E50: The Three Best Rules to be Successful Financially

Nate: In this episode, we will discuss what we believe are the three biggest rules you should follow to be successful financially. She’s Holly and she helps people find financial freedom.

Holly: He is Nate. He makes sense out of money. This is Dollars and Nonsense. If you follow the herd, you will be slaughtered.

Nate: In many things in life, having structure is very important. If you want to be successful with your family, if you want to be successful at your work, you want to be successful working out or eating right, structure and following principles, guidelines, rules, whatever you want to call it can be helpful, very helpful. It’s really why people like Dave Ramsey and some of these other people are actually famous authors is because their main goal is to provide structure or rules or principles to follow. Whether we believe with everything they say or not is moot, but that’s the reason why people flock too. There could be a million rules here on how to be successful with money.

They’re really good, but we wanted to focus in on probably the three biggest rules or the most important rules that you should follow to be successful financially that we feel like will help the vast majority of people in real money terms, but also emotionally, spiritually what can be helpful. Holly, let’s go ahead and get started with our first and probably the most important rule to follow financially.

Holly: We say, pay yourself first. What we mean by that is that literally when you get a paycheck, you’re doing all the work, but most of the time what we tend to do with our money is it goes direct deposited in a bank account or we get that paycheck and we pay all the bills and we pay everybody else first, but we actually don’t pay ourselves. We don’t give ourselves a paycheck. We just spend the money on the bills that come to hand. Pay yourself first, whether that be 10% of the paycheck, whatever that is, but you need to actually pay yourself first because the worker is worthy of the wage.

Nate: That’s why our mission is to help people break the bonds of financial slavery, what we call it. Help people break bonds of financial slavery, and that’s because in our eyes there’s not much difference between slavery and how people operate. As a slave, they do all this work and they don’t get to reap any of the rewards from it. Hopefully they get fed, they get housed, they get clothed. That’s all you get as a slave and hopefully if you have a good master. But if you go onto the world and you see people working, they work at a job, they earn an income and then the food people get, the money, the house, people get the money, the car, people get money, the entertainment people and most of the time they do all this work and they have no money to show for it.

There really is no difference between having one master or many masters. That’s the real reason we’re trying to help people and that’s the first step to breaking free, to start setting aside money that you’re going to keep that will not be spent and then spend the rest. Do it first at the beginning of the month, not at the end of the month. Pay yourself first, make a bill for you and then live off the rest and just watch simple, but just watch what it’ll do.

Holly: Most of the time, Nate, the reason we say pay yourself first is if you wait till the end of the month, often there’s no money left to pay yourself or it’s very minimal because everybody else got the money. Just changing that mindset of giving it to you first actually creates that freedom and it does break that bondage of you paying everybody else and then accepting the leftovers. Most of us, if we had to go out and eat a meal, we want to go out and eat a nice meal. We don’t just want to take the leftovers. When you don’t pay yourself first, you’re basically saying at the end of the month, whatever leftover is what I’m worth.

Nate: It’s becoming more of a thing by the way, the idea of simplicity or minimalism or whatever you want to call it. I think there’s a lot of freedom. My wife and I personally, we’re not big spenders. We live far below our income, well below our means and there’s a lot of freedom that you can have when you have money and whenever your expenses are much lower than your income and there’s a lot of freedom available. That’s because we’ve been able to whip Parkinson’s law. Holly, what is Parkinson’s law?

Holly: Okay. Nate, Parkinson’s law, really there’s three laws associated with it, but really the one I want to focus on is the fact that typically when we get an increase in our income, it also increases our spending or our expenses. The biggest thing in order to conquer Parkinson’s law is actually to learn to live within your means and to actually not necessarily allow the expenses to increase just because your income increased.

Nate: Parkinson wrote a little book called Parkinson’s Law. He says, “Expenses tend to rise to match income.” I know that’s been true in my life. You look back 10, 20 years and you realize what you’re able to live on and you enjoyed life living in that way, and now you’re making so much more money and you’re spending so much and you wonder where did all my money go? Well, that’s Parkinson’s law at work. It’s something we’ve all got to kick to the curb is this natural tendency to allow your expenses rise to match your income. The easiest way to build wealth is to live on less than you make. It’s the most tried and true, most sure way to do it. If you can whip Parkinson’s law and find happiness living on less than you make. When you get pay raise, maybe you don’t even spend any of it because you’re just content where you are. That’s a really great place to be.

Holly: It’s also being able to just understand that you don’t have to keep up with the Joneses, that you actually don’t need the bigger brand TV. Oh my goodness from a 50 inch to now a 60 inch to 70 inch. If the TV works just fine. My kids. Have you been asked? “Oh, are we going to get a bigger TV? Our TV is from 2008.” It’s not the biggest TV in the world. It’s a flat screen and we’re happy with it and it still runs and functions just as good as everything else, so I don’t necessarily need to just go out and buy that newer, better, brighter TV just because I have the expenses to buy it.

