The Money Habit (Official Audiobook)

The Money Habit: The Worry-Free Way to Financial Independence, written by Mike Michalowicz and read by me, Mike Michalowicz. I dedicate this book to your wallet. Now, before you and I kick this off, I will read the entire book to you, but there's gonna be additional bonus content only in this Audible book. I have some additional ideas and thoughts that didn't get included in the book. Well, gosh darn it, you're gonna hear it. I'm gonna share it as we go through the book together. Also, I interviewed my favorite personal finance authors, and they share some insights in this book too. I hope you love it. All right, let's get down to business. Introduction, A Money System That Helped Millions. Now it's your turn. Our people are still living the American dream, even though they were told they can't have it. Sometimes I get feedback from people that floods me with gratitude, gratitude for the honor of teaching and learning. This was one of those times. Our people are still living the American dream. In my biggest and wildest fantasies, and I can tell you, I can go massively big and massively wild, I assure you, I never imagined I'd hear those words. And to receive them unsolicited from Travis Snyder, someone who had the data to back it up, well, it just doesn't get any better than that. Travis Snyder is the dream manager for A1 Garage Door Service, a company with locations across the United States. Hey, quick aside here, there is a book called Dream Manager by a fellow named Matthew Kelly. If you haven't read that book, it is a game changer. Read it. For the employees who opt into the program, Travis's job is to clarify their big life dreams for themselves and their families. As you can imagine, a lot of those dreams revolve around finances. Paying off debt and buying a forever home are the big ones. A1 Garage Door Service was the first company to introduce the Money Habit System to its employees. Because money effectively managed is the pathway to those dreams. It all started with a call I received from Travis's boss, Tommy Mello. Tommy, the founder and CEO of A1, had read my book Profit First and used the system to transform his business into a financial juggernaut. In other words, healthy and huge. Yet Tommy was worried about the most important part of his company, His employees, all 900 of them. While his team of installers and service techs earned higher than average income for their industry, they still struggled. "Too many of my employees are living paycheck to paycheck and struggling with debt," Tommy said. "Can you come teach them how to use a personal version of the Profit First system?" Over the years, I heard from countless readers who had fixed their business finances with the help of my book, "Profit First," but still struggled with personal cash management. I also heard from non-business owners, you know, as in most people, who had stumbled across the book and were trying to adapt it to their personal lives. Whatever their reason, readers tested the cash management system I shared in that book and found it fixed money problems they hadn't been able to tackle before. It turns out the principles I described in "Profit First" work for anyone, whether you are paid hourly or salaried, work part-time or full-time, are on contract or a permanent employee, are deep in debt, or just want to level up your financial game. I never officially tracked how many inquiries I received, but I suspect it was well into the thousands. I repeatedly told myself, I'll write that book for personal finance someday. Tommy's call turned someday into today. Plus, there was one person I knew who had already been living both the Profit First system and its corresponding personal finance system for nearly two decades with great effect: me. Seconds after Tommy's call, I started to assemble all the information, research, and experience I had accumulated while deploying my own simple approach to personal finance. It became the Money Habits System, and it's for people on fixed or flexible incomes for people who have jobs or gigs or side hustles or passive income or earn-as-you-churn work or even own their own businesses. It works with who you are as you are wherever you are. But before I share more about it, let me tell you how it started. I created the original method, the Profit First system, in the early 2000s in a moment of desperation and used it to save my own business. My sanity, and what was left of my bank account. I consider myself ground zero for Profit First, the first person to go all in on the system. And while my business showed the symptoms of my financial ineptitude, the disease was my personal finance. Profit First fixed both. A story I haven't shared before that I want to share real quick, we'll take a break from reading the book, was in my darkest financial period, my daughter, offered up her piggy bank to save me. Well, we were so cash-strapped, I of course could not afford to rent an office, but I needed a quiet space. In our basement, I used cardboard boxes unfolded to build little mini quote-unquote walls around a small corner of the office right next to the furnace. That was my office. And when I was on a phone call, if the furnace kicked in, I'd have to ask the person if I can call them back or at least put on mute for a few minutes. That was check-to-check living. But it's interesting, wherever there's a will, there is a way. The system I created is not rocket science, and it's not a new idea. To solve my financial chaos, I drew on a method rooted in simplicity, one that had worked for generations, the envelope system. It works like this. 1, label a stack of envelopes, one for each type of expense. Rent/mortgage, groceries, fun, et cetera. 2, periodically allocate a portion of your income to each envelope so you know what is available for what purpose before you use it. 3, when it's time to pay a bill or purchase something, use the money in the envelope earmarked for that purpose. See, not complicated. You may have already tried this method. Maybe you use jars instead of envelopes. Maybe you stashed money under your mattress or hid one of those jars so well that you forgot where the heck you put it. As with any budget, all these methods work until they don't. Eventually you find yourself moving money around between envelopes or jars or dipping into that box under the mattress so you can pay for something you want. Most budgeting systems fail because they demand new habits that we struggle to sustain. They set us up for short-term success, but ultimately leave us where we started or worse. Think dieting. We try the new weight loss fad and it works for a little while, but a few weeks or months later, we go right back where we started, often with even more pounds to lose. The system fails us. So that's what I set out to fix. I was determined to make a system that was unbreakable, or at least as close to it as possible for my own undisciplined, marginal at math self. I figured out that any transformation requiring you to become someone you're not just wasn't going to work long-term or at all. If I could create something that worked with our habits, then we'd be golden. I began my 17-year study of human behavior and money. The Profit First system is the good old envelope system plus the pay yourself first principle married with a remove the temptation tenant. And best of all, it works. As in, it really freaking works. I wrote about the Profit First system for the first time in 2008 in a little paragraph in my first book, and then later in an article for the Wall Street Journal that went viral. Not like Taylor Swift kind of viral, you know, like the geeky small business level type of viral. The first edition of Profit First came out in 2014, and we've tracked more than 1 million implementations worldwide so far. I'm proud to say the system has helped readers break free from financial chaos, set aside money for the little things and the big things, the essentials and the extras, and fund their dreams. I love hearing from business owners who've transformed their finances and are now living their best lives. They send me pictures, pictures of their family on trips, pictures of new homes, pictures of the last debt collection notice in the garbage or fireplace. And they tell me the good news about how their lives are different, how they can sleep at night, how their mental health has improved, how life just seems easier to handle. Now, this is a funny aside or interesting aside. Just last night or this morning, my wife and I had a conversation about money. Yes, we live by The Money Habit. And we were talking about taking our adult children and their significant others on vacation. And my wife said she couldn't sleep because she's worried about how much it'll cost and can we really afford it and so forth. And she woke up this morning and logged into our vacation account and there's in fact not enough funds there. So we had a quick family call and saying, hey guys, why don't we do something a little more modest this year? And revisit this next year because there's not enough money in the vacation account to do this. Sometimes there's like a hard decision you're gonna have to make or hard communication, but we surely are not gonna ring up credit cards or go into debt over this or pull from another account. God forbid you ever do that. We simply had a hard conversation 'cause the system made it clear what we had to take action on. I'll tell you, rewind 18, 19 years ago, that would've been a very confusing time and probably conflict would come about too. But now the system speaks to us. It's powerful. Doesn't tell you what you want to hear. It tells you what you need to hear. What I love most is that a million-plus people have financial confidence as a result. They are no longer scratching by. They are in control of their cash. They aren't desperate for a lottery win or a get-rich scheme. Their cash accumulates while they live life as they want. People who had constant money worries now tell me I never have to worry about money again. I never have to worry about money again. That may seem like a bold claim, but I promise you it is true. And I want that for you too. I don't want you to have to worry about money ever again. So I got to work. Now, hacking a proven system and using it for another purpose is one thing, but what if that system was already designed for who you are and how you are right now with your own money? I'd been kicking these questions around apparently for a long time. Tommy's call was the sign I needed to prove my personal finance version of Profit First worked for people who have an hourly or seasonal income. Would this system work for people who are making ends meet on a fixed income while dealing with increasing inflation and economic uncertainty? So if you're watching a video, I want you to send a massive thanks to Matt Robinson, who's doing this video. For me to record a 6-hour or 8-hour book takes me about 20 hours 'cause I eff up so much. So if you're seeing this cropped, which you are, it's Matt Robinson who took care of you. And me, I kind of hurt you. With Travis's help, we started working with a test group of 25 A1 garage door service employees from the Dream Manager program in a money habit group. I called it the Money Habit System not because we need to create all new habits, but because to be financially independent, we must work with the habits we already have. Within just a few weeks, that Money Habit Group experienced remarkable transformation. They paid off thousands of dollars in debt. They saved thousands for future expenses, for down payments on homes, for new cars, and for their kids' futures. And within 6 months, they collectively saved a total of $282,830 and paid off $210,905 in debt. That's 25 people gaining nearly half a million dollars in 6 months. More importantly, they gained what I call cash confidence. Like the employees I've been working with for nearly 20 years, these salaried, hourly-waged, and seasonal employees were confident they'd never have to worry about money again. Not that money challenges would never happen, they will, but now this group has a system that puts people in immediate control of any financial situation. My team and I went on to implement the system with employees at other businesses in different industries and in different regions with varied costs of living in different types of earnings, salaried, hourly, seasonal, freelance, or gig work. That's when I knew for sure that the cash management system I created, that same system that saved hundreds of thousands of businesses from closing, could restore financial security for anyone who needed help, regardless of their life's path. "The Money Habit" is for those of us who tried to follow the usual financial advice and petered out. If other approaches haven't worked for you, you're not at fault. They just don't suit you. So let me be bold. This system might work for you specifically because those others have not. Using the money habit system doesn't require you to change who you are. You don't have to master a skill, use a software budgeting tool, or deprive yourself of everyday joys. Once you set it up, it will run automatically. You won't have to wonder whether you have enough money for this or that. You won't have to feel badly about your financial choices, including spending money on what you want. And you'll accumulate money to go after dreams you may have thought impossible, dreams you may have given up on long ago. It was after Travis gave me the 6-month numbers for The Money Habit program that he shared his comment about the American dream. But that wasn't all he said. He said, "You know, you hear on the news that the American dream is dead. No one can afford to buy a house. No one can go on vacation. But even in this tough economy, I'm seeing the people in the Money Habit program buy houses, go on vacations, save money for their kids' college. So I know it can be done." Yes, Travis, it can be done. Yes, you can do it. You don't have to be good at math or have super willpower or have perfect credit. You don't have to make a lot of money or even have a predictable income. You don't have to understand personal finance. You can do it. The American dream is not dead. It's yours for the taking. Chapter 1: You Have Already Won the Lottery. My son Tyler's hand shook as he gave the check to his new wife, Cora. Staring at the check, he said, "I've never seen this much money in my life." Following the money habit system, I and my wife, Krista, had set aside $50,000 for each of our 3 kids' weddings. And because Tyler and Cora had spent only $14,000 on their big day, we gave them a check for the balance in their wedding account, $36,000, to use however they saw fit. A rainy day fund, a down payment on a home of their own, or towards some other dream. Weeks later, I had to nudge Cora to deposit the check. She'd been holding onto it because she didn't know if her bank would accept a deposit of that size. She'd never seen that much money and never given that much money away. 10 years before that, I could have never written that check. We would have been able to give them a nice wedding gift, like a set of reasonably priced dishes or a pasta maker, but to pay for a wedding to the tune of $50 grand? We couldn't have imagined ever being in that position to help our kids in that way unless we had won the lottery. After I convinced Cora to deposit the check, it hit me. We had won the lottery, and you have too. You just may not know it yet. People dream of getting checks with lots of zeros. Some play the lottery hoping for the big payout. Others eye old Auntie Ling, Uncle Richie Rich, and his gracious will. Why? Because they want to be so financially secure that they never have to worry about money again, and they believe a windfall of cash will help them get there. Rightfully so. Winning lotteries is a long shot. Better said, a long shot. But if you do have the rando luck of a win, The most common jackpot amount falls between $1 million and $3 million, often doled out through state lotteries or the more frequent secondary prizes. The odds of your million-dollar-plus win? 1 in about 12.5 million tries. Those odds suck. To make the odds more understandable, if you played the lottery every day of the year for about 23,942 years, that's not a mistake, by the way, you have a 50% chance, a 50% chance of winning. With a minimum bet of $2 each time, you would pay $730 a year. And over those 24,000 years, you would pay $17.5 million to win, and I'm putting quotes around that, maybe $2 million. In other words, Lotteries drain you, your bank account, and your will to live. Don't play them. Hoping Uncle Richie Rich willed all his money to you instead of the 25-year-old he recently fell in love with is far more likely to pay out, but it's mostly out of your control. You don't have to make bets with impossible odds or pin your hopes on someone else's decisions because you've already won. Seriously. Let me explain. What if you won $2 million in today's lottery? Now that's a good day. The lottery commission then gives you two options: receive the funds in monthly installments over 30 years, or you can cash out right away and get a lump sum of $1 million. Let's say you choose option one, since installments ensure you don't blow all that money on a spender bender. Now what if I told you that you've already won exactly that amount of money, probably more, and you have wisely chosen an installment plan that puts guardrails around your spending. The average American and European earns roughly $2 million in salary over their lifetime, so your primary concern should not be how to come into more money today. It should be how to manage the money you are already coming into more effectively Starting today. You've probably heard that most lottery winners lose the money they won within a few years and end up more unhappy than they were when they didn't have money. Case in point, the infamous story of Jack Whittaker, who won more than $300 million in the Powerball, circulates endlessly. What began as the happiest day of his life spiraled into lawsuits, a gambling addiction, the loss of family members to drug abuse, the loss of his uninsured home in a fire, and complete financial ruin. He is, however, the exception. What you might not know is that the theory of lottery wins making you miserable has been debunked. It turns out lottery winners are pretty happy when they manage their winnings wisely. This insight explains the Whittaker case. Despite already being a multimillionaire before his record-breaking lottery win, he wasn't miserable because of the money. His mismanagement of it did him in. Shortly after his win, he bought a Lamborghini and did laps through his neighborhood tossing money out the window. Can you imagine this dude tossing money out the window? That shows his respect and concern for money. Not long after, thieves stole more than $500,000 in cash from him, which he had inexplicably stored in a silver suitcase in his car while he was inside a strip club. When asked why he made such reckless choices, his response was, "Because I can." If that doesn't describe financial ineptitude, I don't know what does. Financial success isn't about what you can do. It's about what you should do. This brings me back to gifting the money to our son and his new wife. You might assume that the $50,000 we saved for our kids' weddings was possible because of how much money I earned. That's only part of the story. The real reason we were able to set aside that money was because I created a system that helped me manage my income and save for their weddings automatically over 15 years. The system assigned a purpose to every dollar, ensuring all aspects of life, including Tyler's wedding, were accounted for. The money habit guided me on what I should do, and most importantly, it did the discipline part for me. Which brings me back to that prior story I shared with you. Literally this morning, my wife and I decided not to do a family vacation. Now, here's the funny thing. My other two children, at least as of this recording, are not engaged and not married. And that means we have a $50,000 savings set aside for them. Now we have it in an interest-bearing account and secured, but theoretically my wife and I could say, well, maybe the kids aren't going to get married too soon, we should use that for vacation money. But since it's already been allocated to a purpose, we are very clear on what's available for what intention. And since the vacation account doesn't have enough funds for this vacation, We aren't doing it, and we surely aren't stealing from a different account. The odds on lotteries are heinous, but the odds on weddings are pretty darn good. They are likely to happen if you have kids, and there is a typical age range in which they will marry. So I play those odds. And when it comes to money management, playing the odds of life's probabilities will greatly help you too. No matter your income, Whether it's $200, $2,000, $20,000, $200,000, or $2 million, the system you are about to learn captures your cash flow and channels the money for you. Any financial outcome can be achieved by addressing these 3 ingredients: amount, frequency, and time. Now, there is a graphic in the print book, so I'm going to describe it to you so you understand it. Any of these graphics I refer to are available as a free download for you. Go to mymoneyhabit.com. That's mymoneyhabit.com. So here's a graphic. It is a table with 3 rows. And the first row says small times infrequent, which means a small amount times an infrequent deposit of that small amount. And it results in a challenge. It's manageable because it's small, but it's inconsistent because it's infrequent. In regards to habit formation, habit-forming, this is a subsequent column in that chart, it's only moderate. Because it's infrequent, it doesn't mean that you'll stick with it and therefore it's unlikely to establish a habit. It's not routinized. And then therefore, the time to the goal, achieving the financial outcome you want, is going to be very slow. Now the next row says large times frequent, which means a large sum of money, but you do it consistently. Well, the consistent part is good for habit-forming, but a large amount can be overwhelming, which again challenges our habit forming. And if the amount's too large, we'll skip out on it. I kind of make it akin to working out at a gym. If, if you haven't worked out in a while and you decide to throw on hundreds of pounds of weight to do that bench press or squats or whatever it is, it's a very large amount, but it can cause injury and we're really unlikely to repeat it. So the habit forming potential is very low when it's large and frequent. And the time to goal though is fast because it's a large amount and frequent. So while it's optimal on a logical basis, the habit forming is very unlikely because of the pain it brings about. The next line says large times infrequent. And what it says is the challenge is that that can be both overwhelming and inconsistent. This is the worst way to form habits. And it takes the longest period of time because we're doing it infrequently. So we're overstressing ourselves and we're doing it in some rando case. It's unlikely a habit will ever form. But the last row is the optimal way to achieve a new habit. And it's small times frequent, meaning it's a manageable amount of money and you're doing it consistently. Because it's manageable, it becomes routinized, which means the habit forming is very high. And therefore, the times to the goal is the fastest in most cases because you're sticking with it. Now below the chart is a quick caption which I'll read off to you too, and then we'll continue with the book. This is called the money habit formation grid. Big deposits burn you out, and frequent ones don't stick, but small frequent allocations, they lock in the money habit fast. Your brain rewires with easy wins and rapid reps, and it goes faster than any other way. Technically, I could have saved $50,000 if I put just away $1, that's the amount, per year, which is the frequency, for 50,000 years, that's the time to the goal. It's absurd, I know, but understanding these 3 factors allows you to wrap your head around what you want to do, what you can do, and how to adjust when you aren't happy with the progress. Ramping up frequency, You can increase the frequency of your savings to reach your goal faster. For example, if I put away $1, that's the amount again, every hour, I've changed the frequency from before, which was per year, I could save $50,000 in about 5 years and 9 months. That's the time to the goal. If I increase the frequency even more, saving $1 every minute, then that 50 grand happens in just over 1 month, ramping up the amount. You can also increase the amount you save each year. For example, if I put away $100, that's the amount, per month, again, that's the frequency, I would reach $50,000 in just over 41 years. If I double the amount to $200 per month, I cut the time in half to just over 20 years, combining frequency and amount. The real magic happens when you ramp up both the amount and frequency. For example, if I save $25 every day, I could hit $50,000 in about 5 years and 6 months. And if I push my savings to $100 every day, I could achieve the same goal in just 1 year and 4 months. This approach aligns with cognitive load theory, which suggests that smaller, more frequent actions are easier for our brain to process and sustain over time. When a goal feels manageable, like saving $25 each day, we're less likely to feel overwhelmed compared to larger, less frequent amounts like $760 per month, even though they work out to be the exact same amount. By breaking savings into bite-sized, consistent steps, you reduce mental strain and increase the likelihood of sticking to the plan. As you establish your money habit, You will hear my constant drumbeat to allocate funds weekly. It is how you stack small financial building blocks sequentially, resulting in substantial money gains without substantial effort. Now that you understand how amount and frequency interact with time, you can take control of your financial goals. By adjusting just one, or better, both factors, you can achieve outcomes that might seem impossible at first glance. It is the money system, not the money I earn, that has given me the ability to handle almost anything life throws at me and keeps me worry-free about how I'm going to pay for it. Isn't that why we all want a windfall of cash? To do what we want when we want, worry-free forever? When life expects us to pay up. Within minutes of getting the call that our daughter was in the hospital, Krista had booked a flight out of Newark, New Jersey for early the next morning and already started packing. Adela had fallen 18 feet from a wall while climbing near her home in Tennessee. And yes, I live in New Jersey, and I gotta tell you how many people bust my chops for living in New Jersey. And the reason is they're all going through our industrial complex. I invite you one time to come out west of there and check out the blueberry capital of the world. Yes, New Jersey is the blueberry capital of the world. All right, just a little education for you. Let's go back to the book. Thankfully, she was okay, but she had snapped her ankle. Her foot was twisted completely. As she looked down, she realized she wasn't staring at the top of her foot. She was staring at the bottom. In that split second, frozen in time, she thought, I've never seen the sole of my foot before. So weird. Then the pain hit like a striking meteor. And she blacked out. I've been keeping our insurance costs down by using a catastrophe policy with a high deductible of $10,000. This catastrophe was surely about to make us pony up a big chunk of cash. And as we were soon to find out, that 10 grand was merely a drop in the bucket. After she arrived in Tennessee, Krista purchased some medical supplies for Adela, including a scooter to help her get around once she was allowed to get out of bed. Crystal also paid for all the meals and groceries for the 2.5 weeks she stayed with Adela while she recovered from surgery. And because I was traveling for speaking engagements during that stretch, we hired a house sitter to check in on our house, water