Wealth by Design

How often do you hear an entrepreneur or business owner say "I made 7 figures last year", and you assumed that meant they took home 7 figures? We're here to break it to you real nice: 7 figures in revenue is not the same thing as 7 figures in profit. You want to aim for the stars when it comes to both your revenue and your profit, but it's also important to know the difference so you can properly plan and leverage your business's money for long-term growth and stability.

Interested in how to do that? Listen in on Episode 90.

WHAT YOU'LL LEARN

• [01:02] The definition of revenue

• [01:09] The definition of profit

• [01:24] What's really going on when people say they make 6 figures in their business

• [02:37] The "Ritz Carlton" difference and what it means for your brand

• [06:20] The value of sacrificing short-term profit for the long-term

• [07:22] Deciding which is more important in your biz: profit or revenue

• [07:49] Why increasing revenue is much more valuable than cutting costs

• [08:07] The parallel between your business and the national economy

• [08:34] How profit can be manipulated

• [09:37] Ways long-term profit can be "secured" by investing in your business

• [11:00] Why you don't want to be Kodak

• [12:42] How to review profit through a different lens

THE DIFFERENCE BETWEEN REVENUE & PROFIT

Do you know the actual difference between revenue and profit? It's cool, a lot of people use the terms interchangeably. But they're not interchangeable — and they mean very different things. Revenue, for example, is any income coming in from your business. This is every dollar you get paid. Profit, on the other hand, is revenue minus your expenses. So you might make $25,000 a month in revenue, but you have employees, a lease, and monthly subscriptions of pay, so you only have $16,000 left. Then you have to take taxes, retirement, healthcare, etc. into account. Your profit is the money you have left after everyyyyything else comes out.

Got it? K, good.

WHICH ONE COMES FIRST: PROFIT OR REVENUE

So, when you're thinking about building a business that really lasts, which one do you need to be really focusing on: revenue… or profit? Because revenue means you're killing it at what you do, and profit means you're probably taking more way more money. They're both pretty great.

However, if your goal is to make this whole thing last, you might want to consider focusing on revenue. It's counter-intuitive, right? Profit means that you've got a lot of money leftover after expenses, but when you focus on revenue (making 7 figures as a business, for example), it means you have an even higher threshold of income that you can use to really grow and stabilize the business.

Let's take, for example, the Ritz. You know it's a hotel, but you also know that it's almost become an adjective for high class. Part of that process — and why the entire franchise is still so successful — has been to re-invest in the hotels in ways that their guests love. The owner of the Ritz has been known to put piano players in lobbies, and to pay for much higher-end touches than other hotels. They've even gone above and beyond to get a stuffed giraffe back home to a young guest. While, yes, these things all decrease their overall profit, it improves the customer experience and makes it more likely that people will come back for more. That increases long-term revenue.

And that, friends, is what you should be focusing on.

SHORT-TERM REVENUE = LONG-TERM SUCCESS

What you're making right now as a business will inevitably advise your long-term success. Even if you're not a wildly successful hotel chain like the Ritz, you do have some way you can invest in your business so it is even more sustainable down the road. For example, you might have grown your business from the ground up as a one-person operation. But to really make it successful in the long-run, you need to invest some of your profit into hiring someone to help out. Other businesses might need to invest profits into software, or a new storefront, or a business coach so they can take their brand to the next level. And to do all of that, you can't just cut corners. You need to make enough revenue. Period.

EXPENSES OR INVESTMENTS?

So, how can you start focusing on revenue to build long-term success in your business? Consider your expenses through an investment lens. Are you spending money that's just going out the door, or are you spending money on things that will help you grow in the future? Here's a good example: are you wasting money on "amenities" for your office that you don't need — like that ping pong table you see in all the startups in movies? Or are you investing in things like office space for your growing team, which is going to help you grow faster than before? Maybe you're investing in a better camera to take better social photos which help you attract new customers or clients, or maybe you're just spending money on software you don't use or doesn't do what you need.

Take a good hard look at what's cutting into your profits to make sure it's useful. From there, you can increase your profit margins and grow your business. But it all starts with making sure you're making enough revenue and investing it where it really matters.

For more tips on how to focus on revenue > profit, check out this episode of Worth It. You can also see all the resources we referenced in the show notes below.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual.

RESOURCES & PEOPLE MENTIONED

• Our FREE go-to financial and life planning resources
• The Toujours Planning Quiz — Are we a good fit for your financial planning needs?
• Joshie the Giraffe story

CONNECT WITH DANIELLE AND DUSTIN

• Ask Your Questions

• On Facebook

• On Twitter

When you're an entrepreneur, it's hard to separate work from life. When you've built a business (or multiple businesses) from the ground up, it can be even harder. After all, you have big dreams. Maybe you want to scale that biz, hit 7 figures (or 10 figures, you do you!), and work remotely while building your empire. Whatever your vision for your business looks like, odds are that vision also bleeds into your life. It becomes "When I hit 7 figures, I'll buy myself that Tesla," or "I want to live in New York so I can build more contacts for my business."

All of this sounds a-freakin-mazing, and we're totally here for it, but we want to make sure you're not just tying your life vision to your business vision. They should still be separate, at least somewhat. If you're wondering if you have tied your life vision to your business vision (or you know you totally have), this episode will give you some tips on how to separate the two, and a few resources you can use to get clear on what your visions for life and work really are.

WHAT YOU'LL LEARN

• • [00:43] Why entrepreneurs have to be careful about biz decisions that affect life

  • [02:01] How to consider if your business vision counteracts your life vision

  • [04:01] Factors that can affect your long-term happiness

  • [05:22] The difference between a life vision and a business vision

  • [07:06] How a business vision might look, separate from your life

  • [08:07] Why most people regret working so hard

  • [09:13] The risk of putting off your life vision for "later"

  • [11:26] Why revivement (instead of retirement) can align those biz and life visions

  • [13:14] The first step you need to take to feel harmony between your business and life

  • [14:18] How to get your business goals to move you toward your revivement

YOUR BUSINESS OR YOUR LIFE?

Have you ever had an amazing business idea, or a goal for your current business that you just couldn't wait to get started on? But then you started thinking about all the hours it would take, the level of effort and money it might require to get off the ground? Did you think about weekends lost, time with your spouse or partner you wouldn't get, or the difficulty it would require to move and leave family and friends behind? Sometimes, our business visions can be so powerful (and so exciting!) but they come at such a cost to our life vision.

Maybe your life vision is to start a family and live close to your parents, but your vision for your business requires you to work 7 days a week in a city far from home. Which one wins out in that scenario? On a less obvious scale, entrepreneurs face these kinds of decisions everyday. Maybe your life vision is to be fit and run marathons, but your business needs you working all the time and you have no time to train. Maybe you want to travel the world but you're too busy to take the break from work.

Whatever it is, this is how we all have tied our life vision to our business vision in some way or another. It's not necessarily a bad thing, until we sacrifice what we really want out of life to keep the business vision afloat. Instead of allowing one to overpower the other, let's talk about how to make these visions live in harmony.

BALANCING YOUR LIFE & BIZ VISIONS

Y'all, we don't want you to miss out on life because you're too busy building your business. We've seen it too many times, and you probably have, too. Your work should revolve around your life, not the other way around. So, to really balance out what you want for your life and what you want for your business, you need to blend them together and make sure that one doesn't overwhelm the other.

