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I was having a conversation with my brother the other day just about money in general. He’s invested some money into the stock market. And we were talking about that. And then he knows I do financial coaching. And so he was talking about that as well. And what he pointed out, and this is no big secret there, we all know this is basically personal finance is pretty easy, right? It’s spend less than you make, or there’s really only two ways to increase your net income and net income is you know, the amount that you have after you pay all your expenses. You either have to cut your expenses or increase your income. It’s not rocket science, that part of money gratefully, is pretty easy. Let me ask you this. Have you ever decided that okay, this month or this year, or whatever it is, I am really going to tackle my finances, and I’m going to get to a position that I want to be in. Because you’re listening to this podcast, I’m assuming you’re kind of in that mindset right now.
And here’s the interesting thing. People who enter that mindset and ask yourself the same question here. Where is the first place you go to make the numbers work? In other words, if you sit down, you say, Okay, I’m going to make a budget for the month. And I’m going to, you know, save $500 this month, say that your goal or whatever it is, where’s the first place you look? For most people, the first place that they look is on the expense side of the equation, they start looking at, okay, well, I can cut back down on food and I can cut back on entertainment. And I can buy a few less clothes, and I can spend a little less on Amazon or whatever it is they really go into their budget and they start whittling away at these costs. That’s all very good intentioned. I’ve done that. I’ve done that numerous times.
But let me tell you a few insights about that, why that isn’t always the best course of action to take and why it isn’t always the most successful.
The first is that cutting back on expenses for most people isn’t very fun. It usually means dialing back on the things that we enjoy doing, going out to eat, going out to parties, buying new things. Now, I’m not saying that money buys happiness. But after we have lived a lifestyle for a certain period of time to dial back on, that usually means we have to go through a certain amount of discomfort. And to be honest, I think that discomfort can be very healthy and beneficial. But a lot of people don’t have the determination or the self will to keep going down that path. They make their budget and they see the numbers and they dial back on all their expenses, and they get really, really excited. And then the weekend comes along and they’re like, Ah, yeah, you know, it looks really fun on paper, but I kind of want to, you know, go out this weekend or my daughter wants to go out or my son needs some gas money or something like that, right? Real Life hits. And it doesn’t always work the way that we had envisioned it on paper.
Here’s another aspect of controlling expenses doesn’t always work is we can’t always control our expenses. And by that, I mean if your son or daughter breaks their arm, you got to take him to the hospital and get it fixed. That’s just An unexpected expense which you’re going to have to pay. For most of us, we rely on our cars for transportation, we don’t live in the big cities where we can take public transportation. And so if the car breaks down, and we got to pay $1,000, to fix it, with just an expense, we have to do the fridge breaks. Same thing. There’s all these unexpected little costs that come along with life that we don’t always have control over.
And then here’s the biggest factor to why expenses don’t always work. Or I should say why cutting expenses doesn’t always get us the results that we think we’re going to get is that we can only cut expenses, so much, there’s only a so much that we can cut before we’re literally just providing food, clothing and shelter. If we took this to an extreme example, and I’m not recommending you do this, but if you cut out your car, your cell phone, your cable, your Netflix, your internet connection, cut it all out. And all you paid for was your rent, your food, your utilities, and you know, maybe you’re shopping at the local thrift store. They’re just enough clothes to keep you warm or cool during the summer and winter. I mean, if you got to that level one, I don’t think that’s a very interesting life.
But you couldn’t drive your net income anymore. You couldn’t increase your net income anymore. Maybe that’s the way that I should say it, because you’re already at the base level. So you’re already maxed out and tapped out. And I gotta tell you going through and reducing all those expenses, you’re probably all thinking, no, I’m not doing that I’m keeping my internet, you know, I’m keeping my car. And I think that those are good things to keep. I’m not saying that we shouldn’t. But do you understand that reducing expenses only gets us so far?
If you looked at Jeff Bezos, or Elon Musk, or Bill Gates, or Oprah Winfrey, or any of those people who have become extremely wealthy over the course of their life, meaning they didn’t just inherit their wealth, they didn’t get there by cutting expenses, Oprah didn’t get rich, because she was able to reduce her expenses by $1,000 a month. In fact, I promise you that her monthly expenses are significantly greater today than they were 40 years ago. Same thing with Jeff basis, Elon Musk, Bill Gates, they all created value, they all increase the income side of the equation, which brought them more money, which brought them more wealth.
Now, I’m not saying that we shouldn’t focus on cutting expenses, that can be a very important part to budgeting. But I think there’s a time and a place for that. And if that’s all we’re concentrating on, it’s not going to get us the right results. If we’re out there constantly buying things on Amazon, because we think that’s going to make us happy or feel some sort of need in our life, then yeah, that’s when we need to work on our kind of our thoughts, and what’s really going on with ourselves there. And those kind of expenses we can cut out. And maybe we want to work on cutting back our food, maybe 10%. Because we feel like we’re going out to eat too much. That’s all fine and good. But if we’ve already kind of maxed out those expense line items, there’s no reason to focus on all the little nitty gritty.
