How to Expand Your Money Thinking with Chris Harder

Mel Abraham [00:00:06]:

This is The Affluent Entrepreneur Show for entrepreneurs that want to operate at a high level and achieve financial liberation. I'm your host, Mel Abraham, and I'll be sharing with you what it takes to create success beyond wealth so you can have a richer, more fulfilling lifestyle. In this show, you'll learn how business and money intersect so you can scale your business, us, scale your money and scale your life while creating a deeper impact and living with complete freedom, because that's what it really means to be an athlete. Entrepreneur what's the difference between those that.

Mel Abraham [00:00:43]:

Actually build wealth no matter what their circumstances are and those that don't?

Mel Abraham [00:00:48]:

Well, in this episode, I'm having a special conversation with a dear friend of.

Mel Abraham [00:00:52]:

Mine, Chris Harder, and he's asking me.

Mel Abraham [00:00:54]:

Some questions about how do you bring an expansive mindset to your wealth game?

Mel Abraham [00:00:59]:

Instead of cut, cut, cut expenses and.

Mel Abraham [00:01:03]:

Live on beans and rice, how do you bring something bigger to it? And it's a great conversation that we.

Mel Abraham [00:01:10]:

Had for his show, but what I.

Mel Abraham [00:01:12]:

Decided to do is air it on my show because it was such a good conversation. We talked about frameworks, we talked about steps, we talked about the mistakes, we.

Mel Abraham [00:01:19]:

Talked about some of the math, we.

Mel Abraham [00:01:21]:

Talked about the pathway to get there. So I hope that you enjoy this episode. It's a special one.

Mel Abraham [00:01:27]:

I'm bringing Chris Harder and me to you.

Mel Abraham [00:01:30]:

Welcome to this episode of the affluent entrepreneur show.

Chris Harder [00:01:32]:

Here's what I want to make sure that we are catching their attention for today.

Chris Harder [00:01:36]:

We're going to talk about how to.

Chris Harder [00:01:38]:

Build a wealthy lifestyle using less money.

Chris Harder [00:01:40]:

Than you think, right?

Chris Harder [00:01:41]:

That's kind of the theme. Like, people, they think you have to have a windfall, they think you have to sell a company. They think you have to have some.

Chris Harder [00:01:46]:

Big life event, but you don't.

Chris Harder [00:01:48]:

You just have to have some planning and some common sense, and someone has.

Chris Harder [00:01:50]:

To show you a path.

Chris Harder [00:01:52]:

And that's what we're going to kind of illuminate today, but we're going to do it mainly for entrepreneurs and for solopreneurs. Now, what we're going to talk about.

Chris Harder [00:02:01]:

What Mel's going to teach today is applicable to anybody.

Chris Harder [00:02:05]:

So if you have a regular job, if you have a w two job, if you're not a solopreneur, an entrepreneur, don't worry, this still applies to you. But we're really leaning into entrepreneurs and solopreneurs with some of the things that we say for a specific reason. Do you mind sharing that reason?

Chris Harder [00:02:19]:

Mel?

Mel Abraham [00:02:20]:

Yeah. Here's what I found out. Found with all entrepreneurs. So you've got two sides of the equation. Let's just break it down to the basics, okay? To build wealth is no different than trying to lose weight.

Mel Abraham [00:02:32]:

You eat less, move more. Okay? To build wealth, make more, spend less.

Mel Abraham [00:02:39]:

The challenge is that the majority of the advice out there and the majority of things that people are trying to do is to sit back and say, how do I cut, cut, cut in order to have more money so I.

Mel Abraham [00:02:52]:

Can build my wealth? And I hate to tell you, I.

Mel Abraham [00:02:54]:

Think that the reality is that you can't cut yourself to wealth. You have to grow yourself to wealth. And the beautiful thing about entrepreneurs is that they actually can affect both parts of the equation, the expense side and the income side.

Mel Abraham [00:03:11]:

Easier.

Mel Abraham [00:03:11]:

Not that you can't if you're an employee, it's just easier. And so now we can go back and say we need more income, so let's figure out the way to make that more income, which then can accelerate our path to financial freedom.

Mel Abraham [00:03:25]:

Now, as an employee, that might be limited.

Mel Abraham [00:03:28]:

Although I think even as an employee, we ought to be having side gigs and side hustles and multiple streams of income as a security element to knowing.

Mel Abraham [00:03:38]:

That we're not just relying on one stream.

Chris Harder [00:03:41]:

So we're really speaking to solopreneurs and entrepreneurs. Mel is a very successful accountant by background. It's not like he is an accountant today. He's not sitting there doing somebody's taxes, but his background. He owned a huge accounting agency back in the day, and that's always been his trade in the past. And today he's just trying to help as many people as possible realize, wait, you don't need a big windfall.

Chris Harder [00:04:03]:

You don't need a big win. You can rhythmically will yourself into a wealthy lifestyle.