Ask yourself:

• What would my business look like if I got to do what I wanted in life?
• What level of success would I need to reach in my business to sustain the life I want?
• What would I be doing if I wasn't working? How can I get to that point?
• What do I want to do in life before I die? What can I plan to make that happen?

Of course, this isn't just a quick thought exercise. You'll need to put some muscle into it! Especially if you're looking around and realizing you've already tied your life vision to your business vision; it'll take some time to unravel that. In this episode, we give you some resources (linked below) that you can use to make the separation of life and business clear, so that you can make sure the pieces meld together in a way that is healthier for you!

Remember, all of your business moves should be designed to give you the life you want — not the other way around.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual.

Resources & People Mentioned

• • Our Vision Worksheet in our FREE go-to financial and life planning resources
  • Revivement (instead of retirement)
  • The Toujours Planning Quiz — Are we a good fit for your financial planning needs?
  • Tyler J. McCall @tylerjmccall
  • The Top 5 Regrets of the Dying by Bronnie Ware

Connect With Danielle and Dustin

• Ask Your Questions
• On Facebook
• On Twitter

As entrepreneurs and business owners, money is a huge part of our everyday lives — from the few bucks we spend on that morning latte to our home expenses and how we use it to invest in new hires for our business. We all have a different experience with money, and most of us have different "money styles" than our loved ones or business partners. Why is that?

Well, we think it's because most people boil down to one "type": a Spender or a Saver. Now, we know this is a generalization and that we all have a little Spender and a little Saver in us. However, we think that, in general, people lean more one way or the other. We also think that your "type" dictates a lot about how you work with others, whether it's a spouse or a business partner.

Do you know which type you are? Listen to this episode of Worth It and read on to identify your "type" and to get some tips for how to work with your type (and your partners who may be the opposite).

WHAT YOU'LL LEARN

• • [01:43] The spending styles of Dustin and Danielle (and their partners)

  • [09:46] What role childhood plays in your spending or saving style

  • [12:50] How spending/saving types affect business partnerships

  • [14:17] Considering when to spend on things like new hires and tools to grow your business

  • [15:11] Why Spenders may be able to grow faster in business than Savers

  • [15:45] The tendencies of a Spender

  • [17:25] The cycle of Spenders' guilt

  • [19:37] Why a "certain standard of spending" is hard to come back from

  • [21:16] The tendencies of a Saver

  • [23:14] The downside of being a Saver when it comes to building long-term wealth

  • [24:03] How to know where YOU fall on the spectrum of Spenders & Savers

  • [24:34] How the differences in spending/saving types play out IRL

  • [25:57] Navigating a business relationship between a Spender and Saver

Tendencies of Spenders and Savers

When it comes to saving and spending, many of us believe we're somewhere in the middle. You can spend when the occasion arises, but you save if you need to. But we think that, in general, we all fall closer to one side of the spectrum. So… which type are you? Below are a few signs you might be a Spender or a Saver.

Spender:

• • You work hard and believe that makes up for/gives you license to spend as you see fit.
  • You don't (usually) worry that money will run out.
  • You may make hasty spending decisions and wonder why you spent so much later.
  • Prompt: Do you look at prices on a menu before you order? Do you want to buy the most expensive thing on the menu because "it has to be good"?

For example, Dustin is the Spender in both his marriage and his business (you're shocked, we know!). This means he tends to order the Surf n' Turf at any restaurant he visits and he loves spending money on high-quality items that will last a lifetime. He does tend to spend a lot of money easily and sometimes worries he's spent too much. But he works really hard and makes good money, so he feels he is justified.

Saver:

• • You're afraid the money is going to run out.
  • You may have had a situation in childhood that made you feel there wasn't enough money.
  • You compensate for others' spending tendencies, especially if you have a life or business partner.
  • Prompt: Do you find the lowest-priced item before you decide what to order from a menu? Do you limit going out because you worry about spending too much?

Danielle has always been a Saver, although she can spend money where necessary (and sometimes just for fun). When she does spend, she usually has buyer's remorse, aka spending guilt. She remembers her dad talking about "tightening up" on spending when she was younger, and worries there won't be enough money down the road so she shouldn't spend now. She's also the Saver in her marriage and feels the need to spend less if her husband spends more (her dream dining table notwithstanding).

Of course, these are by no means the only examples Spender and Saver personalities; it's just what we've seen in our work and lives. Now that you have a general overview of Spenders and Savers, let's talk about how these play out "IRL."

How Spenders and Savers Interact With Life and Business Partners

While we've talked before about spending vs. saving, we haven't really talked about how this plays into your relationships or how it affects your business. That's why, on this episode, we talked about the different "roles" Spenders and Savers play in their romantic relationships and in their businesses.

Because "opposites attract," there are often Spenders and Savers in the same relationship — whether romantic or business. This balances you both out well, but it can also lead to problems. For example, Spenders may feel "looked down on" by their Saver partners, or rebel against the restrictions a Saver puts on spending.

Savers, on the other hand, might feel like "The Bad Guy," always imposing rules or shooting down new ideas that require a large investment. They may also feel resentful that they "can't" spend as their Spender partner does. Overall, though, they have a practical mindset when it comes to money and believe that they balance out the Spender in their relationship well.

In both cases, working together to talk about your decisions can help balance you out well. Communication is key when you have different personalities and values. It's also important to work together to cultivate the view of "investment" instead of "spending." When Spenders and Savers think of spending, they have two different reactions. Whereas, if they focus on what they're investing in, they may have an easier time finding middle ground.

We also talked about how Savers and Spenders have the same weakness: building wealth.

Spenders & Savers & Wealth, oh my!

You'd probably think that it's just the Spenders who aren't able to build wealth. But it's actually both Spenders and Savers equally — and sometimes it can be even more of a problem for Savers. How in the world!?

Well, Spenders obviously spend too much and don't save (or invest). But Savers often save too much — and put money in places where it's actually not doing them any good. For example, many Savers are afraid to invest in things that make their lives or businesses better. We're talking about the new AC unit that will help reduce your monthly energy bill, or that new hire who will help you scale your biz. Spenders may also put all their cash in a low-interest savings account, when they could actually invest those funds and accumulate compound interest that builds wealth.

As a general rule of thumb, both Spenders and Savers should be saving or giving 25% of their income. Once certain "funds" are funded — like your emergency funds and any short- and medium-term saving goals — you can start investing your money. For Spenders, this may take a while if they're not used to saving anything. For many Savers, though, it might be feasible to start investing sooner because they have already built that habit of saving. The key here is to not just keep saving in a basic savings account. You want to build wealth, not stagnate it!

For more tips on how to build wealth based on your spending or saving type, check out this episode of Worth It. You can also see all the resources we referenced in the show notes below.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual.

Resources & People Mentioned

• • Our FREE go-to financial and life planning resources
  • The Toujours Planning Quiz — Are we a good fit for your financial planning needs?
  • Adulting 101 Series: Life – Episode 83
  • Spending vs. Saving: Mindset and Differences - Episode 67

Do you feel like a total baller because you make a bunch of money each month? Are you living high on the hog because your business is making 6 or even 7 figures? That's great! Hats off to you. But… we're here to burst your bubble a little.

