- The Gap & the Gain by Dan Sullivan with Dr. Benjamin Hardy
- Profit First by Mike Michalowicz
- What is the Money Management System?
- Childfree Wealth Academy
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Disclaimer: This podcast is for educational & entertainment purposes. Please consult your advisor before implementing any ideas heard on this podcast.
Hey Childfree Wealth listeners it is January 2024. I am so lost in what year it is. I'm old school enough that like crossing out the dates on checks I get the date wrong there. I get it right away. But we're in a new year. It's interesting. Beginning of the New Year there’s some psychological tricks happening before they'll make their New Year's resolutions, which probably by the time you list this, you already gave those up.
But we said, Hey, it's New Year, we should start our friends off on the right foot and we're going to walk you through a whole bunch of kind of tips, tricks and things to think about for the year. And Bri, you’ve got any like big money resolutions for you for the year.
Ours is just finish paying off debt, get our emergency fund, and then we've got a couple of things that we just want to buy for our house as well.
That’s fair, we just finished a move actually, and like I have no clue where anything is, so I don't have a clue what the years going to look like. There's a lot of fun stuff going on with the business and other things. So that's where all my time is. But Bri you made a list of things that people should think through & the first one is talking about giving grace.
What does that mean?
Yeah. So whenever you start off talking about money and digging into your money, it can be really hard and emotional sometimes. I always want to say, you know, give yourself some grace, be proud of yourself for even starting this journey. Because starting is always the first step with whatever you do. That is always the hardest and it can be a big struggle and to even get there.
So once you've gotten there, I want you to be proud of saying, okay, yes, I'm going to work on this now. I'm going to tackle these things because it can be overwhelming, especially if you don't feel like you know where to start.
What I like to do at the end of the year, beginning of the year, whichever you want to look at it, is I actually go through all my counseling, what I spend, cause I'm doing expenses for the business, everything else. And I usually find myself beating myself up for like how much I spend on Amazon or something along those lines.
And I’m in a decent financial place. I can afford it, but it's still not a great thing. And I think the natural thing is to look at that, you know, gap rather than the gain. There's a book, The Gap and the Gain. And you can look at this and say, hey, what did I do well this year?
Or what did I do wrong? Or what do I want to fix this year? What do I want to do more of? I think when we start New Years, people tend to start with like, this is what sucks, you know, like I have to fix this pain versus saying, yup, I actually did some okay stuff last year. You're not beating yourself up for the past.
Does that make any sense?
Yeah, it makes total sense. We can often get down on ourselves and say, well, we didn't do this. Well, yeah, you didn't do it in the past. But you've also done other things that got you to this point of saying, I want to dig in and that is really good, because even… no matter what it is just getting there and recognizing and recognizing that gain can be difficult, like you said, versus always seeing the gap.
So I think when I start the year out and say, hey, I've done these really good things and I'm going to continue to do more good things.
That's fair. And I get kind of like back and forth, I want your opinion, Bri. So we say, alright, this is where I'm at, this is where I want to start the journey. Should we have like a perfect goal that says, hey, this is exactly how I want to save $40,000 this year, pay off $5,000 of debt? Or I mean, were you more kind of like be okay with any gain?
I'm more okay with any gain, especially when you're starting, because I think it's unrealistic to say if you've never tracked anything before and you just say, okay, I want to say $40,000 this year, but you have no idea what your expenses are or what your income is or anything like that. It just kind of comes in and goes out and you've never tracked it, if you say $40,000, that may not be realistic for you, and then you might spend the entire year trying to get there and realize, oh, wait, I'm not going to make that happen and then just give up.
Yeah, I don't know. I go back and forth. So when I try to set my goals for the year, I've now got a point where I try to set achievable goals versus crazy goals. And I think if you don't have a like a number or a goal or something, you can almost spend too much time thinking about it.
You know, was like, hey, I'm going to learn about finances this year. Cool. And then what? Like, you know, like, oh, I'm going to pay down debt or I'm going to save more or something that's measurable. I think the good thing about finances is it’s measurable, that thing is that measure could be a positive or negative. Is it? We gotta get away from being a scoreboard.
But your second point you're kind of working is being in the calculator now work, which is literally the scoreboard. So tell me about that.
That can give you a great idea of where to start. So calculating your net worth. It can also sometimes be overwhelming because we don't understand what that is. That is taking up everything that you own, your home, anything and your bank accounts, investments, all of that added together and then subtract everything that you owe. So any credit card debt, car loans, student loans, mortgage, anything like that and whatever that number is, is your net worth. It can be positive or negative.