plants, and bring in the mail, as well as a dog sitter to walk and feed Archer, our mutt. The bills started to add up. Now, let me give you a sense for this. Here's the list. The next day flight was $584. The deductible for the surgery was $10,000. The scooter was $153. Medical supplies were $91. Meals and groceries, noting it's 2, almost 3 weeks of meals and groceries for 2 people, was $520. The house sitter, which was for the 2 weeks for when I was away, $350, and then the dog sitter, which was last minute with overnight care, was a whopping $1,200. The total unexpected expenses was $12,898. If the accident had happened a dozen years earlier, we would have been screwed. I would have been doing the mental math and freaking out about how we would cover the unexpected expenses, likely scrambling to pull together some combination of personal loans and credit cards. And then once we figured that out, we'd be freaking out about how we would eventually make those payments. Worrying about money would've added to the concern we had for our daughter, making a tough situation a full-blown crisis. You can't adequately attend to an emergency when there's a constant undercurrent of a financial emergency. Adding insult to injury, at least for me, money worries come out in anger and frustration, I would be snippy at best and a jerky jerk at worst. Except none of that happened. Krista wasn't worried. I wasn't worried. We knew we had enough cash to cover everything in our health savings account. And because we had the cash, we could act quickly so Krista could be right by Adela's side as soon as possible. Sitting in my hotel room the day after Krista arrived in Tennessee, I called for an update. All was well. Our daughter was in pain, but the surgery went smoothly, and with the help of physical therapy, she'd get full use of her ankle again within a year. After I hung up the phone, I sat quietly in my room and thought about how different our lives were since the dark days of when we were drowning in debt. Back then, I dreamed of being free from the financial roller coaster, and I worked tirelessly to change it. But I couldn't get a handle on it until my daughter, that same young woman who had just broken her ankle, saved my life. The piggy bank. By the time I was 35, I built and sold two multimillion-dollar companies. Before you start picturing private jets, yachts, and Lambos with me throwing money out the window, let me stop you right there. These companies were far from financially fit. Truth be told, neither was I. The difference between what a business makes and what the owner actually takes home is massive. The buyers bought my businesses for strategic reasons, not because I'd made these companies into money-making machines. That's what the new owners planned to do with their acquisitions. Alas, the truth of the situation was something I couldn't see. I thought I was a rich mofo. 2 company exits meant a couple of years of take-home income in the chunky 6 figures. I was able to grow them and get out of them before they crumbled. I was the master of the pump and dump. You know, where you build up something fast with little to no structural integrity—house of cards—and sell it off before it comes tumbling down. My biggest pump and dump? My ego. I pumped up a big fat ego and dumped my common sense. With my obvious Midas touch, I decided to become an angel investor. Now, as a spoiler alert, I was a disaster. I didn't just lose a little money. In less than 2 years, I lost every penny I got from the lottery win sales of my businesses. All of it. By the way, I was so bad at being an angel investor, I now lovingly refer to myself as the angel of death because I was investing in business after business that collapsed after collapse, that fell apart just because I had no clue what I was doing. Things spiraled fast. Bills piled up. I stopped opening them. Unknown numbers? Straight to voicemail. Debt consolidation companies hounded me with multiple calls a day, and their bright shame-inducing envelopes stuffed my mailbox weekly. My financial mess wasn't just private anymore. It'd gone public, and it was humiliating. I did everything I could to keep it hidden. Every day, I'd rush to the mailbox before Krista could get to it, shoving those ugly reminders of my failure deep into a drawer. I told myself it was to protect her, to keep her from worrying. But the truth, I didn't want her to know just how bad it had gotten. I didn't want her to see me for what I felt I'd become. A financial disaster who'd run out of money, out of luck, and nearly out of hope. I started to fixate on who would find out I'd gotten us into such a financial mess. Could the neighbors see my slumped shoulders and sagging head from their front window when I opened my mailbox? Had they received any of the collection notices by accident? What did the mail carrier think? I was so embarrassed. By this time, I was sending numbers that I did know to voicemail. My withdrawal was the start of a depression. In his classic book Walden, Henry David Thoreau wrote, "The mass of men lead lives of quiet desperation." That sums up my life during those dark days. I was desperate to get out from under debt and off the financial rollercoaster ride without anyone noticing a thing. Desperate people do desperate things, so I tried anything and everything. Get-rich-quick books, the law of attraction and all that manifesting stuff. I even tried playing the lottery. I wondered if that sign on telephone poles that read "Stuff envelopes at home, earn $1,000 a week" might be legit. It's not. I wanted ways to be financially sound so badly I started to convince myself that the obvious scams were the real deal. See what I mean? Like, desperate. I knew deep down inside that none of those strategies would work, but we'll do and believe all sorts of weird stuff when we don't have other options. I also reverted to the fabled money shuffle. I moved money from here to to cover a cost over there, and then took from there to cover something else over here. I kept moving money around, trying to keep us afloat until one day there was nothing left to move around. It all went down on the day meant for hearts, roses, and chocolate. On Valentine's Day, 2008, my accountant called. Good news, Mike, I got a jumpstart on your taxes this year and just finished your return for 2007, you owe only $28,000. This was the last tax bill associated with the sale of Company 2, money that was totally gone 12 or so months prior. Good news? Hardly. I had $10,000 in a mix of accounts, and between the tax bill, the accountant's bill, living expenses, and the growing monthly minimum of credit cards, I needed 4 times that amount. Where would I find the money? I gotta add to the story I didn't include in the book, but you gotta hear this. So my accountant, his name is Keith, and when he called me to tell me about this tax bill I owed, I did tell him the circumstances. And I said, like, are there any alternatives? Like, I don't have enough money to survive. I can't pay the taxes. He goes, oh, why don't you just skip paying taxes this year? "you can get a pass." And I said, "Are you serious?" And he goes, "No, just kidding." Now, I don't know if you know this, all accountants revert from these childish evil jokes by laughing and it reverts to maniacal snorting. So when I said, "You can skip taxes," he goes, "No." [LAUGHTER] He literally laughed, snorted at me. And the biggest irony of all, that was 17, 18 years ago. Keith is still my accountant. I don't know. It's kind of funny. It's very funny. In the greatest of ironies, that day I came home with a hopeless heart because for our family Valentine's Day was a special deal. At dinner, we would exchange cards and stories about what we loved about each other. It's one of my favorite days of the year. Yeah, I opened the door filled with dread. I would have to come clean. It was time to tell my family the truth about our finances. At dinner, Chris and the kids could see something was up. When she asked if I was okay, I started crying. I was so full of shame. I mean, I was supposedly the breadwinner, the guy who provided for the family, yet I couldn't do my one friggin' job. Finally, I said, "I've lost everything, every single penny." Tyler and our youngest son Jake sat motionless, stunned, frozen. Adela was 9 at the time. Her eyes big and her shoulders tense, she looked terrified. I don't know if it was because her daddy was sobbing, or she comprehended what I had done, or both. She jumped up from the table and ran as fast as she could on those spindly legs of hers. She booked up the stairs into her room and slammed the door shut. You and I have made a commitment to be providers. That is why you're listening to this book, after all. You've committed to provide for yourself. You may have committed to provide for your family. You may be providing for parents, kids, relatives, others. The thing is, providing financial security is a form of protection. But I was such a failure that I couldn't protect my own family. I wanted to run away from the circumstances that I had brought down upon us. So to see my daughter run away from me was brutally painful. At the same time, I got it. She was doing exactly what I wanted to do, except she wasn't running away from me. She was running to her bedroom to save me. I get emotional telling this story, so bear with me. And I also wonder, as you hear this, that maybe in some way you can relate to this. Maybe you've lived this exact experience, or you've been on the side of being a child where a parent couldn't provide for you. I just think you've been here too. Behind the closed door, she grabbed her most prized possession and then flung the door open. That little 9-year-old girl raced back down the steps with her piggy bank, the one she had received as a gift when she was born. I told her that dreams come true when you manage your money well. And I'm aware of the extraordinary hypocrisy as I say this. Dutifully, she had been saving nickels and dimes and dollars for the horse she wanted to have one day. The rubber stopper on her piggy bank had been secured with masking tape and duct tape and rubber bands so a robber wouldn't steal it. She handed me her piggy bank and then in her tiny 9-year-old voice said, Stop crying, Daddy. We're gonna make it. Telling my family we had no money left was my rock bottom moment. At least that's what I thought. There's a saying about rock bottom moments, and you probably know it. As difficult as it is at the bottom, at least there's only one way to go, up. It's a beautiful sentiment. Too bad it's total bullshit, because the reality is when you hit rock bottom, Life drags you along the ground. Shards of self-disdain slice your skin. Grains of loathing grind your eyes. And boulders of hopelessness crush your bones. If you know, you know. I had always said if I couldn't provide for my family through a business of my own, I would get a job working anywhere, doing anything. If McDonald's was hiring, I would take it. If UPS needed a night shift fella to move boxes, I was in, at least so I said. When I hit that lower than low point, I didn't stay true to my word. Instead, I borrowed money from soon-to-be maxed out credit cards and lines of credit from friends and family, all to keep the business going. And I drank a lot. I drank to feel less ashamed, to feel less, period. For me, Rock bottom became 2 years of, and this is self-diagnosed, functional depression. While Adela's confident declaration had momentarily filled me up with hope that we'd make it, I had no idea how I would make it. And that's when the desperation started. I tried several tools to lift it. I started a daily success diary, which did absolutely nothing. I joined a men's group, which helped some of the time, Most of the time, being in the presence of guys who were financially strong, or at least seemed that way, only amplified my shame. The only thing that would work to get me off the ground and return me to a peaceful state of mind was financial stability. More money is not always the answer. Eventually, the cash games stop and reality hits. This didn't happen when I drained my own accounts. It happened when I couldn't spend anyone else's cash either. Because I'd borrowed everything I could. That was the first time I took a hard, honest look at how I'd run my businesses. I noticed a pattern. I was obsessed with having more, getting more money, and had spent almost no time learning how to manage what I already had, controlling money more. I chased that lottery-level windfall. I did not build wealth. For people who are living in poverty, who can't pull themselves up by their bootstraps because they don't even have boots, more money coming in is the answer to their immediate problems. But for the rest of us, more money will help us only so much before we end up back in the same hellhole. This is because we keep trying to implement budgets and financial strategies and go against our natural habits, and that's when we tend to go haywire. Bank balance budgeting. It's payday! You look at your bank balance and suddenly, after a week of eating leftovers, you're flush. So you start spending. Dinner and a movie, a purchase at your favorite store, a gift for a friend. Then come Monday, you realize you have to pay the phone bill and you owe your coworker Jan for the lunch she covered the other week. Don't forget about that student loan payment you have on autopay. Your payment for that roof over your head is due in 13 days, and you're wondering yet again if you might be short. Bank balance budgeting is making spending decisions based solely on the number you see in your account rather than accounting for upcoming bills and automatic payments. This approach leads to recurring financial stress. So we decide it's It's time to stick to a budget. And that works just about as well as you'd expect. Here's how I used to run my business and personal finances. I'd set a budget at the start of the year, and then within a month or two, I would have blown it due to unforeseen circumstances. An unexpected expense, something we wanted to buy or something we needed to buy would come up, and another one, and then another one. This is not uncommon. According to US News and World Report, 80% of New Year's resolutions fail by the second week of February. We're terrible at sticking with new habits. With my budget merely a suggestion, I'd resort to my well-established habit, checking our bank balance to see if we had enough money right now to cover whatever we had to cover right now. If the checking account seemed to have a healthy balance, we'd spend, except that balance had to cover a lot of other things. Maybe some payments hadn't cleared yet, or an automatic withdrawal would surprise me yet again. Maybe an annual expense was coming up and we hadn't accounted for it. Did we really have enough money or not? What appeared to be a healthy balance on payday would lull me into a false sense of security. Then a few days or weeks later, I look at the low or negative balance and wonder where all the money went. Then the overdraft charge would crush my bones. I think maybe I just need a different budget. Maybe I'm doing it wrong. We turn to financial experts who tell us to budget, and we try that, but budgets work about as well as diets, which fail in the long term 95% of the time. That means pretty much every diet will fail eventually. Notice how I didn't say every dieter will fail. It's not us. It really isn't. Except we think it's our fault. We believe it's our fault. Maybe I need therapy. Maybe I need to figure out why I overspend. Therapy is helpful and mental health is vital for sure. And the solution may be simpler and faster than uncovering our emotional issues around money. The late Howard Farkas was a renowned psychologist known for his unprecedented success helping his clients recover from chronic binge eating and emotional eating. In his book, "Eight Keys to End Emotional Eating," Farkas explains the underlying reason it's so hard for people to stay on a diet and stop eating food they know they probably shouldn't eat is that there is an internal conflict between control and autonomy. He says an aspect of emotional eating is the transgressive motive, a taboo-breaking thrill of defying the rules. Farkas writes, there's a conscious part that you think of as your real self. It's compliant, eager to please, and wants to do the right thing, including diet and exercise, and generally go along with social expectations. There's also a part that you're probably not aware of that's more rebellious. It instinctively reacts against restrictions on your freedom, including the freedom to choose what to eat. These are the two sides of the struggle that results in emotional eating, and this conflict must be understood to be resolved. So basically, we want to budget, but we also want our freedom. We rebel sometimes out of necessity and sometimes just because we wanna. This is why willpower doesn't work long-term. We are wired for the need to comply to social norms— don't go broke— but we also want to break free from those social norms. Buy this fun thing. What does it look like when budgeting starts to fail? We want to buy something outside of our budget. We check the good old bank balance again. It seems like we have plenty of money. Shouldn't be a problem. We can just shift something around later, right? Now the budget, like diets and New Year's resolutions, is blown, and we start to feel pretty bad about our choices. Why can't we get together like Jan in marketing who we still owe $10 for lunch. Let's not torture ourselves anymore, okay? It's not you. You're not a bad person or bad with money or unable to kick your bad habits. Our inability to stick to a budget is not our fault. It's how we're wired. All of us, as in humans, we just don't want to be restricted all the time. Farkas says the solution is to bring these two parts of us, control and autonomy, into balance. When I read about that in his book, I got chills because there's that word again, balance. How do we restore balance between our two natural tendencies so we don't feel the need to rebel and screw up our finances? We allow ourselves to spend what we want in our bank balance. We keep doing what we've already been doing, checking the bank to see if we have money and spending based on what's there. We don't stop bank balance budgeting, we make it work for us. We set up a system, control, so our inner rebel can live, autonomy. That is the fundamental difference in the money habit system, the difference that beats those crappy New Year's resolution and diet statistics and helps you create permanent change. I'll show you exactly how to do that in the next chapter. How I figured it out. In my low, low, lower than low, rock bottom place, dodging bill collectors, it finally dawned on me. What if I stopped trying to use systems that require me to have discipline or to change who I am? What if I had a money system that works with what I already do? What if I figure out how to manage my finances by doing what I'm already doing multiple times a day, looking at my bank account. That's when I came up with the Profit First system for my business. Even in my mental state, I knew that as a business owner, I needed to get my business finances in order first. If I could consistently be profitable, the proceeds would be my source of income. In a nutshell, Profit First involves transferring a percentage of income into different bank accounts, envelopes, that are earmarked for specific purposes. Using Profit First, my business went from being a money pit to a profitable money-making machine in just a few months. I'm generally an optimistic guy, but even I was shocked at how fast it worked. I then went on to build 3 more multimillion-dollar businesses, this time with sound cash management in place, as in businesses that actually pay the owner and all their employees a real salary. Salary. Profit First worked so well for my business that I immediately started using the system, which I call the Money Habit System, with my family's personal finances. I adjusted the percentages to account for different goals and circumstances. I kept tweaking it for personal finances until I was sure it would work for anyone— for people who have a job, people who are paid by the hour or who receive a salary, people who run a business or a side hustle, people are doing okay financially but want to do better, and people who are crawling back from that dark place and haven't yet seen the light at the end of the tunnel. The Money Habit System works because it uses the habits you already have. You don't have to be disciplined or good at math or to understand financial jargon. You don't have to spend years learning finance or bookkeeping, and you don't have to change who you are. Because let's face it, if becoming worry-free requires me and you to change who we naturally are, we'll be stuck on that roller coaster ride forever. When Adela said, "Daddy, we're going to make it," I was humbled by her sacrifice, but dismissed it as a child's ignorance about what we were facing. But maybe ignorance wasn't the right thought. It was innocence. I couldn't believe it possible. I was too low and too mired in the way that you are supposed to manage money. Yet she was right. We did make it. Within a year of my personal finances being in control, the debt consolidation notices stopped coming and the debt collectors stopped calling. We had a small emergency fund and enough money to pay our bills on time every month, and we started setting aside money for the stuff we wanted and the dreams I thought we'd have to leave behind. We made it not because I figured out how to make more money, inherent to an entrepreneur's income is volatility, or because I got really good at budgeting, I'm not. We made it because I finally had a system that worked, a system that didn't demand I become someone I'm not. I could stay myself, minus the massive ego, and the system would still deliver. A system that was so rock solid that it worked even if I, cheated a bit. Cash confidence is power. A couple of months into Adela's recovery from ankle surgery, she received a notice from the insurance company that they would not cover any of the hospital bill. Neatly folded in with the notice was the statement, "Patient responsibility, $75,000." Adela panicked. She now had to pay a bill that would bury her. She called Krista crying, exasperated, panicked she'd have to work 2 or 3 jobs for years to cover it. She was frozen, unable to think of how to get out from under the bill. I too was stunned momentarily, but I knew what to do next. I immediately called our agent, Dan Ritter, and he started the complex process of challenging the insurance's denial. Still, Adela was convinced she'd have to pay the bill. And from my understanding, we were in for a dogfight with the insurance company based on a technicality they used to skirt responsibility. So yeah, the monster bill was going to be on my daughter's lap. "Let's consider the worst-case scenario," I said. "If the worst happens and insurance doesn't pay, we have enough money in our emergency account to pay for it in full. Don't worry, Adela, we can cover it." To comfort my daughter 15 years after she offered her piggy bank to me was a full circle moment I'll never forget. I still get choked up thinking about it. Adela, in her 9-year-old mind, was confident we'd be okay because she had cash confidence, her piggy bank with the duct tape to stop her. Now, I was able to pull from our savings if needed to cover her outrageous medical bill because I I had cash confidence. My wife and I had squirreled away money monthly into our emergency account and had $100,000, more than enough to cover that bill. Once she understood that we could pay the bill if we had to, Adela felt comfort. Her focus shifted from fear and anger to working on a path forward. When we are overwhelmed by financial anxieties, it's freaking hard to see a way out of it, and it's damn near impossible to fight for what's rightfully yours. With the newfound cash confidence, we started making calls and gathering documentation. 