Handling Money In Business & Life
Thanks for joining me on this edition of the podcast. I'm your host, Jason Brown. I'm the co-founder of SERPWoo, and in this podcast, we're going to be talking about money, and finances, and stuff that's probably very boring to a lot of you to do daily, but very exciting when you've got a lot of money and everything's going very well. Before we jump into the podcast, I want to give a shout out to buildersociety.com. Also to Matt Diggity at leapspring.org, and Jared. I'm not going to give up Jared's last name, but Jared definitely knows who he is, because I know he listens. I also want to talk about the fact that a lot of these podcasts happen to end up being business-oriented. We're definitely going to get into marketing. We're definitely going to get into other topics, but I know that a lot of people come to SURPWoo for marketing, and they maybe get turned off by business ideas and business talk. I want to start putting in the beginning of these podcasts some, maybe five, seven minutes' worth of marketing ideas, and they're going to be very hallow, and I thought this would be the perfect podcast to start that with.
I've been recently re-reading a book called The 22 Immutable Laws of Marketing by Al Rice and Jack Trout, and what's very interesting is a lot of these rules I have definitely seen proven true in my life, and probably one of the more important rules is the law of leadership, which is actually the first rule in the book. The law of the leadership says it's better to be first than it is to be better. I know a lot of you are probably disagreeing out there, and saying things, "Well, that's not true. Look at Google. They were not the first search engine, but they're obviously the leader, so that's better." You might look at Tesla, and know that Tesla's not the first electric car, but they're obviously the leader, and that's better. You have to remember when I re-read these words, it's better to be first than it is to be better. First really isn't defined, and first is relative to you versus me.
Look at Charles Lindbergh. He was the first to cross the Atlantic Ocean solo, but do you know who the second person is? You probably don't. It was Bert Hinkler, and Bert Hinkler actually was a better pilot. He flew the course faster, and he consumed less fuel. Even though Bert Hinkler was the better pilot, the person who did it better, they weren't first, and none of you all know Bert Hinkler. If you do, you're definitely an oddball. Everybody remembers Lindbergh, so being the first is definitely very, very powerful. It doesn't mean that first in a very broad sense, like the first search engine, the first electric car. Many of you probably do not know who actually made the first electric car, but you do know Tesla. Google was not the first search engine, but they were the first search engine to actually come out and have a better interface. They were the first search engine to come out and actually use algorithmic rules to determine who should be first on the search engine page using ideas like links from other websites, counting as a vote of confidence, using page rank, using a lot of these other metrics.
They were the first to offer a better experience. Even though they weren't the first search engine, they kind of got into what ended up being the second law of marketing in this book, called the law of the category, which says if you can't be first in a category, set up a new category you can be first in. I can kind of give you an example, back with Lindbergh. Lindbergh was the first to fly the Atlantic Ocean solo. Then Hinkler, who actually did it better, but do you know who the third person was? I'm sure you do. The third person was Amelia Earheart, and you don't know her as the third person that crossed the Atlantic Ocean. You know her as the first woman to cross the Atlantic Ocean. She basically set up a new category. That's why you remember her. When we get into other areas, like when we're talking about Google, and we're talking about Tesla, and we're talking about other areas, it's also important to know the third rule of marketing, or the third law, which is the law of the mind that says it's better to be first in the mind than to be first in the marketplace.
See, that's where all of this starts to hinge. The Altair 8,800 was introduced in 1974. The Apple 2 was introduced in 1976. Which one do you know better? Of course it's the Apple 2, because it was actually the first in the mind than the first in the marketplace. People associated the Apple in their mind first before the Altair 8,800 because nobody knew the Altair 8,800. It kind of goes back to a previous podcast where I talked about if you invent something, or you're first for something, you're somebody who laid the aid, if you don't get it out there and sell it, if you're not selling it, which is very, very important, somebody else is going to come along, see your egg, think it's great, and then they're going to sell it. They're going to hatch your egg, your idea, your baby, the thing that you worked on. They're going to be the first in people's minds because they sold it, they've got it out. It's first in the prospect's mind.
When you hear that first law, and you hear the second and third, it starts making more sense that a lot of the times, you can be first and not better and win out. You can be first in a new category if somebody's already the first in your category. The first actually ends up being, were you first in the mind of your customer than first in the marketplace? The first in the marketplace when it came to home entertainment was Beta Max. You've probably ever had a Beta Max. You probably never even heard of Beta Max, but the first in the mind of the customer was VHS, and that's why VHS helped win out the spot for home entertainment a long, long time ago, and why you have VHS tapes and not Beta Max. I know that we no longer have VHS tapes out there anymore, for a large part. I know we've moved on to laser disc, and to DVDs, and now we're just watching Netflix and Amazon largely online, but that was just an example.
Hopefully, this is a good thing to think about with marketing, especially for you guys who probably do Amazon, or e-commerce, or who are looking at software as a service companies, and thinking that you can do something that somebody else is already doing, but you can do it better. If you're getting into these areas where you're basically a me, too for the large part, you really need to be the first in the customer's mind, especially in a new category or in a new angle. That's what it really breaks down to. Fed-Ex is kind of the first in their category, when it absolutely has to be there overnight. They were not the first shipping company, or the first delivery company. Neither was UPS. Neither is DHL, but each one of those people have a distinct advantage in their own category, and in the perception and the mind of the customer that they are number one for that particular angle.
