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Success almost never comes overnight. It’s much like a frog boiling. Slowly, the temperature changes and as it does, the frog becomes accustomed. He adapts—and to his ultimate demise.
You don’t notice success as it is happening to you. Success is also a subjective thing and not a place of arrival. Because success comes slowly, we adapt to it. We allow the way we live to match our income as we prosper. This is called lifestyle creep.
Lifestyle creep is allowing your income to determine your behavior and your habits. This is the default. Without actively guarding your lifestyle and protecting yourself from lifestyle creep, you are welcoming it.
This is how you have people making $100,000, $200,000, and even $500,000 a year still living month-to-month or operate with debt. How can this be? It’s because it’s a mindset.
That is the danger of lifestyle creep and that is the danger of the lack of planning. If you’re not planning for success, you’re setting yourself up for failure.
What does planning for success look like? It’s having purposeful strategies for how you will steward your resources when they grow beyond the point you’re currently at.
In this episode we discuss the balance between investing back in your business and how much you should personally be saving.
Highlights, Takeaways, Quick Wins:
- If you think a million dollars is a lot of money you might make one hundred thousand. If you think one hundred thousand is a lot of money, you might make ten thousand. You have to think bigger.
- You can either pay the price of hustling now and enjoy yourself later or you can live it up now and pay the price later on in life.
- You’ve got to define your baseline standard of living, because if you’re not defining a comfortable lifestyle for yourself, you won’t even notice that it’s changing.
- It’s not lifestyle creep if you plan the next thing.
- If you want to accomplish big things, you have to have big dreams.
- When you dream big, people are going to call you impractical.
- Money is not something we should apologize for making. There’s nothing wrong with working hard to make money.
- There’s nothing wrong with wanting the leverage an opportunity to do something with your ideas, and that’s all money is.
- Instead of having a budget, I ask myself, “Does this align with my values?”
- It’s not about how far out I can go, it’s about focusing inward on my values.
- The value of your focused time is worth too much to allow unnecessary things to divide your focus.
- If you share your big goals with everyone, they’re going to call you ridiculous. You want to share it with people who will get it, encourage you, and help you succeed.
- Most people will compare you against the “norm,” of the American Dream.
- 05:06 Sean: Putting myself in places where I heard big numbers—listening to podcasts, reading books, watching videos—where people talked about what I thought were big numbers in a way that made them seem small, was key to breaking through the ceiling mentally for me. If you think a million dollars is a lot of money you might make a hundred thousand. If you think a hundred thousand dollars is a lot of money, you might make ten thousand. You have to think big. That’s why I want to share real numbers here, because I want people to get used to it. I want them to stop thinking small.
- 05:55 Matt: That’s exactly how I changed my mindset. The reason I’ve been hesitant to share real numbers is because I didn’t want people to feel like they couldn’t relate to me. I didn’t want people to think they couldn’t do what I’m doing, because it’s not rocket science. I’m building multiple streams of income, some of them big and some of them small, and they’re all going into the same treasure chest. I get to choose how much I want to take out of that.
- 06:43 Last year my businesses made around 1.5 million and as of right now our taxes total around $450,000. I personally don’t make all of that money. I pay myself an average salary, a few thousand per month, to cover my bills and to have a little extra. I could justify paying myself more, but I don’t need it and I would rather put it back into the business buying things that the business needs to grow. The reason I’m working so hard right now is because I made a choice when I was younger that I didn’t want to have to work hard when I am older. I saw my parents having to work hard and struggle and I thought, “You know, there’s gotta be a better way.” You’ve gotta pay the price at some point.
You can either pay the price now and enjoy yourself later or you can live it up now and pay the price later on in life.
- 08:42 I got called out by a family member recently who said I was all about money. I actually try to stay out of the financial side of the business and live as minimally as I can so the businesses can thrive. Because I’ve done such a good job building the infrastructure, the money just comes. I tell my employees, “Don’t worry about what you’re getting paid or what I’m getting paid. Do the work and at the end of the day, the money will flow.” I’m really about having enough to live and not having to worry about whether or not “the man” is going to cut me. There’s nothing wrong with giving ourselves little incentives to have a little fun. My wife and I are planning a vacation and I am also working on ways to spend more time with friends and family, but I also really enjoy my work. Even when I was doing my taxes, it was a pain in the butt, but it was fun. It’s like playing Monopoly. It’s not fun paying out large quantities of money, but you land on the hotel sometimes.