I like to use the example of paper towels, right? People say we don’t have to buy paper towels, just buy a dish towel. And then you know, you can wash that and you never have to buy paper towels again. totally true. can’t disagree with that. But at the end of the year, I don’t know, are you saving maybe $200 a year on paper towels? And what was the inconvenience factor to you and your life? Is $200 really make or break it? Now, people who subscribe to this line of thinking heavily will say yeah, but it all adds up. And it does totally I agree. But at the end of the year, if you got really rigid on doing everything and really cutting all of your expenses, you’re maybe going to save yourself five maybe and I’m betting this as kind of a long stretch an extra $10,000 a year depends on where your expense levels are currently and how much you have to cut.
But for most families who don’t have a serious spending problem, you know, $5,000 in cost savings over a year would be pretty good. And I got to ask is $5,000 a lot of money. Now I know to a lot of you that sounds like a lot of money. But on the whole scheme of things, it’s really not. And the amount of discipline that someone would have to exercise to save that $5,000 would be pretty onerous. Managing your expenses is important. I’m not saying it’s not. But what I am saying is the conclusion that I have come to and that most of my clients have come to is real financial progress, really paying off the debt, really having the means to save for a down payment, really being able to save for your children’s education comes from increasing the income side of the equation.
In other words, they get the financial progress by increasing their income. And so for the next few podcasts, I’m going to shift our thinking and our topics a little bit from cutting expenses and from budgeting. And I’m going to talk about some different ways that we can increase our income. Now, as an introducing that topic, I want to point out three aspects of why focusing on the income side is more beneficial than focusing on the expense side.
And before I get into that, I know a lot of you may be a little hesitant right now. And you’re thinking, well, I’ve already maxed out my income, there’s no way I can grow my income. And I want you to do me a favor, I want you just to set that thought aside for just a minute, finish out this podcast, hear what I have to say, and see if by the end of the podcast, you aren’t thinking something a little different that, hey, maybe I can make more money, or maybe it is more beneficial for me to focus on the income side. So with that thought set aside, I want to point out three benefits to really focusing on the income side.
The first big benefit is that it’s unlimited in the potential. Remember, when I was talking about expenses, you can only cut so much before you’re just down to the nitty gritty food, clothing and shelter. But with income, there is no limit, you can always make more money, Bill Gates could make more money today, if he wanted to do Oprah could make more money, Jeff Bezos could make more money, they could all make more money, the amount of money that we can make is only limited by our thoughts, and by our ability to do work.
The next reason that I like to focus on the income side is there’s a lot of personal growth. Yes, there is personal growth working on the expense side, and that we learn to be self disciplined, we learn what really makes us happy. But on the income side, there’s even more growth, in my opinion, we have to push ourselves to learn new things, we have to push ourselves out of our comfort zone, we have to push our personal character traits, as well as our skills to grow and become more so that we can add more value. And we’re going to talk about that in future podcasts. So don’t let that scare you right now, if it does, but it’s actually one of the huge benefits to working on the income side.
The third and final, I shouldn’t say final, but the third reason that I’m going to talk about today, benefit to working on the income side, is it allows you to have additional money to help yourself and your family members and other people in your community. By focusing on the expense side, you’re constantly reducing, conserving, saving, and it’s very quote unquote, me oriented, I have to take care of me.
But focusing on the income side means that you have more money, you can help your family members, you can help the members of your community you can donate to causes that you believe in, you have additional funds to help not only yourself and your family, but also society propel forward and grow.
Think about that, I think if everybody was just focused on making more money, and then helping other people, pretty soon, money wouldn’t even be a factor in our lives, right? Because everybody would have extra money and everybody really wanting to give it away to help other people. And yeah, maybe something in your life hiccup and, you know, I lost my job or something. And I need six months worth of help all the other people in your neighborhood, Oh, my gosh, we have all this extra money, let’s help you out, you know, get you back on your feet and move in.
Now, that’s a little altruistic. And I know there’s some political and social ramifications there. But conceptually, you see what I’m saying? Let me go back to that other thought that you were thinking about a minute ago that I asked you to set aside that thought where you’re saying, Well, yeah, but I’m already tapped out. I can’t make any more money. And for whatever reason, you think maybe you think that I’m already making as much money as my boss will pay me, or I’m already working three jobs. Or I’m already in my field. And this is just what the industry pays. Those are all just thoughts. And when we think those thoughts, we don’t get creative about how we can make more money.
Now making more money doesn’t happen immediately. You’re not going to listen to this podcast or some other podcast, walk into your boss’s office, ask for a 20% raise and start making more money. It’s going to take a little bit of time. I could start today and cut out five of my expenses and immediately see the benefit tomorrow, whereas income is going to take some time.
When I was working in banking, I was making over $100,000 a year I was close to making. Let’s see how much was it? It’s probably making $160,000 that’s with bonus, and my salary. No benefits just just bonus and salary. I think 160 was the most I ever made in one year. And that was pretty good money. Now I was living in Seattle, so the cost of living there is pretty high. But I was living a pretty comfortable life. I was able to put a decent amount into savings each month and still live a pretty comfortable life. And so I thought it was doing pretty good.