Hopefully that helps out. If you're coming out with a me, too product in e-commerce, or you're trying to come out with a software as a service, or if you're a freelance and you want to sell website design, or AdWords knowledge, you really need to position yourself up in your own category and shine a light on you that's different than everybody else, so that you can be different, so that you can set yourself up as basically first in the customer's mind for that particular category or market, to help you differentiate yourself. This is one of the main reasons why SERPWoo was never positioned as a rank tracker, even though we can track your rank. While we are positioned as originally a SERP tracker because nobody was actually monitoring the SERPs, the entire SERP, whether it was top 10, or top 20, top 30, top 100, whatever it might be. The idea was, put in your keyword, put in your domain or your URL, and we'll track that, and possibly we'll track five others that you tell us to track, or as SERPWoo came in, and we're tracking the SERP.
You give us a keyword and we're going to track everybody, and then we're going to find out what each person does each day over the week, and we're going to come up with metrics. We're going to track your domain, and your URL, and any other ones that you want to give us. We're the angle of, we're tracking the entire SERP. We're tracking the niche. We're tracking things that other people are not tracking and not doing, and now we've spawned a lot of me, too competitors who do it very poorly, but we're always three or four steps ahead of them anyway. Now let's jump into the topic of the podcast, handling money and business and life. Guys, this is very scary if you don't get this right. The reason why I decided to do this podcast was, I've had a lot of people now that we're in Q4, ask me questions about tax strategy, ask me questions about cash flow for a business, income statements. They've asked me about accountants.
Listen, if you have questions about this, you really need to reach out to somebody locally, or somebody even online, especially with a bookkeeper, or a CPA, or a tax attorney. They're going to be able to give you advice that I definitely cannot give you and not talk about. The best that I can tell is what's worked best for me personally, and what worked best in my particular situation, but every one of you all's situation's going to be different from the country you live in, the state you live in, the business that you run, and how that business operates within the country. Listen, if you're somebody who sells e-commerce, and you're located in one state, let's just say that's the state of Kentucky, but you see a product to somebody in the state of Iowa, you might possibly owe tax to the state of Iowa, or as in my business, or at least in one of my businesses, that's not applicable at all.
You definitely need to talk to an individual, talk to a professional, someone that you can talk to, and then I would even go as far as getting a second and third opinion, because a lot of people that you'll talk to, they'll just tell you the way that they like to do it, or the way that they know how to do it. I've actually went and talked to professionals who were bookkeepers, and CPAs, and tax attorneys, and they had no idea how to wade through the mess which is selling on Amazon, or selling with e-commerce and knowing tax in other states. You might talk to two people, and they'll tell you two totally different things, and you'll talk to a third person, and he'll finally tell you what's correct and what's right. You're not going to know that unless you talk to three people, get a third opinion, basically, so I highly advise you to do that.
Because people have been asking me this question about money, either in their personal life or in business and how to manage it, I find it very scary that in Q4, there's people who have made a revenue all year and have not put anything back for taxes. There's even people who do not do their bookkeeping. For a long time, I did mine on bookkeeping by hand, with a pen, and a paper, and an actual paper journal, an accounting journal for Dome. I did it by hand, so that I could understand it, and then I switched to Quicken, and I never got to QuickBooks, and now I'm using a company called Bench.co. People are not even keeping up with this, and there's plenty of times where I failed to do it, and I got behind, but there's people who don't even think about doing it. They just think, "I'm gonna make this money. I need to feed myself, feed my family, live my lifestyle, and then I'll worry about taxes later."
It's really scary, because when you get to Q4, some people even wait until Q1 of the next year, have not put anything back for taxes, haven't even thought about taxes. Listen, if you live in a country where you don't owe taxes because of your situation, maybe you're Canadian and you live in Thailand, and you made your money while you were in Thailand, and maybe you don't owe any taxes, that's great. If you're somebody who lives in a country where you're taxed, like the United States, I know plenty of people, especially recently, who have made money, not even thought about taxes, and now it's Q4, and they're basically going to have to take out a loan or scramble to take on a bunch of jobs and gigs, and get sales to kind of cover their ass for next year. That's something that I definitely, definitely couldn't live with. That would keep me up all night. I'm not sure how some of you guys do it, but hopefully some of the stuff I'm about to talk about can help you with that situation and other situations in your life and business about money.
When I talk about money to people, I find that the largest problem isn't really outside things that have affected them, like medical bills because they or a spouse got cancer, or death, or getting laid off from their job unexpectedly. There's always going to be outside things that happen and it's not usually a problem if they make too little or that they spend too much. It really boils down to discipline, and the lack of discipline. I know that's going to offend a lot of people because people do not want to think that they're undisciplined, or people do not want to think that they themselves at the core have done something wrong, but that's really what it boils down to. I'm not trying to be harsh, but I am trying to speak real life, real talk into people because it could come down to that maybe somebody does lose their job unexpectedly.
