On this episode of Investing for Freedom, Mike draws inspiration from an amazing book called The Richest Man in Babylon, which makes the point that a tenth of what you earn is yours to keep. Mike provides some tips and some personal stories to help you get the most out of your money. Enjoy!
“Our lifestyle, our vacations, our investing accounts, our investment portfolios are never going to rise to the level of our expectations. They’re going to fall to the level of the systems, or the training, or the processes that we’ve put in place.”
HIGHLIGHTS:
0:00 – Intro
1:02 – Mike’s wife Kara, is responsible for Mike understanding that you must pay yourself first
2:25 – A tenth of all you make is yours to keep, according to The Richest Man in Babylon
3:10 – It is important to budget your expenditure, but Mike also likes to enjoy his life and be able to set his kids up for the future
4:16 – Mike used to be very much against a budget, but he realized that you can create your own budgeting rules
5:12 – Kara set up 3 bank accounts. One for giving, one for investing, and one for vacation so that they could save for each of these categories intentionally
6:08 – Always plan your vacation time first, even if what you are going to do is TBD
6:56 – Kara takes 10% of what they make and puts it in each of the three accounts
9:44 – “We don’t rise to the level of our expectations, we fall to the level of our training”
10:35 – If you don’t change your spending habits, nothing will change
11:47 – Write out how much you’d like to give, invest and save for a vacation
12:30 – It doesn’t matter whether it’s a business account or a personal account
13:57 – Mike reminds us about the couples mastermind group himself and Kara are setting up
FULL TRANSCRIPTION:
Thank you for joining me on the Investing for Freedom podcast. Today I’m going to talk to you about paying yourself first. And if this is something that you’ve heard before just stick with me here because most of us have heard it. But I want to really dig in on this and make sure that you’re doing it. And again, for those of you, I mean, if you’re sitting here saying hey, I’ve mastered this, then you know, you can just shut me off. Maybe there’ll be some value in this.
I want to say real quick though, that I owe a lot to my wife Kara, and if you’ve listened to previous episodes, she comes on from time to time. I’m going to be having her on a lot more. As we move into the couples’ mastermind that we’re going to do in 2021, this is a big part of what that framework is going to be around. Paying yourself first.
One of my favorite books, The Richest Man in Babylon. And I’ve mentioned this several times to you guys, and if you have not read that yet, you should go get your hands on it. And if you’re an Audible listener, you like reading books or listening to books in the audio form, The Richest Man in Babylon is a great book in audio or to read. It’s a very entertaining book. It’s based in, you know, the Babylonian empire from back in the day. And so, there’s a lot of principles around wealth and money and the way that they put the parable together, the way George class and put it together. It’s just really, it’s a great book. And the quick little story when Kara and I got married, I walked into the foyer of the church and my uncle was like hugging Kara’s uncle. And they used to auctioneer together. My uncle was from Nebraska and her uncle was from South Dakota and they knew each other from back in the day. And they didn’t realize until they ran into each other in the church that they had actually been connected in the past. And just an interesting story. But my uncle gave us that book, The Richest Man in Babylon for our wedding. And then we didn’t read it for a couple of years.
But in that book one of the, there’s again, different parables, but one of them is the five laws of gold and then the seven laws of gold. But regardless of how the story’s told, a 10th of all you make is yours to keep is one of the main principles in that book. And I want to take it a little further and by the way, this applies to business or your personal life. It doesn’t really matter. You have to pay yourself first. So, isn’t it interesting that your level of spending, it always rises to the level of income that you make? True or not. It always feels like the more money you make, the more you spend. And that is very true, unless you put barriers or borders or systems around it to control that. If you make a million, you’re going to spend a million and less, again, you allocate differently. And by the way, I’m an advocate. I’m a proponent of having a great life.
In The Richest Man in Babylon. One of the rules is budget thy expenditure. So, live on a budget, right? And if you’ve listened to me for any period of time, you’ll also know that I want to enjoy life. I don’t want to get to 65, 75, 85 years old and die with a whole bunch of money. I’d love to leave a legacy. I’d love to have, you know, plenty of money for my kids to get started. But again, I don’t want to do that when I die, I want to help my kids get started in their business, their life fund, their ventures, whatever, you know, teach them to invest. One of my dreams is to have a 25-million-dollar family office. And you know, we don’t, I don’t have to wait until I get there. I mean, we could start a fund when we have a million dollars and start, you know, meeting with the kids once a year or once a quarter to talk about investments as they get older, what better way to teach them? I mean, you could send them off to finance school or you could, you know, create a fund together with your kids. And even that you don’t even need a million, you could start doing it with a hundred-thousand-dollar fund.