6 months of a pragmatic, persistent approach tipped the scales in her favor, and eventually the insurance company agreed to cover 90% of Adela's hospital bill. Thanks to Dan for the guidance. Thanks to our emergency fund for the confidence. When you know you have enough money to cover everything you need, that's cash confidence. And with the help of this book, you're about to get it. The $36,000 check. Since setting up the money habit system in my own life, Krista and I bought our dream home. We intend to pay off our 30-year mortgage in less than 12 years. We paid for all 3 of our kids' college educations in full. We set aside money for retirement and emergencies of every kind. We have individual slush funds, which allows me to go to a Virginia Tech football weekend with the guys guilt-free. Go Hokies, and Krista to go on a girls trip to Napa Valley guilt-free. Go Cab Francs. And the best part, we have had a ton of fun on adventures and trips all over the world. Cash confidence has given us access to our dream life. I intend to do the same for you. These outcomes, no debt, early mortgage payoffs, trips, healthy emergency funds, college funds, and even weddings may seem impossible to you right now. You may wonder if a system as simple as transferring funds to separate bank accounts can really make all this happen. Yes, it can. You may think the money habit system won't work for you because you have too much debt, or you don't earn enough, or you aren't good with numbers. I didn't believe it worked for me either, but it has more than worked. It has transformed my life. And it has transformed the lives of at least a million others. You'll hear some of their stories in this book. Yes, The Money Habit will work for you. It's not complicated to set up, and once that's done, the system runs automatically. You simply need to take the first step and decide to give it a try. You don't have to be stuck in the ups and downs of the financial roller coaster ride. You don't have to be at the mercy of inflation or worry that you won't have enough money to cover the things that are important to you and your family. You don't have to stay in that place where one disaster, one accident, one catastrophe could bury you in debt for years or for life. You will have the cash confidence to live the life you dream about. Congrats, lottery winner! Your financial freedom starts now. One thing I want to share with our folks listening on the video right now— I know we're mid-book and we'll get right back to it. Not using AI. This is the real guy. I notice a lot of authors now are doing their audios via AI tracks, but I think it loses the reality of the story, the emotion. And so that's why I'm doing this live with you. So just wanted to point that out. Real dude here. Chapter 2, The Money Habit System. Stop right here. If you're not ready to set up and do the things that will forever fix your wallet, stop listening to this book and go back to hoping your finances magically fix themselves. Yeah, you heard that right. And I know I sound super rude. I've never started a chapter like that before. And admittedly, asking you to stop listening to this book may not be the smartest idea, but I had to do it. Your financial future depends on it, and your finances are far more important than me selling you this book. So let's get serious and let's do this together. This is the chapter that changes everything. The biggest barrier to financial freedom is not a lack of knowledge. It is not doing what you know you need to do. So you can't skim, you can't 4x this one, you can't get to this when you have the time. This chapter is the game changer, and if you don't act on it, you won't get results. Give me just an hour, and if you're 2xing me, give me just a half hour. That's all I ask. With all the love in the world, I implore you, buckle up, buttercup, and do this shit. We good? Good. Then I have one final plea, and I promise this is it. This chapter will give you the basic overview of the Money Habit System, but to really understand it, you've got to do it. You've got to experience it. I want you to do it today, even if it's 10 o'clock at night and you're comfortably tucked in your bed in your favorite PJs. Money mastery is a 24 by 7 by 365 thing. Start now. Not tomorrow, not soon— today! Even if you're sitting there in your undies, let's get to work. Use multiple bank accounts. Every summer we take a vacation to Long Beach Island. One morning several years ago, We were out to brunch at one of our favorite restaurants, Uncle Will's, and there was a guy at the table next to us who struck up a conversation. I think because I was wearing a Virginia Tech hat. I felt extra generous, so as a surprise, I told the waiter, "Hey, don't tell that guy, but I want to cover his meal." The check came, I yanked out my trusty credit card, and the waiter smiled, "Sir, we've gone cash only." I froze. I looked at the debit card nestled in my wallet at the bank machine in the corner that the waiter kindly pointed out to me. Did I have enough in that account to cover the bill? I had no clue. And since I didn't even have enough cash on hand to cover my meal, let alone his, I had to turn to my sister, her husband, my niece, and my son to scramble together enough cash to pay for this guy's meal. It wasn't even that I didn't have the money. I paid everyone back right away. The real problem? I had no awareness about my finances. I didn't know what was available. I wasn't tracking what I could actually spend. That's the difference now. With the Money Habit System, I never have to wonder. I definitely don't have to do the 'I'll pay you back later, I swear' scramble for cash ever again. In the introduction, I talked about the envelope system that's been around for ages. You designate envelopes for different expenses like rent, mad money, and groceries, and then stash your cash in the envelopes. When you need to run to the store for groceries, you use only the money in the corresponding envelope. Seems simple enough, right? Except there's a couple of problems with the envelope system. What's stopping you from shifting money from one envelope to another? Nothing. It's too easy to pull out of your someday envelopes, the ones labeled rainy day, down payment for dream home, and summer vacation. You think you'll replace that money, but you rarely do. The solution is to open multiple bank accounts for specific expenditures and transfer a portion of your income into each account. And to keep you from borrowing from one envelope to cover an unexpected expense or a spending spree, You'll open a couple of accounts at different financial institutions so you cannot easily transfer funds between accounts. You can keep your bank balance budgeting habit and let your inner rebel be free. This freedom is not a bad habit at all. In fact, it will save the day. As I shared before, you can go to mymoneyhabit.com to download all the graphics, and in the book is a graphic. It just shows the flow of cash, so I'll explain it to you. It shows a cloud that represents the total household income. That money gets deposited into a bank account called income. Income acts like a serving tray. Like if you think a big dinner you're having and you have a serving tray of food, no one eats off the serving tray. You serve the different plates. Well, the income account functions the same way. All your deposits go there, your household income. Then you carve it up on a percentage or dollar basis to other accounts. These accounts include needs, wants, dreams, fix or future, and emergency. The needs account gets a debit card assigned to it, and we'll talk about what needs is. The wants account gets a debit card assigned to it. The dreams gets reserved and held at another bank or institution or hidden in some capacity so you can't access it. The fix account— fix, we'll talk about that later on— but it's used to Auto-pay down debt, or future is used to auto-save. And then the emergency account is also hidden away and secured so you only use it for the only intended purpose, addressing a real emergency. Below the graphic, of course, is the description that says, "The Money Habit System. Rather than ask you to fight your existing habits, the Money Habit System channels them. Your total household income hits the income account, then a percentage or a fixed dollar amount flows into needs, Needs, Wants, Dreams, Fix for Future, and Emergency to give you instant clarity on what money is for what purpose. Debit cards control daily spending in the Needs and Wants accounts. Hard-to-access accounts, which are hidden or at a second bank, protect long-term funds. Automated payments knock down debt. Automated transfers build savings. Here are the 6 foundational accounts I want you to set up. First is Income. This is where your total earnings are deposited. You will never pay bills from this account. Instead, you will disburse funds to the other accounts from this account. You will not get a debit card for this account because you won't use it to buy anything. Second is needs. This is an account for essential expenses necessary for daily living, such as your housing payment, car insurance, groceries, and utilities. You will get a debit card for this account because you will need it for your everyday needs. Third is wants. This is your discretionary spending account for things you want but can live without, such as entertainment, dining out, or new clothes. You will get a debit card for this account. You will choose a different card design or label the cards with the account names to easily identify which debit card to use in which circumstances. By the way, my buddy Matt Robinson, who's in the other room right now, he's the guy filming all this. Dude, I hope you have a wants account. We bought 2 cameras to film, and that came out of my personal wants account. The reason we bought the 2 cameras in a staggered means, as opposed to buying them the same day, is the wants account wasn't funded to buy 2 at once. So it keeps me within my budget, and I don't steal from my needs, AKA groceries. Fourth is Dreams. This account is to save for aspirational spending for major life goals tied to personal fulfillment, such as vacations, investments, or achievements. This money is sacred, so keep it out of sight and out of mind— and a different bank, or at least hidden— to avoid dipping into it for everyday wants. When you're finally ready to make that big buy, you'll transfer a portion of this money into your Wants account to spend with intention and celebration. Fifth is the fixed or future account. Use this account to eliminate debt and secure your financial future. While you have debt, it's your fixed account. Once debt-free, rename it future and use it to build long-term savings. Don't get a debit card for this account. Set up auto payments from it to crush debt consistently. When you shift to future, use automatic transfers to investment accounts or other forms of a security stash to keep momentum and never miss a deposit. Sixth, emergency. This account is savings for unforeseen expenses, such as medical emergencies or urgent home or car repairs. Minimally, you will set this up as a hidden account at your bank to crush the temptation of using it for anything that isn't an emergency. To make it truly seem out of reach, set it up at a different financial institution. When you do need it, transfer the funds to the needs account and pay for that emergency. That's exactly what we did when Adela broke her ankle. You may be thinking, this dude is out of his mind. How am I supposed to keep track of so many accounts? What's my bank gonna say? I get it, and I know 6 bank accounts may seem like a lot at first, but really, the pain is over once you set them up. And your banker? They'll be thrilled about how much moolah you're moving through their bank. In Chapter 3, I will give you a handy-dandy chart called the Money Target that will help you figure out your disbursement percentages, how much to transfer from your income account into the other 5 accounts, why fixed and future are are the same account. You may be wondering why the fixed account for debt reduction and the future account for savings accumulation aren't separate. Simple, having both accounts at the same time messes with your behavioral wiring and gives you too much leeway to drift off course. When fixed and future run side by side, it weakens habit formation and makes it easier to justify poor decisions. Like carrying debt while believing you're building a strong financial future. The Money Habit System is built around financial seasons. You'll learn more about those in chapter 3. At specific times, your main job is to fix debt. No splitting attention between past mistakes and future goals. When your account is labeled fix or future, never both, every time you log into your bank, you'll instantly know your top priority. That kind of insight builds momentum. Behavioral psychology backs this up, in particular, attentional bias. We focus most on what's in front of us. So if you see future money sitting next to fixed debt, your brain gets confused. You lose urgency, you rationalize, you slip. One account, one purpose. That's how you build the habit and keep it strong. And when the debt is gone and your fixed account becomes your future account, the shift isn't just a renaming, it's a milestone. You've earned it. Just don't go back. Debt is common, but that does not mean it's normal. Kill it first, then move forward permanently. Remove temptation. As I mentioned earlier, we tend to borrow from accounts we've set up for a specific purpose. Usually to handle unexpected expenses or buy something we just have to have. Instead of trying to change that habit, we're going to put guardrails around it. The funds for your income, needs, and wants accounts will stay visible at your primary bank, but your dreams and emergency accounts will live elsewhere, or at the very least, be well hidden from the most likely thief, you. Out of sight really is out of mind, And that's exactly where you need some of your money to be. Your fixed or future account will be set up to auto-pay debt or auto-save investments so the money moves on to do its work before you can get your sticky fingers on it. Because if you borrow from those funds, it's not borrowing, it's stealing from yourself. And every time you do it, you chip away at the effectiveness of the entire system. You might be thinking, Why not just move money straight from income to pay off the credit card or invest? That's a fair question. But that extra step of sending money to fix or future first isn't busywork. It's a behavioral firewall. It makes you see the money, feel the decision, and own the move. Skip that and the cash just disappears. The fix and future accounts act as staging areas. You spot the amount, confirm the action, And in that brief pause, you reinforce your money habit. Visibility builds accountability, and accountability makes good behavior stick. If you participate in your company's 401(k) program or health insurance savings program, you're already doing this. The funds are deducted from your paycheck before you get it, so you don't have access to that money, and you don't have to worry about spending it or covering those expenses. The money is subsequently stored at a bank or financial institution other than your regular bank. Better still, your investment account likely prohibits access without a penalty until you reach a certain age. Pull the funds out earlier than a designated date and you may pay a penalty. Temptation removed. Establish a rhythm. When we don't have a handle on our bills and available cash, it causes worry. This is why it's important to establish a rhythm of dispersing funds from your income account to your needs, wants, dreams, fixer future, and emergency accounts. You'll begin by test driving the money habit system manually for 2 months. That means no automation yet. Every time you get paid, you'll log into your bank, look at your income account, and intentionally transfer all your income into your dedicated accounts. Then you'll pay your bills from the appropriate accounts. All this is done by looking at your bank accounts. No spreadsheet, no accounting system, no budget necessary. As a reminder, in Chapter 3, I'll give you the percentages you'll need to figure out how much of your income to disburse to each account. Yes, it takes a little effort at this stage, but there's a reason for this. Each transfer will give you a micro win. A new awareness, and your first experience of control over your money. So in the book here, I have a graphic, an example of how money flows. So you see the 6 accounts, income, needs, and so forth, down to emergencies. And in this scenario, we're saying $1,000 gets deposited. It's explained right below the graphic. It says a $1,000 deposit lands in the income account. On allocation day, funds flow out based on a set percentage or fixed amounts So every dollar has a clear job before it's used. Now in this example, at least for now, I have 60% going to needs, 30% wants, and so forth. So 60% of $1,000 is $600, gets allocated to needs. 30% of $1,000 is $300, it goes on to wants. I put 5% to dreams, 3% to fix, and 2%, I'm sorry, into emergency. Therefore, everything gets allocated out based upon percentages. With this allocation in place, one glance at your accounts tells you what's available for what purpose. After 2 months of doing this manually, you'll set up automatic transfers so your system runs itself. This means your bank will handle the allocations for you based on the fixed dollar amount or percentages—some banks do both—you assign. Your bank will distribute the money from your income account into your needs, wants, and other accounts on a set schedule. In his book, "I Will Teach You to Be Rich," my friend Ramit Sethi writes, "Sometimes the most advanced thing you can do is the basics consistently." I completely agree. Ramit is a big advocate of automation. By setting up auto transfers into his savings and investment accounts, each part of his financial system works together seamlessly. Having his finances on autopilot gives him a cascade of benefits, Among them, his money accumulates while he sleeps, and he doesn't worry about covering bills or having enough money to retire one day. Automation isn't just about convenience. It's about reinforcing the habits and structure you already put in place and understand. You'll know exactly where your money is going because you've been actively managing it for 2 months. Over time, following this rhythm will give you a better sense of your personal cash flow. Like when you need to set aside more, if you need to change your rhythm, that sort of thing. You'll develop a kind of intuition about money that you haven't experienced yet, and it starts by following the rhythm. Quick little side story, I'm going to embarrass my friend Ramit. He's going to be included in this book, by the way, so make sure you listen through. I interviewed him and you'll see it featured in this book. He's the author, of course, of I Will Teach You to Be Rich and also a new book called "Money for Couples." And we were meeting up in Nashville at an author event. And I got an Airbnb effectively for us to stay at. But it was me, Ramit, and two other authors. And I didn't look too closely at the Airbnb to see that it wasn't four bedrooms, it was four beds. So Ramit and I were going to be sharing a room and the other two authors sharing a room. I was the first one to arrive, so I texted the guys and said, "Hey, just so everyone knows, you don't have your own room. We're sharing a bedroom and we're sharing a bathroom." And Ramit says, "Oh, perfect, because I just got a hotel. I'm not staying with you guys." So Ramit did not want to stay with me, and he stayed at a hotel, but he was kind enough to come over and do an interview with me and then quickly bolt back to his hotel. So he didn't have to share a room with the McCalla-whats-here. And by the way, I still made him pay for the Airbnb. I think that's fair, right? The One Account Challenge. The Money Habits System is your worry-free path to financial independence. But right now, you might not feel very worry-free. Maybe you are waiting for your next paycheck before you can fill your gas tank. Maybe your house payment is coming due again. And you're scrambling to make it work. Maybe, maybe it's worse. Or maybe your frustration comes from not knowing when you can afford something you really want. When can you finally take that vacation you keep talking about? When will you be able to go to dinner without putting it on a credit card again? No matter the financial situation, we all have that one thing, something that keeps us worrying or wondering. At the core, Every financial consideration comes down to the same two questions: when will I be able to cover that expense? When will I be able to afford that thing? The money habit answers these questions no matter where you are financially. But still, one thing can get in the way: feeling overwhelmed. Some people find the idea of opening all these accounts at once too much, like walking into a packed restaurant where everyone is talking at the same time. Too many accounts can make too much noise at first. If that sounds like you, before we run the risk of too many voices coming at you, we're going to start small. Just one financial conversation between you and a bank account. The one conversation that will help you stop worrying or wondering. Just like with any good habit, the way to build it to the highest level is to start small before doing it all. So start by opening just one new bank account designated for either something you're worried about covering or something you really want to purchase. So here's your mission, should you choose to accept it. 1. Determine what the account will be for. Ask yourself which financial stressor is on your mind most often. Do you worry about covering rent each month? Paying for groceries any given week? Affording your kids' summer camp registration? Or do you find yourself wondering when you can finally buy those new sneakers or something bigger like a weekend getaway? If the question, when can I afford this, keeps popping up or causes stress, that's your cue to set up an account for it. 2, open just one new account at your bank and nickname it after your biggest financial stressor. When starting out, it's usually a need,, but it could also be a want or dream. Choose a name that instantly clarifies its purpose. To keep things organized, precede the nickname with N for need, W for want, or D for dream so you always know what the money is for at a glance. For example, N-groceries, or N-rent, W-dinner out, D-vacation, or D-education. A gift for Mike. By the way, that last one is a joke, and I've literally had people send me money because of the impact that Profit First or The Money Habits has had on them. And that's very kind. Of course, I won't accept that. But I do invite you, if you do feel that this system has served you so deeply that you are tempted to be of service in response, I invite you to donate to the community Service Center of New York. This is an organization that helps people facing economic insecurity, and they quite literally saved my father from abject poverty when he was a child, and your contribution could do something similar for someone else. 3, allocate money to your new account every time you get paid. For essential expenses like rent or groceries, Set aside a fixed dollar amount each week or per paycheck to ensure the expense is fully covered when needed. For example, if your rent is $1,600 per month, you might allocate $400 per week or $800 per biweekly paycheck to your N-rent account. If it's an annual expense like summer camp fees, divide the total by the number of weeks or pay periods until it's due. And set aside that amount to W summer camp regularly. For expenses without a deadline, like dining out or vacations, allocate a small percentage of your income instead. These expenses are more flexible, so you can adjust as needed. 4, use the funds in this dedicated account only for its exclusive purpose. Don't have enough money in it to buy the new shoes? Then your when hasn't happened yet,, and you are not ready to buy the shoes. Don't have enough money to pay for all the groceries? Then you need to consider how much you can spend on groceries or the possibility you are spending money on fancy shoes at the expense of your pantry. Now, throughout the book, I have these little highlights called Take Quick Action. These are simple steps that you can take to see immediate results. So I invite you to take these actions in the moment. And guess what? Here's your first one. Take quick action. The first step in channeling your magnificent money habit is opening one account. That's it. One account, one designation, one small step in setting up your money habit. One giant leap toward financial independence. Do this now. Not later. Not when you have time. Got it? Good. All right. I'll sit here and wait until you do it. Okay, I'm assuming you did it. That was fast. When you complete the One Account Challenge, email me at mike@mikemccallowitz.com. And yes, that's a doozy to spell and we are on audio, so I'm not gonna chew up your time here, but I'm sure you can find it online. Email me at mike@mikemccallowitz.com with the subject line, "My money habit starts now," so I can easily spot it in my inbox. There is no better accountability mechanism than telling me you're committed. Now, I will be sure to email you back. Just be patient. I am traveling constantly and not always on top of my inbox, and I prefer not to use AI for personal communications. So just be patient with me and I will get back to you. With this step complete, you have already handled the hardest part of this system and you've cleared up a nagging financial stressor. Well done. Set up your accounts. Carrie Sadler, who agreed to give the Money Habit System a shot, told me she was two parts skeptical and one part willing to try because she felt like she was failing with money for so long. But after just two weeks of using the system, Carrie still had money in her usual account for a grocery run, plus her wants account had more than enough for her fave sushi place and a movie. She said that normally by that point in the month, she'd be scrambling to move money around to cover overspending. This time she wasn't. I'm completely amazed at how different this money habit feels, Carrie told me. I think you'll be amazed too. With that one account set up, the rest is easy. Easy money, so to speak. Set a date to open your remaining bank accounts. And if your favorite date is today, all the better. Checking accounts are appropriate for income, needs, and wants. Savings accounts are best for your dreams, fixer future, and emergency accounts. Right now, you're likely depositing your income into the same account you use to pay your bills. You're going to separate those activities, which means if you designate your current checking account as the income account, you'll have to move any auto payments for bills to the new needs account. Or if you'd rather designate your current checking account as the needs account, you'll have to change the account into which your paycheck is deposited so it goes into your new income account. Either way, you can use the accounts you already have to get started on the core 6 accounts. Now I just want to say something here because you're like, Mike, not all my bill payments are needs. I have a subscription to, you know, some online service. That may be a want. Just to make it simple, I'm just showing how these accounts have to be broken out. But when it does come to paying bills, if you're auto-paying wants, like a subscription to something online, it's likely going to have to come out of the wants account. It's not necessarily a need. At this point, just focus on getting the 6-account structure in place. Later, you may have to add more accounts or give them different names. We'll talk more about that in Chapter 5. Right now, it's as though you are laying the foundation for a house. You're not picking out paint colors yet. You're just pouring the concrete. If you're wondering about bank fees, remember that banks are vendors and you are their client. They are designed to serve you. If your current bank charges fees, ask them to waive them. Bank fees and minimum balances are annoying roadblocks. But they're completely avoidable with the right approach. First, choose a bank that works for you, not against you. Go to mymoneyhabit.com to get a list of banks I personally use and highly recommend and to see how they work with the money habit. And if you're wondering what to say to the bank, here's an easy script. I want to open 6 bank accounts so that I can manage my personal finances more effectively. I will be transferring money between those accounts regularly So I need these accounts to have no fees and no minimum balances. When I was a kid, learning to tie my shoes felt like the ultimate hurdle in life. At least it felt that way to me. Over, under, pull it tight, make a bow and pull it right. That rhyme made it worse. I would make a knot. But then I just committed one day. I just did it over and over for a half hour and voilà. I can tie my shoes for the rest of my life. Do it once, you'll never need to do it again. That's what the money habit system is like. And I just got to tell you this aside. I remember the day I learned to tie my shoes in my bedroom at my parents' house. My mother, my dear mother, who's now 90 years old, is still in that house. And she still has that room. It's kind of like this weird homage to teenage Mike. Including my Farrah Fawcett poster that's still up there. And, uh, the shag carpet's still there too. And last time I was there, I just felt like tying my shoes, you know, call back out to my past self. The key is to realize that this is a one-time setup that pays off forever. The challenge is not the effort, it is the mental hurdle. For the half hour at the bank or the 13 minutes online, you will have a lifetime of financial independence. But there's always an excuse that I can wait until tomorrow. So schedule it like your life depends on it because it, well, you know. Take quick action. Right now, set up a date and put it in your calendar. Pick a date and time like it's a meeting with your doctor. Schedule the appointment with the bank. Take the time off from work. Just schedule it. If you were one of those kids where the shoe tying rhyme actually worked, here's the one for your wealth. Join the rank and go to the bank. Set up the accounts and boost your amounts. I know it's silly, but if it worked for you, it may still work for you. 66 days to get the hang of it. We've been talking a lot about habits, how we're naturally wired. We're working with what you already do, not asking you to become someone else. That said, we can learn how long it takes to create a habit and use that as a guidepost for how long it may take you to get the hang of the money habit system. Most people think it takes 21 days to create a habit, but that's actually how long it takes to establish the routine. No wonder we have a hard time sticking to habits. We think we should have it down in 3 weeks, but it's not that simple. Philippa Lally's habit formation study discovered that takes an average of 66 days to form a habit. Maybe it'll take you a little more time because some habits are harder to establish. Yours is simple. You're looking at your bank accounts every day or whenever you need to spend money. Not that difficult. So check your calendar and make note of the date 66 days from now. That's when I want you to email me again and tell me how it's going. Make sure you write 66 days of my money habit. In the subject line so I can find it. And as a reward, I'll give you a bonus chapter that unlocks only when you've completed the full 66 days. No cheating. That's a hint about the bonus chapter. You'll understand what I mean in 9 weeks and 3 days. And I got to tell you, when I wrote this book, I sent it out to what's called pre-readers. These are people who kindly volunteer their time to read my book and give critical feedback. And I had that request in there for someone to email me 66 days later. And sure enough, 66 days later, some, not all, but some of the readers started emailing me and I sent them this bonus chapter and it blew away their minds. I dare say it's the most important part of this book. At the same time, if you read it before 66 days, it could ruin the system for you. If you read it after, even much later, it's okay. But there is a sweet spot. And I know it sounds so bizarre. I hope you trust me on this one. So make a note of it. Email me. I'll send you the bonus chapter. And then you can tell me if it was a mind-blown type situation and empowered you even further with the money habit system. All right, let's get back to the book. Get 'er done summary. Set it up once. Live it forever. 