While you may be making a really great monthly or yearly income, and you are totally killin' it at what you do, income is not the same as wealth. Income is literally what is coming in each month from your work or revenue streams. But wealth is the "abundance of valuable financial assets or physical possessions which can be converted into a form that can be used for transactions." Basically, they're what you already have that you can use to get by — and thrive.

So, this episode, we're getting into why income is not wealth and how you can actually start building true wealth so you can feel really rich.

WHAT YOU'LL LEARN

00:48 The perfect example of a business owner who relied on income, not wealth

03:20 What happens when people hit the 6- or 7-figure mark

03:45 What "wealth" really entails

04:05 4 scenarios where you're not truly wealthy

04:56 The risk of assuming people are wealthy when they have a lot of money

06:33 How we define wealth

07:53 The importance of protecting your wealth with insurance

09:56 How to transition your business income from money to wealth

10:54 Why you should treat your income like a well

12:24 Ways you can restructure your business to move beyond working IN it

13:04 Diversifying businesses, investments, and saving strategies for maximum wealth

You're not as wealthy as you think

First and foremost, we want to talk about a few scenarios we see play out time and time again with clients. They are making a ton of money (yes, sometimes over a million a year!), saving a bit of it, and really rockin' in their business. But we tell them they ain't that wealthy. Why??

Because they usually fall into one of four categories:

• They have a ton of debt. Now, we know we just talked about how you can leverage debt, but these people usually have high-interest debt — and a lot of it. If you have a lot of money in the bank, but you have debt coming out your eyeballs, you are not wealthy.

• They are spending like there's no tomorrow. If you're spending just as much as you're making, and you're not leaving anything to save, you're not wealthy.

• They don't have insurance. You may have a high net worth, money in the bank, money in savings, and still not be wealthy. How? By not having the full spectrum of insurance. We're talking life, disability, health, business… the whole enchilada, you guys.

• Their only source of income is their biz. We've said it once and we'll say it again: your business(es) aren't going to build wealth. If your only source of income is from a paycheck or salary, that means you only have money coming in if you work. True wealth means diversifying your income streams so you can cover your behind if an illness or recession strikes, you want to retire, or you sell your biz. Business doesn't count as diversification; saving and investing do.

So, if all of the scenarios above don't make you wealthy, even though you're making money, what does?

How we define wealth

In this episode, we get real clear on what we mean by wealth. Wealth is your net worth, straight up. It is your total assets minus your total liabilities, and the more assets you have than liabilities the better. Notice how we said assets, not income. Assets include things like stocks, bonds, property, businesses, art, etc. How do you get these assets? By having income, of course. But you need to be putting that income to use by saving and investing in assets that keep you wealthy well after you stop working for a paycheck.

So… how do we build wealth?

If you've read this far, now would be a good time to pop over to the podcast and listen. Because we drop a few actionable steps you can implement to build (and protect) your wealth. Things like:

• Turning your business from income to investment. While this is definitely a process, you can set your business up to be more of a passive income stream for you, than to just start a business that you have to work in all the time.
• Turning your business into something that you can walk away from, without everything falling apart. Turn your contract work into an agency, for example, and scale your team so someone else runs the show.
• Setting up umbrella insurance. We're talking the full spectrum of life, health, business, disability, etc. so you're not risking your chance at long-term wealth if something happens.
• Setting up a bucket strategy to make sure you're setting aside enough money for short-term, medium-term, and long-term goals.

You should also be doing all of it if you want to truly diversify your income and build wealth. So if you want to dive into this topic and really figure out how to move from "money-rich" to "wealthy-rich," tune into the episode. And then go build dat wealth!

This material is for general information only and is not intended to provide specific advice or recommendations for any individual.

RESOURCES & PEOPLE MENTIONED

• Sophia Amoruso
• The Toujours Planning Quiz — Are we a good fit for your financial planning needs?
• The Bucket Strategy: Episode 57: Why Your Money Needs Direction
• Our Net Worth Calculator in our FREE go-to financial and life planning resources

CONNECT WITH DANIELLE AND DUSTIN

• Ask Your Questions

• On Facebook

• On Twitter

If you've been in the entrepreneurial space for more than a hot minute, you probably know Charlie Gilkey. He started out with a blog, but now he is the creator of Productive Flourishing, a podcast and a site that helps people do the work that matters so they can become their best selves. Believe it or not, we nabbed Charlie as a guest on Worth It, and we're really excited to share this interview with you. So, let's get to it.

WHAT YOU'LL LEARN

00:40 Who Charlie Gilkey is — and why we're so excited to chat with him!

01:40 Charlie's background as an Army logistics officer

03:23 How he took his first blog to a full-on business and podcast

03:43 Why his new book, Start Finishing, is different from other productivity books out there

04:46 Charlie's view of the "bro" productivity literature that currently exists

06:19 Why our focus on work (rather than our lives) is a crisis of priority

07:40 The hamster wheel so many of us find ourselves on

09:15 Why money is an instrument, not the end goal

11:10 What happens when you add intention and purpose to your money

12:16 How to make more space for those projects you want to finish

12:57 What "thrashing" means

13:51 How most of us are going about "finishing" the wrong way14:20 The 5 Projects Rule

15:25 Why choosing what you're NOT going to work on frees you to start finishing

16:49 The 2-Hour Rule

18:15 The risks of not scheduling in your project-based work

20:35 Why we tend to justify economics but not emotions when we outsource our work and lives

23:15 The idea of "Project World"

24:35 What Charlie means by "No date, no finish"

28:30 The problem with to-do lists (and how we use them)

30:05 The 15-second or 2-hour decision you'll need to make with each to-do list item

31:01 The 3 ways we experience time

33:23 Why we run and hide when we don't have our projects properly aligned

34:23 The risks that come with thinking motion means progress

35:29 How to take back your time by being mindful of your device use

37:58 The risk of planning too far in advance

41:05 Why Charlie often recommends that entrepreneurs don't plan for more than 6 mos out

42:43 How to handle multipotentialite tendencies

43:10 The benefits of finishing something at a level of mastery

47:39 Charlie's mission in life

THE PROBLEM WITH "NEVER ENOUGH TIME"

While most of our conversations center on money and how to build wealth, we know that most of our audience are entrepreneurs who have multiple interests, love exploring new business ideas, and who want to make the most of the time they're working. After all, you started your own business so you could have time to do what you love, right??

And yet, as Charlie talks to us about in this episode, we tend to prioritize work to the point of sickness or burnout, and we do it all in the name of money or "getting things done." The result is that many of us feel like we're just working for money, that we're not in alignment, and we don't have time to do the things we really want to do — or even need to do.

Charlie goes into detail on why this is in his new book, Start Finishing, and he was nice enough to shed some light on this during our chat. In fact, he calls it out pretty early in this episode: If you're struggling to find the time to do what you want to do, it's not because there's not enough time. It's because your priorities aren't aligned.

GET OFF THE HAMSTER WHEEL

We all have busy lives. It can feel like we're running from one thing to the next, trying to get ahead. And it can feel like a hamster wheel. We're not really getting traction and we're not doing what we feel most called to do because, you know, you have a lot on your plate.

But let's be real. You get to choose what you're working on — and what you're not working on. It can be hard to change what you've already set in motion (yes, you have to finish that client project or get those meetings done before you can really make space for what's important to you), but you can set yourself up for success starting now. How? Charlie calls is the 5 Projects Rule.