So, I don’t want to die with a whole bunch of money. I want to enjoy my life. But at the same time, that principle of budget I expenditures, that’s pretty important. Now, in the book they’re talking about you know, there’s a bunch of people in the book that are like, I don’t want to be controlled by a budget and, you know, bound by what I can and can’t spend. And I used to be that way. And still to some degree, like if you told me I just had to live on a budget and I couldn’t have whatever I want or go wherever I want, that’s the whole Investing for Freedom concept. And it takes a mindset shift, right? So I’m not telling you, you can’t have a good life, and I’m not telling you that you can’t go spend what you want to spend, but you create the rules, you create the boundaries. And so, when you pay yourself first and I want to break this down and I’ll give you a few simple things.
And by the way, if you’ve heard about the couples’ mastermind, and you’re interested go to www.powercoupleswin.com, and you can get on the early waitlist. We’re going to put the applications out in the next few weeks. And we’re only taking 10 couples. If you’re interested, make sure you get on the early waitlist. And then when the application comes out, you’ll have a chance to talk with us. But again, this is a big part of the framework.
And so, there’s three things that I owe this to my wife that I really think in your personal life, that you should really set aside. And so, Kara has even set up three different bank accounts, and we put money into a giving account, an investing account and a vacation account, because those are things that are very important to us. And do you have to do all three of those? No, you decide. But we decided a long time ago that we were going to make memories over possessions. And fortunately, we’ve been blessed enough to be able to have, you know, certain things that we want, but also take vacations. And if you’re not intentional about this, I’m going to start with vacations. If you’re not intentional about it, it isn’t going to happen.
We went to the couples’ goal-setting retreat with the one thing Jeff Woods and, and Jay Papasan a couple of years ago. And what I really, we actually had Jeff come in and teach to our team even before going to the couples’ goal-setting retreat. And the one thing that he said then is, you know, they always, when they’re planning out their year, they always, even if you don’t know where you’re going to go, you always plan out your vacations ahead of time, whether it’s around the kids’ spring break or Christmas vacation or whatever. You block out that time. Even if it says TBD, to be determined on where you’re going, you block out that time first, because that’s sacred time. And if you don’t pay yourself first with your time you know, with your investment, with your money, everybody else is going to get it. So, you have to budget your time. And like I said, even if it’s TBD, pencil in the vacation time, because otherwise you know it as well as I do your boss, your investment partners, you know, events, conferences, whatever it will eat that.
And so, the vacation account now, when it comes to money, so you’ve got to budget your time, but also the vacation account. So, Kara takes 10% of what we make and puts it into a vacation account. She takes 10% of what we make and puts it into an investing account. And she takes 10% of what we make, and she puts it into a giving account. And you might be telling me, Mike, I can barely afford to live right now. You know, we can barely make our bills work right now. Well, that’s the main, you don’t have to start with 10% and you don’t have to start with all three accounts. You pick which one you want to start with. Maybe it’s an investing account. Maybe it’s a giving account. My personal belief. This is how I think about giving. I used to hunt a lot in Nevada, and there’s a lot of watering holes up in the hills of Nevada. And these are not like, you know, pristine streams or like aquifers that you see coming out of the rocks that we’d like to drink out of. These are watering holes that are muddy in the animals, get into it. And there’s not water flowing in all year, and there’s not water flowing out all year. You know, when it rains, it collects some water and they get to drink out of that, but it does dry up. And it’s so muddy and murky and dirty, you would never want to drink out of this.
I look at money like that when you find a dirty stream like that, it’s because there’s nothing coming into it and there’s nothing going out of it. But when you go find a mountain lake, that’s up high, you know, 14,000, 11,000 feet up in the mountains, and there’s a waterfall filling this pond and there’s water flowing out of it. It’s crystal clear, it almost feels like you want to drink it, right. That’s money to me, money is energy and that’s giving. So, I’ve always looked at money and even your gifts, by the way, this is a little tangent here. But even your giftings, if you hold your giftings in, if you don’t share what you know, you need to share with the world, it’s going to stop flowing because you can only fill up so much. If you’re not giving that out, it’s going to stop. And so, it’s the same with money. Money is energy and that energy needs to be coming out.
So, pick one, if you can’t afford all three, pick one, or start all three and start with 2% or 3% or whatever. But as The Richest Man in Babylon said, a 10th of all you make is yours to keep. And in richest man in Babylon, they’re really talking, the whole book premise around investing.