1, complete the one account challenge now. Pick the biggest financial stressor or desire. Name it, open a new account for it, and label it. N, rent. W, dinner out. D, new outfit. You get the idea. One account, one purpose, one giant leap forward. 2, build your 6 account system. You're already opening one account, so keep the momentum going. Set up the 6 core accounts: income, needs, wants, dreams, fixer future, and emergency. This is your money command center. Even if you don't use them all right away, the hard part of getting them set up is done. 3, schedule your wealthy weekday. Pick 1 day a week to log in, allocate, and take a 4-minute or less money pulse. Put it on your calendar like a meeting with your future self, because it is. Chapter 3: Align Your Money with Your Financial Season. Donna Lim spread the white envelopes out on the kitchen table. Each one was rumpled from frequent use and had a label written in blue pen: health insurance, mortgage, food, other supplies, prescriptions, phone, gas, school lunch and fees, car insurance, cable TV, clothes. Some envelopes were stuffed with tens and twenties. Some just had a few dollar bills, and some were empty. She looked at the faces of her husband and their two children and said, "Okay, everyone gets a vote. Which expenses are we going to cut this week?" Donna never expected to be in dire financial straits, In 2008, when the environmental health and safety industry started hiring independent contractors to save money, her husband lost his job. She had a 3-year-old bookkeeping business that had made their family of 4 a little extra money, what she had called the difference between hamburger and steak. But her husband, who'd been the main breadwinner, and her $28,000 in income a year could not come close to supporting their living in Silicon Valley, especially because they had an extra set of required expenses related to her husband's poor health. It wasn't long before they had blown through their savings and they didn't have enough money to cover their bills. When Donna and her family voted on which expense to vote off the island, as she puts it, they knew the first 3 bills to be paid were health insurance, food, and the mortgage. 'in that order.' 'This was before the Affordable Care Act,' Donna explained, 'when an insurance company could deny your coverage for a pre-existing condition. So we had to cover the health insurance first.' Donna worked hard to get more clients, but it wasn't enough. Her husband worked every day to find a new job, but no one was hiring. Eventually, he decided to change professions and learned graphic design so he could take on any job that would give him some income. They sold what they could—clothes, jewelry, furniture, sports equipment, electronics—whatever anyone would buy. To make matters worse, Donna's husband's health continued to decline. Our church would call and ask, "What do you need?" And I would say, "Can someone just go pay for his insulin?" Despite all their efforts and despite support from their community, eventually, The envelope that was always third in line, the one labeled mortgage, was completely empty. They got behind on their payments for their duplex and then more behind until finally the bank was involved. At the time, many people were in financial hell. A staggering 133,223 bankruptcy filings were recorded in California that year, and of the 12 duplexes in Donna's area, 18 were owned by the bank. 18. She and her family were not alone, but that didn't make their situation any easier. Desperation brought about an unthinkable idea. I talked with my husband about splitting up the family. He'd take our oldest and sleep in the car. I'd take the younger one and sleep in the van. Donna and her husband managed to come up with enough money to keep paying their mortgage, but they didn't have enough to cover the months they hadn't paid. Their foreclosure day turned out to be the same day as their wedding anniversary. As they waited for the sheriff to come escort them out, Donna looked at her nearly empty home. They had sold almost everything. Suddenly, like in a movie when the reprieve arrives just in time, her attorney called to say the bank agreed to let them stay in the home and pay off the unpaid debt over time. That was a turning point, the start of a new season, one focused on recovery. Over time, all the envelopes filled with cash, and eventually, when Donna started using Profit First, the envelopes became bank accounts. Donna would move out of recovery mode and into other new seasons where she focused on other goals beyond mere survival. One of the reasons many financial habits don't stick is because life is not static. We experience good years and super lean years, tragedy and good fortune. Our needs and goals change as we make big life decisions like having children and later launching them into the world. Like the winter melting into spring, we move from one financial season into another. Nothing is permanent, so we need a money management system that moves with us from season to season. The Four Financial Seasons. I often write to The Four Seasons by Antonio Vivaldi. 4 violin concertos, one for each season: winter, spring, summer, and fall. Even if you think you don't know the piece, you've heard it in movies and in commercials. I'm far more of an '80s hair band fan personally. You know, the good stuff, like when you're rocking to Dokken or cranking Autograph. But Vivaldi's music, it is turn it up great. And if you don't know what the turn it up reference is, That's an autograph song, my friend. It turns out The Four Seasons was the first composition based on stories, sonnets. Pretty cool. Like Vivaldi's piece, there are four financial seasons: recover, activate, fund, and balance, and a story behind each. And in every good story, there's a quest, a big goal the characters are trying to achieve. So in homage to Vivaldi, Let's break down the story behind each of the 4 financial seasons. Recover. This season is a rebuilding story. Maybe you had a big financial loss, such as a layoff or a natural disaster. Maybe you're starting over after a divorce or bankruptcy, or maybe your debt simply got out of hand. You'll know you're in the recover season if you have ongoing debt that is over and above your mortgage for your primary residence. Let that go so your future can glow. It's recovery time. Here are indicators you may be in the recovery season. Debt overload: you are carrying credit card balances, personal loans, medical bills, payday loans, or any other balance due. Poor credit score: if your credit score is lower than 580, you are considered a high-risk borrower And we need to fix that. Tax debt. You owe back taxes to the government, risking penalties and wage garnishments. And that makes a little more history on me than you care to know. I've lived that. There was that year I couldn't pay taxes. You know, when Keith, my accountant, the giggles, giggles, snort guy, that guy. I went into a tax installment plan. I will tell you, that is crushing. You owe interest. You owe taxes, but you also owe penalties, which makes that interest skyrocket effectively. It is a legalized crime in my opinion, but it was also a crime that I wasn't ready to pay my taxes, so shame on me. Recurring overdraft and bank fees. You are in a cycle of negative account balances and fees. Repossession and foreclosure. You are at risk of losing or have lost a car or home due to past financial mismanagement. Student loan crisis, you carry heavy debt burden from past education choices. Co-signed loan gone wrong, you are stuck paying for someone else's defaulted loan, which by the way almost happened to me. A former girlfriend who couldn't get a loan begged me to co-sign. I declined, and as a result, I lost the girlfriend. Thank Jay, because I guess it wasn't much of a relationship in the first place. Plus, I was just a source of money apparently for her, and this is when I was in college with no money. And lastly, any other financial hangovers? You bought a house, car, or business that became a money pit, or you have debt to anyone that you are struggling to pay. Fund. This season is a dream fulfillment story. You're saving for something you want in the future, either something just a few years out like a new car, or something further out like retirement or a vacation home. An indicator that you're in the fund season is that you're adjusting your needs and wants accounts down to temporarily pour more money into savings for something big. You are delaying short-term gratification in the present for future long-term happiness. If your rainy day fund is bone dry,— that's another indicator that you're in the fund season. A little each day brings dreams your way. It's funding time. Here are indicators you may be in the fund season: Building a robust emergency fund. You want to ensure life's surprises don't derail finances. Preparing for retirement. Your investment in 401(k), IRA, or other future income sources. Saving for something big. You are saving up in anticipation of a large spend on something big in the not-so-distant future. For example, a down payment on a home or a property investment. Fund now and activate soon. Building a college fund for kids. You are anticipating tuition costs so your children don't have to rely on loans. Preparing for an entrepreneurial investment. You're saving up to start a business or side hustle. Yippee! By the way, entrepreneurship is my fave. Planning for long-term healthcare. You're preparing for medical costs, disability, or aging care. Planning for big life goals and dreams. You're planning ahead to fund travel, a sabbatical, passion project, or simply a fulfilling life. Or if I may, maybe you're saving for your kids' future weddings. You know, just a thought. Activate. This season is a live it up story. You're reducing your cash position to extract more experiences out of life now. Maybe you're going on that Disney family vacation or using money to buy more time to relax and take care of yourself. Maybe you are paying for college, or maybe you need the cash to support an aging family member. An indicator that you are in the activate season is that you see every minute as more valuable than every dollar. Live each day your chosen way. It's activation time. Here are indicators that you may be in the Activate season. It's funny, as I read these off, I'm starting to think of Jeff Foxworthy. If you haven't seen You Might Just Be a Redneck, this is uncannily similar. You might just be a redneck. You got 4 cars in your driveway and none of them have wheels. You might just be a redneck. That was a horrible imitation, but you know where I'm going. Okay, let's get back to this. This is the Activate season. Time more than money. Experiences, moments, and being present are your priority over saving or making more money. You're directing money toward travel, hobbies, dining out, or personal passions rather than maximizing savings. Lifestyle upgrade: you're investing in a better home, a car, or quality of life improvements that enhance your daily experience. Personal growth: you're investing in education, courses, fitness, or self-improvement that enriches your current life. Generous giving: you're contributing to charities, supporting family members, or engaging in philanthropy without financial stress. The start of that entrepreneurial thing: you're launching or expanding a business, taking strategic financial risks to create something meaningful. Nice, it's go time! Comfortable cash flow: you're covering all your needs with ease and using extra funds for wants rather than aggressively saving or paying down debt. Luxury and indulgences: you're allowing yourself to enjoy finer things, whether it's designer clothes, gourmet meals, or exclusive experiences. Home and space enhancements: you're remodeling, redecorating, or making non-essential improvements to your living environment. Spontaneous or big picture spending: you're making a major purchase without stressing about the financial impact, knowing you're stable. This is an instance when the activate season may be for a short period, even just a day. For example, you may be allocating in the fund season, but you do one big spend, activate, and then go back to fund. Balance. This season is a best of both worlds story. You're leaning into the now, activate, while also saving for something cool in the future, fund. You want the $8 coffee, and you want to save for a down payment on a house. An indicator that you are in a balance season is that you have one eye on today and one eye on tomorrow. You don't feel 100% comfortable extracting a lot of cash for fun stuff, but you do feel comfortable enough to stop squirreling it all away. Save and spend, a blend that won't end. It's balance time. Here are indicators you may be in the balance season. Every dollar is doing something that feels right. You enjoy today's pleasures while ensuring tomorrow is secure. Every dollar has purpose, whether it's for now or later. You are here now and ready for later. You indulge in experiences and purchases without that nagging fear of, will this hurt me later? You have a protective financial cushion. Your savings and emergency funds remain strong. Allowing you to embrace the now without jeopardizing the future. You are investing in both experiences and security. You take the vacation but also contribute to retirement. You enjoy the good meal but still build your nest egg. You make calculated trade-offs, not sacrifices. You may choose a luxury purchase but not at the expense of long-term peace of mind. You blend joy with responsibility. You are not second-guessing financial decisions. You're at ease knowing you're getting the most out of your money while ensuring security down the road. You have a financial rhythm. You aren't called to save aggressively, fund, or spend freely, activate. You found a rhythm that feels right. Balance does not mean you are putting the same amount or percentage into wants and dreams accounts. It simply means emotionally you're in the middle You are striking a balance between living optimally within your means in the day-to-day and saving deeply for one day in the future, the next season. These financial seasons don't follow a fixed order like spring leads to summer and so on. With financial seasons, you can go right from fall to spring and then back to fall, for example. Now, if only that happened with weather in my neck of the woods. Goodbye to endless shoveling in the winter. Your next season is just that, the next season. As I am reading this to you right now, Krista and I are currently shifting from an activate season into the balance season. We are saving 36% of our income for retirement and future cash reserves, and 26% goes into now moments, like a long overdue home renovation project and our annual 2-week vacation to Long Beach Island. Meets you at the Dairy King. But just back to my point way earlier in this book, we always go to Long Beach Island. We always take that vacation. The money's allocated for it. And we had this other family vacation that we wanted to take, but because we're in the balance season, there wasn't enough funds to do it the way we wanted to do it. And we're putting it on hold. So no matter what your season is, you will always have the accounts telling you what you can do when. Or not do when. Eventually, as we get older and decide to lean even more into the now, we will return to the activate season. But right now, we are still focused on expanding our financial security. We don't want to worry if Social Security will still exist when we are 65, and we don't want to be dependent on our kids when neither of us are drawing an income. One final thought on seasons: in nature, They just happen. Winter's coming whether you want it or not, and so is summer. But you do have some control. You can choose where to live. Love winter? Head up north and enjoy it year-round. Prefer summer? The tropics might be your vibe. But no matter where you go, there's still some unpredictability. Storms roll in, plans get disrupted. Financial seasons work the same way. You can choose to live in a stage such as balance and plan your next move, maybe toward activate, but life happens. Rugs get pulled out from under you. You might find yourself in recover unexpectedly. The system guided by the money target gives you the power to live in the season you want and handle any season that comes your way. When an unforeseen season comes up, you're ready to adapt. As a viewer of this, yes, you are watching on YouTube or some other feed, I want to tell you why I'm doing this. A few years ago, I was scanning YouTube and I was like, oh my gosh, all my books are on YouTube. Someone literally skimmed my audiobook and just posted it on YouTube and it had over 100,000 listens back then. So I said, oh my gosh, why am I not doing this? I mean, the Grateful Dead, when they saw people bootlegging their band, they actually put those folks in the front row so they had the best seats seats to get the best audio quality for their bootlegging. So I'm like, I'm gonna do the same thing. I'm just gonna do it on YouTube. So yes, you're watching a video of me doing the actual reading for the book, and yes, you're getting this entire book for free thanks to YouTube. Hope you enjoy it. So for you watching on the video over there, I'm at a place called Common Mode. It's in Hanover, New Jersey. I've been doing all my books here. One of the challenges— actually, there's two challenges. One of the challenges is if the air conditioning is running, you get this humming sound in the background. I think Derek, our producer, just found that. That's right. So I'm telling our folks on video here, so if, uh, if you hear that humming in the background, we got to re-record that section. But I'll tell you another little thing. There's an airport near here, and every time an airplane comes by Derek will yell, "Pause! Wait, wait!" We have to wait for the airplane or the car to finish making its noise. All right, from the top. The money target. John Harrison was an 18th century carpenter and clockmaker who saw a serious problem that needed to be fixed. Sailors faced a dire challenge, accurately determining longitude. They couldn't figure out how far west or east they were while at sea. To put this in more modern terms, imagine you board a flight from Seattle to Orlando. The captain would know if they had taken you far enough south, but have no idea if they had gone as far east as they needed to. So you might land in Albuquerque or Dallas. Or maybe they would overshoot Florida by a few hundred miles and you would land in the Atlantic. In other words, Not a good situation. Because captains and crews didn't have a way to measure longitude, ships were lost at sea, causing countless sailors to perish and countless fortunes to be lost. In desperation, the British government established a prize for anyone who could solve the problem. Many believed the solution lay in celestial observations, but Harrison thought differently. He defined his own parameters. A clock so precise it could keep time despite a ship's rolling motion and temperature changes. The chronometer kept the exact time in Greenwich. Is it Greenwich or Greenwich? I'm kidding. I'm kidding. Or Greenwich. I'm kidding. I'm kidding. I'm kidding. I'm kidding. I'm being a jerk. So for folks listening in on the video, I just want you to know Matt and Derek are in the other room. Matt's of British descent, and I'm saying some words here, and he's giving me the British pronunciation, which is likely the proper pronunciation, but I'm busting his chops anyway. Here we go. The chronometer kept the exact time in Greenwich, England. This is why you may have heard of GMT, Greenwich Mean Time. Using the chronometer, sailors could compare the time of day by looking at the sun's position, or night by observation of the stars, and compare it to the time in GMT. The time difference would reveal the distance east or west from Greenwich. With a few more calculations, they knew how far east or west they should travel. Like if I said you live in San Francisco and I said I am 3 hours ahead of you, you would know that I'm somewhere on the East Coast. The chronometer became the thing to measure progress on a voyage, always telling you how far you had traveled. And could always determine how far you still needed to go. Here's the part that might just blow your mind like it did mine. The chronometer's concept is still in use today, and you're using it every time you use a GPS. Instead of comparing time with Greenwich, GPS compares time with multiple satellites down to nanoseconds. This precision pinpoints exactly where you are, Beacons are everywhere, guiding us and pinpointing us in our journey, just like Harrison's invention once did for sailors at sea, just like the Money Target does for your fattening your wallet. The Money Target is a simple chart used to identify exactly what percentage of your income to allocate to each of your 5 bank accounts. The chart is based on what financially fit people do at all different levels of income and in different seasons. With it, you can determine exactly what your accounts and subsequent spending behaviors should be. Admittedly, this is not a perfect science. A multitude of factors can affect the numbers, such as the costs of where you live and the size of your family. But don't get deterred by the details. The money target is like horseshoes or apparently parallel parking. Close enough is close enough. I have an office in Boonton, New Jersey, and it's a very narrow street. And the parallel parking there is a nightmare. It's kind of comical to watch me do it or anyone do it, but gosh, is it a nightmare. And many a person has lost a side view mirror as a result. Note, you won't find the income account in the tables below because it disperses to all the other accounts. Now, again, you know this is available for download and you know where to get it, mymoneyhabit.com. I'm gonna give you just a brief overview of these charts. Just so you understand what we're talking about. It has different tiers, and these tiers represent income. So Tier 1 income is up to $50,000. As of this writing, the average earner in the United States and in Europe was earning $50,000 a year. Now, that's not the average household income. That's the average individual earner. And those numbers will definitely change over time and perhaps have changed as you're listening to this. So just make note of this. This chart is where you target yourself, where you start. So if you see Tier 1 income of $50,000 or less or up to $50,000, and that's where you are, that's where you start. But if your collective household income is, say, $50,001 up to $150,000, that puts you in Tier 2. This chart has 6 tiers. So it goes from Tier 1 to Tier 6, and Tier 6 is for households earning over $1 million. And there's all tiers in between. Well, within each tier, you have columns that identify the season you're in. And we talked about this last chapter. You can identify now if you're in the recover season or fund, activate, or balance. Based upon those two known quantities, your collective household income and the season that you're in, you then have a column of percentages that you should allocate to each account. Now, this is what I call the optimal allocation. So I'll pick Tier 2 in this example, and let's say your household income is $100,000. That puts you squarely in Tier 2 income, and we'll say you're in the recover stage. Well, in this scenario, 65% of those funds goes toward needs, 10% goes to the wants account, 3% to dreams, 20% likely to fix. It's a fix or future account, but if you're in recover mode, You're likely paying off debt, so 20% goes there and 2% goes to your emergency reserve. So these are your starting points. I do want to remind you, this is like horseshoes and apparently parallel parking. These percentages may not be perfect for you over time, but it is the perfect starting point. So start with these percentages and then we'll adjust very quickly. Okay, let's get back to the book. And again, if you haven't downloaded the charts, you know where to get them. There is a description of the chart, so I'm just gonna read that to you. The Money Target. These charts show the ideal percentage allocations based on your usable household income and financial season. In chapter 4, you will plug the percentages based on your tier into a tool called the money map to see how your current spending can shift toward optimal use. Here's how to use the money target. Step 1, identify your tier. Find your tier based on your annual usable household income. This is the total net income from all individuals contributing to your household. Step 2, identify your financial season. Identify your household's financial season using the definitions provided earlier in this chapter. Step 3, allocate percentages to your foundational accounts. Based on your current tier and financial season, Assign percentages of your income to your foundational accounts. Remember, we want the system to show your financial circumstances within a few seconds of logging into your bank account. So if you are in Tier 2 and in the activate season, you would allocate 65% of your income to the needs account. To give yourself instant clarity every time you log into your online banking, include both the account's purpose and its income allocation percentage in the account nickname. So instead of just naming it needs, call it needs and then in parentheses 65%. And just as an aside, my wife Krista and I do this system. We have the percentages and I am responsible for the money management at home, doing the transfers and so forth. But with this simple nomenclature where I had that 65% in the brackets, She knows what percentage is going to what accounts, and when I'm not available to do it, she jumps in and she does the allocations herself. Now listen to this. We've also automated the system. There's certain circumstances because I have a volatile income that we need to make some adjustments. So the system is based upon my predictable income, but should things go a little dry for a period of time or we get a little booster shot, Krista can go in and make the adjustments because she knows what percentages should be in each account. And one last thing is our account transfers, at least how it's set up with our bank, is based upon a fixed dollar amount, not on a percentage basis. And that's why sometimes we have to do this tweak. Step 4, review your season regularly. Choose how often you want to review the money target to determine when you want to move into a new season. Weekly reviews like Finance Friday or Money Monday, or Wealthy Wednesday ensure consistency, while quarterly check-ins allow you to reassess your season and adjust percentages as needed. By adhering to the Money Target tool, you'll become clear and empowered. You will know where you stand and how much farther you need to travel. Each adjustment will bring you closer to the financial parameters that work seamlessly with your life. Let the Money Target be your Chronometer, take quick action. Choose your financial season. If you don't know what season you are in, start with Recover. The system is designed so that the seasons will reveal themselves as you move along. So you get her started with Recover, wipe out your debt, and build your foundation by transitioning into Fund. Now listen, bucko, you may be mowing the lawn right now or out for a drive, or my favorite thing, which is out for a run, listening to this book. And you're like, oh yeah, that's cool, I'll consider that later. No, stop running, stop mowing the lawn, and just take a second and say, what financial season am I in? And make that determination at least in your head so that when you get back to your home and you're ready to deploy the system, this has been taken off the checklist. Now get back to mowing that lawn. When your income is unpredictable. Your income might bounce around like my old cat's mood, purring one minute, scratching the bejesus out of me the next. Maybe you're on commission, working hourly shifts, or run a seasonal business. Whatever the cause of the income swings, the money target still works. In fact, it might work even better for you because it gives every dollar a job the moment it lands. Here's how to make it simple and sustainable. Step 1, set your floor. Look back at the past 12 months and find your lowest earning month. That's your floor, your worst case scenario. Multiply that month's income by 12, and that becomes your tier for the money target. Now remember, do this at the household income level, not just one income if you have multiple incomes participating in your household. Why? Because if you can build your system around your worst month, then anything above that becomes pure financial momentum. Step 2, prioritize survival first. If your income is unpredictable, start with one of these financial seasons: recover, fund, or balance. Avoid activate for now, unless you're already having large amounts of savings. Activate is designed for people with consistent, predictable income or sustainable savings and encourages spending money based on consistent access. That's too risky when you're unsure of what's coming next. But no worries, you'll be able to activate the spend soon enough. And by the way, as I set up the money habit for myself decades ago, I started off with activate, and that was a mistake because I didn't determine what my floor was and I started to overspend right away. I properly set myself in recover mode. That's where I should have been from the get-go to get out of debt. Instantly after that experience, and it corrected my money management permanently going forward. By operating from your floor, you ensure security first. When you have a strong month, the system doesn't encourage a spending spree, which is the big danger, by the way, equivalent to when my cat goes for my face. Instead, a strong month helps you stockpile for when the pendulum swings back, so you're not left scrambling to during leaner months. Step 3, give it 12 months. Once you've used this approach for a full year, you'll have a much clearer view of your real financial landscape. And assuming you have strong months, not just floor months, you will automatically have set aside cash. This is when you can allocate the excess dough. Maybe it goes into accumulating savings, paying necessary bills, or spending on the things you want to make happen next year. You're not officially in the activate season, but you're giving yourself permission to activate some of those funds. Step 4, recalculate yearly. Every 12 months, and my little pro tip here is I like to do this at the very end of the year, December 31st. It's the perfect time. I allocate a half day to reflect on the year that has passed and also to make my adjustments with my money habit. Every 12 months, 1, recalculate your floor based on the new 12-month cycle. 