Yeah. And by the way, net worth. Somebody asked you this question, does that include your monthly bills? No, that's not the point. It's like, you know, I have debts and I own stuff, you know, monthly, I got to pay my Internet access. That's not part of your net worth calculation. My take I'm net worth is there's three steps.
There's getting to zero, which is actually the hardest one. Getting to a is technically positive net worth. Most people in the U.S. actually are at a negative net worth. And that's the truth. It's not judging. The next is 100,000 getting from zero to 100,000 is much easier than getting from negative to zero. And again, it's 100,000 to 1,000,000 net worth is actually just a matter of time.
And people go, well, that's not right. You know, you know, it is. If you put your money, you invest it and you wait long enough, you will be a millionaire. Now, mind you, if you're old like me, you might not have as many years as Bri has. You know, she could probably put the money away and wait 40 years and I’d be almost dead by then.
But I think the net worth is a good measure of where you're at. I look at mine twice a year. The kind of middle of the year. I kind of look at it and the end of the year. But one of the things to look at, if you're looking at your net worth is how much money do you put in or take out versus how much did you make in the market?
You know, some years the stock market will completely skew your own bad behaviors on net worth. You do great in the market and all of a sudden you miss that you spend an extra 20 grand or on something or on the other hand, the market could be down a lot and you've done very well on everything else. So it's kind of a skewed metric.
I mean, how do you look at your net worth?
I tend to be that very like goal, goal achiever, you know, I always had to get 100% in class. And so for me, looking at my net worth can be kind of difficult. And we started out the year of 2023 after we got married, negative net worth and now it's positive. But that was really hard for me. And one day we got on a call with Dr. Jay, my wife and I did, and he was like, okay, you need to look at it like, look, it's gone from negative, positive. And my wife goes, yeah, she already knew that. She watched it like every day, which is true because it really stressed me out that it was negative. And so I kept watching. I was like, okay, we're almost there, we're almost at positive.
And now that it's positive, I don't tend to look at it as much and I still look at everyone once in a while, but it's not the same obsessiveness that I had before.
Yeah. So for those that don't catch this, Bri and her wife do financial planning with me. That's one of the things I offer my staff that want to do financial planning. They can work with me like they would a client, and I often will call out people's net worth and seeing the change. Yes, I did this with quite a few clients this year and I said, okay, you know, I had somebody who was spending a lot of money because those are their goals.
They’re trying to die with zero and wind down their wealth. Well no, your net worth still went up. Like, wait, what? You didn't spend enough so it's possible to not be spending enough or not saving. You know, I think that's a hard part for people to understand. But the net worth is the scoreboard. If you are trying to die with zero & wind down your wealth, you have to bend that curve down at some point because otherwise all your monies go to the estate.
But you should know what your score is. Now, here's the thing. I'm going be very, very, very strict on this. Your net worth is not your self-worth. Positive net worth doesn't make you better than some of the negative net worth. I think people just mix these things and we've got a separate episode coming out with Sherrie Johnson talking about self-worth and she does a lot of work on this.
I think the question is to you, Bri, were you measuring your self-worth by your net worth watching it that close?
I think I was for a while, just because I had never like I talked about before, I grew up with a lot of privilege. I never had loans or anything in having a positive net worth all the time to getting married. And everything's now one and now it's negative that really bothered me and that was very, very hard to mentally deal with. And now I'm like, okay, no, I made a commitment like I strongly believe to becomes one.
And it's a little bit of like… I have a religious background when I talk about I think everything is one and I needed to accept that. You know, we I married my wife because I love her, not because of anything else, even though like I'm not don't fault her for any of this because she did what she needed to do.
And we're doing good in life. It was just I tied too much of it to two becomes one. But now I failed in some way. And that's not true. But it was still hard for me.
So you're saying marrying somebody with debt lowered your own self-worth as measured by net worth?
Yes. In my mind, that's what it was doing. And it wasn't right. It's still not right that I thought that. But for a while it was just very stressful because I was like, I don't know what, like I know what to do, but also I don't know, like, can we actually do this?
Yeah, I'm calling this out because people see the number on net worth and like, it's like the joke about a scale. What is a scale? Well, it's a number that tells you if you’re having a good or bad day. You know, you get on the scale today and you're like, ooh, I'm up a pound. Oh, my world's coming to an end.
No, you drink more water or less like, okay, like or less your net worth see some somewhat the same. You know, the market does what the market does. You've got inputs, you don't have full control over it. But if you're going to say, hey, I married somebody, I got debt, I'm now worth less. That's not fair.