The 5 Projects Rule

This rule is one that Charlie highly recommends, especially for those in the entrepreneurial space. Basically, it means no more than 5 projects per time slice (a day, a week, a month, a quarter, a year). Many of us have 5+ projects we work on in a day, like "Do the laundry, finish that work project, mow the lawn, do the groceries, schedule the vet visit, figure out the water bill" etc. — and it's no wonder we don't have time! We are literally cramming our day with projects. Instead, Charlie recommends cutting it back to 5. 5 a day, 5 a week, 5 a month, whatever it is. But no more than 5 in a time slice. To do this, you'll need to figure out what you don't have to do, or what you can delegate. Get real with it, and don't let other people's priorities or emergencies affect this once you've made a decision. Stick to your project plan!

And if your time slice is bigger than a day — a week, month, quarter, year, etc. — you can break those projects down into smaller time slices. In a really good planning world, Charlie says, you'd have a long-term project chunked out into smaller projects, i.e. a month-sized project broken down into week-sized projects.

If you're wondering how to break down your projects by week or even day, Charlie has a recommendation for that, too.

2-Hour Rule

Ask yourself what a 2-hour chunk looks like for your project breakdowns: what can you get done in 2 hours and where you can fit that block of time into your schedule? Charlie also shares that you can ask yourself which items you can get done in 15 minutes, because you knock things off your list really quickly when you see those things come up.

He also adds that we all underestimate how long it takes to get stuff done, so build in a buffer! For a rough buffer, Charlie says you can multiply the time you think a project (or work block) will take by 3. So that 15 minute project… it might actually take you 45 minutes. Plan accordingly.

FINISH THE DANG THING

Charlie shared his big productivity secret on this episode: "No date, no finish." If you don't have a date for that big project you want to finish, or that little project you want to start, it's never gonna get done. And picking a date is only half the battle. From there, you need actionable breakdowns — those 5 projects per time slice we talked about. What are you doing today/tomorrow/this week/this month to move you closer to that goal?

There's another important point that Charlie made: we tend to run and hide from our commitments to our own projects. How often have you stared at your to do list, started to write that email, or tried to find information about your new pet passion… and froze? Maybe you ran straight to a client or customer issue to resolve, or you decided to open Instagram, or maybe you buried yourself in email busy work. #Guilty

But the problem with this is: We trick ourselves into thinking "At least we did something." But it isn't the work you should be doing, and you know it. So get real with yourself, make a plan, and make it actionable.

START FINISHING: THE BOOK

This is just the tip of the iceberg in terms of what we talk about in the podcast. Charlie also covers the problem with how we all manage our to do lists, the risks with planning more than 6 months at a time, and more. We talk about all of it in the podcast, we but we also talk about his new book: Start Finishing.

While this is technically a "productivity book," Charlie says it's different in three ways:

1. It talks just as much about the work of our lives, than the life of our work
2. It's not like "bro" productivity literature that can be exclusionary
3. It focuses on the work that calls to you, rather than the things on your to-do list

He hopes to help people thrive in their businesses, homes, and communities, and we think he's well on his way. If you want to know how to finally start finishing, juggle all of your many interests, and create a schedule that lets you do more than work and feel guilty… this episode and Charlie's new book are perfect for you. Check them out!

This material is for general information only and is not intended to provide specific advice or recommendations for any individual.

RESOURCES & PEOPLE MENTIONED

• 7 Habits of Highly Effective People - Stephen R Covey
• Getting Things Done - David Allen

• Start Finishing - Charlie's new book out 9/24/19

• Charlie's "home" on the interwebs: productiveflourishing.com

Do you think about saving money and instantly feel guilty and/or defensive about your lack of savings right now? You are so not alone. And while we're here to tell you a bit about how much you should be saving, we spend some time in this episode of Worth It talking about why you should be saving. We hope it gets you fired up and ready to save, so let's dive in.

WHAT YOU'LL LEARN

• • [02:20 How Dustin managed to build wealth through savings… even during the 2008 financial crisis

  • [07:45 What Warren Buffet says is the hardest skill to craft

  • [09:35 Why you can still have luxury taste and save for the long-term (if you make the money)

  • [11:00 Using windfalls to build up future wealth

  • [11:40 How to leverage market ups and downs to build wealth

  • [13:30 Why you shouldn't wait for the market to drop to start investing

  • [16:00 The importance of saving more for a work-optional lifestyle

  • [00:30 How to shift your mindset from scarcity to abundance

  • [03:15 The difference between splurging and celebrating

  • [03:45 Why should think about saving as putting your money to work for your future

  • [04:30 The risks of pushing saving off to "one day"

  • [06:35 Addressing your mental blocks about saving

  • [07:15 Why saving can sometimes feel like a penalty

  • [08:20 Thinking about your future self coming to collect on everything you've saved

  • [11:15 The importance of automating your savings

BUILDING WEALTH, EVEN THROUGH A FINANCIAL CRISIS

It's hard to believe that anyone came out of the 2008 financial crisis with more wealth, but those who "weathered the storm" and kept saving and investing during that time actually did. Dustin is proof. While the markets continued to bomb, he continued to set aside money to invest. The result? He's got beaucoup bucks in his accounts now… and it's all because he committed to saving and investing at the age of 24.

The basic truth of saving is this: You'll build more wealth if you start saving (and investing) now. You should save up for emergencies, and we usually recommend 3-6 months of personal expenses and 3-6 months of business expenses. Then you can start funding your Backup Life Bank (BULB), which is about 25x your minimum income requirement. And beyond that… you should be investing.

Why? Because you can add more money each month to your accounts and benefit from long-term interest growth on those higher balances. It's the Law of Compounding Interest we are always going about and it's real! But before we overwhelm you with the idea of investing, let's talk about how much you should be saving.

WHY NORMAL SAVINGS RATES AREN'T GOOD ENOUGH

"The experts" (who are they and where are they hiding?) say the average person should save about 10-15%, but if you're a business owner or entrepreneur, we really think you should up that to about 25%. Automatically set aside 25% of your monthly income to your emergency funds and, once you hit those savings goals, you can start investing 25% of your income to really build up your BULB — because, let's be real, investing will net you more compound interest than a savings account ever will.

And when you hit your BULB goal? It's time to ball out. Go crazy and buy yourself a Tesla with cash, or buy a cabin in the woods. We don't care how you spend your money, once you've paid your future self. The best part about all of this? You can build wealth on your savings and investments, and can make more money on the interest alone — all while you enjoy your extra "spending cash."

You might be thinking, "I don't know, Dustin and Danielle, 25% seems pretty steep…" If that's you, it's time to talk about mindset.

WHY YOU NEED TO SHIFT YOUR MINDSET ABOUT SAVING

We know mindset is a big buzzword here, but we're gonna use it in a different capacity than other people might. From a financial mindset perspective, you need to really think about your savings as improving your future state of affairs. It's also important that you shift your mindset from one of scarcity ("I can't save that much money! I wouldn't have any money left!") to one of abundance ("Look at what I can save for my future while also enjoying what I can spend today").