Then this rumor started going around our family this was several years ago. Hey, Jody’s gonna make a million dollars this year. Like, what? Jody’s a stinking life coach, how is she making any money was my first thought. I had no idea. I was like, you are kidding me? What are you talking about? I mean, I knew she had started this life coaching business, I never really got into it. I thought it was kind of like, whatever, you know. So it’s like, how is that possible? What is she doing? And in my mind, at that point, a million dollars was like so stinking much money that was like, only the crazy rich, or the crazy, smart people could actually make a million dollars.
I’d grown up with my sister, I’m two years her senior, right? I’m supposed to be her mentor. And here she is going to make a million and I’m happy at $160,000. And what I realized there is, you know what, I am never going to make a million because I’m not trying to make a million dollars. How many people do you know who didn’t inherit it? But they just make a million dollars? Because Oh, whoops, I just fell into yeah, I got this lucky job. And what do you know, I’m now making a million bucks.
Most people who are making a million or more have worked towards it, they have set it as a goal and moved in that direction. And that’s what I decided to do. I was like, hey, if my sister can do this, it is very real. It felt very tangible. To me, it felt like something that I could achieve. If you’ll remember way back when my very first podcast, I talked about the gentlemen who broke the four minute mile. And you know, they tried for like eight years, and no one could do it. And then when he broke it, everyone started breaking the four minute mile because someone had already done it, the psychological barrier had already been busted. And now everyone knew that it was impossible.
So I thought, okay, if she can make a million dollars, I’m going to set my goal, and I am going to work towards it, and I am going to achieve it. Now I know there’s going to be setbacks, I know it’s going to be hard, I know I’m going to have to put in a lot of effort. But I’m okay doing all of that. And because I’m okay doing that, I’m already starting to take actions to get myself there.
I promise you, if I was in the same mindset that I was five years ago, and I was making my $160,000. And I was happy with that, I would never get to that million dollar mark. Why? Because it’s not a goal. It’s not even something I’m trying to achieve. So what I would like to ask you to do over the next few days is just kind of ponder in your head.
How much does your family make right now? What’s your household income for the year? And could you double that? Could you triple it? Or maybe could you even just make another 20,000? More? Could you make another 50,000? More? What kind of goal or what kind of number sounds right to you.
Now, initially, this may be very scary, you may be thinking, no, I’m already maxed out, I can’t make any more. And I just I can’t, I can’t, I can’t, I totally get those thoughts and those feelings, trust me. Don’t think that I’m here just telling you that you’re lying to yourself, and you can make more money. Now, I am going to tell you that you’re lying to yourself, and you can make more money.
But, I want you to know that I totally get those feelings. They’re totally normal. They’re totally legit. And one thing I would like to encourage you to do is if you have those feelings, and you’re a little bit scared of your ability to make more and sign up for one of my free 30 minute consultation calls, and let’s talk about that. Let’s talk about where you are now. Where do you want to go? How do we get you there? And if you feel like you can’t get there? Why are you thinking those thoughts? And let’s come up with some different thoughts that will help propel you in the right direction there.
Okay, so that’s kind of what I want to leave you with today, I want to shake your foundation a little bit, I want to shake your core belief system a little bit, I want you to start to shift your thinking from just cutting expenses, to growing your income. And I want you just to kind of entertain that thought over the next week here until I have my next podcast, just think Can I make more money? And if I was going to how am I going to do that.
Maybe that means you stay at your job and you ask for a raise, maybe it means you get a promotion, maybe it means you start a side gig, maybe it means you start your own business. Or maybe it just means you start selling things around your house. If you only want to make a couple extra $1,000. It can be whatever amount you want. Maybe you just want to work on making an extra $300 a month, maybe you want to focus on making an extra $50,000 a month.
Over the next few podcasts we are going to talk about how to increase income. We’re going to talk about all the obstacles that hold us back both in our thoughts, you know in our self doubt in our fear. But I’m also going to give you real concrete things you can do as well. I’m going to talk about how to interview how to ask for a raise, how to write a resume. I’m going to give you ideas on starting side gigs.
We’re going to talk about all of those things and I hope that will will propel you forward. And that as a result of that, it will be a lot easier to pay off your debt, it will be a lot easier and faster to save for a down payment on a home. I’m currently working with a client right now who has $0 saved. Her goal is to buy a house by the end of the year. And the amount of money that she needs on the downpayment, and the area where she lives is about $200,000. So she needs to come up with $200,000 in about eight months.
She’s got a business, and we’re working on optimizing it and growing it so that she can achieve that goal and buy her house by Christmas. And it’s totally doable. It’s doable for all of us.
Alright, if you’re feeling a little self doubt, I just want you to think about that for a week. Think about how could I generate more income? Where could I get more money? How is this possible? And then Tune in next week, and I’m going to give you some more ideas. Thanks for listening you guys. That’s what I got. And I’ll talk to you next week.