- 12:09 Sean: Today we’re talking about avoiding lifestyle creep and investing back into your business. Lifestyle creep is not something you really recognize is happening. That’s why we call it “creep” because it creeps up on you. Sarah in the chat room asks, “When is it lifestyle creep and when is it just you reaching your standards? Like buying a couch instead of sitting on the floor.” You define a comfortable living for yourself. Set a baseline standard because if you’re not defining a comfortable lifestyle for yourself, you won’t even notice that it’s changing. That’s the “creep” part of lifestyle creep. If you don’t have the baseline defined, you don’t realize it when it changes. It’s okay for that definition to include a couch, or air conditioning, or two computer monitors. No one else can define that for you.
You’ve got to define your baseline standard of living so you can recognize when you’ve gone beyond it.
- 13:51 Matt: When my wife and I moved into our house, even though we had the money, we bought a cheap little couch on craigslist that stayed in the living room for quite a while. Every few weeks we put money aside so that after about eight months we were able to buy a nice big “L” shaped couch. We did that over time. We set money aside and planned for it.
- 15:33 Sean: I like that you’re using the word “planning.” Another question was, “Buying a Lambo is something you’ll do for you, but not for the business. Unless I missed something. Can it be considered lifestyle creep even if it’s only 10% of your money at the time?” No. Lifestyle creep happens to you. Planning is something that you do. We are planning to reach a very large goal—the Lambo Goal. It’s not suddenly sneaking up on us as if we were slowly spending more and more money as our businesses grow without realizing it. It’s not lifestyle creep if you plan the next thing. Even if that next thing is an upgrade, it’s about doing it intentionally. If a chair is hurting your back and you want to buy a more expensive chair so it’s more comfortable, that’s not lifestyle creep. It’s okay to plan things as long as you’ve got that baseline standard defined so things don’t creep up on you.
- 16:48 Matt: It’s so easy to get carried away when you see a lot of money coming in from your business. Some of my partners see how much money is coming in from our businesses and think, “Let’s give ourselves a 20% pay increase.” It doesn’t work that way. It could work that way, but we’ve got a 40 million dollar business to build and if we keep filling our own pockets every time our revenue increases, we’ll never get there.
- 17:36 Sean: We’re talking about lifestyle creep as a way to avoid having your money leak out in these “holes” of your ship and living simply so you can invest back into your business. This doesn’t mean that you can’t enjoy the success of your business or the fruits of your labor. We’re not being self-deprecating or martyrs. I’m looking in the chat and Sarah says, “What’s wrong with wanting to make money?” And Seth says, “This isn’t the place to feel apologetic about making money, right?”
Money is an enabler.
It gives us an opportunity to do things and make an impact, positive or negative.
- 19:01 I like to think that we take that opportunity to make a positive impact on people. So I don’t see money as this thing that we should apologize for making. There’s nothing wrong with working hard to make money.
Think Differently About Money
- 19:22 Matt: Money is just a number. Stop getting so attached to it, just think of it as a number, and push it through. Grab a little bit for your bills and a little fun, but let the rest run back through the business.
- 19:43 Sean: Money is paper. It’s just a currency. Money is leverage, influence, and power. There’s nothing wrong with wanting the opportunity to have greater influence. Whether we’ve discovered it or cultivated it, we all have a message to share with others. Some of us aren’t sure what that is yet, some of us need to find it. Others of us feel like we have it but don’t have a platform to share it yet. We’ve talked about the value of ideas before on this podcast and on the seanwes podcast. Ideas in isolation don’t have much value (Related seanwes podcast e041: Your Idea Is Worthless). I like the way Derek Sivers puts it: “Ideas are a multiplier of execution.” So if you have great execution but a sucky idea, the results aren’t going to be very good. If you have mediocre idea but poor execution you will not win. Ideas are merely a multiplier of execution. You may have a great idea or a great altruistic vision, but without the influence and leverage, it can’t go anywhere. Money is just a paper version of leverage, influence, and power.
There’s nothing wrong with wanting the leverage an opportunity to do something with your ideas, and that’s all money is.
- 21:26 Matt: It’s important to remember that the only way you can have something grow is to feed it. Some people think they can squeeze as much as possible out of their job, their business, or even something as personal as your family. When you do that, it throws things out of balance. Sean and I often talk about how important that balance is and making time to take a sabbatical week or even just a movie night. It may sound silly, but those kinds of things are hard for me. If you’re not paying attention, it’s so easy for these areas of your life to get out of balance and fall into lifestyle creep. One of my employees was going to Starbucks every morning and I said, “Why don’t you invest a couple hundred and get yourself one of those nice personal espresso makers?” And he said, “Matt, the one I want is $800. And that’s just a decent one, that’s not the luxury one that I really want.” He went ahead and made the investment, but I told him, “Just for kicks and giggles, pay me what you would have spent on Starbucks every day, and at the end of the month, I’ll total it up and give that money back to you.” At the end of the month, he had spent nearly $400, just on coffee.
