The Myth of Cutting Expenses – Episode 556

This transcript was auto-generated and may contain errors.

[00:01] Welcome to the Prosperity Podcast. Prosperity thinkers, welcome to the podcast. Today, we’re going to talk about the myth of cutting expenses. This comes from the book, No Worries, by Jared Dillion. Jared is a fairly well-known author in the finance space, but he’s not a financial guru, doesn’t trade for others. He worked on Wall Street. He’s a college professor, and he writes a couple of newsletters in the finance space. So kind of strange. So the premise or the point of this episode is talk about the myth of cutting expenses. Kim, first off, why does that not work? Because a race to the bottom is not winnable, and so you can only cut so much in your life without a complete overhaul, which some people have to do.

[01:03] I’ve had to do that in my life, and yet you can still only cut so much. And so trying to focus on reducing expenses is only going to get you to the bottom, from which then you better figure out a way up because there will be no more down. And why race to the bottom? It’s just the wrong direction. It’s so much more valuable to do something else. But I’ll hold on that thought if we want to tease this cutting expenses or don’t cut expenses message out a little bit more, tell us what some of his other thinking is. Yeah, absolutely. So you nailed it at the very beginning because he says the greatest lie ever told you can get rich by cutting expenses to the bone. That tees up accordingly with the episode we did about Dave Ramsey.

[01:58] And it’s not to necessarily say Dave is wrong and he’s throwing everyone to the side. There’s a time to cut expenses. We’ve both been through it. The problem is, is that if that’s the only song you sing, then it’s not going to get you to a beautiful place. So it’s the abundance side that happens. So when you’ve had people go through this, I would love to hear for you what approach you take, because obviously there’s some times where you do say, Hey, this has to be cut or maybe this has to be managed. And then there’s the abundance. So what does that look like for you? Well, I will admit that gratefully throughout my career, over 30 years of helping people, their personal finances, it is on a rare occasion

[02:45] that I get involved in somebody’s day-to-day or month to month expenses because it is such a personal area. It is such a choice. It is one made of values. There is absolutely nobody that can judge right or wrong in the space. And so because I’m a big picture person, first of all, I don’t want to get into that detail. And second of all, there are so many other better ways to spend time. And as stated, yes, I mean, there are some obvious things that if somebody is in need of cutting expenses that they should go do, but there are always other solutions in the way of increasing income, in the way of partnering, trading in the way of using a community to get the results that you need without spending the money.

[03:36] I mean, there there’s just so many different solutions. And so I believe that it is very detrimental to be overtly focused on cutting, cutting, cutting, just like I believe it’s detrimental to be overtly focused on funding that emergency fund if emergencies, emergencies, emergencies are all you ever think about or getting out of that, getting out of that, getting out of that is all you ever think about. You’re going to get more emergencies and more debt. We get what we focus on. And so it’s imperative to as quickly as possible, focus on building the opportunity fund on top of the emergency fund. It’s imperative to focus on building assets instead of getting out of debt. You know, just quick story.

[04:25] I recently saw an article about Robert Kiyosaki who has 1.2 billion with a B dollars of debt and all throughout his conversation. And he was on the conversation with Tom Willwright. It must’ve been a, a transcript of a recording of some sort. They used the words have debt, using debt, et cetera. However, the title of the article was Robert Kiyosaki is in debt. Well, there is a big difference between those words because in debt means that he had more debt than he had assets, but having debt means that he has more assets than debt. And it’s a critical distinction. And I think unfortunately our society is not very well trained in this space. As we all know, there’s very, very little financial literacy ever taught

[05:31] in the school system. And even though now it’s actually trying to be taught in the school system, so much of it is misleading. And so to bring this back full circle to what are we focused on? And if we’re focused on cutting costs, getting out of debt, building an emergency fund, that is great for a day, but then move on, expand, build assets, increase your income, get better at what you do, get another job, increase your value to the company that you are serving so that you can get paid more. I mean, there, there’s just so many, many other ways that are so much more positive in their orientation than focusing on cutting costs. You mentioned something inside of the thread about Robert and the language

[06:26] in there, and I’m going to tie it to something that’s related, but probably not quite related. And I was listening to an interview with another investor and he said, if you have a $2 million loan with the bank, you have a problem. And he’s like, you might not be able to get ahold of them. They might not treat you well. They might come after you. They might cause you problems. He goes, but if you have a $200 million loan with the bank, you have control. They have a problem. You’re going to be able to communicate with them. And so there’s a different perspective in there. Whereas, as you mentioned, someone off the street that’s not familiar, they’re going to look and say $200 million. And we look at that different.

[07:17] So how first, how is it that we look at it different and how can we start to position our financial thinking differently? Well, let’s bring up Jim Carrey’s story of writing himself. And I’m sorry, I don’t know the number. I think it was a hundred thousand, but this was a long time ago. He wrote himself. It doesn’t matter what the number is. It was a big number, a check, a physical check for that number. And so literally I think somebody could benefit from writing out the number, speaking the number, whatever that larger number is that they think is big. Multiply that times 10 and work with that number because you know, it’s interesting. You’ve got people in New York and other large cities that are normal people

[08:08] that are in relatively normal incomes with normal expenses, but they’re talking about billion dollar deals because their role is doing billion dollar deals and they’re able to roll those numbers off the top of their head, you know, off their tongue in writing without any trouble at all. Well, every single person can and should do that. It’s a great way to just expand your mind out a little bit and actually know, well, how many zeros is in a billion or what about a trillion and just really work with it so that you’re not tripped up by it. And I remember when I was brand new in the industry, you know, I’m this little 24 year old girl with his little income and this little car and this little house, and yet I had to start learning about bigger houses,

[08:55] bigger cars, bigger incomes, and I had to be okay with them. I had to be okay verbally. I had to be okay emotionally. Like I couldn’t let somebody say to me, well, I earn half a million dollars a year and let my face say, oh my gosh, you know, that’s amazing. It is amazing. And it needed to be normal. Absolutely normal. So the normal that we are looking to do is create a normal abundance around us. And the other parts to the section that we were talking about, you know, cutting expenses and now we think in abundance, that means that we start to shift our thinking because you’ve now mentioned, you know, example, 24 year old, something in the career and hearing about a half a million dollar income, that should not be something that shocks you.