Nate: You could afford to get a new one. It probably wouldn’t make or break you financially if you did. It’s close to the edge because at any point in time it can become an addiction. At least that’s what it is for me personally. The reason I don’t always upgrade as soon as the phones ready, always get the newest TV, get the newest software, get the newest computers, whatever it is. The reason I don’t is because I want to safeguard myself against the fact that if I start because I can afford it and now as opposed to maybe five years ago wouldn’t have been able to do, but to actually get the newer, the better things that can easily become just a part of who I am.

If your main goal is to build wealth and that’s what you really care about, it is true. You can watch the same TV channels, you can go onto the same movies with a TV from 2008 as you can now. You don’t necessarily need to watch it in 4K, ultra high def to enjoy a good movie. You really don’t. I think we can agree on that. That’s obviously the first rule. Live on less than you make. Learn to enjoy doing that and look forward to doing that and I think it’ll change a lot of things if that hasn’t been a part of who you are.

Holly: If your kids see that within you, they also actually appreciate those special occasions where you actually get to go do something special. Not that you couldn’t have afforded it in the past, but hey, you don’t have to go out for ice cream everyday just because you can. You can make special occasions or special memories just by doing that and allowing your lifestyle to indicate one that is you not having to struggle financially, but also not that you can afford the latest, greatest, best, brightest, whatever it is. I mean, my girls love garage sale and just because it’s something fun to do to find that bargain versus like, let me pay full price for something.

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Nate: Moving onto rule number two. Don’t invest money in things you don’t understand or you could maybe say, don’t just chase high rates of return. I hear the most horror stories from people who were told, “This is a great investment, great opportunity, you ought to get in,” just because a buddy told them to do it, they jumped in. A lot of times those deals have a short window of time that the money can be accepted and they didn’t understand it. They didn’t investigate very much themselves. Invest in things that you understand a bit and that can be the same thing here, Holly, with infinite banking for people too, is don’t just buy a policy because Nate and Holly said it’s a good idea.

Learn about it because you’ll be so much more profitable and you can make money without knowing much about something. Think of all the money you could make if you actually just spend a little bit of time and energy to learn about it. Rule number two is don’t invest in something that you don’t really understand.

Holly: Or that you didn’t investigate. Like Nate said, really find out for yourself if it’s a good match, if it’s something that you really want to do and that you believe in. If you don’t have any interest in what you’re investing in, then why are you investing in that? Don’t just go off the guarantee of the high rate of return like Nate said, even when you want to work with somebody new, whether it be to purchase life insurance or to buy a property. Really look at the pros and cons and the belief and find out from somebody who maybe has worked with that person, not just, “Hey, I invested and it’s going to give you a great rate of return.”

I remember a few years ago a bunch of individuals that everybody was buying into oil wells and they’re going to give you such a great rate of return and yield all this profit. Most of the people never took the time to investigate it or they didn’t really understand what they were investing in and they ended up losing money versus making money.

Nate: The kind of same thing happened back in December of last year, late December, early January when the cryptocurrencies were going wild and people were saying, “Nate, you really got to jump in, this is the future.” It very well could be. I’m going to be first. As I’ve said on this podcast before, I just haven’t spent enough time learning about any of that to say yay or nay whatsoever. The reason I didn’t invest in it is because I didn’t understand it. I could have understand it if I spent the time. I just didn’t spend the time so I did not put the money in there even though everyone was saying that you should put it in there and I’m thankful that I didn’t because as you know, if you’ve been around that marketplace at all, it’s bottomed out.

It may come back up and there’s all the new types of coins all the time and everything … They look to me for advice for this, but essentially just as an example, I didn’t. I said, I’m not going to jump in because I really have not put enough time into this to do it and I don’t want to lose money. I also don’t really want to make money just because I got lucky. That’s essentially what happens if you invest in something that you don’t understand is you’re hoping it goes up. You don’t really know why. That’s essentially what you call getting lucky and that’s a bad way to run your finances.

Holly: I want to say on a side note with investing, when you are in a marriage, in a relationship with somebody else and it’s both of your guys’ money. I would say make sure you both are in agreement on the decision of the investment versus one of you making the decision and invest in it without speaking to the other person. It’s just a good rule of thumb. I even have told individuals that want me just decide right now, there’s no problem with sleeping on something for 24, 48 hours or being able to say, and I’ve said a lot, I need to speak to my husband about that and we need to be in an agreement together. It’s a decision we made together, never to be forced to make a decision right then. If they have to have your money right now, to me, there’s something wrong that they can’t wait.

Nate: Rule number two, don’t invest with things you don’t understand. Don’t just chase high rates of return but be smart with money. Be consistent with it. The third rule is a little bit more philosophical maybe, spiritual maybe, but it has connotations with how you’ll act. That is rule number three, don’t focus all your wealth building energy on the idea of retirement. Don’t focus on retirement, focus instead on building wealth. Retirement will come if you’re wealthy, but if you focus on retirement, chances are you probably will not actually ever be wealthy.

