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Is debt ever a good idea? What about credit cards if you pay them off quickly? Should you save for retirement? What’s the difference between saving for retirement and investing? How do you differentiate between personal spending and business spending?

Ben and I share our thoughts on these and other questions and I talk about whether $4 coffees or a Netflix subscriptions are a bad thing when it comes to keeping expenses down.

Show Notes
  • When Is Debt a Good Idea?
  • 04:11 Sean: For those of you who haven’t gone back and listened yet, I did a spouse episode with my wife, Laci, on our no-debt mentality (Related: e097 Spouse Episode: The No-Debt Mentality). If you want more on this topic, you can go back to that but we were talking about this a little bit in the chat room before we started recording, and I really like what Sarah said:
  • “I’d rather build my business with my own dollars and owe it to myself rather than owing it to my bank.”

  • 05:34 Ben: “I like that expression, ‘Owing it to yourself,’ especially if you’re a person with high standards. Owing to yourself kind of denotes this idea that you are a person of quality—you are a person that is capable of producing something of quality. You owe it to yourself to fulfill what you’re capable of doing. When you take another party out of the equation, like a bank or an investing party, you really make it more about the quality that you are capable of producing for you and not about meeting somebody else’s expectations or requirements.”
  • 06:20 Sean: Yeah, I explained the mental clarity that a debt-free approach gives you in e097. Kyle was mentioning this in the chat room:
  • “It reduces stress, removes scarcity (the feeling of owing someone on top of paying regular bills), and lets you focus on the business more than the money. Going into debt for the sake of furthering life or business is also only a quick shot of dopamine. It’s quickly fading and turns into a cycle.”

  • 06:55 I’ve mentioned before that I don’t have anything against someone with debt—I just want to help them get out of debt! You can’t put a price on the feeling of not owing anyone. I’m not wanting to look down on someone who has debt, I want to say “Hey, let’s get out of this! Let’s get to a point where we can operate from a position of freedom!”
  • 07:21 What I don’t like is when people are committed to a lifestyle of debt, living outside of their means, and not trying to get beyond.
  • You’re either the master or the slave.

    You own your life or you owe your life.

    You can’t put a price on the feeling of not being in debt.

  • 08:03 This is not coming from a place of condescension, it’s to say, “Let’s at least have the goal of getting to a place where we can operate out of freedom and not be stuck in this lifestyle, or this mindset, or this cycle.
  • 08:19 Ben: “Yeah, I think it’s one of those conventional things. I’ve even heard some people say, ‘That’s just how it is. If you want to play, you’ve got to pay your dues. You’ve got to go into debt. If you want to experience the kind of success that everybody is shooting for, it’s just one of the things you have to do.’ But I think we should challenge that. Why does it have to be that way?”
  • 11:24 Sean: I like that I can tell there’s already a switch in your head where you’re going into creative thinking mode here. You’re choosing to see this situation as something to be figured out. The place that you’re starting is a mindset that says, “I’m going to find a way to operate out of freedom instead of operating out of a debt lifestyle or a debt cycle.” It really comes down to the place that you’re starting. What are you starting with?
  • Are you starting with what you want and then letting that excuse a debt that enables it?

    Or are you starting with a mindset and allowing that to let you think creatively in order to solve your problems while adhering to that mindset?