2, adjust your tier if needed. 3, move to or stay in the season that fits your current reality. This includes the option of moving into the activate season. 4, use the excess money for intentional spending based on last year's overages, not on this month's optimism. This approach gives you flexibility without sacrificing stability. You're still living within your means, still protecting your financial future, and still building momentum one varying deposit at a time. Take quick action. When you consider your money target allocations, base your starting point upon your floor income and your season, and then live by them consistently. As a result, Every dollar earned over your floor becomes your win. You know what I'm going to say, stop mowing that lawn and figure out your floor right now. When the money target feels out of reach. What do you do if your money target doesn't seem doable right now? The good news, you're not alone. Many folks feel adjusting to the target percentages is too much, too fast. The great news, the fix is easy and is designed to move at a manageable pace. Step 1: Review your spending. Look at your historical spending to see what percentages of your income you currently allocate to needs, wants, dreams, fixer future, and emergency accounts. I'll show you exactly how to do that in the next chapter. Step 2: Calculate your typical percentages. Compare the percentages from your historical spending to the money target standards. Step 3: Slowly close the gap. Don't force yourself to hit the target percentages on day one. Over the course of 2 years, aim to shift your income and your allocations. Review and shift your percentages every 90 days, every quarter, so that you are inching toward the money target allocations that match your income and your season. This phased approach reduces the strain that can come from doing it true and blue from the get-go. For many, starting slow and letting it grow is the best approach. Life happens, economies shift, jobs come and go. While 2 years is the guideline, adjust as needed. Just don't ever, ever, ever abandon the system. Cool? Cool. Step 4, notice any financial strain. As you work toward closing the gap, pay attention to any financial strain. If you hit a ceiling, Where adjusting further feels too tight, pause for a quarter before reassessing. Progress isn't about speed, it's about sustainability. Sometimes the raise doesn't happen or inflation does, and not so pleasant life surprises like job loss can stretch the timeline. The key is to keep moving forward at a pace that keeps you financially stable and stress-free. Of course, there are the hardcore folks, the people who want to set up the entire system immediately. For the folks like that who would rather go all in and get the hard stuff over fast, starting out and sticking with the money target percentages from day one is the way to go. With this approach, you will get the benefits fast. Adapting to your season. Changing seasons, whether due to a new job, unexpected windfall, financial setback, or a new chapter in your life, will require adjustments to your money target allocations. Here's what to concentrate on in each season. Recover: Prioritize needs and fix. Address critical expenses like rent, utilities, and groceries while actively paying down debt. Fund: Focus on setting aside cash to dreams and future. Build long-term savings for significant goals like retirement or a down payment. Activate: Shift your attention to building wants and drawing funds from dreams. Allocate cash for meaningful experiences such as vacations or personal goals while staying within your means. Balance. Blend wants, dreams, and future. This is about finding harmony where you're enjoying life today while preparing for tomorrow. Here are a few things you can do to spot when a change in season may be in order. Check your numbers. Your bank account tells the story. If your needs account is always tight while your dreams account grows, you may be overfunding the future, fund season, and are preparing to shift into activate. If debt lingers stubbornly, you're still in recover. Monitor your stress levels. Financial stress is a powerful indicator. If you're panicked about bills, you're likely in recover. If cash is piling up but you feel restricted, you may be overdue for activate. Reflect on your goals. What's your current focus? Paying off debt signals recover. Saving for a dream aligns with fund. Prioritizing enjoyment points to activate. A thirst for living in the now while also securing your future indicates balance. Your goals clarify your season. And I want to share a little story about goals. It's about a dear friend of mine who sadly has passed away. His name is John. And I was going to an event, a business event, and John was intending to be there, but he texted me just a few weeks before and said, you know what, I just gotta be with my family. And we're using funds we've saved to do this amazing vacation. So he's like, I am doing a big pass on this event. And I know what I'm losing out on the event, but I know I'm gaining with my family. And that's what he did. And John passed away the day he returned from that trip. It was a horrific situation, but I'm so honored that John devoted his time to his family, leveraged his funds, because honestly, none of us know when that last moment may happen. Be honest about shifts. Seasons can change suddenly. Did a windfall boost your savings? Did an emergency drain your funds? Stay alert to life's changes and adjust your strategy accordingly. Financial seasons don't control you. Winter may be brutal, but it's temporary. Fall takes effort, but the rewards are worth it. Spring brings growth and summer offers joy. The key is recognizing your season and adapting your money target to match. The beauty and work of recover season. Where I live in New Jersey, Winter can be the most beautiful of seasons. After a snowstorm, the world transforms into a white, fresh, heavenly landscape. Powder glistens like diamonds under the sun, and a quiet stillness blankets everything, inviting a momentary pause in life. I instinctively cozy up in a chair with tea, or on rare occasions, a bourbon, or on super, super rare occasions, a bourbon tea. And don't judge that, it is a thing. But winter is also demanding. The shoveling, oh, the friggin' shoveling. Hours of backbreaking work to clear paths, dig out the car. I even clear out a spot for my dog. Only to witness the friggin' snowplow guy burying my driveway entrance with packed-in ice boulders. Thanks, pal. Hope you're enjoying that hot chocolate of yours which we all know is bourbon tea. Freezing fingers, numb toes, and the sharp sting of cold makes every effort a challenge. Winter is a mix of bleak and beauty, a promise of renewal that must be earned. Sam Horton Martin was in the depths of his financial winter. Over the years, I've come to know Sam as the essence of a good guy. He does anything for a friend. He had a wonderful marriage, that he cherished deeply. His husband, Wayne, was the financial anchor in their relationship, and when he passed away, Sam was devastated, emotionally and financially. His husband left him hundreds of thousands of dollars in his will, a gift meant to protect Sam and secure his future. Within 3 years, Sam lost it all. By the time Sam and I spoke, he was in his bleakest hour. His bank account held literal pennies, He was living off food stamps and handouts from friends. His rent was months overdue, and his landlords, who Sam had become close with during the pandemic, faced the agonizing decision of evicting a good man or sacrificing their own source of income. But worse than the financial wreckage was Sam's shame. He felt he had disrespected his husband's hope for him, destroyed the gift he had been entrusted with, and proved to himself that he was incapable of handling money. His winter wasn't powdery snow and diamonds. It was slush, ice, and salt. Not the plow guy's road salt, but the salt that gets rubbed in wounds. Then The Money Habit changed everything because the key to Sam's financial transformation, and quite possibly yours, is not cash, it's clarity. Sam's struggles weren't just about having too little money, though he had practically none. The real challenge was the paralysis he felt from not knowing what to do with what he did have. Without clarity, everything feels insurmountable. Sam's reaction to the uncertainty was to shut down and freeze up, even awkwardly laughing away his money concerns by labeling himself as a money moron and sucking at math. The first mission when you're feeling stuck is to recognize the root of the problem, a lack of clarity. Research indicates that the fear of uncertainty can be more distressing than facing a known adverse outcome. A study published in Social Science and Medicine found that people often experience greater anxiety waiting for medical results than they do when receiving a serious diagnosis. The not knowing creates a worry spiral where you imagine the worst-case scenarios, While knowing, even if the facts are dire, brings clarity and the ability to act. Money works the same way. It's not the problem itself that's most frightening, it's the uncertainty of not knowing where you stand or where you need to go. Once you have clarity, you can start the march forward and experience, maybe the first time in forever, confidence that you have control over money. Clarity through focus. We got busy diagnosing Sam's financial situation. He had piled up debt and couldn't pay all his bills—classic signs of the cold, harsh recovery season. First, we analyzed his income. With his part-time coding job, Sam fell into Tier 1 on the money target. We then ran the percentages and found there was just enough, barely enough, to cover his essentials while still chipping away at his debt. Funding indulgences or emergency savings? Nearly impossible at this stage. But as you now know, the mind thirsts reward. Even in the recover season, the wants account still gets a few dollars every week if that is all we can spare. It's minimal, but it keeps motivation alive. With this target plan in place, it became clear cutting costs alone wouldn't make Sam financially fit. He needed to increase his income by moving from part-time to more time and less part, at least to the extent his health allowed. Next, we tackled clarity through accounts, which is something you'll need too. We always begin with the 6 starter accounts: income, needs, wants, dreams, fixer future, and emergency. But real peace of mind comes when you zoom in and tailor those accounts to fit your current financial season. In chapter 5, I'll share more about how Sam used the Money Habit System to move from crisis to recovery. Saving too much. About 35 miles south of where Sam lives is Tiffany Aliche, the brilliant author of "Get Good with Money." When I committed to writing this book, Tiffany was one of my first calls. Why? Because I knew she'd bring the goods. Tiffany has this incredible way of making you rethink everything you thought you knew about money. I wanted her take, her sharp insights on how to deal with our finances and how we misbehave when it comes to them. And man, she delivered. Her ideas poured out like water from a fire hose, each one sparking new thoughts for this book. And as a quick aside, and talking about Tiffany, I literally met with her just a few days ago, and I further interviewed her. Now, I've already written this manuscript. I'm reading it to you now, but she had some additional ideas that I wanted to include, so I included a part of that interview in this book itself. I hope it serves you deeply. But here's what really hit me. It wasn't just her ideas, it was her story. Like a lot of people, I always assumed the toughest part of financial growth was building funds to climb out of debt save for dreams, or stack up investments. But Tiffany shattered that notion with something I'd overlooked entirely: the miser's problem. When saving becomes the sole obsession, living gets pushed to the sidelines. And in that moment, I saw it crystal clear. Financial freedom isn't just about accumulating, it's about living. In retrospect, it was a no-duh. She was reminding me of a premise that you and I both already know. The caveman principle: we gather, store, and use. Well, we are supposed to use. So one day my parents sat me down, Tiffany shared, and they were like, is everything okay? I was confused. Yeah, why? They said, you look like hell. Tiffany said Nigerians are direct, and Nigerian parents are really, really direct. Their bluntness stung. Tiffany had been saving relentlessly, skipping self-care and everyday spending to build her financial cushion. Tiffany briefly looked down at the well-worn outfit she had on, and her emotions swelled. She shared, I remember snapping back, I'm saving. I'm being responsible like you taught me. And then my frugal parents, parents who taught me to save every penny, said something that shocked me. "It's okay to spend some money, dear." Her father, a man so financially disciplined he could make a spreadsheet blush, handed Tiffany his credit card and told her to go spend $400 at Macy's or Sears. "I knew something was wrong," she said, "when the cheapest man I know told me to treat myself to new clothes." Ah, yes, the miser. So infamous, the last name of one of Charles Dickens' most famous characters, Ebenezer Scrooge, is now synonymous with being a miser. The miser syndrome is the obsessive tendency toward not so much saving as much as not losing. There is a constant worry that spending of any type will lead to financial ruin. The consequences are avoiding spending on expenses that would actually improve quality of life. The emotional toll of guilt is too much to bear when the miser does spend. So for our video viewers right here, I have a name, a pronunciation. Maybe you can even hear it. This is this guy, John Elwes. Elwes. So there's a pronunciation. But before I did that, Matt Robinson, who is the most amazing photographer, he's based out of New Jersey. Make sure you hire him for all your photography. He's here. He's doing this video setup for us. And I said, hey, Matt, you're British. How do you pronounce this last name? And he goes, what a stupid name. That's my best British accent, by the way. All right, it's Alwes, just so you know, it's Alwes. Here we go. John Alwes, a British member of parliament in the 18th century, epitomized miser syndrome so completely that despite inheriting a vast fortune, he refused to spend money even on basic necessities. He lived in crumbling properties, wore clothes until they disintegrated, and ate spoiled food. His relentless pursuit of not losing drove him to sit in the dark to avoid the cost of candles. He even declined to pay for the most rudimentary education for his two sons, George and John, reasoning that putting things into people's heads is a sure way to take money out of their pockets. All this worry, and it could have been avoided, barring legitimate mental health issues, with The Money Habit. The system doesn't just show you where your money should go, it assigns it a purpose before you use it, freeing you from the mental gymnastics of, am I using this the right way? Each dollar knows its job. It's not just sitting there making you feel like a miser for impromptu money decisions. It's at your bank, ready to get to work for you in the way you always intended. And with that, worry wilts. Hope that helps, Ebenezer. Regain agency. In August of 2023, Vicki Lanthier unexpectedly lost a healthy 6-figure consulting contract. And just like that, she landed in a new financial season. At the time, she had $60,000 in commercial debt, as well as her mortgage and other living expenses. Most people would panic in a situation like this, but not Vicki. A 14-year military veteran, she knows how to survive a crisis. In her book, High Agency Human, Vicki details how she not only survived being drop-kicked into a recover season, but eliminated the typical financial overwhelm most people feel when they lose their primary source of income. She used a process she called radical reduction, where she instantly reduced her expenses down to just the the fundamentals. The essence of her system: no delays, no overthinking, just do it. And just do it once, hard. Within 10 days, she had sold her house and moved into an apartment, sold some of her furniture and other items that did not fit into her apartment, and eliminated expenses she didn't need. Through this process, she cleared her debt, created a $20,000 emergency fund, and and increased her investment savings by $100,000. The combination of the mass liquidation and reduced ongoing expenses left her with extra cash to fund a life pivot over the next year, which she used to obtain her registered nurse license and get a new job. And thanks to some creative moves, she also took her dream trip to the Arctic and went to France for the 18th anniversary of D-Day. By moving quickly, Vicki was able to shift into a new season and a new life. When I asked her how she could let go of so much of her life, she explained people get caught up in the sunk cost fallacy, our cognitive bias to continue to spend on something we've already invested in, like a big house, even when it no longer makes sense to do so. Vicki said something that stuck with me, and it speaks to the heart of the Money Habit System. We need to live at the limits that set us free. This is how we gain agency over our own lives. When you choose your financial limits on purpose, a magical thing happens. Chaos converts to structure, structure sharpens clarity, and clarity creates freedom. Back on the Limb. When I met Donna Lim for the first time, she shook my hand and said, I hated your book. Yowch, that's not good. Tell me more, I replied. Why did you hate it? Because of all those bank accounts. Donna is now the founder of Suter Consulting, an accounting firm that helps people improve their cash flow. She was referring to my book Profit First, which she had heard about from some of her clients who were implementing the method. To her, the accounts seemed confusing, unnecessary, and like a lot more work. The second time she heard about it, she ignored it. By the third time, she said, okay, this system isn't going to go away, so let me really understand it. The fourth time a client mentioned it, she decided to try it herself. I did your 1% challenge, she said, and I never looked back. Donna is referring to my challenge to Profit First readers to transfer 1% of their income into a profit account. I adapted that challenge for you. It's the one account challenge from the previous chapter. And if you haven't completed it yet, this is your cue. I don't care if you're in your undies, go do it now. She shared her story with me, the envelope survivor story I shared with you at the start of this chapter. Today, she is a certified Profit First professional who swears by all those bank accounts. She's seen the system transform her clients' businesses and her own. "I don't know why starting the bank accounts was so hard for me at first," she said, "because I'd used the envelope system to get us through that terrible time." Donna stood at the edge of financial collapse, juggling bills and planning how to keep her family safe without a home. Yet with the envelope system, step by step, she fought back. She modernized the physical envelopes into multiple bank accounts and tackled her finances with clarity. I think my favorite part of her story involves the same set of envelopes laid out on the dining table. It was when, for the first time in ages, a little extra money appeared. Gathering her family around the table, Donna asked a simple question: We have a bit more now. What do you want to bring back into our lives? She expected her kids to request cable TV, gadgets, or maybe a well-deserved dinner out for the family. But their answer was humbling in its simplicity. Mom, can you just go to Costco and stock the kitchen like you used to? Ah, yes, the abundance of a full cupboard. There's more to it than food. It's the security of knowing there's enough, always. In that moment, Donna realized the true power of her season wasn't just climbing out of debt. It was creating a new foundation for her family to always have enough. The recover season isn't the end of Donna's story, nor is it yours. It's the beginning. Donna and Vicki are in the fund season now. Tiffany is in activate. I just entered into the balance season. Sam is navigating recover. And you, what season is it for you? Whatever it is, embrace it, my friend. It's beautiful out there. Own the situation you're in and lean into the reason for it. For your season. The get 'er done summary: know your current season, blaze your financial future. 1, choose your financial season. Are you rebuilding, recover, stockpiling, which is fund, enjoying the now, which is activate, or doing a bit of both, balance? Don't overthink it. Pick the one that fits today. Seasons change, and so will you. 2, use the money target. Find your tier based on take-home usable household income, match it to your season, and apply the percentage allocations. These are your financial coordinates. Follow them. 3. Name it to claim it. Modify the labels of your bank accounts to include the allocation percentages. For example, needs 65%. The percentages give you clarity on where your money goes. The accounts give every dollar a job. And every job gets done. Chapter 4, Plot Your Course on Your Money Map. Now, before I start reading this chapter to you, I was one of those guys who thought this first line was nonsense, but it is the absolute truth. I learned it the hard way by overspending. So let's kick into it. You will never outearn your ability to spend. That you will one day make more money than you spend is the misguided hope of most people. It was surely mine. I believed that if I simply earned more than minimum wage, my life would be more than just, you know, minimum. Not true. My wife told her father on our wedding day that would be just fine because I earned $46,000 a year. He spit out his bourbon tea laughing. We had no idea how much money we needed to live. I thought when I reached a 6-figure salary that I would have I finally financially arrived. Nope, not even close. And when I sold a company and became a temporary millionaire, clearly that was the fix. Reality, I lost it all. Stop falling for the greatest misbelief in the world of personal finances. Unless the amount you make is next to nothing, it doesn't matter, at least not much. How you handle what you've been dealt is what matters most. Every year I visit my family doctor. I hope you do the same. It's the best way to track your health. Over the last 5 or 10 years, something interesting happened during my annual blood tests. My doctor would tell me, your sugar levels are elevated, stop eating sweets, which ironically I have honey here as my throat lozenger, but that will be my only sweet for for today. I never really took it to heart. I'd laugh it off thinking, "Well, I guess I have sweet blood." Besides, I didn't think I ate many sweets. Sure, I binged on strawberry Twizzlers on every road trip because it's not just the car I need to fuel too, but it wasn't like I had them every day. The prescription wasn't enough of a wake-up call. I needed something apparently on paper and in my face. I applied for a new life insurance policy and did not get elite status. To give you context, I exercise 5 days a week. I do cardio and weights. I eat vegetables and fruits. I'm at a healthy weight for my height. I have very little stress and I cold plunge, which I mention not because there are any scientifically proven benefits, but like every plunger, I feel obliged to share it with the world. So there's that. But by all measures, I thought I was in excellent shape, except for my blood sugar. When I got only standard qualifications for my life insurance while a slightly, let's say, paunchy friend, who I won't embarrass by revealing his true identity as Greg Echler, my fraternity brother from Delta Sigma Pi, a 1994 graduate of Virginia Tech who now lives in Colorado. So I'll call him Gerg. I totally messed that up, sorry. Gerg. Qualified for elite status with the same company. I was knocked out of my chair. I called the insurance company and asked them why. They said, "Your blood sugar is too high." Hearing it as you should do this from my doctor wasn't enough to move me, but having the number right in front of me, not qualifying for something I thought I deserved, and seeing this was costing me money to boot, that was the wake-up call. I launched a quick 14-day glucose study on myself. The main culprits? Two things: tons of bread and excessive dry fruit. My God, do I wolf down bread. And dried fruit? I can go through a bag of dried apples faster than the winner of Nathan's Famous International Hot Dog Eating Contest. Which I believe, at least as of this recording, was the famous Joey Jaws Chestnut. One shriveled apple was as much sugar as You guessed it, one non-shriveled apple. One a day keeps the doctor away, but a bag of 40? In one day, I was eating an entire year of school teachers' bribes every day, and I thought it was healthy. But this experiment gave me the insights I needed to moderate. I simplified my diet and improved my sugar levels dramatically. Now, let's talk