Chris Harder [00:04:10]:

So, Mel, do me a favor. I want you to frame this for.

Chris Harder [00:04:13]:

Somebody who says, I work a nine.

Chris Harder [00:04:16]:

To five or here I am a.

Chris Harder [00:04:18]:

Solopreneur and I work hard, but I'm barely making ends meet.

Chris Harder [00:04:23]:

I have about as much month as I do money. How can somebody like me start to build wealth? Why don't you speak to the person who's going to count themselves out before we speak to the people that have.

Chris Harder [00:04:31]:

A little extra to start using?

Mel Abraham [00:04:34]:

I think the first thing that we.

Mel Abraham [00:04:36]:

Need to understand is actually wealth creation.

Mel Abraham [00:04:38]:

Has absolutely nothing to do with money.

Mel Abraham [00:04:41]:

As much as people will say it's money money, it has nothing to do with money. And in fact, no matter where you are, no matter what your circumstances are, I firmly believe that you don't have money issues.

Chris Harder [00:04:51]:

Interesting.

Mel Abraham [00:04:52]:

Here's why I think you have money symptoms.

Mel Abraham [00:04:55]:

They're symptoms of the behaviors, the decisions.

Mel Abraham [00:04:58]:

And the choices you made in the past.

Mel Abraham [00:05:01]:

And that's confronting for a lot of.

Mel Abraham [00:05:03]:

People because they go, wait a second.

Mel Abraham [00:05:05]:

I got to take responsibility.

Mel Abraham [00:05:07]:

But here's the empowering part. If they're truly a symptom of choices I've made and decisions I make and.

Mel Abraham [00:05:15]:

My behaviors, all I got to do.

Mel Abraham [00:05:17]:

Is change them and I change the outcome.

Chris Harder [00:05:20]:

Damn, that hits.

Chris Harder [00:05:21]:

People don't want to accept, wait a minute. What do you mean money symptoms? You're telling me these are just symptoms from decisions that I made in the past? From a lack of action or taking the wrong actions. I've put myself here. It's not that society is against me. It's not that wages are too low. It's not that inflation is too high. You're telling me it's me and this is my fault? That's a tough not to swallow, buddy.

Mel Abraham [00:05:42]:

So first things first. I tell you this not to take.

Mel Abraham [00:05:45]:

Blame, but to take responsibility, okay?

Mel Abraham [00:05:49]:

And they're very different, because when I look at responsibility, that also means I have the ability to respond versus blame, which is just getting the big stick.

Mel Abraham [00:05:58]:

Out and beating yourself up. And I lived this.

Mel Abraham [00:06:02]:

So in 2004, I got involved in an investment. At least that's what it was presented.

Mel Abraham [00:06:07]:

To me as, an investment.

Mel Abraham [00:06:10]:

And by 2005, I figured out Ponzi scheme.

Mel Abraham [00:06:15]:

Here's a financial guy like me that actually would be hired to put people like him in jail to testify.

Mel Abraham [00:06:24]:

And I got taken literally, wiped out.

Mel Abraham [00:06:27]:

One third of my net worth.

Chris Harder [00:06:30]:

Wow.

Mel Abraham [00:06:31]:

Between me and two buddies, we lost.

Mel Abraham [00:06:33]:

Over four and a half million bucks.

Chris Harder [00:06:35]:

Okay?

Mel Abraham [00:06:36]:

So I'm not exempt from bad choices.

Mel Abraham [00:06:40]:

I'm not exempt from bad decisions. I think that I probably lost more.

Mel Abraham [00:06:44]:

Money than some people make in a lifetime.

Mel Abraham [00:06:46]:

What we need to look at is.

Mel Abraham [00:06:49]:

To say, my current circumstances are not the destination. They just happen to be my current circumstances.

Mel Abraham [00:06:57]:

And it wasn't until I sat back.

Mel Abraham [00:06:59]:

And asked myself the question, what did.

Mel Abraham [00:07:02]:

I do to contribute to finding myself?

Mel Abraham [00:07:06]:

Here the rules.

Mel Abraham [00:07:07]:

I ignored the voices. I ignored the criteria that I didn't look at the due diligence. I didn't do all those things.

Mel Abraham [00:07:14]:

That's my responsibility.

Mel Abraham [00:07:16]:

Now, granted, the guy was a con.

Mel Abraham [00:07:18]:

He was a thief.

Mel Abraham [00:07:19]:

But there was some things there that I had to look at and say, I need to shoulder that burden.

Mel Abraham [00:07:25]:

And when I shoulder that burden, not.

Mel Abraham [00:07:27]:

From a blame standpoint, from a responsibility standpoint, then I have the power to.

Mel Abraham [00:07:32]:

Extract lessons from it that allow me to rebuild. And so 18 months from that point, not only did I recover what was lost, but we surpassed it by three times.

Chris Harder [00:07:46]:

Dang. I love that.

Chris Harder [00:07:47]:

Because it took responsibility.