  • 12:24 At the end of the day, you do have an option. A lot of other people out there will tell you to compromise. They’ll tell you that you should compromise and that you have no other option. But you do have an option. It is always a choice. Every single time someone goes into debt, they are making a choice. That’s something you want to take responsibility for if you want to get control of your life.
  • Can Credit Cards Be a Useful Spending Tool if Used Responsibly?
  • 13:53 Ben: “What do you think about using a credit card, but paying it off every month for the sake of getting the rewards?”
  • 14:31 Sean: If you’re able to use a credit card that way with no problem, then sure, you might as well get the rewards. It’s just that if that’s a trigger for you and it’s something that leads to buying things you can’t afford, or living outside your means, then you probably don’t want to to use a credit card.
  • 15:45 Ben: “There’s a saying that I really like: ‘Where you lack discipline, you need to to add structure.’ It’s the same kind of principle here. If you have enough discipline to manage your credit cards, earn the rewards, and pay it off without ever going into debt, I think that’s great. But a cash envelope system can be useful for somebody who needs more structure to make sure they’re staying on top of things.
  • 16:20 It’s good to be real with yourself about what you can and and can’t take on responsibility-wise and put some structure around yourself if you need to.”
  • 16:40 Sean: We talk more about structure and budgeting in a previous episode (Related: e091 How I Prevent Unwanted Spending Even Though I’ve Never Had A Budget).
  • Do You Save for Retirement?
  • 16:49 Sean: I know everyone says, “If only I started saving for retirement at age 25!” But honestly, for me, I’m not really thinking about that right now.
  • 17:21 Ben: “Well, I tell you what not to do! I had a full-time job and they were matching dollar-for-dollar what I was putting into my retirement account. It fluctuated during the recession and I came out with about $7,000, but I ended up cashing that out to pay off some debt. We did what we needed to do at the time, but I kind of regret that decision.”
  • 18:17 Sean: That was a 401k, right?
  • 18:19 Ben: “Yeah.”
  • 18:20 Sean: You get pretty heavily penalized for pulling that, don’t you?
  • 18:23 Ben: “Yes, you do. I was basically just lazy with the way I handled that. If I’d been more creative, I could’ve found other ways to take care of that financial stuff. Right now, neither Rachel nor I have any retirement savings, so I’m probably not the best person to ask about that either.”
  • 19:14 Sean: Yeah, I don’t have any either. Rather than putting money into retirement now, I’m investing that money in myself. When you put money into retirement, you’re essentially investing. You’re wanting that to compound and eventually have more money years later. Personally, I’m investing that money in myself—I’m investing that money in my business now because the returns on that are going to be far greater.
  • 19:44 This is actually something we talked about in the most recent episode of Late Nights With Sean & Matt (A Community member-only podcast). It’s goes into how to get started with investing. In it, Matt lists out the top 5 places to invest and the first one you should start with. That’s a really good one to check out if you’re a Community member, but the first place you want to invest is in yourself.
  • 20:18 Invest in your own business. A lot of people think they should start investing in the stock market or with real estate, but no—you should start by investing in yourself! If you have a business or if you’re an entrepreneur, invest in yourself; get equipment, get training, invest in your own learning. That’s going to come back tenfold because you’re motivated to turn that around into a profit. It was like Sarah was saying earlier: she’d rather owe herself then owe her bank.
  • 20:47 If you invest in a startup or in the stock market, those people—those companies—are less incentivized to give you as big of a return as you would for yourself. So that’s the very first place you want to invest and that’s where I’m at now. I’m not really worried about retirement savings.
  • 21:09 Ben: “My definition of retirement is being more financially independent. It’s not having to do work in order to pay my bills. If I do it the right way, that’s something that can happen a lot sooner than 65. I think changing the definition is kind of important. I love what you said about investing in yourself: there’s not some magic that happens to that money you invest by calling it a retirement savings. Really, any money that you put into something that is going to yield interest is an investment whether you call that retirement savings or not.”
  • How Do You Handle General Savings?
  • 23:46 Sean: My situation is kind of complicated. I have a business checking, business savings, business tax, and then I have my own checking account with my wife. I should be clear: it’s not that my wife and I have separate money, I just treat the business as its own entity.
  • 24:34 We have a personal checking account and a personal savings account. Basically, the money that’s in the business is for reinvesting into the business. That could be marketing, that could be gear, it could be development. The business is being setup as an LLC and we’ll soon be on payroll. Previously, it was all just self-employment. What I’d do is I would just move whatever money from the business that was needed to cover our bills. As we make more money, we don’t change our lifestyle, we just move enough money to pay bills.
  • 25:20 Previously, Laci was working at a day job (she’s now working full time at seanwes), and we were just using her money to pay expenses and for any bills that her income didn’t cover, we would pull from the business. If there was money leftover after paying bills, we’d shift that to savings and use savings whenever we wanted to go on a trip or buy something like furniture.
  • 25:46 Ben: “We put most of our money into a savings account where it earns as much interest as it can without making it being where we can’t get to it. Each month, if we have money beyond what our regular bills are we move it there. We do have short term savings as well for things like Christmas gifts or birthdays too.”
  • When Can You Afford a Baby? They Look Expensive!
  • 29:35 Sean: I didn’t even know if I was going to read this one but maybe you can speak to it, Ben. We’ll try to keep this one short because I don’t know if it was a joke or not.
  • 29:51 Ben: “Man… you can’t. There’s not a magic dollar amount. This is something I’ve always believed: if you wait around until you feel like you’re absolutely ready financially or emotionally to have a kid—or really to do anything significant—you’re not going to do it. You’ve just got to take some steps forward and believe. It’s like that movie.”