If that affects you immediately, I could come back and say, "Well, why didn't you have a savings buffer? Why didn't you have a second stream of income?" That person's going to come back to me and say, "Well, I didn't have the time. I didn't know how to do it. I had all these unexpected expenses, like the water heater broke, the car broke. I had to put braces on my kid's mouth." There's always going to be an excuse. There's always going to be a new excuse in somebody's life, even mine, but if you don't have the discipline to have multiple sources of income or you don't have the discipline to have a savings buffer, or you don't have the discipline to stay home instead of going out with your friends and popping bottles of champagne, it's ultimately going to bite you in the ass at some point when the next excuse rolls down the hill and hits you in the face.
When it comes to discipline, I think I can always point to something, and not everybody thinks like that. They think, "I don't have time to have a second source of income, or a third source of income." Why not? What are you doing when you come home, or are you coming home and watching Netflix for hours on end, and Amazon on hours on end. Are you coming home and then leaving to go shop at the mall, and go watch a Cubs game? Are you coming home and playing online, and wasting time, and reading tons of books, but not taking action? There's something there that's not disciplined enough to have the focus to get that second or third source of income. When it comes to spending, listen, debt is out of control in this country with people. That's why you got people like Dave Ramsay, and Suzy Orman, and all these other people out here, even Tony Robbins is publishing a book about money.
There's a debt problem. People want to go out and buy stuff when they feel depressed, or when they feel the need to, or when they see somebody else do it on Facebook? If you're not disciplined enough to just stay home, and just suck it up that you do not need to go out and buy those new Jordans, or that you don't need to go out and buy that new Tesla car, or those new solar roofing panels, or even the new MacBook Pro, or the new iPhone, then you're going to get yourself into that situation. Now it's clearly fine if you go out and do that stuff when you have proper income sources, and you've got a proper savings buffer, but most of the time people have the problem in their life because they're just not disciplined. The people who are now in Q4 that haven't saved up for their taxes, that's a lack of discipline. Why didn't you, when you made the money, when you made the revenue, go ahead and just put 25% or 30% back into another savings account, and not even touch it as soon as you made it?
That way, you would've had money quite possibly to cover all of your tax expenses at the end of the year, or at the end of the quarter, and then anything that's left over because maybe you over-figured, would've just been a nice bonus. It really comes down to a lack of discipline, and anybody that has the excuse, listen, I know that there's these outliers where somebody did do everything properly and they just always had their water heater break, or their house caught on fire, or hopefully not, somebody died and they put all of it into funeral cost, or it affected them because that was an income earning spouse, or somebody got cancer and had all these medical bills. I know there's outliers like that, that none of what I'm talking about applies, but me and you both know deep down that for probably 85% to 90% of the people out there, it really comes down to lack of discipline, and with that lack of discipline comes a lack of focus also, and a lack of attention.
The first tip I'm going to give you is yes, you've got to have a savings plan. I know a lot of you all probably hate to hear that. It sounds very Suzy Orman-ish, Dave Ramsay-ish, very savings guru-ish. I know probably your parents and other people have tried to beat it in your head, but a savings plan has helped me tremendously many times in my life. As a matter of fact, I don't see and understand how people have a 401K and contribute money to their 401K, or other retirement vehicle, while they have debt or while they don't have a savings plan. Many times it's both, the person doesn't have a savings plan and they have debt, but they are contributing 401K, and the workforce and even self-employed people, the options have become very easy now that enrolling into retirement is automatic now, and you have to actually opt out for a lot of plans. I've never understood why somebody would contribute money to their retirement and still have debt or no savings plan, or both.
When I really look at it, if you've got debt, any money that you think that you're going to make, be it compound interest or free money with your company match, or on your 401K, is totally ate away by the fact that you have debt and that debt has interest also. Let's not even think or even consider the fact that you could be working at that job for two years, and living paycheck to paycheck like so many people actually do, and then you lose that job. You have nothing to fall back on, and if you say, "Well, I'm gonna reach into my retirement now and take that money out because I've got a catastrophic event where I have no money," you're going to get penalized on that. Now you've got debt interest eating away while you're unemployed, and you've been penalized on your retirement withdrawal, so you're just losing money left and right basically, because you're losing money when you take that withdrawal. You've lost a good chunk now, and then at the same time, you're paying debt, I'm sorry, you're paying interest on your debt.
To me, it makes much more sense that before you ever put a penny into a retirement vehicle, you pay off your debt first, and then you start a savings plan. Once you get to six months ... I know some people do one month, some people do three months. Highly recommend six months. I actually like to recommend 12 months, but I know a lot of people aren't disciplined to do that, and have a retire, a savings in place so that you can weather through bad times because they are going to happen. When I look at, I know these numbers are different, I know these numbers always change. It depends on who you get them from, but if I look at the average household credit card debt in the United States, it comes up to past $15,500 total. When I go to credit card debt calculators, like the one on Bank Rate, and I just round it off to $16,000, when I put in $16,000 and the interest rate that most people are paying on their credit card, and the fact that they're making just their minimum payment, because I know people are living paycheck to paycheck largely, it's going to take you 389 months making the minimum payment to pay off that average credit card debt that the average household has in the US.