Chris Harder [00:07:48]:

You said, all right, fine. I see where I put myself here.

Chris Harder [00:07:51]:

But if I can put myself here, it means I can put myself where.

Chris Harder [00:07:53]:

I want to go.

Chris Harder [00:07:54]:

So that radical responsibility can be a tough pill to swallow at first, but it can also be a very empowering pill to swallow going forward. You have something called the wealth priority ladder. I think this would help to start position people into why they can recover.

Chris Harder [00:08:11]:

From any decisions that they've made, no matter what age they are, and still.

Chris Harder [00:08:16]:

End up on the positive side of a financial life that they want to live. Why don't you start walking us through.

Chris Harder [00:08:21]:

This a little bit?

Mel Abraham [00:08:23]:

What this is, is the way I look at money. When you get money, people will ask.

Mel Abraham [00:08:28]:

Well, what do I do with it great.

Mel Abraham [00:08:29]:

I'm making money. What do I do first? What do I do second? What do I do? Third. And so this is where we sit back and say, all right, what are.

Mel Abraham [00:08:36]:

The priorities to build wealth? And I think the first thing so.

Mel Abraham [00:08:40]:

We look at it, and I have six different well, actually seven different levels.

Mel Abraham [00:08:45]:

That we go through in here.

Mel Abraham [00:08:47]:

You might sit back and go, oh.

Mel Abraham [00:08:48]:

It'S like Dave Ramsey's baby steps.

Mel Abraham [00:08:51]:

And I love Dave and the work he's done, and he makes a huge.

Mel Abraham [00:08:55]:

Impact in this world. Okay?

Mel Abraham [00:08:57]:

But it's very different than Dave's steps because Dave is spending time helping people.

Mel Abraham [00:09:02]:

Dig themselves out of a hole.

Mel Abraham [00:09:04]:

Most of the people are sitting back and saying, I'm in a hole.

Mel Abraham [00:09:07]:

How do I get out?

Mel Abraham [00:09:09]:

So the way they're doing it is, let's cut things. I want you to come at it from an expansive standpoint. The way I want you to look at your money is not how to dig it out of a hole. Now, we can help people do that.

Mel Abraham [00:09:22]:

And there's principles to do that, but.

Mel Abraham [00:09:24]:

This is really about you building your mountain. This is about building your wealth. This is about building a life that's meaningful, that gives you the freedom to.

Mel Abraham [00:09:33]:

Have choice in life.

Chris Harder [00:09:35]:

I love Dave.

Chris Harder [00:09:36]:

Obviously, number one financial show in the world and a lot of great advice. You can't poke holes in the fact that he is legit. But the thing that I've never been able to resonate with is this cut back, cut back, cut back, beans and rice mentality that he promotes no matter.

Chris Harder [00:09:50]:

What situation someone presents to him, instead.

Chris Harder [00:09:53]:

Of teaching people to get bigger than the financial problem in front of them, right? And it's a dangerous mindset, and it's.

Chris Harder [00:09:59]:

A dangerous default to build.

Chris Harder [00:10:01]:

You don't want to build a default of, oh, something happened.

Chris Harder [00:10:05]:

What else can I get rid of?

Chris Harder [00:10:06]:

Oh, something else happened. Oh, what else can I strip myself of? Oh, here's another one of life's things happened. What else can I cut back on? Because, Priest, when you run out of things to cut back on, and you.

Chris Harder [00:10:16]:

Train yourself to say, how do I get smaller?

Chris Harder [00:10:20]:

But, Mel, what you do and what.

Chris Harder [00:10:22]:

I've always been a fan of is training yourself, go, how do I get.

Chris Harder [00:10:26]:

Bigger than the financial challenge in front of me? And that could be a real challenge, like, oh, got these medical bills. How do I get bigger than the challenge? Or it could be like, hey, I've got this thing I want to invest in. How do I get bigger than that challenge? So it doesn't matter if it's negative challenger or positive challenge in front of you. When you have a financial challenge in front of you, instead of building this muscle and this default of getting smaller and smaller and smaller, you should be building the muscle and the default of OOH, how do I get bigger and then how do I get even bigger and how do I get even bigger? Until you're so big and so strong that nothing that life throws at you.

Chris Harder [00:10:54]:

Financially will really phase you anymore.

Mel Abraham [00:10:56]:

You're so wrong point.

Mel Abraham [00:10:57]:

It's the difference between looking at something.

Mel Abraham [00:10:59]:

And saying, god, I wish I could afford that, and saying, how can I make it affordable?

Chris Harder [00:11:06]:

Yeah, I need that. How can I make it happen? Yeah. I love it. Okay, so continue on.

Mel Abraham [00:11:12]:

The first phase is, I want people.

Mel Abraham [00:11:14]:

To have breathing room.