- 24:55 Sean: Part of the beauty of this show is that we offer two different perspectives. I want to bring in an alternative view of the scenario you just described. I don’t focus on saving the four dollars. I focus on making the $400. So if spending that four dollars saves me from having to spend the time making my own coffee and it gives me the energy to think about how I’m going to execute on the thing that’s going to make me $400, I’ve just made $396.
Should You Have a Budget?
- 25:46 Sean: I’ve talked before about how I’ve never had a budget. Imagine a ranch house on a square shaped property with a fence and you have a birds eye view. There’s a house in the middle, there’s a fence around the perimeter. The fence is like your budget. It tells you how far you can go before you’re out of bounds. A lot of people like to spend a lot of time on this fence, making sure it’s as close to the edge of their property as possible, and that it doesn’t spill into someone else’s property. I get this picture in my mind of someone walking right up to the edge of their property line, trying to push the boundaries as far as they will go. If you have a line item in your budget of $30 for entertainment, you’re going to spend it. What if I want to hustle this month and not spend that $30?
- 27:15 I like to think of the house as the center of your values. I try to focus as much as possible on the center of the property—on the values. I don’t even care where the boundaries are because every purchase I make, I ask “Does this align with my values?” I know it’s different for every personality, but this approach has always served me well. I’m also not being a tightwad about it. If I want a Starbucks coffee, I go out and get it. If I want to go see a movie, I go see it. Because those things are not where my focus is, I can count on one hand how many times I do those things in a month. It’s not about how far out I can go, it’s about focusing inward on my values. When that’s where my focus is, I can do whatever I want. Not everyone can do this. Some people, if they let themselves do whatever they want, they’d run wild.
The value of your focused time is worth too much to allow unnecessary things to divide your focus.
- 28:25 Matt: That does work well with your personality but I agree that it’s not for everyone. I have some employees that have to have a budget, otherwise they’ll go wild. Even so, whatever they have in their food budget, they’ll spend. Whatever they have in their entertainment budget, they’ll spend.
- 29:11 Sean: I don’t have the problem of Starbucks three times per day, but those personal allotments help my quality of life without introducing lifestyle creep. I’m not worrying about messing with a personal espresso machine or how much having one will cost. I’m able to focus my energy and attention on making money.
- 31:14 Matt: It takes time to learn that having money in your pocket doesn’t mean you have to spend it. If I’m carrying cash with me, I have a tendency to give it away. It’s good and bad. It’s bad when you have to tell your wife you gave away her shopping spree money. I’m so thankful for what I have and if I can help somebody else out, I want to. I’m learning that it’s better to teach people how to do things for themselves instead of just giving them things. If I can give them the tools they need to start out and teach them what I know, that makes my personality happy.
How Much Should You Personally Be Saving?
- 33:19 Sean: I really like this question from Amanda, “If you’re making an income in business, but want to save while investing back into the company, what is a proper ratio? What money should I be taking for myself rather than investing?”
- 33:34 Matt: I cover my bills and then I like to bring in a little extra for my wife and I to have some fun money, and then savings.
- 34:08 Sean: Over the course of two years, Laci and I put aside $4,000 and are taking a belated 5th anniversary trip in May to New York City. We went in 2012 and did all of the touristy things and this time we’re going to just take our time and enjoy things. We’re not using all of that money, probably only a couple grand, but we have that much money set aside for that kind of thing. Otherwise, all of the money is going back into the business. We set aside enough to pay our basic stuff. We don’t really get out that much.
- 36:41 We’re talking the ratio of saving money versus putting money back into the business. It’s easier for us because we pay ourselves a salary. It’s a lot easier if you structure it to where it’s the businesses money and the business pays you as an employee. That’s the easier answer than coming up with a ratio. One of the reasons I don’t like ratios is because it scales with the growth of the business and it’s easier to squander your money. If you have a fixed salary, it doesn’t matter how well the business is doing, you’re covered.
- 38:39 Matt: You have to put in the work at some point in your life.You have to make the choice of when you’re going to put in that work. You have to put in the work if you want to build that bulk of money or that residual income that’s going to take care of you in the future. It’s important to remember that we all have to sacrifice at some point. It’s a struggle, but it’s totally worth it. Sean, as we’re sitting in our Lambos looking at each other, it’s going to be worth it. Don’t focus on the ratio too much. Figure out what your cost of living is, give yourself a little fun money and a little extra money to save. If you can do that consistently, throw the rest of it back into the business.
