One-Liners on Financial Freedom – Episode 200

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[00:03] Welcome to the Prosperity Podcast, fresh alternative personal finance talk for independent thinkers who prosper outside of Wall Street. Here’s your host, best-selling author, Kim D.H. Butler and No BS Money Guy, Todd Strobel. Hey everybody, welcome back to another edition of the Prosperity Podcast. Today we have best-selling financial author, Kim Butler, and our co-host with us. This is Todd Strobel, the No BS Money Guy. We’re going to be talking about an article from the June, let’s see here, June 2017 issue of Ink Magazine where some really important people give one-line financial pieces of advice. And what we’re going to do today is take those one-line pieces of advice and compare them to what Kim Butler, with her experience, would agree, disagree, or maybe somewhere

[01:05] modify what they’re saying. Now the advantage that Kim has over these people is that she has the opportunity to have these same type of financial conversations multiple times every day with multiple people. So I would urge you to really consider this with respect, what she has to say, because she has a collection of information, not just one personal opinion. So welcome, Kim. Yes, thank you, Todd. This will be fun. I feel like it’s Twitter on a podcast. Awesome. Well, the first thought that we have in here is by a lady by the name of Toni I admit, K.O., somebody that I don’t know. But she’s the founder and the CEO of Los Angeles Sunglass Company, Perverse. And when she started the company, she had sold her previous company, NYX Cosmetics,

[02:07] to L’Oreal in 2014 for $400 million plus. So I mean, she was not a newbie by any means. But she woke up one morning to realize that she had 250,000 pair of sunglasses that she was paying tens of thousands of dollars on to store each month and there was no market to sell them. So her best piece of advice is money is at the root of every decision as long as you are the business owner. Well, I’ll agree with that. That is absolutely true. And as sad as these little one liners are, when we think about the holistic nature of money, in fact, her very statement, it’s still accurate. But I want to add something to it. And that is that money is at the root of all decisions. If you’re a human being and you live on this earth, I mean, it’s anybody.

[03:09] And we’ve often talked about how we should all really treat our personal finances like a business. We should have a balance sheet that shows assets and liabilities. We should have an income statement that shows money in and money going out. And yet so many people don’t and people often get themselves into trouble because they really don’t know the whole truth of the matter because they don’t treat their money like a business. So yeah, thumbs up to that one. We just need to add to it a little bit. Super. And in that same particular paragraph, it also talks about one of my favorite shows, which is Shark Tank and FUBU founder, Damon John. I’m not sure if you know who he is, but he is a very, very, very rich person

[03:57] who basically built his own wealth, who his mom took him to get his first credit card while he was 18 and warned him to never fall behind on the payments because this world is built upon the credit system. Yes, so accurate. And I love that his mom did that. What a great lesson to learn. You know, the physical act, of course, you know, that can all be done online these days, but it is super valuable for people, especially young people, to know that one should never get behind on credit cards. Now I have to admit, I’ve gotten behind on them. That’s not a fun thing to admit, but that’s full disclosure. And so what might also be valuable is what do you do when that happens? So maybe on another podcast, we’ll just have a whole discussion about that.

[04:47] But is that really his financial advice? Like, don’t get behind on credit cards. Well, I think his advice is, is that, you know, your personal financial statement is your reputation to the world when you go try to make a deal go through and that when you sit down across the table from somebody, the numbers that you personally have reflect in the deal you’re trying to put together. Yes. Well said. Great. I think that’s a, like I said, a great piece of advice. And, you know, and then I think on the flip side of that, there’s also purpose, you know, I mean, we look at companies like Amazon, I mean, Amazon, as far as I know, lost money for at least 20 years. And yet somehow investors knew that there was something that they were

[05:43] doing that was right somehow somewhere. Yeah. You know, it’s interesting that my husband, Todd, has dug into that a little bit and though they were quote losing money, it’s because they were reinvesting all of their profits into increasing their capacity, their efficiency, their offering base, et cetera, et cetera, et cetera. So it is an interesting thing. When you look, Amazon is definitely a case study, but an outlier one that is not the norm. And yet your points well taken. And that’s that sometimes you have to go for the long tail. Oh, I have complete respect. I mean, when you are doing something that has never done before, who do you follow? That’s right. And I mean, there are a lot of people who have done things