You're going to end up paying at the end $23,422 total. That's roughly $7,000 more than you originally had, and it's going to take you forever to pay it. That $7,000 that I would much rather have right now over time, of course, obviously, than to pay out over time just to have the benefit of that credit card. That's just a credit card that we're talking about. If I go and look at mortgages, I found a number that said the average mortgage is $172,000, so I'll work off that. I put in the average interest rate, and I put in a mortgage period of 25 years, and the total cost of that mortgage over the 25 years is $270,100 ... Almost $100,000. $98,000 to be exact. $98,000 that you're going to pay over 25 years just to have that mortgage. That's debt. I don't care what anybody says. Your home is not an asset. An asset is something that brings you in positive cash flow, and your house does not do that, not unless you've got a rental or unless you're trying to flip a house on the short term, but a house is not an asset.
I don't care who you are, what your qualifications are. A house is a liability. A mortgage is a liability. Knowing this, we've got $98,000 plus $7,000, which was the credit card debt. You're now up to $105,000 in debt, over a period of time, of course. Here's what's interesting. When I look at the average retirement, the average specifically 401K that somebody has typically at age 40, which I know it's a little older for some of you people. At 40, the average is between $100,000 and $150,000. Let's just say $125,000, because that's right in the middle. The compound interest on that is not that much. Unless you got a million dollars, or you're closer up to that range, your compound interest is really not hardly anything in comparison to the fact that you've got $105,000 in debt that you're paying over time.
When I look at the average 401K for somebody who is 40, and it's $125,000, and yes that was built over time. That was built up over free money from possible an employer match, and also from the compound interest. Why not just take what you would've had in your 401K, the $125,000, and applied it to your debt? The monthly payment that you would've been making on all those years of work could have paid off your debt that would've been your home, that would've been your credit card debt, that could've been your student loans, your auto debt, or any other debt you have. The only thing you're going to be missing would've been the free employer match and the slow building of compound interest in the very beginning. I know that everybody wants to make a big deal about this compound interest. The compound interest really compounds at the far end of your retirement, and yes, you've got to build up in the early years and build up to that, but you're having debt and debt interest eat away at what would've been your gains.
Your golden years is not in your retirement. Your golden years are actually in the beginning and middle of your life, not at the end. This is why I'm against people having retirements or at least making retirement payments when they have debt, or when they have no savings. Once you have that debt paid off, applying it to a savings account, because once you're debt-free, to me it still doesn't make sense to contribute money to a 401K yet, at least not until you have six, possibly 12 months of savings. You start applying that money now to your 401K, what happens when you lose your job? What happens if you're self-employed and you're not able to contribute because times have gotten tight? What happens when your health insurance doubles like it's getting ready to for many Americans, and now things are really tight? If you would've had a savings account, had been building up a savings account, you would've had a nice buffer to get you through that.
A lot of people just don't think like that, so if you don't have six months of savings, you're definitely gambling on your future. There's been many times where having six months or 12 months of savings has helped me out. Times where I've got laid off from a job, times when my business went through a hardship, and it was unexpected. Even though I had other income streams in place, maybe they weren't fully developed yet, and I really needed that six months of savings, or 12 months of savings to get me through the year because for those people that say, "You know what? I can always find another job. I can always do something else, sell something else, make money, hustle," that's great that you got that optimism there. The reality is is sometimes that just doesn't happen, and today's economy, it can literally take you three months, six months, 12 months to find a job.
I'm not talking about those of you that think, "Well, if it came down to it, I'd flip burgers at Burger King." Hey, that's great, but it's probably going to cost you more money, especially if you've got a job where you make $50,000, $80,000 a year, or $100,000 plus. It's probably going to cost you money and cost you opportunity to go take that job at Burger King and flip burgers, and you miss out on waiting, and getting that other $50,000, $80,000, $100,000 plus a year job because you're too busy flipping burgers. It can take actually months if not a year to find another suitable opportunity. There's been times where I've created some of the businesses that I have currently because it literally took a year for me to find another job, and it wasn't because I knew it was going to take a year. I was keeping myself busy trying to find a way to make more money while also looking for a job, and it just so happened that that business ended up making me more money than if I would've went to go get a job.
That took months to accomplish, so there's definitely going to be times, they're definitely going to be come where you need six months, if not 12 months, of savings. When I mean savings, I don't mean everything. You do not need to replace six months or 12 months of your current monthly income, because let's face it. Most of us, we make a certain amount of money each month, or a certain amount of money a year, and we don't need all of that to survive. When I talk about savings, I talk about things that you definitely have to have. For an example, don't put back money in savings for your cable bill. Cable's not something you have to have. Don't put it back for your cell phone. A cell phone is not something you have to have. The things that I put back in my savings account were things like electric, things like water, things like property taxes, things like gas for my car, the grocery bill.