Mel Abraham [00:11:15]:

So the first thing I want people to do is get at least $1,500 or one month's expenses in a high yield cash account. This isn't an emergency fund. This is literally I don't have to go break the glass. I don't have to go into debt if the transmission breaks. This is simply to sit back and say, how do I make sure I have that? The one way that I'll have people.

Mel Abraham [00:11:36]:

Do this is that they sit back.

Mel Abraham [00:11:39]:

And say, well, how do I get the $1,500 in my one month's expenses?

Mel Abraham [00:11:42]:

Well, I'm betting, like, if I went right behind me and looked at all.

Mel Abraham [00:11:47]:

The technology I got sitting in there that I'm not using, I'm putting that on Facebook Marketplace.

Mel Abraham [00:11:53]:

I can come up with $1,500.

Mel Abraham [00:11:56]:

It is a one time thing that just gives you some breathing room. So now we can sit back and.

Mel Abraham [00:12:02]:

Say, now let's look at the rest of it. Because I know that for the most.

Mel Abraham [00:12:06]:

Part, if there's a medical issue, I've got deductibles covered.

Mel Abraham [00:12:09]:

If there's a car issue, I've got.

Mel Abraham [00:12:11]:

That covered, for the most part, without going deeper into debt. So that's the first stage is to sit back and say, let me get.

Mel Abraham [00:12:18]:

My comfort fund in place. $1,500 or one month's expenses.

Chris Harder [00:12:23]:

Okay.

Chris Harder [00:12:23]:

And is it whichever is greater? $1,500.01 month?

Chris Harder [00:12:26]:

Whatever is greater.

Mel Abraham [00:12:26]:

Whichever is greater.

Chris Harder [00:12:28]:

So if somebody has one month of expenses of $4,500, they need to get bigger than the problem.

Chris Harder [00:12:33]:

Right.

Chris Harder [00:12:33]:

We're talking about growing, not shrinking, and they need to get radical and find.

Chris Harder [00:12:36]:

A way I got to go find.

Chris Harder [00:12:38]:

A way to create $4,500 and put that into a high yield savings account.

Chris Harder [00:12:41]:

Yes.

Mel Abraham [00:12:42]:

And now you've got that comfort fund in place. And now we can tackle the next phase, which is where we're actually looking.

Mel Abraham [00:12:49]:

At, do I have consumer debt, and.

Mel Abraham [00:12:53]:

Do I have what other people call emergency fund?

Mel Abraham [00:12:56]:

I call it peace of mind fund. And the reason I use Peace of.

Mel Abraham [00:12:59]:

Mind fund is when I have the right amount in there, I didn't have peace of mind.

Chris Harder [00:13:04]:

I'm okay.

Mel Abraham [00:13:04]:

The market went down 20%.

Chris Harder [00:13:07]:

I'm fine.

Mel Abraham [00:13:09]:

When 2022 hit, we had a 22% decline.

Mel Abraham [00:13:12]:

It didn't matter to me, and I.

Mel Abraham [00:13:15]:

Could stay in the game. We've had an increase of, I don't know, 16% this year so far.

Mel Abraham [00:13:20]:

But here's where the difference is. A lot of people will say, Get out of debt first, then worry about.

Mel Abraham [00:13:28]:

Emergency fund and investing.

Mel Abraham [00:13:30]:

I think it's a mistake.

Chris Harder [00:13:32]:

This is where you differ from Dave, so keep going.

Mel Abraham [00:13:34]:

So I think it's a mistake because.

Mel Abraham [00:13:37]:

Debt management is and I want you out of debt.

Mel Abraham [00:13:41]:

But debt management is a different muscle.

Mel Abraham [00:13:43]:

Group than wealth creation. And here's the other thing we know. The sooner we start investing, the sooner.

Mel Abraham [00:13:52]:

We get in the game, the more we have time on our side. Because there's one thing that no matter.

Mel Abraham [00:14:00]:

Where anyone starts, that all of us.

Mel Abraham [00:14:03]:

Have to pass through.

Mel Abraham [00:14:04]:

If we think about the trajectory of wealth creation, it starts off really flat and then it goes up in a hockey stick. And that flat zone is what I call the wealth flat line.

Chris Harder [00:14:17]:

Okay?

Mel Abraham [00:14:18]:

So when you first start putting money away and you may have experienced it, you're putting money in your four hundred and one K. You put it in your IRA, you put it in your brokerage account, and you're putting $1,000 here, $500 there. And then you look at it three.

Mel Abraham [00:14:30]:

Years down the road and you go, I made $67.

Mel Abraham [00:14:33]:

It didn't really grow much.

Chris Harder [00:14:35]:

Yeah.

Mel Abraham [00:14:35]:

And there's this zone in there where it doesn't really grow much because it hasn't reached critical mass.

Mel Abraham [00:14:43]:

And that's what I call the flatline zone.

Mel Abraham [00:14:46]:

This is the dangerous place because people get impatient. People look at it and say, I just made $67. Screw it, this doesn't work.

Mel Abraham [00:14:53]:

And what do they do?