[06:34] that have never been done before. And I would say probably it would be pretty safe to say 90% of them burn up somewhere in the atmosphere, but the other 10% become shooting stars that light our world. Okay. Let’s go for another one. Here’s a dollars and cents. Make money before you start asking for it. The best way to validate your market is to get customers. Love it. Yeah. So for business owners, that’s a great statement and proof is in the pudding. And I think really for individuals, I would say the same thing as a young person out in the marketplace, start making some money, and then if you fill the need for help in a particular area to buy a home or get a car or what have you, then coming back to your sources, obviously typically your

[07:28] parents, you’re going to have a lot more credibility. I just know in my own personal situation, you know, my kids have savings accounts and they know to go to those savings accounts if they need something. And yet if they came to me and said, look, I have this in savings, but I want to buy this house or do this investment or whatever, and I need help. I would be a heck of a lot more interested if they were putting some of their own money in the deal. The next comment that we have comes from Glover Quinn, who’s the safety for the Detroit Lions and Quinn lived on 30% of his take home pay during his first three years in his NFL career. And he’s talking about how that made such a difference by choosing a lifestyle

[08:14] that still would be considered quite a lifestyle, but yet he didn’t fall into the competition realm where he wanted to be better than all the other NFL players, which allowed him to live nicely, but with the potential for injuries and things like that allowed him to prepare for his future. Absolutely. That is just really a demonstration of proper financial handling. And yeah, we could all just toss it off and say, oh, well, 30% of X million is, you know, piece of cake, but it doesn’t matter. He made a choice and that was to save first in order to pay himself first. Something that we’ve all heard that we should do, but many, many people don’t and particularly many people with that kind of income.

[09:05] So three cheers to that one. Okay. The next one is from Debbie Sterling, who’s the founder and CEO of Goldie Blocks, a STEM toy company geared towards girls, which I’m not familiar with, but it’s, she, and this is a quote, my then boyfriend and now husband told me the only way to give my startup a real chance to succeed would be to focus on it full time. I saved as much money as I could so that I had enough in the bank to last me an entire year and put all of my attention into Goldie blocks. Nine months later, I launched a Kickstarter campaign and raised more than $250,000 and I was finally able to give myself my first paycheck at Goldie blocks. I love that. And I think the message there is to focus, but again, listen to what she did.

[09:59] She saved first, which I just love. I think that’s so instrumental in helping us all know that when we’re going after something that we really care about, we can save. And I think the challenge for a lot of Americans is because we’re not going after something that we really care about that’s close to our hands. Instead, we’re going after this thing called retirement and it’s so far out there and we have no visualization of what that even looks like in our own lives, of course, saving or even investing is not as exciting. So that’s a great suggestion. Find something that you really care about and go after it. Go saving after it with a vengeance. And I would take that one step further in that if you did your saving properly,

[10:51] which would be in our world, probably inside a whole life insurance policy in the event that things did go wrong, you could still preserve some of your capital, couldn’t you? Absolutely. And that is something that we’ve seen our clients do numerous times. It’s wonderful. The support and the foundation that whole life insurance can provide a family if they’re struggling through late credit card payments or other things like that. All right. Our next one is from Bobby Brown, the author and founder of Bobby Brown cosmetics, and it’s when I was just getting started my career in New York. My father told me, don’t waste your time trying to stick to a budget, which I think I’ve heard you say that figure out how to make more money and

[11:41] always spend money on good food. That’s you and your husband together. Yeah, that’s pretty funny. I’d happily eat protein shakes and, you know, as long as I had some meat every now and then and veggies, I’d be good, but Todd’s friend has told me a long time ago, Todd has no food budget, but you said it well, just the idea of a budget as a general rule doesn’t work. What works so much better is save first, you know, go for 10%, 20%, even 30 or 40% if you can save that and then spend the rest and something too that my parents told me a long time ago is especially when it comes to home furnishings, spend a little bit of money on things that you sit on, sleep on, or walk on. So chairs, beds, bedding, couches, carpets, flooring, that kind of thing.