We're talking about essential items here, so it's not like if you make $80,000 a year, that you have to have $80,000 for 12 months savings, or even $40,000 for six months savings. It's nice if you can get to that. By all means, if you can get to that, do it, and if that's what makes you comfortable, do it, but when I talk about savings, I'm talking about the things that you definitely have to have. If I got laid off from my job tomorrow, or if all of my income basically froze up from my businesses, I can do away with cell phone. I can do away with my cable. I probably would not do away with my internet, because that's basically how I generally make money online, because I'm an online marketer that can also do web design and programming, so it'd be foolish to do away with that. I wouldn't need cable. I wouldn't need cell phone. I wouldn't need money to buy new clothes.
All these things that you spend your income on are probably not going to be needed, but you probably will want to keep your home. You probably will want to keep your car, because your car is going to help you find new opportunities if you work a day job. Your home, well, you're going to need a place to live, so you definitely need to put money back for your property taxes, or your mortgage payment, your auto insurance, your gas for your auto. Of course you're going to want water, and electric, and heat. You're going to want to have groceries, which you can probably slim down on that well with not eating out, and just going to the grocery store and buying essentials. There's a lot of things that you can cut out, so that's what I mean by savings. You'll realize that if that event happens, there not a ton of money that you need to have, so the six months to 12 months actually looks a lot easier to accomplish when you realize that.
There's no reason why your business cannot also operate this way with its own savings account. There's going to be times in the future where your business might need money, and instead of going out and getting a loan, or trying to hustle more to sell, which is always great. Your business having a savings is an excellent idea, because there might be lean months that come for your business. There might be times where you want to expand. There might be opportunities that you want to take hold of. There could be times where you have a planned event, like you're planning to go to Inbound next year, so you start saving up for it if your business doesn't already throw off enough cash to just let you go. Having a savings for your business applies for the same reasons as having savings for personal, so that if you go through a tough period, or you need to expand, you don't have to alter what you're already used to doing to keep your business going forward.
Second of all, I know that I've got a lot of people that say that they just do not have their tax money saved up for Q4, or for Q1 of next year. Really with handling money in your business and life, you really need to be disciplined enough that as soon as you receive income, you go ahead and divvy it up. Instead of the person that's been through a rough patch, or finally have success in business and they make $10,000 in one month, and they're overjoyed and excited, and they're like, "I'm gonna take this $10,000, and now I can pay all of my bills. I'm gonna take this $10,000 and buy this, and buy that." You really need to just go ahead and take that $10,000 and divvy it up where 30% of that probably goes into a savings account marked for taxes, and then 10% is marked as savings. What's left over is what you actually use to take for yourself, or to pay bills, and do what you need to do, and you need to be disciplined when you do that.
I know that this won't apply for every business, because for some of you all with businesses like with e-commerce, or with other businesses, you might get $10,000 in income, and you might have $10,000 in expenses, to buy inventory, to also hire employees or purchase third party services to help you with your business. That's fine, because you're going to be able to take that off as an expense. If I'm talking to somebody who might be a freelance consultant, and they're essentially trading their time away for money, and they don't have $10,000 in business expenses that they can immediately work off with that $10,000 of income, you need to get that money, and you just need to go ahead and earmark a certain percentage away for taxes, and a certain percentage away for savings, and be disciplined. Not get that $10,000, and say, "Woo hoo. I'm going to enjoy a steak dinner, and pop some champagne, and go pay my auto loan, and my mortgage, and do this, and do that, and then tomorrow I'll have $0."
Another thing you need to do with your money is you really need to automate it. You need to get it off your brain. You need to quit spending so much time on it, especially when it comes to paying bills, or saving, or even paying yourself out of your business. I've been guilty of this, where I just withdraw money out of the account, my business account when I need my salary, and really what needs to happen is that just needs to be automated. I know that there's some of you out there who possibly don't make enough, or it fluctuates during the month to where you cannot automate a set amount of money to come to you on a specific period because you might not have the money in your business' checking account at that time. For those of you that do, you really need to set it up to where you're not just manually having to think about money, and manage money, and go in and withdraw from your account when you need it.
It needs to be a set amount at a set time if you can afford it. More importantly, you need to automate your expenses, and typically what I'll do is that when I need to pay myself, I have the business pay me personally, and it goes into a holding checking account. It's just like a regular checking account, but I call it holding. I have another bank account at Ally Bank, and Ally Bank knows at certain times of the month it needs to reach into that holding checking account and take money out. The money it's taking out going to Ally Bank actually goes into several different accounts at Ally Bank. Ally Bank I've got set up as a savings account because it pays a nice interest rate, and what I like to do is I've got goals. These goals represent different accounts at Ally Bank.
One goal might be a very nice yearly trip that me and my family take. Another goal might be my kids' college education. A third goal might be something like saving up to buy real estate, so that I can flip and sell real estate. What ends up happening is, each one of those accounts at Ally Bank on a specific day reach into that original holding checking account, and maybe it withdraws $100. It puts it into maybe the vacation fund, and then it reaches in again and takes out $300, and puts it into maybe the real estate fund. I've got different goals like that. I've got many more, and those were just examples, and example amounts, but it's kind of like timed productivity. Many people over-estimate what they can do in a day, and they over-estimate what they can do in a week, and they under-estimate what they could do over a year.