about your finances. Just like with my blood sugar revelation, You need a health check. And now, you now know about the financial seasons and you've identified your tier with the Money Target System. So we have the information we need to take a close look at your current spending and how you need to adjust it. We'll use a tool I call the money map. It works hand in hand with the money target, which gives you your financial destination. The money map is your GPS. In no time, we'll determine the health of your current financial situation so we can plot a course for a healthy future. Bonus: this process doesn't require any needles, unlike my dang blood sugar tests. The money map. If someone is planning to lose weight, the first step they need to take is to get their baseline. They need to know their heft—that's your word, not mine—and measurements. Great money management kicks off the same way. You need to know where you stand. The money map is your financial weigh-in. Don't worry about nailing every detail or sweating the financial nuances because that's not the goal here. We just need a ballpark idea of how much you make, how much you spend, and where that money goes. Even if you're clueless about the exact numbers, your best guesses are more than enough to get this system working fast. You can do this on paper. Alternatively, all the tools you need for this are waiting for you at mymoneyhabit.com, and we even have an AI tool there waiting for you. It'll walk you through all of this for free. Let's make this simple and get it right. Here's how it works. Step 1, calculate your monthly usable income. The monthly usable income of your household, whether one income or more contributes to it, is the foundation of your personal finances. Since most bills and expenses hit monthly, we need to align your income the same way to make it easy to compare what's coming in versus what's going out. We'll use the monthly usable income calculator to do the simple math, and as an example throughout, we'll follow the journey of a couple, Buck and Penny— all right, you've got me, it's Gerg— who are using the money habit system. In the book here is a table that's called the monthly usable income calculator, and You simply add up all of the earners' annual take-home income that contributing to your home and add it up, then divide it by 12 to figure out the monthly income to the household. Your take-home income is the actual amount that lands in your bank account after taxes, 401(k) contributions, insurance, and other deductions. In other words, it is the money that is usable. Just because your salary is $10,000 a month doesn't mean you get $10,000. It might be closer to $6,800. That's the number we work with. Earner 1's annual take-home income, likely you or a significant other. Earner 2's annual take-home income. Now this is if you have a second household income, include it here. If not, you just leave it blank in the table. Other annual take-home income. This includes any steady money coming in such as child support payments, Social Security or pension payments, rental or investment income, or contributing household income, public benefits or aid, or that uncle who moved in just for a few weeks 7 years ago, but at least he helps with the bills. Once you've totaled your annual usable take-home income, divide it by 12 to get your monthly usable income. That's the MUI, it's pronounced mooey. Like a cow that demands extra attention, you know, kind of mooey. Take quick action. Calculate your MOOE and round it to the nearest dollar. This isn't government bookkeeping. Close enough is good enough. Speed beats pinpoint accuracy here. I do want to make one special point here that's not in the book. When it comes to other annual take-home income, there's certain income that's allocated to a very specific purpose and needs to be used that way. So I mentioned child support payments. Well, that's not general income. That doesn't go to your dreams and wants of buying maybe that vacation home. It has to go to supporting your children. That's the intention. So groceries and so forth. In a case where it has a designated use before you recognize it as income, sometimes we deposit that money directly into the related account. So maybe you set up an account called my children. And the money goes into that account. Just an idea for you. Let's see this in action with Buck and Penny. Penny earns $68,000 after taxes. Buck earns $54,000. They have no extra income and, lucky them, no freeloading uncle. The book now shows a monthly usable income calculator that's completed. I'll read the definition or the explanation below. This example shows Buck and Penny's combined annual take-home income. The total is divided by 12 to calculate their monthly usable income. Important note: this reflects net income, the amount deposited after taxes and deductions, not their gross or top-line income. So in this case, the total annual usable income was $122,000, but when you divide it by 12, their monthly usable income is $10,167. Not sure what the actual take-home income is for you or another earner? Use one of these methods. Ask your boss. Just say, I'm taking better control of my finances. Can you provide my gross and net annual pay? Most will happily help. Bonus ask of the boss: hey, while we're at it, how about that raise? Now proceed at your own risk, but you heard it from me. Check your pay stub. If you're paid weekly, multiply your net pay by 52. If twice a month, Multiply by 24. If your pay stub frequency is different or hard to calculate, the tools at MyMoneyHabit.com will do it for you. Look at your bank deposits. If your paycheck is direct deposited, this is your net pay. Identify the amount and frequency, then annualize it. Use last year's W-2 with a catch. This only shows gross wages. To find your net, ask the human resource folks or your accountant for a breakdown of your deductions. Refer to last year's tax return. If you have variable income—self-employed income, commissions, etc.—use last year's tax return as a baseline or divide the last 12 months of deposits by 12. If you or another earner stashes some income on the side before contributing to the household—doomsday prepping, a hidden bug-out fund—only count what actual contributions go to household operations. Step 2, calculate your total monthly spend. Understanding your total monthly expenses and savings shows where your net income is already committed. This is the most critical step in gaining financial clarity. It gives you a clear picture of your money flow. Use this monthly money flow calculator to run your calculations. Start with the MUI, that's the M-U-I, you calculated in step 1. Put it in the top row of the chart and categorize it as income. Continuing Buck and Penny's example, we get the following. So the chart that's displayed in the book is the monthly money flow calculator, and we simply put in the first row, which is the monthly usable income. So that $10,167 we referred to earlier that we calculated for Buck and Penny, or Gerg, is inserted here, and the category next to it says income. Step 2.1: Gather your expense data. The next thing to do is to collect and categorize your expenses. Gather the following for the last 3 months, or just last month if that's all you have: bank statements, credit card statements, receipts. In your monthly money flow calculator, write down your regular monthly expenses. Focus on monthly expenses first. Record the following: description—what the expense is, for example, rent or groceries or streaming subscriptions. Amount: the fixed monthly cost, for example, rent or streaming subscriptions, or a rough average for a variable cost like groceries. Then tackle your sporadic expenses, for example, dining out or vacations. Calculate your approximate annual spend on them. So for 3 months of an expense, simply divide it by 3 to determine the monthly amount. If you spent $1,500 on dining out in 3 months, the way Buck and Penny did, The equation would look like this: $1,500 divided by 3, which is $500 per month. Record the description and the amount for your sporadic expenses in the flow calculator. Here's what Buck and Penny's chart looks like now. So for the graphic in the book, the monthly money flow calculator, there are roughly 10, maybe more, lines. So it starts off with the monthly usable income, which is $10,167, and then it has all these expenses. So rent, which is $4,000, Groceries, $800. Luxury car, $1,500. It continues on with gas, streaming subscriptions, dining out, new furniture, credit card bill, gifts, gym membership, vacation, and clothing, all with the appropriate number associated with it. Now in the table at the very bottom, there's a squiggly line. It simply indicates they likely have more expenses. This is just an example. And here's the description from the book. Each expense is itemized and assigned a monthly amount. Both fixed costs, such as rent, and estimated sporadic spending, such as gifts, are included. The wavy line at the bottom of the table signals that Buck and Penny may have additional expenses. When you fill out your own, make sure you include everything. The reason we record all expenses and costs without tracking an ongoing balance is to prevent mental interference. When we see a running balance, we tend to second-guess or try to improve the system on the fly. Which can distort the truth and undermine the process. Step 2.2: Identify categories. Now that everything is captured, it's time to categorize each expense and calculate the balance. Assign each expense to a category: needs, wants, dreams, fixer-future, or emergency. Be honest and discerning about the category assignment. Your mortgage is likely a need unless it's for a second home, which might be a dream. Even after you've saved enough to acquire a second home, unless you need it for survival, any bills related to that home are dream expenses. Groceries are typically a need. Dining out, a want. A personal chef is definitely a dream. As for clothing, you need it, sure, but anything Louis Vuitton is a want or dream, not a need. Your critical review is essential. A friend or expert might provide even more objectivity. If I may, I suggest you connect with an expert at mymoneyhabit.com. As a reminder, needs are for essentials, rent, groceries, utilities. Wants are the nice-to-haves, dining out or entertainment. Dreams are the big goals like vacations, luxury items. Fix is for debt payments. Future is for savings or investments or investing in your own growth. And emergency, that's for unexpected expenses. Here's what it looks like for Buck and Penny. Again, you can download this chart, so we're not going to go through the entire thing, but just as a quick reference, we've categorized now for Buck and Penny all of these different expenses. So rent is a need, groceries is a need, the luxury car, that's a dream, gas is a need, streaming subs, meaning streaming subscriptions, that's a want, and then there's other wants, dreams, and there's a fix with the credit card bill they have. If you're not currently allocating money to certain categories, that's okay. Right now, we're simply getting a clear picture of how your money is being used. In Buck and Penny's case, there's no money going toward the future or emergency categories, and that's just fine. Step 3, total the categories and calculate percentages. Now let's break things down into the money map. The first goal is to total each category from the monthly flowchart calculator and determine what percentage of your monthly income is going toward each one. Your category totals may exceed or fall short of your income. This is normal, so don't stress over this. The goal here is simply to understand the general trend of where your money is going, not to get everything perfect. Continuing our case study of Buck and Penny, we see the totals add up as follows: needs, $5,300; So this is a summation of rent, which is $4,000, groceries, which is $800, gas $250, and clothing $250. Wants is $1,175, which is the accumulation of streaming subscriptions, $150, dining out, $500, gifts, which is $75, and a gym membership, which is $450 a month. Dreams, $2,525. So this is their luxury car, which is $1,500 a month, new furniture, which is $525 on average every month, and the vacation account, which is $500 a month. Fix is $2,300. That's their credit card bill. Future, they're allocating nothing currently, and same is true for the emergency account. Note that both the fix and future categories are listed here, and that's intentional. It's possible you've been trying to address two top priorities— by paying off past debts while also trying to prepare for the future. For now, we need to assess both simultaneously to understand your full financial picture. But when we implement the system, we'll shift focus. First priority: clean up the past by tackling debt and overdue obligations while still preparing for emergencies. Then, once we lift that weight, we will reroute more money toward the future by building savings, investing, and creating true financial momentum. Calculate percentages. To determine the percentage of your income allocated to each category, use this simple formula. Category monthly income divided by income monthly total times 100 equals percentage of income. Take Buck and Penny's needs, for example. So they had a total sum of $5,300 for their needs, and their total monthly usable household income is $10,167. So $5,300 needs divided by the $10,167 times 100 equals 52.1, and that rounds down to 52%. So that's our percentage. Repeat this for all categories to get a clear picture of where your money is going. Once you have the numbers, plug them into the money map below. Once you have all your numbers, plug them into the money map I'm about to reveal to you. Now, I did say earlier you don't have to be good at math, and I stand by that, but you do need to use a calculator. So it's a real simple formula, but you have to use a calculator to get these numbers accurate. So now in the book is the chart, which is the actual money map showing the percentages that's being allocated. So I want to give you each percentage. The total monthly household income was $10,167, which of course is 100% of their usable household income. In the graph, there is a dark bar below that. We're not going to play with that number. That's simply where we're starting out, and then we're going to see all the deductions that come from that. The next account listed is needs, and the monthly spend here is $5,300. Well, we already did the math above. That came out to 52%. Wants was $1,175, so that came out to 12%. Dreams was $2,525, which came out to 25%. Fixes was $2,300. That came out to 23%. Now, if you're doing the math in your head, kudos to you. You may have figured out those percentages—needs, wants, dreams, and fix—adds up to more than 100%. And sure enough, it adds up to 112%. In fact, when I tallied up the monthly spend, it was $11,300. Well, this is instant clarity. They're making $10,167 a month, but they're spending $11,300. That means they are accumulating debt. So don't expect your actual spend percentage or allocation percentage to be equivalent to the income you make. It could be less. Sadly, it's often more. Sometimes it's right on. But regardless of what it is, we have something to work with, and that is the good thing. Looking at the money map example, we see that Buck and Penny's total expenses exceed their income, meaning they're running a deficit. Since their spending is 112% of their income, they're outspending their earnings and will need adjustments. However, your numbers might look different. If your expenses are lower than income, then extra money is unaccounted for. That surplus could be allocated to future or emergency categories depending on your priorities. Take quick action. When you look at your own numbers, if you find your running balance is negative, indicating you're running at a deficit, in relying on debt to cover it, don't criticize yourself. That doesn't help. The goal is to gather the facts. Just the facts, ma'am. Finally, you'll notice that in the money map, fix and future are listed separately. This is on purpose. Firstly, you may be currently addressing both at the same time, so they each need attention. Secondly, while I've been encouraging you to start with fix and move to future, sometimes it makes sense to do both. For example, if you locked in a super low interest loan, for example, we'll say 2%, and you can now earn more through savings or investments, and we'll say 5%, prioritizing future may be more profitable. If that's your strategy, consult a money expert for guidance. And now you know the website, it's mymoneyhabit.com. Step 3.1, apply my money target percentages based on your season. Now refer to the money target in Chapter 3. Find your current tier by identifying your annual household usable income and recall your current financial season. Here's a quick refresher. Recover: You have debt outside of asset-related loans like a mortgage or reasonable car payment and carry balances month to month. Your priority is regaining stability and reducing debt. If you're unsure of your season, Always start with the recovery season. Fund: You are focused on building savings. Your priority is growing your financial reserves. Activate: You're spending more freely, using savings for a meaningful purpose or investing in experiences. Your priority is maximizing the present. Balance: You are managing both savings and spending, striking a mix between securing your future and enjoying life now. Your priority is maintaining equilibrium. Based on their calculations, Buck and Penny are in Tier 2 of the Money Target. And just a reminder, that's between $50,001 up to $150,000 of usable household income. And in the book, I pull up that section from the Money Target, that Tier 2 section, and you can see all the percentages. And then we're going to pick based upon their season the proper percentages to insert in their money map. Because Buck and Penny's monthly expenses exceed their income, they are likely racking up debt or depleting savings if they have them, which is a clear sign they are in the recover season. Knowing their season, they transfer the target percentages from the tier 2 recover season column into the money map under the target percentage column. And in the book is the next graphic, which shows their actual percentage allocations and their targets. So I'll just give you a couple examples from it. In the needs row, Their actual allocation was 52% of their monthly income, but the target is actually 65%. Another case is they were allocating 25% of their income toward dreams when the target is only 3%. When the target percentages are added up, they will always achieve 100%. So that's a quick hack you can use when you transfer over the target percentages. Just add up those percentages to make sure it's 100. If something is not adding up to 100, if it's more or less, that means the numbers were not transposed properly. Step 3.2, make the adjustment. Now we're going to see how far off you are from the target. Amber Duggar, founder of Profit for Keeps, author of Profit for Joy, and a coach to thousands on personal budgeting, calls this moment the awful. The emotional sting you experience when you finally see where your money has been going versus where it needs to go now. I always tell my clients to leave space after moments of financial truth, she says, to go for a walk or do something they love. This moment is like ripping off a Band-Aid. She's right, it's raw, it's real, but it's also the start of real raw control. Feeling the awful means your blindfold is finally off and the relief is in sight. I'm personal friends with Amber Duggar, and when she told me the story about The awful, gosh, could I relate? I went through this myself. And the clarity is shocking in the beginning. And so many people who've used The Money Habit go through the same experience. And sometimes there's guilt or shame or anger. And that's okay. But the reality is you now see with clarity. We have an action plan forward. So give yourself that leeway. And I will tell you, Amber Duggar and her organization is the most kind and caring organization because they know that you have to navigate those considerations and they're really capable of seeing people through that. So thanks, Amber, for sharing that powerful story with me about the awful. It's a pivotal moment in everyone's journey when it comes to the money habit. So just for our viewers here, I took a quick break, threw in the glasses. My eyes, I don't know if this happens to you, my eyes are starting to fade, so I need glasses to amplify. We'll see how this goes. For each category except income, subtract the number in the actual percentage column from the number in the target percentage column to calculate the adjustment. Be sure to include a positive or a negative sign before the number in the adjust column to indicate whether you need to increase or decrease spending in that category. For example, in needs, the target is 65%, but Buck and Penny's actual percentage is 52%. That means an adjustment of +13%, indicating that this category should ideally receive more funding. Now hold your judgment. You might be thinking, wait, they need to spend more on needs during the recover season? Answer: in this case, yes. Before we act on the numbers, let's finish the full analysis. When we reflect on this process in step 4, we'll reveal real issues in Buck and Penny's spending. For now, run the numbers for each category and complete the adjust column. And this again shows the money map in the book, and I'll give you some examples, but you can of course download this. The needs row, which has a $5,300 a month spend in total, the actual percentage is 52%, but our target is 65%. So in the adjust row, you see plus 13%. In another row, we'll use dreams again. The total allocation on a monthly basis is $2,525. That's a 25% for the actual column in regards to how much is taken from income. But the target is 3%. So the adjust is -22%. When we total this up, it's -12% for the entire adjust column, which makes sense because the actual column was 112%, they were overspending by 12%. Our target is always 100%. So we're gonna have to adjust down by 12%. So that minus 12% makes total sense. To verify accuracy, add up all the percentages in the adjust column. Since some numbers are positive and some are negative, the total should match the difference between your actual percentage total, which is 112% in our case, and your target percentage total, which is 100%. So when you add up these rows, and I won't belabor the math with you right now, it adds up to -12%. This matches the difference between 112% and 100%. If your numbers align, you've nailed it. If they don't, something might be off. Double-check your calculations. Take quick action. If this stuff is giving you brain burn, and I totally get it, you can use the free tools at mymoneyhabit.com to do all the work for you. Step 4.0: Reflect on the data. Before I share my thoughts, I'm curious about your observations. Take a moment to reflect on these questions. Needs. This category's fix is an increase. Does that surprise you? Could it be that Buck and Penny missed some essential expenses? Looking at the details, is their rent higher than it should be, or are they underspending elsewhere to cover it? Wants. This category requires a slight decrease. What do you think? Can they still experience the small luxuries in life? Does it matter to Buck and Penny? Are they simply a victim of living without a budget forcing them to make a small cut here? Dreams. Whoa! This category needs a massive cut. What do you think is causing that? Are big-ticket expenses in this category throwing off the entire budget? Are you blaming Gerg? I mean, buck? 'Cause judging me, kind of is. Fix. It's odd that this category needs to decrease. Does that seem right? Could this be credit card spending instead of actual debt repayment? Are they just covering minimum payments while continuing to add to their balance? When you see that their fixed category needs a decrease, what emotions come up? Emergency. With no savings here, does it feel urgent to allocate something? Are they putting themselves at financial risk by not having a safety net? What does it feel— how does it feel to prioritize debt repayment? Here's what stands out for me when I reflect on this. Needs. Something feels off here. Buck and Penny seem to be living as expected, but where are utilities, healthcare, and other basic costs? My spidey senses say something is missing. Rent seems high compared to their income. Would a move make sense? Groceries might also be an area to tighten up. Wants. The decrease here is slight, meaning they still have room for everyday enjoyment. I suspect they won't feel the pinch. But a $450 gym membership? Come on, Penny, you're better than that. Dreams. This is the biggest issue, bar none. The luxury car is killing their budget. It's instantly clear that it has to go. Vacations aren't helping either, but maybe they'd be realistic if the luxury car wasn't in the picture. And gifts are nice and all, but are they right and all? Fix: This part gives me goosebumps because they actually need to decrease their debt allocations. In other words, they don't need to put out as much money to the credit card each month, making the number manageable. But, and it's a big but, the current payments they are making are of little benefit if they continue to swipe. The real solution? Stop using the credit card altogether and aggressively pay down the principal with the allocation suggested. This shift will change everything. Emergency. This excites me the most. Even setting aside only $203 per month, which is 2% of monthly income, would build over $2,000 in savings by year end. That's a sizable step toward peace of mind and financial security. And it will only get better over time. This plan might not always align with what we want to hear, but delivers what we need to hear. With this clarity comes control. Amber Duggar calls this grasp of where you're spending your money the gateway of awareness. The awareness her Profit for Keeps clients gain about their personal money choices illuminates other truths about relationships, emotional patterns, and even their values. This in turn reduces stress and anxiety. Amber says you feel more empowered when you understand your financial landscape. I expect you will feel the same when applying the money map to your own finances. If you haven't built your money map yet, now's the time. It's fast, easy, and while it might feel a little uncomfortable at first, it will give you the following: a clear diagnosis of your financial situation, a direct path to to long-term financial health, the ability to take control and make informed decisions. This is your moment. Your money, your future, and the life you deserve all await. Let's do this now. Looking at your debt. I did not go over debt or savings in the money map because it's not relevant yet. What is relevant is for us to understand your current cash flow circumstances. I began investing in businesses as an angel investor about 20 years ago, and I was miserable at it. Less angel investor and more angel of death, if you get my drift. A realization about my repeated failures only came years later. I couldn't fix a single business by trying to fix everything at once. It works only when you focus on one vital need at a time. When it comes to financial health, we can't fix everything at once either. In fact, there is a specific sequence every financially stressed individual and business must follow if they are going to improve their finances. Start with the here and now. You must fix your current cash flow. From a financial perspective, if you are losing money every month, it doesn't matter how much debt you have or what you want for the future, your situation is unsustainable. Resolving your finances always follows this sequence. One, fix the present day-to-day circumstances first. Two, then address the past mistakes. In other words, debt. Three, lastly, drive your financial future. And maybe not so ironically, that sequence is exactly what I use when I invest in businesses today. I started investing again about 3 years ago and I'm no longer the angel of death or turning around companies. Using a process that's