Keep A Healthy Balance
- 40:55 Sean: Moataz asks, “Should you ever sacrifice things like sleep or nutrition in an effort to be frugal for your business?”
- 41:05 Matt: I don’t know if I’m in a position to talk about that. I think there’s a balance, there’s laziness, and there’s too much. You have to find that balance for yourself. During the last month I haven’t been eating as much because I’ve been so focused on my work. The other day I had a really bad headache and had to stop and it was because I hadn’t eaten anything all day and had only had coffee and soda to drink. It’s really important to take care of yourself so you can put out the best quality of work you’re capable of. You’re not going to put crappy gas in your Lambo.
- 42:20 Sean: Since Laci started working at seanwes, she doesn’t have to get up as early. As a result, I’ve ended up sleeping more in the past six months than I had in the whole year prior. I used to average five or six hours and now it’s closer to eight. I feel good, but I also feel a little guilty. I have a lot of extra things going on. Yesterday was crazy. I had something with every person on the seanwes team on top of my normal workload. I used to do seanwes tv every day and the reason I put that on pause was to work on Value Based Pricing, but I had to focus on my conference talk, and now that I’ve done that I have to focus on getting the Community opened up again.
- 44:17 We just took on a new employee and this is his first week. On the seanwes network, we now have live shows every day. I’m doing a whole lot, but I’m also doing less than I was before. Before, I was maintaining this kind of busyness on top of recording and releasing a seanwes tv episode every single day. It was insane. I was working nearly 17 hours per day. I’m sleeping more now and I’m struggling with the guilty feeling because I’m not living up to the output that I had before, but I also feel like I’m putting better gas in the Lambo. If I hadn’t started taking Small Scale Sabbaticals I would have burned out a long time ago, but who knows if I would have just burned out anyway had I kept up that pace.
- 46:22 Matt: You’ve put systems into place that are allowing you to have more time which is the ideal goal. That’s something I’m working on right now and it’s hard because I have a lot of businesses to do that for. I’m also kind of picky and I like performing the very best service. I’ve found that when people aren’t invested, they tend to do the bare minimum and that’s not good enough for me. I want to provide the very best quality. You told me a long time ago that it’s better to put out 90% than to put out 0%. What would happen if I got sick, or got hurt, or needed to take a vacation? Is everything going to crash?
How To Talk About Your Business
- 48:02 Sean: Another question: “If your social life makes it really hard to live simply and to invest in your business, should you try to explain yourself to everyone or just get new crabs in the bucket?”
- 48:14 Matt: I’ve tried explaining my whole thing and some are accepting and some say it’s ridiculous. To the people who say it’s ridiculous I try not to bring it up too much around them.
- 48:32 Sean: I agree with that because it’s like we say: If you share your big goals with everyone, they’re going to call you ridiculous. They’re not going to get it. You want to share it with people who will get it and encourage you, and help you succeed.
- 48:44 Matt: I never tell people right away that I have all of these businesses. I tell them about one of my businesses, then another, then another. It’s difficult to explain all of what I do. I’m teaching people to pay it forward with what they have because that’s what I do. I want to give my people the tools to succeed in their business and teach them to pass that knowledge on to others. Getting back to the question, I would ease into it. My brother tries to explain to people all of the things he does in real estate and they’ll tell him he’s being impractical because it’s a bad economy. So I tell him, “Just tell them you have one rental house. As the conversation goes on, you can open up more of the picture.”
Most people will compare you against the “norm.”
- 52:20 The norm is that you go to school, get into debt, get a job that you use to pay off the debt, until you have kids running around, then you’ve got more debt. Apparently that’s the American dream. Maybe that is happiness, but I missed that boat awhile ago. This show has been brewing in my head for the past few weeks because I’ve been seeing how the extra money has influenced my partners and I’ve been seeing how some of my employees have abused their budgets and I remember being that way in the beginning. At some point I looked at my situation and had to ask myself, “What am I doing wrong?”
- 54:50 I think a big part of what has helped me is that I take time to analyze things and see where I could be working more efficiently and changing things. This year I only made half of what I wanted my business to make. Who knows, maybe if I had gotten more sleep and taken better care of myself, I could have analyzed things a little better and gotten us there. A lesson I continue to carry with me is not to let the money dictate what I’m going to do, but to always be analyzing, making the necessary adjustments, and improving.