Basically what that says is, in essence, if you do these little things each day over a year, you can accomplish a great deal. If you try to jam pack everything into a day, or into a week, it's possibly not going to happen. You're over-estimating what you can do productivity-wise in a day, in a week, the same way you're going to over-estimate what you can do in your savings or in your financial goals in a day or a week. If you're under-estimating what you can do in a year, it's because you can actually take the small steps to accomplish your goal over 365 days for a whole thing. That's essentially how my savings is set up, so for me and my family to take a nice vacation each year, that might be $15,000, and that's including hotel, flight, activities, food, so forth. Maybe not even flight, just a car rental, and if I can take money out, small amounts daily, or small amounts weekly, and small amounts monthly, put into that account. In 12 months, that money's going to be there, almost guaranteed.
It's the same way with college education, which I've got other investment vehicles for that as well, but this is like a nice buffer. The same way with buying real estate, and even though I might already have a couple real estate properties, this would be like a fund that could help me purchase the next one, or maybe it's a fund to help me improve the ones I already have. It's not typically just that goal of buying another house, or buying another piece of real estate. It's kind of a general fund, and when you start doing that, you start finding out that you can hold this money, you can achieve your goals, you can draw a nice interest from it, especially if you're using Ally Bank. That's almost completely automated, at least as far as your goals are concerned.
I'll also automate all of my expenses. They're all paid either via a credit card or a debit card. I like to specifically use a credit card that has points backed up with it, and then I just pay that credit card off at the end of the month, and for those things that I'm not able to pay with a credit card, I use Chase Bill Pay for. Chase Bill Pay knows to just send out a check on a certain date for me, if I go in and set it up ahead of time. I don't have to think about money. I don't have to think about when I'm getting paid. I don't have to think about the bills that are due. The bills that I do have due I'm mostly earning points on. Any of my goals are automatically funded as well, and I don't have to think about money. About the most I ever have to think about money is remembering my PIN number at the ATM machine.
Another thing I do, and I know I catch a bit of flack for this. Some people don't understand, and I always find it hilarious when somebody wants to rebut it. I hate to think about money. I hate to think about bills. I hate thinking that I might be late on something and incur extra charges because of a late fee. What I've done is this kind of goes along with the six month savings ... A lot of people find it very hard to say, "I need X amount of money for six months savings." Even when somebody obtains a good amount in their savings, they're often tempted to spend it. Something happens. Oh, there's a once in a lifetime trip. I'm not sure if I want to go, but I've got the money in the savings account. I'll just dip into that savings and get it. They'll see a really good deal on a car that they've always wanted, like an older Corvette, and the person's going through divorce, and they're selling it real cheap, and you think, "You know what? I can dip into that savings, and I can get this car, and I'm going to be happy."
That temptation goes back to lack of discipline, and it's very hard for people one, to think of big numbers like, "I need $40,000 for six months of savings." Two, it's hard for people to stay disciplined to not touch that money when they think something is an emergency and they need to go in and get that money, even though it's not an emergency. One thing that I have done with my money is that I like to essentially prepay my expenses that I know I'm going to have to have if something happened to me. Basically what that means is this. I can pretty much count on that my electric bill is roughly $200 a month, on average throughout the year. In the summer, it's a little less. In the winter, it's a little more, so if I average it out, it's about $200 a month. For six months, at $200, that means there's a $1,200 savings that I need to make sure that I can afford that for six months if something happened to me, whether I lost my job, or I got hurt, or my business flat lined.
What I like to do is take $1,200, and just pay the electric company up front. They give me credit for $1,200, and I've now got this credit on my electric bill. What I do is I continue to make the monthly payment there on out. What happens is I always have a rolling $1,200 credit at the electric company, and if three months from now, I got laid off from my job, or my business flat lined, or I got sick and had to stay in the hospital, or was just sick and had to stay in bed for three months, or if something tragic happened to my family, and I was depressed, and I couldn't bring myself to work, I just stop paying the electric payment. That $1,200 credit finally starts kicking in, and I know that I've got six months that my electric is going to stay on, because no matter what happens, if I lose my job, if I get sick, if my business flat lines, I know I'm going to continue to have to need electric in my life.
Why don't I just go ahead and give them $1,200, which happens to be my six month example, and then continue to make the monthly payment, and I've always had this rolling $1,200 credit. My electric company is probably not going anywhere. If they did fall out of business, it's probably going to take months to happen. I don't think my electric company's ever going to steal my money, and yes, I'm going to look at my bill when I get it, or my credit actually now, when I get it each month, to ensure that that $1,200 credit is still there. This makes sure one, that I'm never, ever late on a payment because I've got that credit. Two, I don't have to think about it. Three, if something happened to me, I already know that it's paid, and I don't have to go to a bank, withdraw the money, and take it to the electric company. It's already taken care of.
I just basically repeat this process for my water company. I repeat this process for anything else that I have that there's a recurring monthly payment. For example, I've got homeowner's association dues. I pay those up for six months. I've got water bill, which I've already said that's paid up for six months. There's things that I know that I'm going to have to have and need, and having that credit is an excellent way for me to forget about it, not make the payment, ensure that if something happens to me, that that kicks in automatically. More importantly though, it helps ensure that if I get tempted, and I have low discipline for whatever reason, and I get tempted in my life, I'm not going to go and go ask the electric company to give me a refund back. There's really no way to get that money back. It has to be used. I'm not going to do that with the water company. I'm not going to do that with the homeowner's association. I'm not going to do that with my insurance.