Of course, we're not gonna just leave you hanging with some vague "Change your mindset" crap like that. Here are a few actionable tips you can use to actually shift your mindset from saving = scarcity to saving = abundance:

• • Try thinking about your savings as an absolute must. Think about it like your rent, your utilities, your non-negotiable plant subscription kit you get in the mail every month.
  • Think about your future self coming to collect. Do you want to live a work-optional lifestyle by the time you're 40? Do you want to retire in your 50s after your kids go to college? Wherever you see yourself using up all that cash you've stashed, take a minute to visit yourself in that future. See yourself living in your "revivement" cashing in those checks, withdrawing that money, and living your best life.
  • Automate it. Don't think about setting aside money every month, just set it to auto-transfer. You might freak out when you have to manually do that transfer and accidentally sacrifice your future wealth for your current comfort.
  • Don't spend it all at once. There's another skill you need to develop, y'all, and it's not assuming that "abundance mindset" means "spending every last dang dime." Yes, you can celebrate and yes you can spend the money you've worked so hard to make, but true abundance comes when all of your needs are taken care of. So don't neglect saving!

There's another thing we want to talk about: changing your assumptions about saving.

YOU KNOW WHAT THEY SAY ABOUT ASSUMPTIONS

Have you ever heard the phrase, "Assume means to make an ASS out of U and ME?" If you haven't, you're welcome. But now we want to talk about your assumptions about savings… and how they might be making an ass out of you.

Let's see if you've said this to your (or your besties after a few mimosas):

"I'll start saving one day, but for now I'm just enjoying the money while it lasts."

You do see the problem there right? Because, if things went south tomorrow, you wouldn't have any money to enjoy. So you need to re-evaluate your goals and make sure you can take care of yourself beyond tomorrow!

"Business is booming now, so I don't need to save right now."

You know, while you're making those big bucks, you could be setting aside just 25% (when you make a lot of money, 75% of your income is still a lot of freaking money) and building massive wealth. Save and invest when you have those windfalls — Dustin did, and he's sitting pretty now! Plus, your business could fail… and then what?

"My businesses will keep me afloat."

Let us make one thing very clear: you can diversify where you save and invest your cash — bonds, stocks, different asset classes, etc. — but you can't diversify your businesses enough to build true wealth. Because multiple businesses won't necessarily cover your 🍑. Don't assume your businesses are going to keep you afloat if a recession hits, and don't expect the money to keep rolling in after you want to walk away. The good thing about saving money? It makes money for you… without you needing to work. So, we'd say that's a better investment.

CALLING YOU OUT

We've covered a lot of ground today, but it's far from the first time we've talked about this you guys. You can go through our entire podcast library and see that we've been talking about this since Day Freakin' One. But we know hearing how much you should save and actually saving that much are two entirely different things. So we're doing something a little different this episode: we're calling you out.

We've given you the foundation, we've given you step-by-step action plans. We hate to break it to you, but the jig is up. It's time to start saving.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual.

Resources & People Mentioned

• • Our FREE go-to financial and life planning resources
  • The Toujours Planning Quiz — Are we a good fit for your financial planning needs?

Connect With Danielle and Dustin

• • Ask Your Questions

• • On Facebook

• • On Twitter

We hear it all the time: "I feel like I'm not actually an adult because I have debt. And debt is bad!" Do you resonate with that? Well… we're here to tell you a few things about debt that just might blow your freakin' mind. Check out the fourth installment of our #Adulting 101 series about *drum roll please* debt repayment. How much should you be paying to debt? You'll probably be surprised.

WHAT YOU'LL LEARN

02:19 What people sacrifice for the sake of paying down debt

03:20Generational fear and hatred of debt

03:46 Dustin's chart that "explains everything"

05:00 Why the truth is that not all debt is bad — and why not all debt should be treated equally.

07:42 Why you should treat interest rates like a game

08:26 The definition of interest

09:09 The good, the bad, the ugly debt

10:56 At what percentage you should start focusing your debt repayment

11:26 What Dustin thinks is "horrifying"

12:58 How much should we be paying off our debt?

13:29 How to shift your savings goals around to pay off high interest debt

14:10 Why debt should be viewed as a tool that gives you leverage

16:29 How paying down debt can actually risk your long-term wealth

17:40 Why you may be risking stability in a recession

IT'S NOT THE 80'S ANYMORE, MOM

Do you have parents, grandparents, or older family members/peers in your life who talk about "debt being dumb"? Maybe you've heard a shall-not-be-named "money guru" say that and thought, "Well crap, I must be dumb." We take issue with this approach to debt. Why? Because it's the not the same world anymore, and sometimes debt is kinda smart. Yeah, we said it.

From the early 70s all the way up until the financial crisis in 2008, there was about 40 years of high interest rates. These interest rates were way higher than historical averages — and even what we're looking with now. That means, if you're a Millennial, your parents were maybe paying 14% interest on their mortgage. Insane right?! What's even crazier is that today, we're looking at the lowest interest rates in over 200 years. So, when we talk about debt "back then" and debt nowadays, we're talking about apples and oranges.

This means that owning a house with a 4% mortgage is wayyyyyy better than owning one like your parents did (and probably paid off) at 14%. This means that your car loan at 4 or 5% is wayyyyy more affordable than your dad's old T-Bird. And you know what? The cost of college has increased 260% since 1980. So thanks, Aunt Linda, for the story about how you paid your way through college, but the reality is we need loans to get that same education.

So, when we talk about debt, know that we (as in Dustin and Danielle) know that we're actually talking about interest rates. And as Danielle puts it, interest rates are really just a game you gotta play.

HOW TO PLAY THE INTEREST GAME

To put it simply, interest is the cost of acquiring money. How much does it cost to borrow the money you need? How much will it cost you to take out a loan to buy a house? How much does it cost to get money to pay for your education? And is the interest worth that cost to you? Really, that's a good measurement of your need for debt. Do you want to pay 7% extra for that car… or would you be cool with paying 7% on a cheaper car that still gets you where you wanna go?

And interest has another important role in your debt: it helps you decide which debt is "good," "bad," and "ugly."

THE GOOD, BAD, UGLY DEBT

We're not telling you to ignore your debt if you have, let's say, a 0% interest rate on your new car or home furniture. What we are saying is that you shouldn't push yourself to the brink to pay down debt that has a low interest rate. But yeah, sometimes we make mistakes and go into credit card debt over stupid crap like a new phone and some killer blue suede shoes. Those are the kinds of debt that we want to avoid — and pay off faster. Other times, things like predatory lending can get us in a bind and we may be paying 20-30% on things like cars, payday loans, and credit cards. So that leads us into the good, the bad, and the ugly — which we talk about in depth on Episode 60.

But the gist is this:

"Good" debt (and yes, we use that term loosely) include:

• Mortgage
• Auto loan
• Student loan
• Business credit cards or loans (with good interest rates)

These are used to improve your situation.

"Bad" debt:

• Adjustable rate mortgage (you buy a house and the rate can be changed over time, sometimes ridiculously high)
• High interest student loans (that you're just paying the minimums on)
• High interest car loans (this happens if you have bad or no credit)

A good frame of reference for bad debt: anything higher than 5%. If that's where you're at with a loan, it might be good to buckle down and pay more.

"Ugly" debt:

• Credit card debt
• Store credit debt
• Payday loans

"Ugly" debt usually is qualified by interest rates in the 20-30% range, and they require you to really do some work to get them paid down. Why? Because you're paying up to a third more than you spent — that "cost" associated with the money is totally not worth it.