No, it's not. It is.
Yeah, it's not fair at all. And I fully admit that I think part of it was really hard because we have a prenup, and I hope prenup is the most expensive thing that I ever use. We both say that, but when you do a prenup, you have to list out every single thing that you have and they calculate your net worth and then your future spouses and they give you these papers and it says your net worth and big, bold letters on it.
And so that was really stressful to get that because we got that a few weeks before our marriage. The prenup was signed and finalized. They say, here you go now go get married. And that part stressed me out. And it just kind of made me spiral a little bit when I shouldn't have been.
And I think that's real. I mean, a lot of people don't want to calculate their net worth because they're worried it's going to like destroy them. If I see this negative number, I'm going to, you know, and especially with student loans and all the other things that people are struggling with. But at the same time, we do need a measure.
Finances, I mean, most is behavioral, but we do need a number at some point. I think it's just that separation to remember you are not your career and you are not your net worth. And I just think in the U.S. we get that wrong, let's just say. Calling out you should measure net worth. You should look at it once or twice a year. Don't let it measure you.
Alright. Next up on Bri's list for the four things we should do at the beginning of the year. Number three is gather your income and expense statements. What do you mean and why?
I want you to gather all of your pay stubs and see exactly what is coming into your bank account every month, because especially if you have it split up between different accounts, it can sometimes be hard to figure out, well, what am I making out? My salary is, whatever, 60, $70,000 a year. But that doesn't mean that that's what you're actually taking home every month, because you have taxes taken out, you can have health insurance taken out and other deductions.
And so figuring out what's actually coming into your bank account that you have to use is really important. And using your pay stub is the easiest way to go about them. And then also just figuring out your expenses, is what am I spending money on that every month? You know, what's my rent, what's a mortgage, what other bills do I have that I need to be paid every month?
And, you know, what are the things outside of those fixed expenses? And I'm also spending money on every month. And by looking at your bank statements or credit card statements, you can figure out where your money is going. Because oftentimes I know at least my bank will say for the year this much has gone into the account and for the year this much has been spent, which is great, but that doesn't say where the money is going.
So actually taking time to look through those things and say, you know what is realistic to spend on groceries every month? I don't know. If you've never looked at it before. You're not going to know what your average is. And so taking the time to sit down, it can be very overwhelming. But just looking at it a little bit to get a better idea, that's going to be helpful.
By the way, that's why she started with give yourself some grace because we're getting deeper into this stuff all day. And I mean, yeah, the expense one I always like, I get to the end of the year, I'm like, did I really spend that much on fill in the blank dining out, Amazon, whatever my bad habit was for the year.
I said REI.
Yeah. We all have it. The other one by the way, I like to do it. This step when you're gathering all your expenses is look to see if there's any subscriptions you should cancel. Yeah, I hope it is true. My one like luxury financially is I keep all the streaming services, but I'll still look at it & go like you got nothing new on this service, this one should just go away for now. The Apple TV one, the Apple Plus or whatever they call it now, that's the one that I tend to subscribe for like a month and then get rid of it because it doesn't have enough stuff in between. You may have other like that the used to be old school was the gym membership that you haven’tgone in forever, you know, or whatever it is.
It's a good to look at that I think when you look at your pay stubs. My other one on that is to look and see if anything increased or shrinked as far your expenses, as far as like the the take home versus the gross and saying, oh, what the heck, this benefit now is more than I thought. Unfortunately, you might not be able to change some of that, but you need to know that the other thing it's going to happen is you will have an income that's 150,000 plus.
Remember Social Security you were getting you might want over the max of last year. It's going to come back the first of the year. Same with for one case you saved everybody in the beginning the year of your last year and you weren't paid last at the end of the year, it's going to come back like these things are going to magically change.
I think one of the harder ones to miss on your income is if you have your own small business. If you have your own small business, you need to be following something like the profit first method and knowing what your business brings in and doesn’t and you need to keep your personal and your business expenses separate.
Alright, number four on Bri's list is create a budget. Okay? This is now like a budget is like diets. Okay. Nobody wants to do either of them. But like we got to I mean, yeah.
So budgeting is never a fun word, but it is important and I've said it before and I'll say it again, you know, every successful business has a budget. If they didn’t they wouldn’t be able to pay you in order for you to be able to pay your bills, you also need to have a budget in place. And a budget is a plan.
It is not going through and tracking your expenses at the end of the month and saying, oh, what did I spend on. It is intentionally taking the time before the month starts to say, this is what I have coming in this month and these are the bills that I'm going to have to pay, and this is where my money's going to go. And it's creating a plan for your money versus letting your money just go wherever.