Mel Abraham [00:14:54]:

They pull the money out.

Chris Harder [00:14:56]:

They quit.

Chris Harder [00:14:57]:

People told me to invest in this and it's not growing. Screw it, I need that money to.

Chris Harder [00:15:01]:

Go pay off my credit card.

Mel Abraham [00:15:02]:

Without a doubt.

Mel Abraham [00:15:04]:

What happens is that that puts you right back to the starting line. And so when you start investing again, you actually have to start all over again.

Mel Abraham [00:15:13]:

The only way to eat up that flatline is time.

Mel Abraham [00:15:17]:

So you got to power through.

Chris Harder [00:15:18]:

You can't get tempted by what would feel good. Yeah.

Mel Abraham [00:15:21]:

Let me ask you this.

Chris Harder [00:15:22]:

So many people would say, hey, you got to pay off that 20% credit card instead of making 8% on your money because that's a delta of 12% working against you. How does that reconcile in the plan of debt management over debt elimination?

Mel Abraham [00:15:36]:

In the beginning, mathematically, yes.

Mel Abraham [00:15:39]:

You would sit back and say, I'm going to pay the 20% credit card off first.

Mel Abraham [00:15:44]:

The problem for me is that when.

Mel Abraham [00:15:48]:

You do that, you are stalling out, putting any money away, and you're not creating the wealth creation behaviors. Yes, you're paying off debt, which is another behavior you want, but we're not taking care of building the muscle. So even if now what I haven't.

Mel Abraham [00:16:05]:

Said is that you split it equally.

Mel Abraham [00:16:08]:

You may not split it equally. You might sit back and say, I'm going to put 75% towards my debt and 25% towards my Peace of mind fund and my investing.

Mel Abraham [00:16:17]:

That's fine.

Mel Abraham [00:16:18]:

Just know that that's what you're doing is you're doing both at the same time. Because I don't really care, from a.

Mel Abraham [00:16:26]:

Wealth standpoint, if we're putting $5 away or $105 away.

Mel Abraham [00:16:32]:

What I care is the muscle is getting moved.

Chris Harder [00:16:34]:

Okay.

Chris Harder [00:16:35]:

This is more about building the muscle, then.

Mel Abraham [00:16:36]:

Yes, it is.

Chris Harder [00:16:37]:

Okay.

Chris Harder [00:16:38]:

All right. Because mathematically, people can poke a little hole in it, but from a, hey, when are you going to start building this muscle, then? If you wait till all your debts paid off, when are you going to start building this muscle, and when are you going to start getting on board of this power of compounding interest?

Mel Abraham [00:16:52]:

Here's the other way to look at it.

Mel Abraham [00:16:54]:

If I'm 20 years old, every dollar.

Mel Abraham [00:16:57]:

I put away at 20 years old.

Mel Abraham [00:17:00]:

Will turn into $88 by the time I'm 65.

Chris Harder [00:17:04]:

Wow.

Chris Harder [00:17:04]:

Can you explain to people why real quick?

Mel Abraham [00:17:06]:

Because of the power of compounding.

Chris Harder [00:17:08]:

Listen to what he said.

Chris Harder [00:17:10]:

Every dollar you can put away at 20 turns into 88 when you're 65.

Chris Harder [00:17:14]:

Yeah, but let's break it down.

Chris Harder [00:17:16]:

So rule 72 says take whatever your return on investment is, divide it into 72, and that's how many years your.

Chris Harder [00:17:21]:

Money will double, right? Yes.

Chris Harder [00:17:22]:

You're basically saying a dollar turns into two, into four, into eight, into 16, into 32, into 64, into 128 and so on.

Chris Harder [00:17:31]:

Yeah, that's how we get there.

Mel Abraham [00:17:33]:

Exactly. Now let's play this out, because this.

Mel Abraham [00:17:38]:

Is where you start to realize, if I delay putting the dollar in at.

Mel Abraham [00:17:42]:

20 and wait till 30, it's still a good number.

Mel Abraham [00:17:46]:

But it's not 88. It'll turn into $23.

Chris Harder [00:17:50]:

Whoa.

Chris Harder [00:17:51]:

That's a difference.

Mel Abraham [00:17:52]:

Waiting at ten years, 88 times to 23 times.

Chris Harder [00:17:56]:

Let that sink in, folks. And this doesn't matter what age. You don't have to be 20 for this to have a wow factor on you. The point is, go ahead, wait five years, wait ten years. Look at the difference in multiples from 88 to 23.

Mel Abraham [00:18:09]:

So now I look at it and say, if I'm paying a little bit of money in and extending a little bit of the debt payoff, but I'm getting an $88 investment versus a $23.

Mel Abraham [00:18:21]:

Investment, I'm going to do that all day long.

Mel Abraham [00:18:24]:

That's one of the reasons that I.

Mel Abraham [00:18:26]:

Kind of look at it the way I do.