[12:39] And then don’t spend as much money on the pictures and the lamps and the, you know, other various things that go into a home. So if that’s helpful to somebody, then there you go. Awesome. Well, the next one is from Zach Paray, co-founder and CEO of the financial startup, I believe it’s Played, P-L-A-I-D. My dad told me that keeping my personal spending low would give me more flexibility than I ever imagined in my career. We spent a long time bootstrapping in the early days and have a low burn and having a low burn rate was very important. Yeah, that’s fabulous. I love that thinking because of the word freedom and future and flexibility. That is what saving does for individuals, for families, for even corporations.

[13:35] So great suggestion on his part. Fran Dunaway, co-founder and CEO of women’s clothing company, Tom Boy X. Raising money is hard. You get told no, no, no, no, so many times. But you just have to keep at it and not give up. Yeah. And keeping at it and not giving up is true on your savings environment as well, because it’s such a slow beginning that you really want to just keep at it, keep at it, keep at it and not give up. That’s a great really advice piece on so many aspects of life. I think this is really the difference between purpose and passion and a good idea. I mean, we can all hear a good idea that, wow, this is something that I think would help the world versus this is the way I was sent here to

[14:33] change the world and that gives you the ability to take the multiple nos. Yep. Well said. Joe Fernandez, co-founder of social analytics startup, Clout. Clout reportedly sold to lithium technologies for 200 million. Uh, Fernandez is also the co-founder and CEO of miscellaneous equipment, rental startup, joy mode. What made Clout hard was that we raised money at too high evaluation. I’d heard about not focusing too much on high evaluation and I thought that’s not going to happen to me. But after our first two rounds, the final round was at 200 million. It was a pressure cooker that was so high evaluation that the return our investor needs needed was really intense. Interesting. So, um, uh, I’m searching for the exact advice there.

[15:31] Help me with it. Well, they, they placed a value on their company, basically saying that I’m going to sell you a million dollar house and they’re borrowing 800 million against, uh, 800 million against a billion dollar house, let’s say, and the house appraises for 500 million. So we can just be grateful when that happens, but not rely on it. I think that goes back to our principle of prosperity that we talk about and, uh, how important cashflow is and not net worth. Um, Max Levchin, I hope I’m pronouncing his name right. He’s the PayPal co-founder, which I have an immense respect for PayPal. Um, when I was going to school in Chicago, I got one of these old school department store cards and went from getting 10% off on jeans

[16:27] to owing more than $500 and getting calls from collectors. Ultimately, I was able to pay it off, but I felt guilty throughout. And I learned that something that’s too good to be true is never a possibility in the real world. Yeah. So we have to bring up Todd Langford’s comment about if it’s too good to be true, you just need to dig a little bit deeper and had he done that, he might’ve figured out some of the detriments of the credit card game. And yet somehow it seems like so many people have to go through that learning curve personally, even if they’re told it by other people. So once again, yes, stay current on your credit cards. Don’t have too many. And I know that there’s a lot of businesses that have been built on

[17:13] credit cards that would have fallen into the category of too many. But, um, as a general rule of thumb, you know, one for personal, one for business and call it good. And I’m not a fan of the store cards at all. I think it’s much more beneficial just to have some generic ones that work everywhere. But, um, there is definitely a temptation there with the save 10 or 20% on your purchase when you sign up. Well, I have to add the never to never, um, the too good to be true part. And that’s that I cannot believe, excuse me, how many times I’ve been in a situation where I needed to wait 45 minutes to an hour for a cab and pay $50, or I could wait five minutes for an Uber and pay $15. Yep. Now that’s probably too good to be true, but I ended up where I was going

[18:11] before the other cab would have even gotten there, so it had to be true. Right. Right. And you dug deeper and figured it out. Uh, Jessica Ma co-founder and CEO of accounting software company in Denero. When in Denero ran out of funding and I had to lay off our staff several years ago, I learned to never read or believe your own headlines. Good or bad. I got drunk off our press and we grew and spent accordingly. Big mistake. Yeah. So how do we apply that to our personal lives? I think it goes back to the, uh, trying to keep up with the Jones’s idea and how irrelevant that is. And even just adopting, I guess, what’s called essentialism, you know, but sure by things, but by what’s essential, you know, the, the theory