But, now that you know which debt you should be prioritizing, how much more should you be paying to your good/bad/ugly debt?

HOW MUCH SHOULD WE BE PAYING TOWARDS DEBT?

This doesn't apply to every person, but a good rule of thumb is to spend about 5-15% of your income on debt. This includes your credit cards, your student loans, your car payment, etc. It does not include your mortgage, which is part of our housing episode (jump to Episode 81 here).

And, again, it depends on the interest rate! Are you at a smaller interest rate like 4%, or high percent like more than 17%? If you're at 6% or higher, you should probably lean more towards the 15% of your income range going to debt repayment. But not at the cost of your savings!

Remember your savings and investing. You should be saving (and giving) about 25% of your income but, if you have a lot of high interest debt, you might want to cut back on that investing if your interest is high. Then, once those higher interest debts are paid off, you can ramp up the savings and pay down the other lower interest rate debts over time. Why do we say this?

Because investing can net you 3-6% on average… which negates any sort of interest you'll be spending on low interest debt.

How? Because as you compound interest on your savings and investments — meaning you grow your accounts because you're getting paid interest into them — you continue to add more money, and get paid interest on those higher amounts. You're making money on the money you've earned. It's freakin' magical. You know what's not magical? Going broke to pay off low-interest debt.

DEBT ISN'T YOUR RISK; IT'S THE FINANCIAL INSTITUTION'S

We'd like to leave you with one last note: People think all debt is bad because it's a financial "burden" that rests on them. But that's not the truth. The party carrying the real burden are the banks that loan us the money. Essentially, you could never pay that money back (sure, you'd be screwed, but they'd be out the money), so they are the ones more at risk than you are.

We hear this all the time when we see Facebook rants about how "China owns our debt!" What you need to understand is: we don't have to pay back that debt right now. We have more money in our bank account because they (China or the banks) are holding that debt for us. This frees up more cash in our accounts to pay them back, but also still keep living.

And there's psychological value in knowing that we can pay things back over time — making it possible for us to do other things in life, like buy a house, have a baby, build a business, etc. We're not saying don't pay down your debt, or to only ever pay the minimums. But we are saying that you can do it at a pace that allows you to fill your other buckets.

DON'T PAY DOWN DEBT AT THE RISK OF YOUR OTHER NEEDS

We're just gonna say it: having an emergency fund so you don't have to go into credit card debt in case of an emergency is much more important than just paying off your credit card right now. Being able to afford the roof over your head while also paying down your student loan debt is more important than going all in to pay down your debt — and losing your roof in the process. And building long-term wealth is more important than paying down "good debt" for the sake of saying you are debt-free. #JustSayin

The biggest advantage of being young is that you can save so much, and therefore gain so much compound interest, that you can build vast amounts of wealth over time. But if you're focused on paying back "good" low interest debt, you're losing out on those prime saving years — and setting yourself up for more risk if something not-so-fun happens.

So let's reframe your debt: low-interest debt can give you power and leverage, rather than be a burden. It's not 1985 anymore, so don't let older generations tell you all debt is bad. Instead, lay out your debt, look at the interest rates, and figure out which debt gives you power and which debt is taking AWAY your power.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual.

RESOURCES & PEOPLE MENTIONED

• Ep. 81: Adulting 101 Series: Housing: Episode 081
• The Toujours Planning Quiz — Are we a good fit for your financial planning needs?
• Our FREE go-to financial and life planning resources

CONNECT WITH DANIELLE AND DUSTIN

• Ask Your Questions

• On Facebook

• On Twitter

You've heard us talk about housing. You've heard us talk about transportation. Now, we're talking about life. Not like the heavy "What is life?" stuff… just the money side of it. Do you know how much you spend on "life," i.e. dining out, clothing, Netflix and chill sessions, vacations, etc.? Do you ever wonder if you should really be spending that much money on yourself? You're not alone. That's why, on this episode of Worth It, we're talking about the "life" category of your spending: how much you should be spending… and how much you should be saving.

WHAT YOU'LL LEARN

• [00:41] What is included in the "life" category of your expenses

• [03:41] Why it's so easy to spend more as you earn more

• [05:20 The concept of business longevity

• [06:42] What's happening in our generation when it comes to saving/spending

• [07:36] What the Law of Attraction has to do with your finances

• [09:18] How abundance and scarcity mindset affects your "life" spending

• [10:23] The risk of "abundance mindset" as it relates to overspending

• [12:13] Whether you have a "wealth mindset" or a "money mindset"

• [12:51] Why wealth-minded people aren't afraid of running out of money

• [13:52] How to create a wealth mindset

• [15:02] What the BULB process is

• [15:14] How much you can spend (after saving)

THE IMPORTANCE OF LIVING WITHIN YOUR MEANS

Before we dive into how much you should be spending on "life," we want to talk about what's actually driving you to spend. As successful biz owners and entrepreneurs, we know you're #killingit, but that can also mean you're tempted to get it while the gettin' is good. That means more trips, more shopping sprees, and more "Sure, I'll loan you that money for your startup!" All of that is great, and has its place… but only if you're saving and investing what you need to create long-term wealth and stability.

That's why the first thing we talk about in this episode is considering your relationship with spending now so that you can have wealth in the future. Are you saving (and giving) 25% of your income? Do you have a Backup Life Bank like we talked about in Episode 63?

Remember: Your Backup Life Bank is 25x your minimum income requirement. If you need to make $80,000 a year to get by, you'll need about $2 million in your BULB.

Of course, we're not saying you have to set aside 25% of your income AND have $2 million in the bank before you can have any fun. We're just saying the amount of money you can reasonably spend on "life" is subject to how much you're really setting aside.

Once you've started saving a quarter of your income and are working toward your BULB, what you spend on life is up to you (within your means, of course). That's why we also talked about your mindset… because that really affects how much you're spending and saving. Plus it's, like, totally #adulting.

How to create a wealth mindset

As adults, we have to do a few things we're not super excited about. Like floss every night and clean the kitchen. We also have to spend money on things that don't "spark joy," as Marie Kondo says. So no, we can't just spend all our money on avocado toast and Teslas. We also need to consider our future, our businesses, and what we'll do if things don't always go as well as they're going right now.

That's why we talk a lot about mindset on this episode. Because, once you have the saving thing down, you can spend as much as you (reasonably) want. But how do you know you're spending on "life" in the right ways? You spend in alignment with your values, visions, and goals for your life and money.

Sounds easier said than done, right? In this episode, we talk about how to embrace a wealth mindset (rather than a spending mindset) and even offer one of our tools to help you get there. Use our Vision Worksheet to figure out if your life's expenses align with your true values, visions, and goals — and to get clear on what you want your money to do for you, so you're not spending in areas that make you go "Why the heck did I buy that?!"

A FINAL NOTE

This episode isn't about telling you what you can and cannot spend your money on. However, we are firm believers that you should be spending well within your means. If you're not reaching that 25% savings goal, nor have you started your BULB, those should be goals of yours before you start spending more of your hard-earned cash. Until then, live within your means and really think about what's important to you. Sure that trip or designer bag sounds great now, but is it really more important than security and wealth in the future?

If you're wondering how much you should be saving, spending, or putting in your "backup life bank," this is the episode for you. And if you're wondering how to manage the money so you can spend, save, and do all the things, you can always contact Toujours Planning to see if our financial planning services are a good fit for you.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual.