Chris Harder [00:18:28]:

Not only that, Mel. When you're paying off a debt, you're.

Chris Harder [00:18:32]:

Paying on a balance that's declining, or when you're paying a percentage, you're paying.

Chris Harder [00:18:35]:

On a balance that's declining.

Chris Harder [00:18:38]:

When you are putting money into a.

Chris Harder [00:18:40]:

Compounding investment fund, you're earning interest on.

Chris Harder [00:18:43]:

An amount that is compounding that's getting larger.

Mel Abraham [00:18:45]:

Yes.

Chris Harder [00:18:46]:

So it's not as simple of an exchange of, well, I better get rid.

Chris Harder [00:18:49]:

Of the 20% while I'm earning instead of earning 10%. It's not that simple.

Chris Harder [00:18:53]:

It's because one is a snowball that is melting and the other is a snowball that is growing in a snowstorm.

Chris Harder [00:19:00]:

And you want to be able to.

Mel Abraham [00:19:01]:

Put that power we get momentum with.

Mel Abraham [00:19:05]:

Our money as it grows.

Chris Harder [00:19:07]:

So what if you're hearing this?

Chris Harder [00:19:08]:

You're like, Well, I'm 40. I'm 40, and I have made the bad decisions. I accept the responsibility.

Chris Harder [00:19:13]:

It's too late for me. What do you say to that person?

Mel Abraham [00:19:16]:

Oh, God, I hear this all the time.

Mel Abraham [00:19:18]:

So here's the thing. What you did in the past is what you did in the past, we can't change it.

Mel Abraham [00:19:26]:

The next best time to decide to take control of your financial destiny is today.

Chris Harder [00:19:32]:

Yeah.

Mel Abraham [00:19:32]:

And so even if you're 40, even if you're 50, at 50 years old.

Mel Abraham [00:19:39]:

In today's world, you've still got two.

Mel Abraham [00:19:41]:

Decades ahead of you, okay?

Mel Abraham [00:19:44]:

So the real question is, what can I do in that time?

Mel Abraham [00:19:48]:

Because let's say that we set a number.

Mel Abraham [00:19:52]:

We say, I want to have $2.

Mel Abraham [00:19:53]:

Million and I'm 40 years old. And you go, well, I'm too late.

Mel Abraham [00:19:58]:

So do you not try?

Mel Abraham [00:19:59]:

Because aren't we still better off?

Mel Abraham [00:20:01]:

If I got to a million two.

Mel Abraham [00:20:03]:

Instead of zero amen.

Mel Abraham [00:20:06]:

I would rather get 60% of the way there than 0% of the way there. So there's no reason and there's no age to ever stop trying.

Chris Harder [00:20:15]:

And I mean, using a simple example.

Chris Harder [00:20:17]:

If some start at 40, by the.

Chris Harder [00:20:19]:

Time they're 68, based on average returns, their money would have doubled four times. So there's two things at play here. Your money could still double four times.

Chris Harder [00:20:27]:

By the time you're 68.

Chris Harder [00:20:29]:

That means one turns into two into four into eight.

Chris Harder [00:20:32]:

Or that might mean ten grand turns.

Chris Harder [00:20:33]:

At 80, or it might mean 100 grand turns at 800 grand, right?

Chris Harder [00:20:37]:

Yeah.

Chris Harder [00:20:37]:

So that's point number one.

Chris Harder [00:20:38]:

Point number two.

Chris Harder [00:20:39]:

This is where you say, we're speaking to solopreneurs and entrepreneurs specifically because they.

Chris Harder [00:20:44]:

Can get a bigger shovel.

Chris Harder [00:20:46]:

They have the muscles and the talent and the skill and the ability to say, okay, I'm making $8,000 a month right now, barely making ends meet, but dang it, if I just made an extra $2,000 a month by creating one more widget, one more thing, one more service, one more whatever, and I didn't touch it.

Chris Harder [00:21:04]:

Other than that was my investment snowball. Not $2,000 a month for that 28 years plus the power of compounding.

Chris Harder [00:21:13]:

Now, we're talking about some real money.

Mel Abraham [00:21:15]:

Here, some real big money. I think that's the beauty of being.

Mel Abraham [00:21:20]:

An entrepreneur, is you have the opportunity to adjust it. You have the opportunity to look back.

Mel Abraham [00:21:24]:

And say, all right, I'm not going.

Mel Abraham [00:21:26]:

To buy something until I create an.

Mel Abraham [00:21:29]:

Income stream that actually supports it.

Mel Abraham [00:21:32]:

You mentioned about where we live. We live in a nice house, and yeah, it costs to live here.

Mel Abraham [00:21:38]:

But I look and I go, when.

Mel Abraham [00:21:40]:

We did it, we looked at it and says, what's the machine we have in place? And will it support it not going into debt, not going into the hole every month? So we looked at it from the perspective of that whole perspective of how.

Mel Abraham [00:21:54]:

Can I make it affordable?