[19:08] behind the, Oh, Emma dog is contributing. Here’s our mascot. Emma dog, the theory behind the, Oh, you know, this 10th pair of jeans is going to catapult me into social acceptance is not good. So, uh, I don’t know that folks need to go as far as mentalism minimalism. I realize some people will, and that’s fine. Um, but, but I love that term essentialism, the idea that by only what you love and what is essential. And, um, the best thing is that each person determines that on their own. And as you brought up earlier, okay. Then couples have to decide how to come together on that. But that’s a lifelong process that I know Todd and I are always working on. The way I see this really is that, you know, when you come out of college

[20:02] and you get into a management training program or something, you’re usually kind of at the bottom and you go through a lot of work. And then all of a sudden that work starts paying off and you start anticipating making 20, 30, 40% next year more than you made this year. And eventually that curve runs out. And if your lifestyle depends on continuing on making nearly twice as much as you did this year, next year to pay for what you already bought, you’re in trouble. Well said. Um, another comment from Mark Cuban, who just said from my dad, don’t use credit cards. There you go. So, so now we have the complete opposite and you know, there’s just a efficiency factor around credit cards. So fine. Use them, pay them off every month.

[20:59] That’s in my mind, not using them. Let’s see what we’ve got here. You know, while you’re looking there, Todd, one of the things I think is interesting about all these statements is two things, actually. The first is that they are all, as we’ve identified, just, you know, short little one-liners when the subject needs at least 20 one-liners. But the second thing is that all of these people, I think most Americans would consider wealthy, the people that are listed in this article. And it does always interest me how out of touch and how quickly out of touch somebody can get when wealth is very, very prevalent compared to just regular people. And we certainly have clients that would consider themselves wealthy.

[21:51] I mean that, you know, that definition, you can be wealthy at a $2,000 a month income if you’ve handled your debt properly and you feel like you have a lot of freedom with your money and you have a low cost lifestyle and you’re doing what you want to do. But my challenge with a lot of these people is that they aren’t the general American public that we’re interested in helping. And so their comments, though some of them relate to credit cards and that kind of thing, are really sometimes so out of the box. And I found the same thing with Tony Robbins books. You know, in his books, he talks about capital gains rate at 25%. You don’t hit that till 400 and something thousand of income. So, you know, sometimes their connection to the person, the basic

[22:39] person’s day-to-day environment is so off track that I question the advice just because as I’ve indicated, it’s coming from a completely different financial place. Awesome. And I think what I’m going to do is I’m going to skip to the last one here, cause I think it’s really good and remind everybody that this came from the June, 2017 issue of ink magazine. So you can go read them all if you want to. But this last one is from Caitlin Gleason, founder and CEO of healthcare tech startup eligible. I buckled down to get out of debt after reading this in Benjamin Franklin’s autobiography. Necessity never made a good bargain. Yes. Yes. That’s the look how much money I saved when we go to the store and

[23:33] buy things on sale or with coupons or what have you. And that’s the wrong verb for that activity without a doubt. Super. Well, Kim, for our listeners, I know we have some more information that you always like to share. And I’d like to have you an opportunity to present that to our listeners. Absolutely. We have a fun ebook called financial planning has failed. It talks about the idea around budgeting and some of our thoughts they’re available in audio format, just for our listeners. And there’s a PDF as well. If you want to have a look, see at the graphs that are referenced, that is available at partners. Number four, prosperity.com slash ebook. Super. Well, I encourage our listeners to keep sending in your questions.

[24:21] Um, we appreciate each and every comment and each and every question. Um, and if you notice, we will address them. There’s no subject that, uh, we are afraid to address on the air. And we encourage you to keep sending those. Again, this is no BS money guide, Todd Strobel, special thanks to Kim Butler and special thanks to our listeners as well. Take care of everybody. Thank you for listening to the prosperity podcast to take control of your money and have it work for you. Visit us at partners for prosperity.com. If you liked this episode, make sure you subscribe and leave a review.