called reclamation, which means restoring a business where the owner's overworked, not profitable, exhausted, and bringing that business back to full health. And that sequence that restores you personally to financial health, where you fix the present, then address the past, and then lastly work on the future, is the exact method we use to turn around businesses. It will turn around your personal finances too, I promise. The Money Habits System accounts for all these components from the start, but places the necessary focus on current circumstances. And that's why we haven't dived deep into debt yet. While we absolutely must and will address debt completely, it's premature at this moment. One thing I do want to address are the two common forms of debt, since I refer to them in the money target. Showing more concern over credit card debt than a mortgage, for example. Here's why. Asset-based debt. This is often called secured debt. And includes debts like mortgages or car loans, where the item purchased has sustained value and ideally appreciates over time. For example, most homes increase in value over time. Cars, while they typically depreciate, still hold value for a sustained period and can be sold to recover part of their cost. Liability-based debt. This is also referred to as unsecured debt and is debt associated with items that have no sustained value or depreciate too quickly to be considered assets. Examples include using credit to buy consumables like food or making purchases like an expensive guitar that depreciates once used and stored for years. Liability-based debt often shows up on credit card statements, personal loans, and bank loans used for debt consolidation. While I'm not a fan of debt in general, the emotional weight of it can be overwhelming. Differentiating asset-based debt and liability-based debt is crucial. Our focus should be on eliminating liability-based debt first, as it provides no lasting value or benefit. Yet asset-based debt, managed right, can be a huge ally. Adjusting for inflation. In the mid-1970s, when I was a corduroy-wearing 5-year-old, My mom and I would sit in endless gas lines waiting for our turn based on a license plate lottery due to the OPEC oil crisis. It was a time of hyperinflation, so cost cutting was not just with gas. At home, my parents waged an all-out war on electricity. It was treated like my mom's fine china—always there, never used, reserved strictly to impress guests. The rest of us We were shamed if we could see our own hands in front of our faces at night. Every room followed a strict one-light-only last-resort policy, and even that was negotiable. Carrying a dirty dish from the den? Den light off, kitchen light on just long enough to rinse, then off again. Back to the den, light on, then off once the TV kicked in as our main light source. During commercials? TV off for exactly 120 seconds like it was powered by gold. That was inflation survival in the '70s. Gas rationing, light switch gymnastics, and mastering the delicate art of navigating your house by the dying glow of a Zenith TV. Inflation almost always hits essentials first, meaning the needs account is the priority to address when inflation rises. Food, fuel, and other weekly expenses are affected first, followed by expenses like utilities, transportation, vehicle maintenance or public transportation, and then rent or mortgage rates. This uptick in pricing can happen over months, a year, or years, and it can come in waves. Leases and other contracts hold steady only for as long as they last, so once they expire, inflation catches up with them too. Since wants and dreams are non-essential, when inflation hits hard, you can delay or reduce your allocation to them without affecting your daily survival. In the short term, before inflation fully impacts your budget, reducing wants and dreams and shifting the money to emergency for 6 months builds a financial cushion. Cutting wants too aggressively can backfire because it eliminates joy, So find lower-cost alternatives that provide the same mental reward. If a full spa day is out, maybe a group meditation provides a similar sense of relaxation. Avoid making repeated cuts that trigger a sense of loss every time. Instead of going from a spa day to just a massage, then to just a sauna visit, then to meditation, make one big change up front—spa to meditation—and remove the pain of 1,000 cuts. One big loss is easier to accept than 4 small ones. During inflation, if you're renting and your lease ends in 12 months, expect a rent increase and start saving now. A quick search for "how much will rent increase in my area" will give you a good estimate. If your rent is currently $2,000 per month and expected to increase 15% to $2,300 in 6 months, start setting aside the extra $300 now in a special new needs account dedicated to rent. This forces adjustments in your spending ahead of time and ensures you know whether you can afford the new rent before you renew your lease. Locking in fixed costs where possible helps stabilize expenses. If you have an adjustable rate mortgage that resets soon, inflation could drive up payments significantly. A fixed rate mortgage is usually safer. If rates drop, You can refinance, but if they rise, you're already locked in at a lower rate. Inflation requires quick proactive adjustments. Secure essentials first, shift money toward stability, and reduce financial shocks by preparing for future costs today. Money shame can be a catalyst for change. Money shame is normal, but not necessary. Many of us have felt the sting of embarrassment when facing financial difficulties, and I'm no exception. Years ago, my family went on a vacation with close friends. It was a trip we couldn't afford, and my friend Chris covered the entire bill for my family. While I was deeply grateful for his generosity, I was also overwhelmed with shame. I felt inadequate for not being able to provide for my family. That moment stuck with me, not just because of the financial strain, but because I realized how my money mismanagement had stolen my confidence. However, I also discovered that shame, while painful, could be a catalyst for change. If you are feeling money shame, know that this is your moment to choose differently. The best way to overcome shame is to act. Start by acknowledging your current reality without judgment, then commit to mastering your finances one step at a time. The Money Habit System offers a simple and actionable framework to guide you. By taking control, not just managing money, you're reclaiming your confidence and your future. When I put this system in place, I didn't become rich overnight. Neither will you. But I did gain something far more powerful: confidence. From day one, I felt more control. Within months, I saw meaningful progress. There were slip-ups along the way, but I always returned to the system and stayed the course. If you haven't yet, finish the money map and build your action plan. You'll gain clarity, control, and confidence in your financial journey. This is your moment to transform your relationship with money and move forward with purpose. Get 'er done summary. Build your money map. 1. Calculate your monthly usable income. The MUI, or what we call MUI. Tally all net income coming into your household and divide it by 12. This is your usable income after taxes and deductions. 2, track your spending. Review recent statements and categorize every expense into needs, wants, dreams, fix, future, or emergency. Don't worry about perfection. Ballpark estimates are fine. 3, compare your actuals to the money target. Use your current tier and financial season to find your money target percentages. Then compare what you're currently spending to where the money should be going. 4, calculate your gaps and realign. Where are you overspending or underallocating? What needs immediate correction? This is the moment of truth. Don't judge yourself. The goal isn't guilt, it's clarity. Chapter 5, Gain Control with Clarity Accounts. Now, before I start reading this chapter, I just wanna share what just happened outside the room. So I'm in a studio here and Derek Franz is our producer of the show. Matt Robinson is doing the videography work. And we started talking about containers. This is something you and I already talked about in my book. Last chapter, and the container is dictating the consumption. This is such a core principle. Now we were talking about sugar consumption, particularly in the United States, and I had a high blood sugar level and I was very careful about reducing my blood sugar intake and it's had a significant impact. But we were also describing and explaining what we see out there. There's, there's so many containers that are getting bigger. A Coke can is like a full-size bazooka now. It's, it's massive. And then Matt shared a fascinating story. He said there was an experiment done where all these processed foods were provided and the equivalent food, but prepared in a healthy way, organic way at home was done. And the impact it had on people and the lethargia and the sugar levels and the problems people had with processed foods versus others. But then in this experiment, they did a swap. And he said it took about 2 weeks and the blood levels and the behaviors swapped at the same time. Well, I found that fascinating that things can adjust that quickly in our health. And the reality is it can change that quickly in our financial health. So remember that, that this system is setting up containers. It's ensuring that money's allocated to its intended use before you spend it. So you're making better decisions. It's the healthy food version, if you will, of personal finances. All right, let's get into this chapter. A vision board dream fulfilled. And all it took was one offhand comment, 10 years, and about $75. Okay, actually $75 squirreled away monthly into a secret account, but who's counting? In 2008, I hit my financial rock bottom. But after using the money habit system, By 2013, I had my debt fully under control. I was still in my recover season, but I paid off all my active credit cards, and the system I followed, which I will share with you in the next chapter, ensured I would put all my debt to rest within a few years. On New Year's Eve in 2013, Krista and I sat down to create our vision board for 2014, a ritual we had been doing for a few years. We would cut out pictures and phrases from magazines that represented experiences we wanted in the new year and pasted them onto a poster board. Financial recovery can make it easy to forget to dream and even easier to lose sight of what excites your partner or brings them happiness. On the surface, it was just a craft project—cutting, gluing, and arranging images—but emotionally, it was a small way to keep our dreams alive and to bring a little hope and enthusiasm to the road of financial recovery still ahead of us. It always surprises me that many of the things we paste onto vision boards actually come about. Maybe not immediately or in that year, but sure enough, they happen more often than not. I don't think vision boards are anything magical. They work because the rituals bring the things we want into conscious thought, and then we act on them, even if the action is itsy-bitsy. That year, Christa pasted a picture of Canyon Ranch on a 2014 board. I'd never heard of it, so I asked her about it. It's my dream self-care retreat, she said. It's a resort I saw mentioned on the Oprah Winfrey Show as the best of the best for wellness. You can learn about nutrition, eat healthy gourmet meals, get massages, exercise with trainers. It's basically a health nuts resort with a boatload of pampering. As she described Canyon Ranch, I could see how much it meant to her. So after we finished our vision board, I looked it up. Holy wow, that place was expensive. Like $5,000 for 2 people for 3 days expensive. My God, I thought, who can afford that? Well, I guess Oprah. And then I thought, why not open an account and see what happens? Since we were still in the recover season, I determined we could put $75 away each month toward it and still finish off the debt within our timeline. I went full incognito since I didn't want to tip off Krista. I set up an account and labeled it D-CRT, my code for Dream Canyon Ranch Trip, and an automatic transfer. Then I used a hide feature in our online banking so Krista wouldn't stumble upon it. I also did that so I would forget about it, which I did. The $75 transfer happened each month and I didn't even notice. I forgot about the account, and I forgot about the trip. Every so often when I went through the bank statements, I would see the D-CRT account sitting there. I'd look at the balance, and I was always surprised. I remember looking at the account a few years after setting it up, and it had passed $2,000. A few years later, it neared that $5,000 goal I had set. But life went on, and I didn't pay much attention to it. At one point, I even forgot what that old D-CRT CRT stood for. Then near the end of 2003, a friend of mine mentioned that she went on a women's retreat and stayed at the fabled Canyon Ranch for a few days. She went on to explain how the all-inclusive wellness retreat was like no other. Canyon Ranch. Oh yeah, Canyon Ranch! D-CRT. Fired up, I logged into the account and we had over $8,000 in there. That's when I booked the trip. That Christmas, I told Krista I had a surprise trip for her in 2004. I gave her the dates and I told her I'd give her the details one week before we left so she could pack accordingly. On September 18th, 2024, while we were visiting my college buddy Matt Cox, I told her we are going to Canyon Ranch next week. Tears streamed down her face and she started shaking, and then I got the biggest hug of my life from her. And Matt, if you're listening, Matt, you are my witness. You too, Kathy. The trip cost a little more than $5,000. Inflation happens over 10 years. But the $9,000 I had saved by the time we left on the trip at $75 a month was more than enough. We went for a 4-day trip and we had a little over $1,000 extra she could use to buy some cool outfits, Canyon Ranch swag, and get a massage treatment when when she got back from a weekend away of getting massages. The best part, I didn't worry about spending a single dime. I was there for every moment, physically, mentally, and emotionally. Krista and I still do our annual vision board ritual. Now though, I realize opening a money habit clarity account is the ultimate form of financial manifestation. It doesn't matter if it's $75 or $1. By setting money aside to fund something specific, You are acting on your dreams. You are letting the universe and your subconscious know your dreams are more than desires. They are intentions. The power of clarity accounts. In chapter 3, I introduced you to Sam. After his husband passed away, he found himself in a financial crisis that seemed impossible to resolve. Once we got a handle on his situation, we were ready to allocate his income to accounts. Because he tended to forget how much he needed for each bill, Sam needed more specificity than the 6 foundational accounts provide, so we added a few clarity accounts. In the recover season, needs and fix are the essentials. So I asked Sam, what are your essential essentials that you worry about most? For Sam, those were food, shelter, and heat. So within the needs category, we added a few accounts and gave them prefixes to identify their categories. We also added one want account to satisfy his inner rebel and give him hope. Sam's recovery season accounts looked like this: N-Groceries, food and supplies for his apartment. N since they are an essential need. N-Rent, shelter is an N. N-Heat, heat, gas, and electricity, also essential, so N. F- C, credit card. This was to tackle his one credit card with outstanding debt. It gets an F since it is a fix, not to be confused with an F for future. So for further clarity, you could spell out the entirety of fix or future as the prefix. And as Sam puts it, he kind of likes the idea of F-City, if you catch his drift. Ba-dum-tss. W, small joys. For tiny indulgences to keep deprivation burnout at bay, W for want. Now, when Sam logged into his account, he instantly saw that money was available for that purpose. If his end groceries account ran low, he knew he had to either adjust his funding by working overtime or rethink how he was allocating money elsewhere. This granular level of detail gave Sam the confidence to manage his money instead of feeling like it was managing him. But clarity is more than categories, it's meaningful categories. So we made sure Sam's account names worked for him specifically. N Rent and N Groceries were straightforward and meaningful, but W Small Joys? That sounded dull to him. He got excited when we renamed it W Girl Just Do It. And for taxes, he loved calling his fixed account F the Gooberment. Sam apparently likes F jokes as much as I do. For the N Heat account, he leaned toward N This Biatch to stay warm. To each his own, I suppose. Personalize your accounts to make them both functional and engaging. Sam's story is still playing out while I'm reading this book to you. He likely has years of transformation in front of him, but within minutes he had financial clarity like never before. He instantly saw the diamonds in the snow. He managed to work things out with his landlords and keep paying his bills. Surely he he will slip up as he journeys forward. We're only human after all. But the power of the money habit system is that once you see the financial clarity right there at your bank, you will never unsee it. And those mistakes? No worries, my friend, the system takes care of those too. These specialized clarity accounts work alongside your foundational accounts to take the guesswork out of your finances. They provide hyper-specific visibility into the expenses you think or worry about most. These accounts are specific use accounts that break down your existing, now you can say this with me, needs, wants, dreams, fix our future, and emergency accounts into cleaner, more precise categories. Your needs account already covers essentials like housing, food, transportation, and so on. But what if every trip to the grocery store still feels like rolling the dice? What if you want more granular insight into what money you have for what purchases? Instead of lumping all expenses into one broad need category, you can create clarity accounts for specific areas of spending that causes you stress. For example, instead of a single needs account, you might set up the following: N groceries to track food expenses separately, N rent so you always know your rent is covered, N gas for your car's fuel. Fuel expenses. Now, instead of constantly wondering if you can afford groceries or panicking about rent, you see the exact amount sitting in your account without mental math or guesswork. And it doesn't stop at needs. You can apply the same approach with your wants, dreams, fixer future, and emergency accounts. W, dining out for guilt-free restaurant splurges. F, personal loan payback for finally squaring up with your buddy who covered you during tight times. W, hobbies, for things like books, video games, music lessons. Yes, the guitar obsession counts here. D, vacation fund, for that dream you've been mentally packing for, for the last 5 years. E, the pooch, for when you rush your dog to the vet after he eats an entire roast chicken, bones and all. #TrueStory. And of course, D-CRT, for the surprise gift of a lifetime for your significant other. These accounts don't have to be permanent. Once a goal has been achieved or a specific stressor is no longer an issue, you can roll the bank balance into the respective foundational account or rename it for your next financial goal. For example, when I finally buy the D new guitar, I will rename the account to D Yet Another New Guitar because I'm always one broken string away from an irresistible excuse to get another. When you can see exactly how much you have for a specific expense, two things happen. One, your stress levels drop because you're not second-guessing whether you have enough. Two, you make better financial decisions. You eradicate overextending yourself or overspending in one area at the expense of another. If you're picturing a nightmare scenario where your bank app is flooded with endless accounts, that's not how this works. Most people find they only need have 5 or so clarity accounts in addition to their foundational accounts at any given time, and the accounts evolve over time. When starting out, you may only need 1 or 2 clarity accounts to target the biggest sources of financial stress. That alone can be a game changer. More accounts are helpful only if they bring clarity and reduce stress. If they start feeling like financial clutter, it's time to ratchet down. Setting up clarity accounts allows you to control your money as you see fit. Not based on what an expert or budget template tells you to do. Lack of autonomy and control over your finances is a big reason why budgets fail. As Amber Duggar, the budgeting expert you met in chapter 4, puts it, templates are loaded with implied judgment. She warns that tools like budgeting apps often come with default categories and values that mess with your mindset. People see tithing, daycare, or charity in there. And if they don't have that category in their life, they start to feel like they're doing money wrong. That's why the money habit system doesn't tell you what to value. It gives you the structure to support what you already value. In the book, there is now a graphic that says the power of custom accounts, and this is a peek into how my wife and I use the system. When we log into our bank, we see these accounts set up and it is personalized It is purposeful and it is crystal clear. And you'll see it right now too, even on the audio. So there's an account called Income and the balance is zero, which means the income has likely been recently allocated to the other accounts. We have an N Mortgage, which means a need. It's our mortgage. There's $3,575 in there. We have a W, Chris's debit, and a W, Mike's debit. Chris's debit has $800 minus $35. You can see who's spending more money. Now, let it be noted, my wife does get a larger allocation because she does certain spends on her debit that cover both of us. We have W Date Days, and that has $190. And this is the account we use to go out to dinners. And my wife and I like to go to a fancy restaurant every so often. And this is the account that she'll look at. And if it's not the right number, she'll say, let's delay the date. But if it's the right number, she or I will be the first to say, "Date day," and we're heading out for a great dinner. By the way, the LBI house also has a nice balance in it. This is a dream. We wanna one day buy a beach house on the famous Long Beach Island in New Jersey. This is a snapshot of some of our Clarity accounts. Kristin and I can instantly see what money is available for what purpose, and so can you. That's the beauty of this system. Let's do a quick test. Imagine it's the middle of the month and we're checking these bank accounts to make money decisions. First up, the income account. It's sitting at zero. That means everything from the last paycheck has already been allocated. One more paycheck is coming this month, and when it does, it'll get distributed too. Now let me ask you a few questions. Our mortgage is $5,000 a month. Can we pay it today? Nope. The mortgage account only has $3,575 in it. But since we do this regularly, I know the next paycheck allocation will cover the rest. Krista wants to take a friend out for lunch and pick up the tab. Can she? Yep. Her Krista's debit account has $800 in it. As long as she's not heading to some off-the-charts expensive place, she's good. How about me? Can I take my buddy out for lunch? Maybe, but only if we're hitting a local deli. I've got $35 in my Mike's debit account. I also have to consider what I won't be able to get if I use that money, like 2 lunches for myself. Krista and I want to go on a date tonight. What are we doing? Whatever adds up to less than $190 because that's what's in our date days account. That might mean a movie and a dinner or just ice cream and a walk, which would mean cash left for another date. I like option 2. Now check out our F stock market account. We've got $18,000 saved there. I could invest that, or if the market's dipping, I might just sit on the cash and wait. And then there's the DLBI house account. We've got $38,000 set aside toward our beach dream house. It's a solid start, but every time I browse real estate apps, I'm reminded just how far we still have to go. Apparently they aren't giving away bayfront properties down the shore. Here's the point. I know exactly what each dollar is for. So does Krista. So do you. You just have seconds of exposure to my finances, yet you mastered it. There's no guessing, no stress, just clarity. Once you have the basic money habit system down, use clarity accounts to customize it however you like to suit your daily life, to alleviate the stress of ambiguity, and to fund your dreams. Maybe you want more than one emergency fund. Maybe one for unexpected house repairs and another for healthcare. Maybe you want to take multiple fancy trips. Maybe you simply want to get more specific about expenses. You have control. This is your system to tweak however you see fit. It's important to me that you get that because when you set up the accounts that matter to you, you are more likely to follow the system. Make it your own. What if one day could become a specific day? What if you stopped questioning whether your dream can happen and instead determined the moment it will happen? What if you stopped wondering if and started expecting when? Justin Stafford isn't saving for a someday trip. The Money Habits System enables him to determine exactly when he can take the trip. So someday becomes a specific day on the calendar. I was always frustrated with myself because I didn't have enough money to do what I wanted to do. Justin said in an interview for this book, "Me and my buddy had been talking about going out to Alaska. We have a friend who charters fishing trips, so all we'd need to worry about paying for was the plane ticket there and back. But I never really had the opportunity to say, 'Yeah, I can definitely save the money by this date.' I couldn't commit to the plan because I always had to cover something else. Now I actually have that ability." Based on my new money management abilities, I can basically figure out to the date when my buddy and I are going to be able to make that trip. Justin joined the Money Habit program at A1 Garage Door Service because he wanted to learn how to control his finances. I had started making a lot more money than I was used to, he explained, but I was still stuck in my old ways, spending whatever money was in my account. My net worth was basically whatever paycheck I got that week. Getting out of the old money cycle was his top priority. Instead of worrying about how he would cover his bills each month or if he'd be able to handle unexpected expenses, he wanted to know for sure he had enough. Justin is in the fund season, working toward having 4 months of living expenses saved up, a new-to-him truck with the upgrades he wants, the Alaska trip, and most important on his list, his 7-year-old daughter's future. "Lillian is my world," Justin said. "When she's old enough to have the kind of needs I have, I want her to have a cushion. If she decides to buy a house at 18, she'll have a little bit of money on top of whatever else she saved up. Or if she wants to get a new car." A house at 18? I could barely afford my used Nissan to get to college and back. Great dad there, Lillian. You're a lucky kid. Once he had a handle on the Money Habits System, Justin adjusted the accounts to work for his everyday life, his goals, and his habits. Before his paycheck hits his account, he already had several out-of-sight, out-of-mind withdrawals: child support for his daughter, health insurance, and his 401(k). Once the net pay hits his income account, he transfers funds to 5 accounts. Here's the breakdown: and rent, This is Justin's savings account for his monthly rent and anything related to running his house, such as utilities and internet. The bills are on