[09:48] Now we look at where we’re at, and we should be looking at our upsides. So what is our upside that we’re taking? How, how do we project this abundance around us and the upside instead of saying, oh, cutting? No, we’re saying we’re creating abundance. We’re creating the upside. Help with that. Well, it’s so valuable to just know that you can do it and that we can help there are other places out there that can help because this space starts in your mind, in your brain, with your thinking. And it’s why the first principle of prosperity is to think, because if you are thinking, I cannot do this, you are correct. And so the first job is to get you thinking that you can do this. And is it going to be hard?

[10:40] Maybe, maybe not. We don’t know that either. Nevertheless, even if it’s hard work, there are so many support structures out there to help you and to help you learn and to give you the words and to give you the space to start to think more abundantly, which then enables you to act more abundantly, which then enables you to be in operation with abundance and prosperity. And I know I’ve shared this story before, you know, there are times when I have not felt that way. And I’ve gotten online and donated $25 to Kiva.org or Heifer International or whatever it is to enable me to just give first, to elevate my thinking, to get it outside of myself, because I think the more we get stuck inside ourselves, the more of a challenge we’re going to

[11:37] have about making any kind of shift. And when we can pull it outside of ourselves, then it enables us to see the bigger world out there and know K&OW that there is a solution and it starts in our minds. Yeah, absolutely. So as we are recording this episode, early-ish of the year, we’re in a couple of stages of uncertainty. And I’m just going to put it stages of uncertainty from the farmers throughout our country. They’ve had cold snaps and then they’ve had lots of wet weather and snow, and we’ve gone through all of that. Then we’ve got an election cycle year, which, you know, honestly turn off the TV and you probably won’t realize there’s that many problems, but we do have other fluctuations of inflation that’s

[12:32] happening and we’ve got fluctuations that are happening as in careers. So what I want to do, Kim, is I want to be able to look at that. And we had a previous episode on abundance and we’ve got this episode on, instead of, you know, cutting costs, we’re looking at abundance as well. I want to pull this prosperity, all of this together, so that as our listeners are gearing up and strengthening, because we’re coming into the spring of the year and the spring of finances, what’s some spring type advice that you can share? Well, I’m always so grateful that the work that we do has been the same work for 25 years, not the first five years of helping people with personal finances, but ever since. And so it is time for renewal of thought because the

[13:27] products are the same products. Products are things that you buy. The strategies are the same strategies. Strategies are things that you do. And what else in life can you say that was true 25 years ago, and that’s going to be true 25 years from now and 25 years after that and after that. And so while I love the time of renewal, it’s so important to me that we focus our renewing not on buying another product or trying a different strategy, but on focusing those tried and true traditional things that have worked for centuries. So the foundation of everybody’s personal financial space is liquidity. It’s your emergency opportunity money. That should be stored in a mutual life insurance company that offers

[14:19] a product called whole life. And you use a strategy of barring against it and paying it back with numerous episodes on that. Your next level up should be about cashflow and controlling cashflow and being focused on things that enable you to move cash around. Cash should flow. It needs to be moving. And this pretty much means not doing typical retirement plans that everybody else suggests, not doing buy and hold that so many other people practice and preach, not doing the cutting of expense approach, but instead the increasing of income approach, and I’ve become more and more clear and hopefully more and more bold in making those recommendations because they fly against what everybody else out there is talking about.

[15:16] Absolutely. Kim, you always have this ability to bring it back to the foundation. And that’s essential right now, especially with the fluctuations, the changes that are happening in our environment. So for all of you listeners, one thing that you can do is look at human nature and we’re all going to say, yes, but my situation is different because fill in the blank. I have a new job because I have a new child. I have a grandchild. I have this amount of money that I have to move. Whatever the film in the blank is, realize it’s going to come back to a principle, something that has been tried and tested over and over. So if you have one of those life events, send an email to hello at prosperity thinkers.com and get a message off to Kim.

[16:16] That’s special for this podcast. And there will be a principle or a strategy or something that showed the test of time. And then you’ll be able to sit there and go, okay, it’s not an emergency. All right. Someone else has been through this and if there’s a solution that works for you, it does. And if it doesn’t, you’ll have clarity. That’s the way that I operate. You feel the same way, Kim? Yes, clarity is very valuable and it’s something that we should be seeking and it’s not always easy to gain and sometimes another human being brainstorming with you can help create it. Perfect. So instead of chasing the bottom, cutting those expenses, instead of going for more confusion, more information, get some clarity.

[17:03] Hello at prosperity thinkers.com. And again, thank you for investing your time with us today. Thank you for listening to the prosperity podcast to take control of your money and have it work for you. Visit prosperity thinkers.com.