The money is gone and out of the way, and it automatically kicks in if something were to happen to me, and I remove all temptation of trying to go into my savings account, and dip into it, and spend money. This was a very hard thing to do, because just like other people, I would see something that I really wanted, a brand-new iPhone, or I would see something that I thought that I would just need to have in my life, like a brand-new television that was a lot larger and had a better sound, and better picture to it. I couldn't go into my savings account, because it just wasn't there. It was at these other companies, ready to be used whenever I lost my job, whenever I would get hurt or sick, or whenever my business flat lined. There's a lot of people that I've talked to about that that have just found that amazing, but not amazing good, amazing stupid, and I'm just like, "Hey, listen. I'm never gonna be tempted. My money's never gonna disappear because somebody stole my identity and got into my savings account."
My spouse isn't going to go behind my back and take the money out of the account, and me find out about it later. My money is safe with these companies. The electric company is not going anywhere. My water company's not going anywhere. My homeowner's association is not going anywhere. My insurance company's probably not going anywhere, so because I'm going to need these things when something happens in my life, why not go ahead and give it to them now, have a rolling credit, and remove all temptation from my life to spend this money somewhere else, possibly. As we wrap things up, I really want you to get a sense of that money in your business, and money in your life, that's something that you really need to respect, something you really need to understand, and really know the meaning of money.
To me, every dollar that I have, whether it's a dollar I earned, a dollar that's in savings, a dollar that goes out to expenses, or even a dollar that gets tied up in debt, those dollars are very important to me, and they're very important to my goals because to me, money equals options. Not necessarily freedom, but options, and I want to keep all the options that I have open at all times, and money makes that possible. When I think about my money, I really do think of it as the cliché that I'm sure some of you all have heard, that each dollar is like a soldier going out to battle for me. Hopefully that dollar, when it goes out to war, and goes out to battle for me, brings me back some prisoners which are more dollars. To me, that's how I look at money, and that money helps me keep options open. If you don't respect money or have a discipline for money, you're really going down Shit Creek without a paddle.
I know a lot of what I've talked about today happens to revolve around savings a little bit. While I feel that savings is something huge that a lot of people like, I don't want you to get the thought that I'm telling you, you cannot go out and get your $5 latte, that you have to cut that out. I'm not being that strict, because I don't believe that. I do think that you need to have goals, though, with your money that are realistic, and you take these tiny steps each day to help automate it, and remove temptation. You can definitely still have your $5 latte. You can still go out and buy a $90 pair of Jordans, as long as you're doing things correctly. I do know with money that a lot of these people who think that you've got to save yourself to debt, here's the thing. You can only save and cut back so much, so I'm not telling you to have this lifestyle where you're not able to enjoy anything, and go out to a movie, have your latte, buy your Air Jordans, or whatever it is that you think that you need and want.
I'm not telling you to cut that out, because there's only so much that you can cut when you start cutting back. The real path to wealth and having money is having more income streams, having more money, making more money. It's not about cutting back, because you can only cut back so much, but your income potential is unlimited. However, a lot of people don't recognize that their income potential is unlimited because their options are stripped away from them. Their options are stripped away from them because they have debt, so if your income potential is unlimited, meaning that you could be running three businesses. Of course, I don't mean that today or tomorrow, but over time, you're not ever going to be able to achieve that because if you're in debt, because you didn't have savings and you didn't treat money correctly, you're never going to have an option to work on your first business, or even your second business idea because you spend all day tied up at your 9:00 to 5:00 job.
You spend all day tied up making money to pay a credit card, or a mortgage, or you spend all day looking to even make money because you're living paycheck to paycheck, and then your options are exhausted to realizing that your income potential is unlimited, because you're running around in circles because of debt and because of savings. While I think that earning money and increasing your revenue options, and those being unlimited are true, for a large amount of people, it's never realistic because their options have been stripped away from them, because of debt, and because of savings. If you have to show up to a place from 9:00 to 5:00, and then you have to maybe work a part-time job, you're never really going to get anywhere because you're so worried about paying the mortgage, you're so worried about paying these credit card bills. You're so worried about buying the next new iPhone that you've got all this debt, you have no savings, and your dreams ultimately get slowly crushed in front of your face.
Now that we're getting into the last part of this podcast, which is always about a new business idea, I want to talk to you about one I've had for awhile, one that I've shared with very few people. They always laugh when it ell them about it, but nobody's ever done anything with it, especially not me. If Pasha, if you're listening, you'll definitely know what this idea is. The idea is essentially centered around the payday loan vertical. Payday loans and cash advance is definitely not a new area. These shops have existed on street corners for years. They've existed online, as online websites for years. There's been affiliates for petty loan cash advance stuff for years as well. My idea was essentially running a physical location for one of these payday loan stores, and [inaudible 00:58:05] since it looks like a traditional payday loan cash advance physical store, whether it be a small building or in a strip mall.
