust to think and make decisions for you.
If you are interested in more information on the subject, the founder of Trello has a great article on hiring the best programmers
2. Buy your way in
There is a philosophy that I love Earn your way in against Buy your way in.
Whenever you want to learn something, you have to numbers somehow.
Would you like to learn how to become a better chess player? You have to pay with your time and energy to become more qualified.
If you are shopping, rent a bus. Someone who has invested their 10,000 hours. An hour with them could save you hundreds of hours.
This is powerful because unlearning bad habits can be difficult.
Imagine you have learned all your life how to go wrong with basketball. It will be difficult to repair the muscle memory you have developed.
I took many private lessons in Jiu-Jitsu, Brazil. I have observed that "You don't know what you don't know”. A trainer corrected me once, always allowing my opponent to take advantage of me.
I had no idea that this was a problem. But because we recognized it early, I've now got used to fighting handles.
Do you know how much your time is worth?
Sit down and calculate it.
Let's say you earn $ 60,000 a year. That's about $ 30 an hour. You should outsource everything under $ 30 an hour.
Don't mow your lawn. Give it to the neighbor's child for $ 20.
You could spend 10 hours learning how to set up a WordPress website. Your 10 hours is worth $ 300. Someone overseas can set up your WordPress website for $ 50.
Appreciate your time more. You can always make more money, but you can't get more time back.
3. Improve your health
Photo of Chevanon photography from Pexels.
I don't have to dive too much into this area, but health is everything.
Don't be an obese millionaire.
If you sit at your desk all day while an internet marketer devastates your body.
A few things I spend on health:
- Float tanks
- Higher quality food
- Higher quality supplements.
- Tracking devices like an Oura ring and a Badass scale.
- Things that help me sleep better. High quality thread sheets. Bedjet device.
- Testing. Blood tests. Genetic testing. Testosterone tests.
- Gym. I have a BJJ gym membership and a weight lifting gym.
- Yoga classes.
- Prehab: I see a physiotherapist every now and then to fix things to prevent injuries.
You understand what it is about.
I don't care how you spend your money on health. but it should be a big priority.
Health is a force multiplier.
It is one of the biggest levers you have.
Bad health eventually catches up with you.
If you have children, you have a moral obligation to be in the best physical shape.
4. Make your finances more robust
With this pandemic we are facing a health and economic crisis.
The future is unpredictable.
What it is worth to me is to be financially robust. The world is unpredictable. Are your finances strong enough to deal with the unknown?
Some options include:
- Have a solid emergency fund.
- We have a six-month emergency fund in an online savings account.
- It's tempting for me to want that invest spend it or spend it. However, an emergency fund means that we can handle small emergencies.
- Strong insurance.
- Most people get the minimum requirement for their car insurance. We go higher. Probably because Atlanta is full of idiot drivers.
- We are insured if we have an accident with an uninsured driver.
- We have more property damage than normal. It sucks to pay more for insurance than other people. But I know I can handle a black swan with $ 250,000 damage.
- Diversify your income.
- Not many people saw this pandemic coming. It is still incredible for me. The people who have been hardest hit have relied on it one Source of income. That is a single point of failure. You should always work to have multiple sources of income.
- One question I ask myself is … "If I couldn't work physically for six months, how much money would I have?"
- Just make sure you find the right balance.
- Some people out there have too many active sources of income. Would you rather have one company that earns $ 25,000 a month, or 5 companies that each earn $ 1,000 a month?
- You have limited time and energy. There are compromises.
- My philosophy is to have 1 or 2 forms of active income. Stay focused. Convert your excess capital into passive forms of income: index funds, managed property, commodities, etc.
5. If you own a company, invest again in creating competitive advantages
Starting a business has never been easier.
It has never been easier to research and see what is profitable.
IF When you become profitable, you have to deal with other people trying to take what is yours.
Earn $ 50,000 a month if you lose something from Aliexpress? This is great, but what prevents someone from seeing your ads on AdSpy and competing against you?
Once you start making money, it's time to invest again in creating some moats.
- Create better branded content and motifs instead of remixing the provider's videos.
- Improve your fulfillment so customers get it in three days, not a month.
- Work with the manufacturer to create some product improvements
- Hire influencers to increase your perceived value
I do not believe in "residual income.”
Every day is a competition and you should always try to climb the ladder.
Spend to achieve your dreams
Find out what you are value.
Some of you will appreciate a brand new iPhone 11. I think it's a waste of money and little better than an iPhone X.
I'm willing to spend several hundred dollars on a new chef's knife. Some of you think it's a waste of money.
We are not wrong – we only appreciate different things.
Allocate your resources as efficiently as possible.
Think about it like this:
You have an available income of $ 5,000. You want to go on vacation and open a side business.
You COULD Spend US $ 5,000 and spend an Instagram-worthy vacation. You no longer have any money left for your side business, so you have to use your manpower and concentrate on “free”.
Or you can better allocate the money.
Spend $ 1,000 on a cheap vacation. You still get a great vacation. Now you have $ 4,000 in your side business.
Hustle and bustle for a few years.
Your side business has grown.
You can now spend that $ 5,000 on your dream vacation.
But the difference is that you didn't sacrifice your dreams for it. You have your dream life AND your dream vacation.
I use the term victim a lot.
This is because you have scarce resources.
You can have something You want but you can't have everything You want to.
The people who cannot control their spending become slaves to debt.
You compromise every day.
Some people will spend their $ 1,200 stimulus check on a new iPhone. They choose more than $ 1,200 in their emergency funds or groceries worth $ 1,200 for a few months.
I want a nice wedding whenever that happens. I could do a wedding in the courthouse and save a lot of money. But I chose a beautiful wedding and I understand the opportunity cost of that decision.
Photo credit from Maurice Lustig from Pexels.