Chris Harder [00:21:56]:

Yes.

Chris Harder [00:21:56]:

Is this decision I'm making affordable based.

Chris Harder [00:21:58]:

On my future goals?

Chris Harder [00:22:00]:

So let's talk about some sacrifice. You got some great examples that you and I have chatted about in the past, real life stories, right? Kid that bought a watch, woman that wanted an office, things like that.

Chris Harder [00:22:11]:

And you showing them, wait, that decision wasn't blank dollars.

Chris Harder [00:22:16]:

That decision was this much. Walk us through some of these examples, because whether you're 20 or whether you're 40 or whether you're 50, these hit. Yeah.

Mel Abraham [00:22:24]:

So the first one is so I get my haircut by a 23 year old kid, and he knows what I do. So we're constantly talking about money, investing and all that stuff. So I'm sitting in his chair, and he looks at me.

Mel Abraham [00:22:35]:

He says, hey, man, one of my best friends just bought a $5,000 watch. And I looked at him.

Chris Harder [00:22:40]:

I go, really?

Mel Abraham [00:22:41]:

He said yeah. Now you and I are watch dudes.

Mel Abraham [00:22:44]:

Okay, I get it.

Mel Abraham [00:22:45]:

But at 22 years old, I said, Is he making a lot of money? He says no. He's 22.

Mel Abraham [00:22:52]:

He's not making any money. And I thought I said, what made him do it? He said, well, his budies thought it.

Mel Abraham [00:22:59]:

Was you know, we all thought it.

Mel Abraham [00:23:00]:

Was a cool watch, so he did it because we thought it was cool. I said, all right, so let's do some math. Remember I said earlier that if you.

Mel Abraham [00:23:08]:

Put money away in your twenty s eighty eight dollars. I said, So he spent $5,000 on a watch. Had he invested that by the time he's 65, it would be $400,000. He spent $5,000 to impress a bunch of dudes that probably aren't in his world in three years. And I look at it as he's.

Mel Abraham [00:23:28]:

Foregone $400,000 out of his financial future.

Chris Harder [00:23:33]:

Wow. That's not a $5,000 watch. It's a $400,000 watch.

Mel Abraham [00:23:38]:

It is, and I don't want people.

Mel Abraham [00:23:40]:

To take away well, Mel saying not to spend. I actually am not someone that will ever tell someone well, not very few.

Mel Abraham [00:23:46]:

Times will I tell someone not to spend it.

Mel Abraham [00:23:49]:

All I'm saying is, if you're going to spend, make it intentional, make it.

Mel Abraham [00:23:53]:

Conscious, and be completely aware of what the overall cost is, because every money.

Mel Abraham [00:24:00]:

Decision we make today should be in service of the lifestyle and the financial.

Mel Abraham [00:24:05]:

Future we want tomorrow.

Chris Harder [00:24:07]:

Yes. Amen. Okay, so that's a great example. You got an office example.

Chris Harder [00:24:13]:

Someone's like, hey, should I upgrade my office?

Mel Abraham [00:24:16]:

This one happens. This is some as an accountant, I used to hear these kinds of things all the time, and so I happened to be speaking in an event, and this person raises their hand to ask a question, and she says, I'm thinking about getting a new office. And I said, cool. She goes, It's going to cost me about $20,000 more a year.

Mel Abraham [00:24:33]:

And I said, Great. I go, do you need the new office.

Chris Harder [00:24:37]:

She goes, no.

Mel Abraham [00:24:39]:

I said, okay, then why are you going to get the new office? Well, I like it.

Mel Abraham [00:24:46]:

I can afford it, but it'll save me in taxes. And I said, okay, so can we break this down?

Mel Abraham [00:24:52]:

Because there's two things here. I said, So you're willing to spend.

Mel Abraham [00:24:56]:

$20,000 to save taxes, but your deduction will save you? Only if I just do the math.

Mel Abraham [00:25:03]:

7000 in taxes, just spend 20 to save seven.

Mel Abraham [00:25:07]:

Exactly. Because I'm assuming a 35% rate. In the end, she saves 7000 in taxes, but she spent 20. In the end, she's still $13,000 out.

Mel Abraham [00:25:19]:

Then I said, and to you, you're looking at this $20,000 over a couple of years as I can afford it is 20,000, but you don't need to spend it.

Mel Abraham [00:25:30]:

What would happen if I put $20,000.

Mel Abraham [00:25:33]:

Away and let it grow? Well, at her age, it was going.

Mel Abraham [00:25:38]:

To be 23 times.

Mel Abraham [00:25:42]:

So wait, $20,000 times 23, if I'm doing the math right, 460.

Chris Harder [00:25:48]:

Yes.

Mel Abraham [00:25:48]:

It's another half million dollars.

Chris Harder [00:25:50]:

So we have a $400,000 watch and a $460,000 office upgrade, except people saw it as a $5,000 watch and a $2,000 a month office upgrade.