There's actually some psychology around this saying we shouldn't use the word budget just like we shouldn't use the word diet. I don't really care that much, but like we call ours, the Money Management System looks at musts, shoulds, coulds, & won’ts. There's tools, there's apps, I don't care which budget you use or what tool, conscious spending plan or whatever.
I don't care. But you have to have a plan for your money. And I think with budgeting, people think about like, well, you're going to tell me I can't buy my latte or avocado toast. Like, that's so trope at this point. No, that's not the point. We're trying to say is, hey, do you want your money to go to the trip to Paris you want to go to or do you want it to be going to Amazon? And I keep going to Amazon because that's my personal one.
The other one I've seen all you have published about DoorDash last year, and you'll find out you weren't budgeting that well. I mean, whatever it is, it's a question of what is it going to your goals or is it going to just mindless spending?
One of the things I like to watch out for is what I call the stuff budget. It's not really a budget. It's just like the extra money I spend on stuff that I don't know what I spent. That's the mindless spending we're trying to get you away from. So what's your favorite budget system?
I was using a free Google Sheet for a while, really like that. And now I'm using Monarch Money. I think it can be really helpful and it just quick and easier. When you're first starting to budget, I prefer to use a Google sheet because I think it makes you a little bit more intentional. You have to sit down with it and look at things a bit more than an app that just automatically categorizes things because it can be easy to say, oh, it's already done that, but you do have to go back and sometimes fix categories on there.
Yeah, we can include a link to our money management into the tracking system. Bri’s got a whole system. She's the budget expert on our team. And when you're looking at a budget, my thing is don't expect to get the first month right. Expect to get it better each time. Don't blame the app because it's really not the app.
It's you. It's how you're using it. Which app you like? I don't care. I've been using Mint forever now. Mint going away. I don't know what I'm going to change to, but I got to do something. Some people love. You Need a Budget, YNAB. Monarch. I don't care. It's what works for you. And the key, though, is you want to set a budget.
And then each week you look at as, are we on it or not? Now, I want to be very clear, there's a big difference between budgeting and accounting. Well, don't you think is the beginning a month? We have a plan for it and we do it. Accounting is at the end of the month. Like, what did we spend?
Well, if you're just going at the end of the month going, what did we spend? You can't change anything. It's already spent. A budget is intentional.
Yeah. And it's going to be ahead of ahead of time and then checking in on that budget on a regular basis through having budgeting meetings, whether that be with yourself or with any partner that you share finances with going through you're taking time each week to check in on, say, hey, you know, what did we spend so far in this category?
Are we still doing good? Maybe we went over in this category and so we need to take a little bit of money from a different category to adjust things and still be able to stay within our income.
Yeah. And by the way, with budgeting, it’s a lifelong struggle. Like it's like just, you know, did I get it right? Do I have to tune this up now? Because what'll happen is that as people get great at budgeting & saving money and then off to talk about spending money. It's something that you're always tuning. Now, I am adding fifth point I want to add in here for the beginning of the year I want you to have a plan for what you're going to learn for finances for the year.
I don't care what topic we all have things we learn. Pick a topic that's going to be your focus. Now you like books, you can pick up books. Yeah, we've got our book club. You can see some of the ones we recommend. We've also got 15 courses, a hundred videos, we’ll put a link in there for there is actually a free trial there, so you can all get all that.
But I don't care what you're learning, but you need to be learning something. Bri, what are you learning for 2024? Wow, I got the year, right?
That's a good question. I haven't thought about it yet. I you know, I'm still going through the CERTIFIED FINANCIAL PLANNING™ curriculum. I'm going to be learning a lot there, whether it be more about taxes. What else do I have? I’m trying not to think too far ahead on my classes here. I think taxes I still have to do.
And then more on retirement planning. I then planning. So I'm going to be learning a lot of things probably too many to list here.
At Childfree Wealth, we actually said that all of our employees should be, say, 10% of the time learning something every week, every month, every whatever it is, because you need to constantly be growing. You know, personally I'm looking at not so fun stuff about trusts and scaling businesses and legalese. And I don't know. Nothing that's fun for this topic. On a personal side, I'm always trying to learn something each year.
I think my goal for 2024 is like figure out a new hobby. You know, I go through hobbies like every year or two. Bri keeps pushing me to do something outside of work. Right now when you run your own company, little crazy. My wife just asked me what's going to be your hobbies for the year? I don't know.