RESOURCES & PEOPLE MENTIONED

• Episode 63: Self-Employment + Retirement: Work-Optional Lifestyles
• Vision Worksheet inside our Resource Vault
• The Toujours Planning Quiz — are we a good fit for your financial planning needs?

CONNECT WITH DANIELLE AND DUSTIN

• Ask Your Questions

• On Facebook

• On Twitter

Is it time to buy a new car? Are you wondering what you should be spending (or not spending) on your new wheels? We know that it's tempting to buy the newest model hot off the lot, but this week's episode offers some guidance on what to consider when it's time to buy a car, how much you should spend, and what to look out for in your payments.

WHAT YOU'LL LEARN

5:20 The role luxury and status have in our purchase decisions

7:45 Why it's important to consider why you're buying a car

8:15 Why buying luxury car is not a problem — as long as you can afford it

10:00 Things to keep in mind with a car purchase, including additional costs

12:05 The risks of unexpected maintenance

13:50 How to break down the true cost of a vehicle

15:05 Deciding if you even need a car

15:25 What percent of income should be allocated to transportation, but only if you're saving enough money

16:20 How everyone's values will affect how they spend on transportation

18:25 How to pick a car that aligns with your values

23:45 What to do if you and your partner both have cars/car payments

26:00 When you might need to just buy a hooptie

27:10 The trick to get those dents fixed ;)

28:00 Whether or not you should pay off your car when you come into cash

29:45 Tips and tricks for saving money on vehicles and loans

CARS ARE CRAZY EXPENSIVE

If there's one universal truth to take away from this episode, it's that cars are a luxury at this point — especially new cars. The average cost of a new vehicle is $37,285, according to Kelley Blue Book, and the average used-car price was $20,200 according to Edmunds — and we think that's on the low end. But those averages also don't account for supplementary (or additional) costs associated with vehicle ownership. Costs like:

• Insurance
• Parking costs (garages, meters, etc.)
• Tickets
• Tolls
• Maintenance
• Gas
• Car washes/upkeep

With all that in mind, it's time to dig into what kind of vehicle you can actually afford.

HOW TO FIGURE OUT WHAT KIND OF WHEELS YOU CAN AFFORD

The first question we think you should always ask yourself when you think about vehicle ownership is: Should you actually buy a car? We don't care what the answer is, but it's important that you ask it. And from there, we have a follow-up question: Can you afford it?

Here's a general rule of thumb (meaning that it's not a strict rule, so much as a guideline): About 15-20% of your income should be spent on transportation. Our one caveat to that? Only spend that if you're already saving 20-25% of your income. If you're not able to save right now in the double digit percents, you may reconsider your ability to buy a higher-end car — or a car at all. Instead, you might want to find a car that fits into the lower percent of that 15-20% range or get real comfortable with not having a car until you can pump up those numbers.

What if you can't afford a car right now? Well, do you live in a city with transportation, do you live close to where you live and work, or do you have easy access to other modes of transportation (bumming a ride from a coworker, borrowing a car from a family member, etc.)? Uber and Lyft are also great options, but they can add up, so be careful with that. Considering all of these factors may help you find ways to go without a car until you're more ready.

If you're in a situation where you don't have your personal finances in order, you may need to buy a hooptie. You know, a real junker car. Nobody loves having one, but they serve a purpose: saving you money so you can get your finances right.

Of course, if you decide you do want to buy a vehicle — and can afford it — the next question is: what kind?

CHOOSING YOUR WHEELS

The first question, when you're in the market to buy a new car, is: "What matters most?" Comfort, amenities, luxury, environmental impact, etc. are all acceptable factors when considering a new (to you) car. There's also another factor: status. If status is important to you, and you have the money to back it up, go for it. But admitting that to yourself first is key.

However, we think status comes with a price tag that a lot of people don't really want to pay, so dig a bit deeper on what "status" means to you. Is it having all the bells and whistles of a higher-end car, but you don't want the price tag or care about the brand name? Sometimes even the cheaper brands have the same amenities as higher-end brands, and you can spend a lot less on a Toyota than you can a Tesla.

If things like better gas mileage, electric power, or space enough for friends and family are important to you, decide how much that's worth. And don't be afraid to shop around. Buying a certified preowned vehicle is also a great way to get all the bells and whistles without losing a ton of money as soon as you drive a brand new car off the lot.

MANAGING DOUBLE PAYMENTS IN A RELATIONSHIP

If you're in a relationship, the question is likely: How do we manage two car payments? Because, the way the universe works, you will both need a new car at approximately the same time. It's just a fact of life. But if you have a spouse or partner who can hold on to their car a little longer (or your ride is still going, albeit with less enthusiasm than before), you can stagger payments that way.

Alternating your car purchases is a good way to keep costs down, and to not pay double car payments. Of course, it might be possible to share a car between the two of you (depending on your situation) if you're in a pinch, want to save the environment, or just save a few hundo a month.

PAYING INTEREST ON YOUR VEHICLE

One of the biggest questions we get is: "Should I pay off my car note if I've got extra cash?" As a general rule of thumb (remember, not a strict rule), we say: If your interest rate is 6% or lower, you don't have pay it off before the term is up. We say that because your money is likely put to better use being invested and saved, because you can get high rates of return.

However, if your interest rate is over that percent, or you've been swindled by a bank or dealer, you may want to pay off your car loan or refinance. Refinancing your car with your bank or credit union can save you a ton of money on interest. But if you already have a really low percent — like 3% or lower — you're sitting pretty.

TIPS TO SAVE MONEY ON YOUR NEXT VEHICLE

We've purchased a few cars in our day, and so have our friends. In this episode, we pass on some of the wisdom we've learned from our own experiences, as well as theirs. These include:

Always ask for the invoice amount.

The vehicle invoice is the dealer's cost on the car, and we've heard that you should only pay about $1,000 over their invoice amount. You'd be surprised how much dealers make just by adding thousands of dollars to the top of their invoice amount, so don't be afraid to ask to see the invoice.

Ask a dealer what their buy rate is.

Most of the time, dealers offer to finance your vehicle for you. Before you go with their rate, though, ask what the buy rate is. The buy rate is the interest rate the bank charges them, and the dealership charges more on top of that. This can lead to you pay 2% and more on your loan! We think half a percentage or more is all you should be paying.

KNOWING WHAT'S RIGHT FOR YOU

At the end of the day, nobody can tell you which car, interest rate, or monthly payment is right for you. If you decide you're ready for a new car, truck, or SUV, we hope this has provided some guidelines to help. Of course, if you're looking for financial advice specific to your situation, you can always take our Toujours Planning Quiz below to see if we can help.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual.

RESOURCES & PEOPLE MENTIONED

• The Toujours Planning Quiz — Are we a good fit for your financial planning needs?
• Our FREE go-to financial and life planning resources

CONNECT WITH DANIELLE AND DUSTIN

• Ask Your Questions

• On Facebook

• On Twitter

#Adulting: how many times have you seen that hashtag, or even said it aloud? We're sure it makes older generations roll their eyes, but that's alright. We know that adulting can feel hard, but we don't think it has to be that way. That's why we're committing this little mini-series to all of you out there trying to "adult." And as part of our #Adulting 101 Series, we're diving straight into the deep-end, talking about housing.