Essentially you walk in, and there's two parts to the store. There's the front part, where the customer walks in with the entryway, and then there's a wall with a window, with you being behind the window. The second part is what actually is going on behind that wall where you're at. How most payday loan cash advance setups are set up is exactly like that. They might also have a drive-through window. Essentially somebody comes in to apply for that short-term loan. They have a credit check that goes on. They have a background check that goes on. They look to see if this person has had loans, other payday loans in the last few days. Essentially, they determine if this person can get the money. Once that's approved, essentially what happens is then a contract is filled out, an agreement is filled out, that this will be paid back through a withdrawal from their bank account at a certain rate of return, and then the person's given money.
That's a lot of work. That's a lot of risk, and the return is actually quite good. The problem is, I kind of want to reduce all that risk. I even want to reduce all the work. What I came up with was essentially having the same story with the entry front part, and then the behind the wall glass window part, where I would be at. Essentially what happens is this. When the person walks in, or the person drives up through the drive through, they're basically presented what looks like a fancy ATM machine, better known as a kiosk. It's a touchscreen kiosk, and all this kiosk does is it's programmed to go to one website and one website only. The website is my website, which happens to be an affiliate or a white labeled payday loan affiliate website. What happens is as you walk in and see this, or drive up and experience this, you, the customer, are doing all of the work. You're inputting in your name and address, all your information that's needed, phone number, possibly Social Security number.
You're essentially putting it into my website, and then my website as the affiliate goes back to the advertiser, gives them the information, and then the advertiser does all the work of checking your credit history, checking your background, checking if you had other loans out, still outstanding, and determining if you're eligible for the short-term loan. If you are eligible, then the next step is getting the money sent to your bank account directly. If you're not eligible, then you just get denied. What this does for me is, now I can have an unmanned payday loan cash advance store, or maybe I can hire somebody at minimum wage to maybe help out with technical aspects, say if the kiosk isn't working correctly, if the web page is not working correctly, they can provide some technical assistance. Essentially this store carries no money at all, so I don't have to worry about getting robbed. I don't have to worry about keeping money on hand.
I assume no risk, because I'm an affiliate, and the money goes directly to the person's bank account if they're approved. There's no work almost involved. There's no money, and I assume no risk, because I'm getting paid as an affiliate. These affiliate payouts are rather nice. The beautiful thing is, is if you do have somebody that's attending the store, if you set it up that way, you can start making note of who comes in on a regular basis, like maybe every week, or month, or two months, but you're going to have repeat customers. This is just how this industry works, and if you notice that somebody's coming back on a regular routine and getting approved for these loans because you see it happening, you can set up a flow to where if this person walks in or drives up, you actually interrupt them. You say, "Listen, I know that you've been coming here every week, every month maybe for the past five months. We'd like, instead of you using the kiosk, we'd like to offer you a loan directly."
You offer this person a loan with real money in your store, and then you can start setting up a direct rate relationship with that customer, and earning the interest or the payment off that money, and working with them directly instead of sending them to the affiliate network. What's going to end up happening is is that this person is coming back on a routine basis, and you notice that, and they're getting money, and getting approved. They obviously are a good customer. They're getting their loan. They've got at least a credit score worthy enough of repeat payday loans, which is probably not that great to begin with, but the risk is essentially low enough that they're getting approved through the affiliate network. If they're getting these loans each time they come in, then they're obviously paying off the loans in order to get the next one the next time they come in and get approved for it.
If that's the case, you can step in, do a personal relationship, a personal agreement with this person. Give them actual cash, and then be able to collect that possibly at a higher rate than the affiliate payout. You're building a relationship with select clients, select customers where pretty much all the risk has been removed because they've shown a pattern, at least with the affiliate network, that they can get approved for it, and that they pay it off, and that they keep coming in and needing money. I think there's two benefits there, definitely. The third benefit would be if this is all white label, and you're using your own website, you're collecting emails of people who need money, and you can take those emails, and send them other offers later on. Maybe later on in the day. Maybe it's on an auto responder. Maybe you send out once a month, and you're possibly sending them offers for a second payday loan. Maybe you're sending them offers for make money at home. Maybe you're sending them offers to consolidate their debt, or to reduce their insurance premiums.
You can find all kinds of offers to help people who are in need of money or have some kind of money need. You can make money off all of those emails as well. This is an idea that I've thought about for a long, long time. I've never pulled the trigger on it. I've talked to a few people. I know they haven't pulled the trigger on it, and everybody seems to love the idea and laugh at it. I don't know if that's a good thing or a bad thing, but I definitely think that there's a way to automate a payday loan and cash advance stuff away from the internet, but in a physical location and still bank on it. I know where I live, I live near a military base, and these payday loan stores are just everywhere, and they thrive not only off the people in the military, but the people who surround the area as well.
I know that these payday loans have risk. They carry money. There's some work involved, even though it's low level work, and I think that somebody could open one of these up, and possibly entirely automate it, plus cherry pick the good customers. Then on the back end, make money off all the emails as well with related offers. If anybody takes that idea, please let me know. I'd like to know if these ideas are worthwhile for people, if they're doing them, if they work out. Please just let me know, and if you all have any questions or comments, please leave them below, and I'll see you next time.
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