  • 30:32 Sean: Which movie?
  • 30:33 Ben: “The one with the Holy Grail.”
  • 30:37 Sean: Indiana Jones?
  • 30:38 Ben: “Yeah, Indiana Jones. You’ve got to take the step before your foot finds the path.”
  • 30:44 Sean: You’ve got to grab the artifact and put something in its place.
  • 30:49 Ben: “No…”
  • 30:50 Sean: Wrong metaphor?
  • 30:51 Ben: “That was…”
  • 30:52 Sean: Wrong movie?
  • 30:53 Ben: “That’s the wrong movie. That was the first one. Anyways.”
  • Should You Always Be Looking for Ways to Invest Money Into Your Field of Interest, Regardless of How Much You Are Currently Making? Or Is Time the Better Investment?
  • 30:56 Sean: This kind of ties into the “afford a baby” thing because I feel like there’s never a “right time.” Everything tends to adjust to the space that you give it. Just like with a project: if you plan to spend a week on it, then it takes a week! If you give it a month, it takes a month. Things tend to similarly expand.
  • 34:14 “Should you always be investing no matter what?”
  • 34:27 Sean: My answer to that would be: cover your bills first. If you have a dollar over that, you should be investing a fraction of it. Like we talked about previously, the number one way to invest is in yourself. If you have money above your expenses, begin by investing in yourself. Investing in your own business. Invest even if you have a dollar over your bills, but make sure you’re hitting those bills first.
  • What Bills Can You Reduce or Eliminate When You Are Trying to Make Things Add Up?
  • 35:39 Sean: Everyone tends to go for the entertainment budget here first. What you think about this? On the one hand, you could save the $7.99 or $10.99 or whatever Netflix is these days, but I’m inclined to think there needs to be a balance of having some kind of quality of life and enjoyment and being responsible with how you spend.
  • 36:33 Do you really want to cut out everything? “No, I can’t get a $4 coffee with you.” At what point do you make allotments?
  • 36:41 Ben: “This is such a tough and personal question.”
  • 36:45 Sean: I have to add another plug in here: you’ve got to go back and listen the budgeting episode we linked to earlier. Rather than focusing on where you can cut pennies and make sure you’re not spending $4 on a coffee or $10 on Netflix, I say focus on centering yourself instead of looking to how far you can push the boundaries.
  • 37:14 Instead of trying to define the boundaries and try to be just on the side of the fence of what’s “legal,” I prefer to say, “Let’s center this on the value.” What are the important things? What are the things that you should be spending money on, spending time on, and spending focus on?
  • 37:41 The analogy I gave in that budgeting episode, was to picture a property with your house in the center. The fence is pretty far outside your house. You want to be focused on the very center: on your house, on what you stand for, on your principles, on your morals, and on your values. I just find with that kind of a focus, everything else seems to take care of itself. If I have a coffee, it’s not the end of the world and I’m not stressing out about it. I’m not worrying about whether I can get 7 coffees this month or whether 8 will put me over. I feel like that puts the focus on, “What is the maximum I can spend?”
  • 38:25 Ben: “Yeah, it’s saying, ‘How close can I get to this line without crossing it?’ The question of getting rid of a $10 Netflix subscription seems kind of silly because it’s not going to make much of a dent. There aren’t 20 things like that that I could cut out of my monthly budget to make up a significant difference. I need to focus my attention and energy on things that I can do to raise my ceiling.
  • 39:34 If I start doing that exercise and find that I’ve got the Scarcity Mindset, there’s this reduction that starts to happen. I start cutting things out, but really I’m running away from this imaginary line that is lowering in my budget. It just keeps eating away at the things I’m able to do. I just feel like that’s rarely a positive direction to go when you’re trying to figure out how to make up the deficit in your budget.”
  • 40:34 Sean: I like what you said about raising the ceiling. Rather than worrying about the boundaries, what if you spent that effort focusing on doing better in your own business and getting to the next level? You might just realize that you spend 3.5 of your work hours on Facebook and Reddit.
  • How Do You Manage Personal Spending and Business Spending?
  • 41:09 “My personal and business spending seems to merge into one clump—do you have any guidance on that?”
  • 41:18 Sean: This is an interesting one for me. It was just recently my birthday and Laci was talking about how hard it is to buy gifts for me. She said, “Whenever you want something, you just buy it!” The thing is, everything that I want and everything that I need is a business expense because my business is so thoroughly aligned with what I’m passionate about. It’s a beautiful thing, I just struggle to speak to the issue of personal spending vs. business spending because I tend to just buy equipment, and gear, and software, and things that help my business and I love that.
  • 43:07 Ben: “The line between my personal and business expenses is becoming more blurred for me too. The things that I spend money on personally are things that benefit my business, but thinking about it also causes me to be more intentional about whether spending money on this thing will really enrich the quality of my life. Does this help me align even more with my goals? I like this idea of that line being blurred because it makes my business goals my personal goals also.”
  • 45:27 Sean: Honestly, what I like even more than the line being blurred is this: picture two circles. Imagine that they very edge of their circumferences are touching. For some people, it’s a little blurred. It’s somewhat of a slight Venn Diagram. But for me, I like when the two circles are completely eclipsed. If the two circles are completely eclipsed, it means what I do vocationally is completely aligned with what I love to do personally.
  • 46:04 That’s obviously something we’ve talked about before and I’ve struggled with because what’s on and what’s off? What’s work and what’s play? What’s home and what’s business? What’s family and what’s job? But for me the solution to that has become the sabbatical. I’m an all-on kind of guy. I love that I can be all on in my business and feel completely fulfilled personally. It’s not that I can’t wait until I get home so I can do this other thing. I love that I can be all-on about what I enjoy.
  • 46:39 But I also recognize that even if I love to do what I do for work, I need to reset and I need to pursue secondary passions. I need to rest. I need to relax. I need to switch things up even if I love what I do. More so than the lines being blurred, I love the circles being eclipsed.