BUYING A HOUSE — EEEK!

Just thinking about buying a home can make a Millennial break out in sweats — or at least, that's how the media makes it sound. But we know better. We know that student loan debt, ridiculous living expenses, and job insecurity all play a role in someone's ability (and interest) in buying a house.

But beyond that, we think that sometimes people just don't have the resources they need to pull off possibly the biggest #Adulting trick: buying a house. If you're in a place where the thought of buying a house has crossed your mind, or you're wondering when in the world you can afford to buy one, this episode is for you.

WHAT YOU'LL LEARN

• 02:39 Danielle's housing story
• 08:25 Dustin's housing story
• 12:43 The fear that comes with buying a home
• 14:40 3 questions to ask yourself before buying a home
• 15:49 How to calculate additional costs on top of your mortgage
• 16:42 Other costs you may not consider as part of homeownership
• 18:51 How much of your net income should be spent on true needs
• 19:15 How to decide whether to buy or keep renting
• 20:26 How to choose between a starter home and forever home
• 22:32 Why you need to know your "Chip and Joanna Gaines" status
• 26:08 The first steps to start saving for a home
• 27:45 What to expect from down payments
• 29:10 Why Dustin likes putting the least amount of money down
• 30:06 Why you need to know closing costs upfront

WHAT TO CONSIDER BEFORE YOU EVEN LOOK FOR A HOME

On top of sharing our own histories with home buying, we walk you through what it looks like when you start toying with the idea of buying a home. Are you thinking you want to rent for a while, but would buy if the right house comes along? Are you scrolling madly through Zillow trying to find a house within your price range? (Side note: Zillow's "calculations" are a joke, so talk to a realtor and your bank before you get too excited.)

One of the major factors we talk about in the episode is knowing your income. If your income is variable, and or if you're not sure your job is stable, buying a house can be a risk. But if you're settled in your income, or you know your income will be increasing — through a big business deal, a raise, etc. — it may be good to look at houses in your price range now so that you can have even more cushion later.

But there's something we really want y'all to know about buying a home: it's not just the sticker price on the house you're paying for!

Additional costs come with a mortgage, including:

• Homeowner's insurance (which can be pricey depending on your location)
• Property taxes (again, pricey based on location)
• Mortgage insurance premiums (if you don't put 20% down)
• Yard and exterior maintenance (your landlord won't be doing that anymore!)
• Repairs (no home is perfect)

Of course, that's all once you've got the house on lockdown. But what about the down payment and closing costs? Down payments range from 5 - 20% of the total cost of the home, which is a huge chunk of change — and closing costs can sneak up on you. Your closing costs cover loan origination fees, appraisals, title insurance, taxes, deed transfers, and just crazy amounts of fees for all the paperwork you'll be filing. You may also need to prepay property taxes, homeowners' insurance, or a homeowner's association bill then, too. That can add up to thousands of dollars.

Now, keep in mind we're not trying to scare you off from the prospect of buying a house. We're just preparing you for all that goes into this level of #adulting. So… still interested? Cool. Time to talk about the 3 questions we think you should ask yourself when you think about buying.

THREE QUESTIONS TO ASK YOURSELF Question #1 Should I rent or buy?

This is pretty much where we all start, isn't it? Our lease rolls around and we ponder the question "Should I re-up our lease, or is this a sign from the universe that I should buy?" So, we break down when you should consider renting, and when you might be ready to move on to Question 2.

When should you keep renting? When you have big changes coming up, and you're not sure what that will mean for you:

• A new job
• A new relationship
• You just moved out of your parents' house (no shame)
• You're about to get married or are saving up for a wedding

Of course, there are always exceptions to this general guideline, like being newlyweds or new parents, etc. But if you're not sure about your income especially, or how much you need to save to achieve other financial goals, now may not be the time to buy.

Question #2: Are you looking for a starter home or forever home?

We don't expect you to die in the first home you buy, but there are major benefits to buying a home you plan to stay in for at least 10 year. Yes, 10. Why? Because if you plan to buy a house and turn around and sell it in less than 2 years, you run the risk of selling during a market downturn, eating money on capital gains taxes (if you buy during a housing price boom), and spending even more thousands of dollars to buy your next house.

Of course, a starter home — meaning it's more affordable, likely smaller, with fewer bells and whistles — can see you through a solid decade, even with major life changes. These homes are great if you're single, just starting out in a relationship, are in the baby steps of your career or business, or you don't want a big mortgage preventing you from living your best life.

But if you're ready to just send it and find the home of your dreams, you may be able to find your forever home. This may mean spending more money on a bigger house that can accommodate a growing family, or is located in a prime area you want to stay in. This option is often best for people and couples who are really secure in their income and have been saving for their dream house for a while now, but there are always exceptions.

Whichever one is right for you, we want to make one thing very clear: equity builds slowly. Don't expect to buy a house and have tens of thousands of dollars in equity a year or two later. You don't see a lot of that equity until the end of the mortgage, because most of your payments at the beginning go towards the interest — it's scaled so more interest is paid up front. Because the banks know y'all want to buy a new house every few years!

Question #3: Do you want a move-in ready house, or are you up for renovations?

Most people assume they can do a fixer upper, but you're probably not Joanna and Chip Gaines, OK? Especially if you're buying a house with someone you love, home renos can bring out a whole new side of you both. It takes time and it can get expensive if you DIY and mess something up, so put a lot of thought into buying a fixer upper vs. something that is ready to go on move in day. Depending on your budget, you might be tempted to buy a fixer upper, but this is where we caution you to think again about your DIY skills. Remember your last #PinterestFail? Do you want that to be your whole house?

Decided which way to go there? OK, now it's time to buy a house.

HOW TO ACTUALLY AFFORD A HOUSE

This is where things get really juicy. On the episode, we walk you through how to get ready to buy a house. In general, and depending on your individual situation of course, here are a few tips:

• Come up with a savings strategy. Use your short-term and intermediate-term buckets to save approximately 25% of your income. Those buckets will go towards closing costs, down payments, repairs you might encounter, appliances you'll need to buy, and so on. What happens if you can't save 25% of your income? Start with what you can save and figure out how much more time you need to add to your savings strategy. Those short-term and intermediate-term buckets might just become a long-term goal.

• Figure out your down payment goal. If you're buying a $100,000 house in Madeupville, you may need $20,000 on a conventional loan. If you put down less than that with a different mortgage, plan to have a slightly higher mortgage, because you'll have mortgage insurance premiums to pay until you get the balance under 20% of the total home's value. It may help to talk to a bank or two to figure out a general ballpark for home prices to calculate this number.

• Don't forget about closing costs. We've seen so many people get burned by closing costs, because they're often not finalized until the very end of the homebuying process. So save up for that (averages are about 2-5% of your new home's value) and ask frequently during your offer and closing process what the closing cost estimate will be.

Of course, you'll need a really good bank and realtor to help you get the most out of your homebuying process, but the steps above are steps you can take now to get ready. As always, we go into more depth on these tips and the three questions above in this week's episode, so if you've got houses on the brain, you should really take a listen.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual.

RESOURCES & PEOPLE MENTIONED

• Ep. 30: 5 Tips For First-Time Home Buyers, with Eric Blanchard
• The Toujours Planning Quiz — Are we a good fit for your financial planning needs?
• Our FREE go-to financial and life planning resources

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