So, I just want to encourage you and challenge you to just get this philosophy in. And so, if you’re one that’s telling me, Mike, I’ve heard this concept before of pay yourself first, then I just have one question for you. Are you doing it? And if you are congratulations, if you are doing it, reach out to me at The Mike Ayala on Instagram, DM me and just say hey, Mike, I’ve been doing this for X amount of time. Share with me, you know, the wins and I’d love to have a conversation around it. But if you’re the person that says, you know, I’ve heard this before, I don’t care how many times you’ve heard something, are you doing it? Because execution is what really happens. And like I said before, your level of spending is always going to rise to the level of your income, unless you put barriers and systems around it. There’s that saying by I can’t remember who said it, he was a Greek poet and he said we don’t rise to the level of our expectations. We fall to the level of our training. That is so powerful. And it’s the same thing you could apply that in your personal world, in your spending. Our lifestyle, our vacations, our investing accounts, our investment portfolios are never going to rise to the level of our expectations. They’re going to fall to the level of the systems or the training or the processes that we’ve put in place.
And so, the easiest way to start moving towards success is not to make more money unless you make more money and you start doing something different with it because you could double your income. And if you don’t change your spending habits, it’s not going to change anything. This is going to sound cliche, but this is why so many people that win the lottery end up broke, right? Because it doesn’t matter how much money they have if they don’t change their spending habits. And if they don’t know how to invest and they don’t change all of that, then they’re going to end up in the same boat.
So, here’s the thing. You don’t need more money. You need better habits, better processes. And I genuinely believe pick up The Richest Man in Babylon, start paying yourself first. And that is going to revolutionize the way you do things. And by the way, when it really comes down to it, vacations are important to us. And I’ve shared this on previous episodes, but that’s recreation time. That’s recreation time. Most of my best ideas have happened while I’m on vacation. And in fact, my team actually used to hate it when I would go on vacation, because I would come back with all these ideas and ways to make the business better. And I would think about things that I’m not thinking about when I’m in the middle of the battle. And so, vacation is probably on top of us being together as a family and recreating. It’s probably one of the most important things that you could invest in because we need that in life, in order for us to climb the next mountain that’s ahead of us. So I would just encourage you to sit back, you know, maybe just pencil down, write out, you know, how much you’d like to give, how much you’d like to invest, how much you’d like in your vacation account and go set up these different accounts. And again, this is courtesy to Kara. Go set up those different accounts and don’t keep them, you know, easily available even on your online, like, so you can just transfer the money in and out. Because when you start seeing that big number sitting there and you have this emergency, pop-up, it’s going to be really tempting to go take money out of your investing account, to pay for your shortfalls, especially at the first.
So, money is energy and the more you deploy that money, the more you utilize it for what it’s meant for, the more of its that’s going to come in. And again, I want to say this one last time. I don’t care if this is your personal life or your business account, the same thing applies. So many times, as entrepreneurs you know, we run our businesses and we take X amount of salary, and then we just hope that there’s going to be profit left at the end of the year. And sometimes we don’t take any salary. If you shift that mindset. And I have to ask you this question, if there’s not enough money in your business to pay you and you’re grinding for free, then is that truly a business? Is it a profitable business? Is it a business that can really sustain you long-Term?
If you’re in a season of growth and you’ve said hey, I’m going to go all-in on this. And I don’t need to make money for 6 months or 12 months. Great, fine. Not arguing with you on that. But I’ve seen so many entrepreneurs in quotation marks, air quotation marks. I’m an entrepreneur, I’m grinding. I saw somebody put something up the other day that, you know, I’d rather work a hundred hours a week as an entrepreneur than 30 hours or 40 hours as a W2 employee. And I’m just like, okay, I get the mindset. And I was an entrepreneur, you know, from the age of 24 on, but we always paid ourselves first. I never went without, and I’m not saying we didn’t struggle in businesses. I’m not saying we didn’t have to cut our salaries at certain points in time. We did. But it’s a mindset that you’re coming in with. And if you’re constantly telling yourself, you know, I’m an entrepreneur and I have to grind and there’s no money in the business. There’s never going to be any money in the business. It’s an energy, right? And so, pay yourself first. That’s what I’m really getting at.
By the way, if you are a couple and you’re interested in joining the couples’ mastermind, this is the stuff that Kara and I have worked so hard on in our personal lives. And we are looking so forward to growing in 2021 with 10 amazing couples, we’re going to do a couple’s goal-setting retreat at the beginning of February 2021. And there will be monthly calls. There’s going to be some one-on-ones with Kara and the women, and then me and the guys, and then we’re going to do a couple’s bucket list adventure. Later in the year, it’s going to be an amazing year. We’re only taking 10 couples, a maximum of 10 couples. So, get on the early waitlist at www.powercoupleswin.com. And again, I hope you enjoyed this. And like, you know, I hate to beat a dead horse, but if you’re the person that’s saying oh, I’ve heard this pay yourself first thing before Mike. Are you doing it? Are you pouring money into yourself? Are you pouring money into your family and the vacation time? And are you pouring money into investments and giving? That’s the question.