Holly: Well, and I think too, Nate, when you said it’s philosophical as well as spiritual, it’s also a mindset. When more only focused on how much money or a magic number we believe we need in order to retire, then basically we’re not focused on wealth building at all. We’re only focused on this NESTEG that we’ve talked about before that we believe is going to sustain us. If you’re focused on wealth building, it’s something that creates money. It creates a legacy. It will generate money for years to come and you’ll never stopping building on your wealth and building on the legacy that you want to leave. I think that’s vital. We’ve said it before, in my opinion, there’s no magic number or NESTEG that’s going to be sufficient enough because we never know what’s going to happen in the future.

We don’t know what’s going to happen with our economy. If you think that the million dollars is the answer and that’s what you’re focused on, you get there and you retire and the million dollars doesn’t last you then it didn’t do you any good because your focus isn’t on building wealth, it’s focused on that number I’ve got to get to or that amount of money I’ve got to make in order to retire. We’ve had rabbi Lapin on here too who’s talked about retirement and what it actually means. In reality, retirement means you’re of no benefit to society, you’re not contributing to society, so I’d hope that nobody would ever truly want to totally retire if you’re not contributing at all to society.

Nate: I think it’d be a good goal, at least in my own mind is to try to always be wealthier next year than you were this year. If that’s your goal, even at age 80, even at age 85, 90, when most people are liquidating their accounts just trying to live. If your goal is to always continue to build wealth, the chances that you’ll have to work for an income are going to be slim at that point because that’s been your focus. As Holly said, the idea of just leaving the career, leaving your workforce just so you can live off the spoils of your labor, it’s a mentality that causes people to actually a waste of money, to lose money, to do things that they wouldn’t have done otherwise if they really felt content.

As rabbi Lapin also mentioned, if your main focuses is on retirement, that’s the main reason that you’re saving money and doing things, and that’s your main focus then you’re not really as you’re working most of the time that’s your main goal, I can’t judge you. I don’t know you, but it’s common that you find yourself that you’re actually just working for money. You’re not really working to serve people. If you can draw a love to serve people. If you run your own business serving the clients and customers you have. If you are an employee doing your best to serve the businesses, customers, your fellow employees and your managers, the owners of the company.

If your goal is to walk to work, to walk into the office with a servant’s heart, then you really won’t focus on leaving because your main mission is just to serve God’s people. In reality, if your main focus is on retirement, you’re probably a lot of times people just are working for the paycheck to be able to buy the assets that will hopefully work for them. They can leave and then many times you leave and you’re stressed out the whole time in retirement of, “Is my money going to last? Will the economy support my investments? Is there going to be a correction? Will I have to go back to working out?” It brings all this fear and stress into life that really you don’t need to carry with you.

If you would focus on building wealth and becoming wealthier each and every year, retirement will come. The fact that you’re being financially free will come, and it’ll come much quicker and much more powerfully than if your main goal is to get just enough to where you can finally leave and then cross your fingers and hope for the best.

Holly: I like what Nate said, just that you’re building wealth every year to make more than what you built on last year to leave more wealth and have more wealth the following year. Partly because for me, I don’t ever want to stop being a servant. I don’t ever want to stop bringing hope to people in the clients we work with and stop having relationships with people because I don’t feel like my work is ever done. I often have this picture of my dad, whether it be a hospital bed or his death bed or this or that, and he’s like, “Did you get that last application signed? Did you meet with that last person?” Because really the goal of the entire family and us is really to serve the people around us and bring financial freedom and to teach you how to leave a legacy and to build wealth.

If we really think of that and have our mindset on one of blessing other people but serving other people and also leaving wealth and having wealth, like Nate said, we’re not focused on that end of how much money. I do see so many people stressed out. Nate, like you said, is that retirement number enough? Even commercials today say that, you know, “What is your number? We can review it with you.” Well, if you’re looking and focusing on a number or an amount, you’re actually not focused on living life. You’re focused on will I have enough, which is stress in and of itself.

Nate: With that being said, we’ve named off three rules today. I really believe if you follow the three rules that we brought to you, you can see a big transformation. If you would live on less than you make, kick Parkinson’s law to the curb, learn to keep your expenses below your income. That’s the most important thing you could ever do. If you would only put money in things you understand and not chase high rates, return knowledge, your ears get tickled, you’ll be able to safeguard against a lot of the losses that occur. If you change your focus from retirement to building wealth, then you’ll be, I really believe, far wealthier in your lifetime and leave much more to your family. This has been Dollars and Nonsense. If you follow the herd, you will get slaughtered.

Holly: For free transcripts and resources, please visit livingwealth.com/e50.