Maybe I'll find a good video game that I like, but that usually lasts about a week because then I blow through it. My point is for everybody, you need to have something you're learning. You have something, you're growing something. Yeah, this podcast works the other two days, you can listen to podcasts. There's a difference between listening to podcasts and actively learning.
I think one of the things I will caution you if you are an Internet fan, you're on the podcast. It's not because you listen to this. You are trying not to mix your recipes financially. I don't care which plan you follow, just pick one. You can't pick Dave Ramsey, get out of debt, and the Grant Cardone get all the debt.
You can't put those together. Be very careful on that. We actually end up with a lot of clients that we go on, program, things they read online or other things because they start mixing recipes. I think the other challenge from a village template is to learn where you're at. If you haven't done a budget and you have worked through your network, then you haven't looked at finances.
We have a course we call financial foundations. It's the basics. People go, well, but I want to talk about investments. Yeah, I know we'll get there, but we need the the foundations done first. And I think this is a natural thing that you want to push yourself further. Does that makes sense, Bri?
Yeah, it absolutely makes sense. And I've worked with this with clients and talked to them about it before and often say, hey, you know, I get that you want to do this, but we need to do these first steps and work on a budget because we need to learn to walk before we can run. And sometimes I'll even tell people they’re using too much brainpower, just stop reading so many things because you're taking so much in, which is great and I'm glad you're learning, but there is a point where it's too much.
I think if you if you're learning stuff and not doing anything with it, you haven't learned. You're just reading things. Actually changing your behaviors takes time. You need to understand that. You need to make those changes. You need to see them and then make tweaks and work it through. Just reading every book that's on the shelf behind Bri is not going to help.
Now, Bri, I saw you were going to try to help some other folks for those that don't know in our self-directed course, our Childfree Wealth Academy, we actually have regular Q and A's, but that's only for people that are part of it. And you're going to do one for everybody. Is that fair?
Yeah. So on January ten, it'll be 5 p.m. Eastern. But I'm not sure you’ve got to figure your time zone for that. I'm going to do a free Q&A just kind of to help you get your started on your money journey for 2024. And it'll be very low in the spotlight, limited. I'll put that link in the show notes.
You can sign up for it, come for an hour, ask questions and you can stay the whole hour. You can just stay a few minutes. Whatever works for you. I'm happy to answer any questions.
Whatever questions you get in these Q and A's.
I get a lot of different questions. Sometimes it is a, hey, you know, I don't understand how to use this system, especially like with our right capital system, the budgeting part on there, people sometimes need help with that. So sometimes specific like that or it's, hey, you know I know I need do my estate planning what is a will can you just explain that can you tell me and so I can answer that what is how do I figure out my deductible one when I recently was you know, I read something about I need to change my insurance deductible.
Should I be doing that? I'm like, Well, these are some things to think about on there. And what coverage is enough. So it can be any you know, I just don't understand what a word is or a concept is that I've heard, or it can be a bit more in-depth and say, you know, can you really take and explain this specific topic?
Yeah. And I've done a few of these Q&As. I've done Instagram lives and others did this. And I think what I've found is because we're putting a group of child free folks together in a room to ask you as it's a completely different set of questions. Yes, budgeting still the same. Getting our debt still the same. But then it but then it takes a hard right turn.
And I think part of the bonus of a group Q&A is like some will ask questions you like and people go, I didn't have the guts to ask that question. Or like, I didn't think to ask that question, but I really want to know. And I often when I do these Q&As as I like, try to rotate between people, get ready turns and somebody say, I don't have a question, but I want you to go back to so-and-so because they had a great question and that that's just great.
It's a free, what was it? A one hour event.
Yep. One hour January 10th on Zoom.
Depending on depending on how many people come, you might get a half dozen, ten, 15 questions. I have no clue. So sometimes the questions are easy. Yes. All right. Next, like I said, many other times, it's I would say join Bri for that Q&A. Also, if you want one on one, how risk taking clients now you can actually sign up with the link there.
Yes, that costs money. Let's just be honest on that. But you get the one on one personal help and you work through your entire financial plan. Bri is our newest Childfree Wealth Specialist, which means she has spent the past year with me learning the ins and outs of finances around being childfree and the way we do things at Childfree Wealth. She is awesome at this.
So I have a feeling that's going to fill up pretty quick. She has a limited number of clients she can take. If you have any interest, feel free to click the link that's in there in the notes or you can get the free Q&A. We're just trying to get you to get the year started, right? That's the hard part now.
Now by the way, come like May something random will happen. Your place will help you then do well at least we can start off on the right foot.