Chris Harder [00:25:59]:

Yeah. You touch on something.

Chris Harder [00:26:01]:

So basically, we saved almost a million bucks right there in those two examples.

Chris Harder [00:26:04]:

By the way, my life has been ridden with examples of what not to do when I was young.

Chris Harder [00:26:12]:

All of these exact same decisions. It's like you're describing me to a T, by the way. So if someone's hearing this, this is not finger pointing.

Chris Harder [00:26:20]:

This is, again, acceptance of, well, nobody.

Chris Harder [00:26:24]:

Opened my eyes this way until this exact point in my life. So now who cares what I did in the past? I can do it better if I decide to in the future.

Chris Harder [00:26:32]:

That's what this is really about.

Mel Abraham [00:26:33]:

It really is. And just so everyone realizes, I'm you. I did the same thing until I started to understand it and run things.

Mel Abraham [00:26:41]:

Through this new financial filter.

Chris Harder [00:26:44]:

Yeah, because, you know us, we're certainly.

Mel Abraham [00:26:47]:

Not living on beans and rice. We travel. We're taken off to Scotland in October, and we're staying at a nice hotel. We're traveling first. So it's not that we're not spending.

Mel Abraham [00:26:59]:

Money, but we're very deliberate on the.

Mel Abraham [00:27:02]:

Things that actually matter to us, that.

Mel Abraham [00:27:04]:

Give us joy, that give the richness.

Mel Abraham [00:27:06]:

To our life, and we're willing to spend on it, and we do it.

Mel Abraham [00:27:09]:

Wholeheartedly and without guilt.

Chris Harder [00:27:11]:

And you can do that with confidence once you know the financial rules.

Chris Harder [00:27:14]:

I think that's the kicker, is people are like, screw it.

Chris Harder [00:27:17]:

It's intimidating. So I'm just going to live a.

Chris Harder [00:27:18]:

Good life, or they're like, I'm going.

Chris Harder [00:27:20]:

To cut back because I'm scared of any decision to any buying. So I'm just going to live this life of nothing and cut back, cut back, cut back. Neither one has to be the answer. The answer is become educated. It's not as intimidating as you think. And once you have that education now, you can make these decisions and confidence what is for me and what is not for me based on my future goals. You said something, I don't want to skim over this. Talked about the allure of a tax write off. I see people out there giving advice all the time buy a 6000 pound vehicle, g wagons count. And by the way, we have a G wagon, but we didn't buy it for the tax write off. G wagons count as tax write off. And that's why you should rush out and give all these stupid TikTok advice. Individuals, they're all over reels, too. It just makes me cringe when I see it. So, technically speaking, are they right? Yes, you can if you can show the need, you can write off a 6000 pound vehicle.

Chris Harder [00:28:12]:

But are they right?

Chris Harder [00:28:13]:

And that this is the move you.

Chris Harder [00:28:14]:

Should rush out and make? Well, no, because you have to spend $250,000 to get a G wagon just to save, what, $100,000 probably on the.

Chris Harder [00:28:24]:

Street and says, hey man, I got.

Chris Harder [00:28:24]:

A deal for you.

Chris Harder [00:28:25]:

You give me $250,000, I'm going to give you a suitcase with 100 grand back.

Chris Harder [00:28:29]:

Do we have a deal?

Chris Harder [00:28:31]:

You'd say hell no, get out of here.

Mel Abraham [00:28:33]:

I would do it all day long with them if they wanted me to.

Chris Harder [00:28:35]:

Do that in reverse.

Mel Abraham [00:28:37]:

I'll give you 100.

Chris Harder [00:28:39]:

Yeah, exactly.

Mel Abraham [00:28:40]:

Here's what I would do instead, and in fact, I do this. I opened up a defined benefit plan, which is a pension plan that gives me the ability to put more money away. So instead of putting 250,000 into a G wagon, I put $250,000 into a defined benefit plan. Get the tax deduction, but keep the money, let it grow tax deferred. And then when I take it out.

Mel Abraham [00:29:00]:

Down the road, it's part of my wealth.

Chris Harder [00:29:03]:

Yep, absolutely. But what do you drive? Do you just walk everywhere then?

Mel Abraham [00:29:07]:

Yeah, I do drive a Tesla.

Chris Harder [00:29:11]:

I mean, we have examples all day long that we could share. The point that we're trying to make is if you become educated, you don't fall for the bad advice. If you become educated, you get to make these decisions in confidence, not out of scarcity. And when you build the muscle of hey, let's get bigger than the problem, part through our education, part through our action, instead of just cut back, cut back. Cut back to the point where all we know how to do is cut back. And now we're too small to handle any problem. When that becomes your default, you become unstoppable financially.

Mel Abraham [00:29:39]:

Thank you for listening to the affluent entrepreneur show. With me. Your host, Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the Affluent Entrepreneur Facebook group now by going to Melabraham.com/group and I'll see you there.