autopay except for his rent. To ensure he doesn't spend any of the money in his account, he doesn't keep a checkbook. Instead, he drives to the bank once a month and gets a cashier's check for rent and drops it off at his landlord's house. I figured out how much I need each week to cover everything I need to run the house. And after I transfer that amount to my N-rent account, I divide the rest of my income into the 5 accounts, including the N-rent account. That way, if I don't work for a week, I still have money in that account and everything is covered. In this way, Justin's N-rent account is doing double duty as his emergency account. Once he has 4 months of living expenses saved in his N-rent account, thanks to his weekly overage, he will stop putting extra money into that account. This way, in case of an emergency, he has rent already secured for 4 months. And he knew the exact date on which he would hit that goal, specifically 8 months after starting the money habit program. Now, I wanna share a quick aside here because you may be saying, "Oh, he drives to the bank and gets a cashier's check? Why doesn't he just ACH this money? Why does he have checks? It's kind of double duty. It's a lot of extra unnecessary work." It's because it controls his behavior. At the end of the day, we're our best ally and our worst enemy. So I want you to follow a system that works with who you are. Now, I'll give you a little hack I've done with exercise. This is back, I don't know, 15 years or so, but I committed to exercising regularly. I played sports in college, and after that, I kind of wanted to give up on any kind of movement, and it was not serving my health well. So I said, I'm going to go back to the old college ways, and just out of pure discipline, work out every single day. And that worked for one day. I worked out and the next day I was sore. I was like, oh my gosh, I'm not doing this again. But I started to observe my natural patterns. I'd wake up in the morning, go to the bathroom, make myself a cup of coffee, you know, somewhere around there scrolling through the news and skipping yet another workout. Well, I had a predictable pattern, which was I'd wake up in the morning and go to the bathroom. So I literally put my sneakers on the toilet seat. And so when I'd walk into the bathroom in the morning, the only way I could use the toilet was by grabbing my sneakers. And that was the cue, sneakers in hands, to at least put them on my feet. And once they're on my feet, just walk down to the gym. And that was enough to get me going. It's called a behavioral intercept, or at least I call it a behavioral intercept. What are your natural patterns? What are systems you can set up that leverage what you already do? I have a saying, don't change who you are, channel who you already are to get the outcomes you want. Back to Justin. Wants, this is a personal savings account that's easier to access than Justin's other savings account. He uses this account if he needs a new pair of boots, for example. Dreams, this is a personal savings account used to save for a new truck and his planned vacations. Like his Alaska trip. F-Lillian's future. This is a personal savings account for Lillian's future needs, wants, or dreams. W-General spending. What's left he uses for general spending. Everyday stuff I need for work or whatnot. My drinks, cigarettes, maybe a lunch or something like that. He tries to limit the money in the general spending account to $250 per week. I would prefer he keep that account at zero after disbursements to the other accounts, but it works for him. He keeps this at his existing bank for ease of access. The other 4 accounts are all at a different bank where he gets a better interest rate. The Money Habit program taught Justin to think about how he is naturally wired, which helped him realize that every time he spent his full weekly paycheck in a week, he was falling into the trap of Parkinson's Law. New to Parkinson's Law? It is a behavioral principle that translates to your expenses rise to match your income. In other words, the more money you see sitting in your account, the more you unconsciously find ways to spend it. It's not a character flaw, it's wiring. Justin didn't try to out-discipline Parkinson's Law, nor should you. Instead, design around this spend-it-all tendency by making some of your money inaccessible. As an audio listener, I want to give you a little bonus information here about Parkinson's Law. So this was a theorist, I believe in the 1950s, named Northcote Parkinson, and his study was initially around time. What he identified is that the more time that's available to do something, the longer it takes us to get it done. So if you remember back in the school days when it came to preparing for an exam, The greater or earlier the notice the teacher gave us, the longer it actually took us to prepare. But when it came to the test is tomorrow, we went into cram mode. So Parkinson also pointed out, as less time is available, we become more efficient in utilization of that time. So more time, more inefficiency, less time, more efficiency. Well, this concept expands to all containers, not just the container time. But the more money we have available and accessible, the more we'll naturally spend. So Justin, very smartly, was using containers and getting them out of sight and out of mind so he wouldn't feel compelled to spend them. It's just how we're all wired. I'm a major out of sight, out of mind kind of guy, Justin explained. When I open my bank account on my phone and see the available funds, I think I can spend all that right now. So I keep all my accounts except my general spending account completely separate in a different bank, and I don't have that bank's app on my phone. If I want to mess with any of those accounts, I have to physically go to the bank. Rather than try to force himself to change that habit, he went all in on the out of sight, out of mind component of the money habit system. 5 accounts designed for clarity. Pretty simple, and it works for Justin. He said, it makes me feel more comfortable knowing that my money's going to be available when I need it. I know 100% of my bills will be paid. I have no worries or stress about money whatsoever. Boom shakalaka! There it is. This is the reason I hope you do this and the reason I am reading this book to you. I have no worries or stress about money whatsoever. I want you to feel that too. You will be forever grateful to yourself, and your Lillian, if you have one, will be to you too. Eventually, Justin will start saving for a down payment on a house, but right now he's taking his time. I was the epitome of an impulse buyer before The Money Habit, he said. That's what led me to purchase my first house, which put me in a bind. I don't want to be in that situation again, so I'm giving the whole money management system a solid year to get used to it, to get it really dialed in, and then I'll set a date for when I want to have a down payment for a house. Once he has that date, like with the Alaska trip, he'll figure out how much he needs to set aside the down payment, open a Clarity account, and calculate the new allocations. The money habit isn't a rigid system. Yes, there are guiding principles and essential functions that need to be in place, but it's designed to flex with your tendencies. If you need to hide accounts to protect yourself from yourself, do it. If piling up a buffer in your rent account works better than having a separate emergency account, then do that for now. If calling it general spending feels better than labeling it wants, that's perfect. This system is about working with your wiring, not against it. Do what feels right, but just skip those cigarettes. You too, Justin. You can customize the money habit system to fit your needs and goals. Then adapt it again as those needs and goals evolve. Do what is intuitive for you and works seamlessly with the way you operate. The Money Habit isn't about a one-size-fits-all or global best practice approach to money management. It's about aligning with your habits, not mine or anyone else's, to maximize your mastery of money. Understanding wants versus needs. One of the most common questions I get from people learning to use the money habit system is, how do I figure out if an expense is a want or a need? On the surface, the answer may seem obvious, but as you start using the system, you'll run into the nuance of that question. For example, one couple couldn't decide if the monthly fee for their gym was a want or a need. On the surface, gym fees are a want. We can all get exercise without paying for it, Except the gym had free childcare, which is a big deal when you have 3 kids. This couple used the gym's daycare several times a week because it was the only time they could get a break to run errands and handle other adult responsibilities. So was the gym a want or a need? That's a good question. I'd like to think they could find alternative childcare options such as trading with other parents or leaning on family. But what if they didn't have those options? Ultimately, you get to decide if an expense is a want or a need. Here's a guide to help you figure that out. Needs are the essentials for life. See them as the bare minimum. They are the things required for survival and stability. You must eat and drink. You must have shelter, basic transportation, clothing, healthcare, and so on. Wants are the enhancements and upgrades to life. See them as the betterments. These improve the quality of life but are not necessary for functioning. A good litmus test: if you cut it out completely, would your health, safety, or ability to work and function suffer? If yes, it's a need. If no, it's a want. You could also consider wants as needs that are upgraded. Groceries—needs versus dining out—wants. Transportation need versus a luxury SUV want or dream. Determining the difference is not about deprivation, but about intentional choices. Be very careful about the human nature to justify, to say that a want, my fancy pickup truck, is really a need, a beater car. I justify the truck because I need to go to Home Depot to get things like the new grill that I need and can only get it home with the truck I need. These are all wants. In your book, the print version, of course you can download this graphic, is the needs versus wants. And I have different categories just to identify it. So we talk about food, housing, transportation, and so forth. And I have some examples of what a need would likely be and what a want would likely be. Remember this: needs are the essential and necessities for living. Wants are the small or big betterments of upgrades or extras. The evolution of my accounts. The money habit works at all different levels of income. I can speak to this since I've used it in a year that I made $9,699. That is the exact amount I earned in 2008 when I started the system. The only time I made less was when I worked part-time in college in the early '90s, earning about $3,500 each year. I have used the system when making $100,000 or thereabouts for over a decade and used it when making $750,000 and more. It worked every time. It has served me just as effectively at every level. The system is adaptable, and awareness and control happen at every level. Let's be real, my finances today don't look like they did 15 years ago or even 5 years ago. Yours will likely change too, perhaps dramatically, hopefully for the better and better. But the reality is it could tank too. Here's a snapshot of what my money habit accounts look like at 3 distinct financial seasons of my life. My recover season, $75,000 per year. Back when our household income was about $75,000 per year, we had a house and 3 children, leaving us very little wiggle room in our budget. Day-to-day cash clarity meant more than ever at this point. Plus, we had debt we needed to fix, putting us squarely in the recover season. In the book, I have a chart. Again, this is all downloadable, and it's my accounts at the tier 2 income. And here's the description. This is a sampling of accounts I had during my recover season. Note the F-retirement is a clarity account under the future category. I was crushing debt. The account is not shown here., but I had a tax-deferred investment account through work where it made financial sense to save for the future while prioritizing the fix of my past debt. Other accounts in this chart include our necessities like utilities, groceries, and our mortgage. Just make this important note: since this graphic displays only a sample of my accounts, the percentages for each category may not perfectly align with the recommendations for the RECOVER season. I couldn't fund big dreams yet, but I had clarity and peace of mind. The system protected me from going deeper into debt. My fund season, $250,000 a year. Years later, I had created a business that brought in a steady flow of big projects and my financial situation significantly improved. This initiated a big jump in my company's income and mine. And at about $250,000 annually, Christ and I felt more comfortable, yet valued the intentionality behind the system even more. We shifted to the fund season, preparing for future events like vacations, education, and retirement, and also our kids' weddings. At the same time, we chose to get out for more frequent date nights. Even though the fund stage concentrates less on wants, since the money targets are percentage-based, the increased income freed up more of the fun in fund. In your book, the next graphic is our tier 3 income and a sampling of what's in there. This is a note below the graphic. It says, the example of my accounts during a fund season shows an increased savings orientation, overpaying the mortgage to get down faster and saving for future events. The increased income allowed us to boost grocery costs for healthier food and dates out for a healthier marriage. Now there was space for wants and dreams, but I still couldn't splurge without thought. Each account brought clarity and eliminated overspending temptation. My life today, the balance season. Today, my income is significantly higher. It took decades to get there, and it could still go somewhere else. Like you, if my income is going to move, I want it to go up, up, and up. But life happens. Layoffs, recessions, curveballs. And in an instant it can drop to zero. In fact, my income has gone back to zero 4 separate times in my adult life. We just wrapped up an Activate season using wedding funds, as you know, taking a few epic trips and renovating the house maybe a bit too much. I got to the point where the neighbors started asking if we'd ever have a week without contractors. Apparently hammers and circular saws are allowed, But it was all part of the plan, all within the season. Now we're shifting into balance and quiet in the neighborhood. It's funny, we have an annual picnic for our neighborhood called Harvest on the Hill. And one neighbor didn't know it was me. And he said, hey, Mike, he said, there's someone in the neighborhood that always has contractors over. Who is that? It's so frustrating. And I looked around. I'm like, I don't know. I don't know, but if I do find out, I'll tell you. I hope he's not listening to this book 'cause there's the big reveal. In this section in the book, there's one final graphic, and this is my accounts today, again, downloadable. And the note below it says, "As my wife and I shift into the balance season, we are focusing on saving for dreams while spending on experiences we want to become treasured memories. At this stage, dreams are bigger, yet clarity remains critical." The core practice allocating every dollar never changes. The scale and specifics evolve, but the habit remains constant. Clarity accounts to tackle financial uncertainty. As your circumstances or goals change, you may want to add clarity accounts to manage specific problems. I'm a total geek for this stuff, so I have quite a few such accounts. One to save for replacing my roof in the future. Sorry to the neighbors, which is separate from my ongoing home repair account. Creating these is not a must, but they can be helpful at times. Here are a few scenarios and how to use Clarity Accounts to navigate financial uncertainty. The grocery fix. Grocery costs are creeping up, making it harder to stay within budget. Instead of using a credit card, shift more into an N-groceries account to absorb the increase. Planning meals and cutting impulse buys also keep the budget in check. Doing this will force you to reconsider the other accounts. Maybe we need to trim on the wants and dreams to balance back out, or maybe it's time for a side hustle. No matter what, by adjusting, you are now proactively thinking of your next move. Well done. And here's a take quick action opportunity. Use a debit card for groceries. When everyday expenses keep landing on a credit card, it's harder to break an overspending cycle. Using a debit card linked to the end groceries account weekly ensures essentials are covered in cash and that you don't buy those tempting extras since the money is not there. The health hike buffer. You are 6 months out from that time of year no one looks forward to, health insurance open enrollment. And with it comes the annual surprise of new pricing. You know it will happen, you just don't know how much your premium will jump from ridiculous to redonkulous. Start socking money into an N medical premium account now, giving yourself a 6-month runway. When the new premium hits, your cash flow is already adjusted. And if by some miracle it stays relatively flat, sweet relief! Redirect that buffer into your W wellness account and finally enjoy that long overdue you day. The side hustle to fix that annoying thing. Maybe you want to whack out that one stinking credit card balance once and for all, and you side hustle to do it. In that case, use all the extra cash from the hustle to pay off the credit card in an F credit card debt account. Get it done. Then if you keep the side hustle, make the extra cash into a life boost where you disperse the income through your current money map without changing the percentages. Here's a quick bonus tip for you. If you're looking for a side hustle and trying to figure it out, there's a great book that addresses it. It's by my friend Chris Guillebeau. The book is called Side Hustle, and the subtitle is From Idea to Income in 27 Days. The guy is literally one of my favorite authors, and I think you'll find great insights in that book and great stories of others who've gone before you. The car repair cushion. The car starts making a weird noise, and instead of panicking, you check the N Home and Car Maintenance account and see that money has already been set aside for this exact situation. No need to put it on a credit card or scramble for cash. Or maybe you have a D New Car account, and it's the only one with available money. Now you face the decision. Is it worth repairing the car and holding on longer, or do you want and have enough to go new? Not enough now? You pull from the new car to pay for the old car's repair, knowing that the dream of the new car will be delayed some, but the repaired old car is giving you a lot more time to save for the new one. So you feel good. The subscription audit. Subscription services have stacked up and the monthly bill is getting absurd. These are wants. So you move all subscriptions to one card and my gee, you are spending a lot. So you decide to binge and cut. You devote a weekend to binge all the shows you can imagine on one streaming channel and then cancel the channel. You do this each weekend and after a month you've canceled 4 streaming channels and you are saving over $100 a month. That now gets directed to emergency instead of wants. And within a year you have a nice cushion in your emergency fund. The try-it-first rule. A major lifestyle upgrade like buying a new home or a new car looks tempting. Before you make the leap, moving the expected increased cost into a mock account for 6 months proves whether the new purchase is actually affordable. So you make a W car payment account and you start paying for it by putting the money in and seeing how this affects other parts of your life. If you can keep it up for 6 months, you're good, plus you have a cushion of money for the car payments. If you can't manage, it just isn't time yet. Take quick action. A great technique to managing spending is to look at a Clarity account immediately before you go into a store, whether brick and mortar or online. Use your debit card and check the account balance immediately after the purchase. Seeing how much is there and then how much leaves keeps you in control. Here's how you could screw this up. In the early days of developing the money habit system, I made a lot of mistakes. Heck, I still make mistakes, and I've watched early adopters of the system make mistakes. Fortunately, you can learn from our blunders to ensure it doesn't happen to you. Here's what to watch out for as you deploy the money habit in your life. Overcomplication. I I've seen it happen that someone sets up way too many accounts thinking they're being hyper-organized only to drown in those details. A grocery account, sure, but add a bathroom products account and a fresh fruit account and suddenly you've created chaos. Too many accounts dilute clarity and without clarity, the whole system can collapse. The key, stick to the core accounts, needs, wants, dreams, et cetera, and only add more when it truly boosts motivation or clarity. Being too logical. This system isn't just about numbers, it's about behavior. And behavior is deeply tied to emotion. A taxes account might seem logical, but it doesn't tell your brain what it's for. Is it for property taxes? Income taxes? It's too vague. Instead, use emotionally charged names. For example, CRT, Canyon Ranch Trip, inspires excitement, while the Fed's tax money reminds you not to touch it. Emotional triggers keep you on track and engaged. Neglecting or forgetting accounts. Even seasoned money habit enthusiasts like me aren't immune to this. I've accidentally pulled from the wrong account because I forgot another one existed. For instance, I dipped into our car fund when I should have used the kids' car account. I cause confusion and extra juggling. To avoid this, regularly review your accounts. It's better to be intentional than reactive. Paralysis by analysis. The beauty of this system is simplicity. Don't ruin it by overthinking. The money habit isn't about tracking every penny. It's about crushing the dollars. My mom is a perfect example of what not to do. She reconciles her checkbook monthly. Spending hours, sometimes days, to track down discrepancies of a few pennies. If she's off by just literal cents, she'll make calls to her handsome young son, visit the bank, and dig into every detail until she figures it out. Over the past 60 years, she and my dad caught the bank making exactly one mistake. One! Back in the '70s, a $50 deposit wasn't processed. She still fears that they'll make another mistake. Now I'm not suggesting you ignore accuracy or reconciling, but that level of detail can be overwhelming for some people. Me, for example. It can lead to frustration and ultimately giving up, and that would be the bigger mistake. With The Money Habit, your money is pre-categorized for you so you can intuitively spot when something seems off and investigate without all that painstaking detail. You already have a somewhat working system. If you've got routines or approaches that are already working for you, don't toss them out like fries at the bottom of the bag. This isn't an all-or-nothing deal. Instead, think of The Money Habit as a toolkit. Pick and choose the elements that enhance what you're already doing. The goal isn't to overhaul your approaches for the sake of change. It's to make it even better. False sense of security. Setting up the system is just the start. It's not a set-it-and-forget-it deal. We still have some setting to do. I've seen people shocked by an unexpected tax bill because they weren't reviewing and adjusting regularly. Quarterly check-ins are crucial to stay on track and avoid nasty surprises. Blaming the system. This one's a trap. The Money Habit forces hard decisions up front because it's supposed to. But when people hit a roadblock, like, "I can't afford this because my account is empty," They sometimes blame the system instead of themselves. They abandoned it entirely, convinced that no system works. The system doesn't break your finances, it reveals what is already broken. Stick with it and the rewards will come. Spending can be pain-free. On day 2 of our trip to Canyon Ranch in Arizona, Krista and I got up around 6 to hike the trail that surrounds the facility and watch the sunrise. We walked to the top of a ridge with coffees that were prepared for us by resort staff. We stood in the fresh air listening to the birds beginning their day. The sun just started to peek into the valley and light flooded the area. As we took it all in, a small herd of javelina—they look like wild pigs—walked across the path about 100 yards from us. The sun cast a shadow from the massive trees and it seemed like a moment from The Lion King. Krista teared up and said, this is heaven. Yes, it kind of is. Even though I created it, the effectiveness of the money habit system still amazes me. Not only is saving pain reduced, but spending is pain-free. Because I set up a custom D-CRT account, I didn't need to do the I could make this happen if I don't pay for this other thing dance. The funds were there, ready to go. I didn't have to say someday. Instead, I picked the day. I know it's bold to say being free of financial worry is heaven, but it kind of is. Another experience on the vision board checked off. Get 'er done summary: make the dream a commitment, and a commitment becomes reality. 1. Pick your dream. Choose one thing, big or small, that lights you up. If nothing jumps to mind, Think about what would bring someone else you love joy. 2. Open a new account. Log into your bank and open a new savings account. Label it with your dream—D-Hash Canyon Ranch, D-New Guitar, D-Surprise Trip, whatever it is. Make it specific, personal, and fun. The label is the nudge. 3. Automate a transfer. Set up an automatic transfer on a dollar or percentage basis. $75, $25, even $5 a week. Whatever you can spare, just set it and forget it. 4. Hide the account. If you raid it, you erase it. Use your bank's hide feature or move the account to a separate bank. Out of sight really does reduce temptation. 5. Celebrate when you check it. Peek in occasionally. The balance is the physical proof that your dream is in motion. It's happening, baby. It's really happening. Chapter 6: Crush Your Debt. At Dom Anderson's house, unopened bills stacked up like a monument to a dying dream. I was scared of money, Dom told me. The idea of handling my finances was overwhelming to me. Anytime I had to deal with my credit score or bill collectors, I avoided it. Each envelope served as a silent accusation of failure. When Dom started earning a higher salary at A1 Garage Door Service, he knew it could go one of two ways: blow through the extra money with nothing to show for it, or use it to get closer to his goals. He joined the Money Habit program because he wanted the second path. His dream was to start a private equity company and invest in properties, but that dream seemed to be off in the distance. Way off. First, he had to get a handle on his money and his debt. "I wanted to be in the 800 club, as in my credit score," Dom said. "It seemed so unattainable. I had a credit score of 530. How could I get to 800?" That's the thing about tackling debt. Before you can sort out the tangled mess of financial problems, you have to stop adding to it. This isn't just a financial truth. It's a life truth. Something every newbie dad gets when his infant son decides crayons are a snack. It was back in the day, and as a good dad, I went into panic mode the second I saw our youngest, Jake's mouth packed with crayons. I scrambled frantically to pick the rest up off the floor, thinking I could outpace his relentless gnawing by cleaning faster than he could chew. But for every crayon I grabbed, he managed to shove another into his mouth. It was drool (his), wax (the crayons), and tears (mine) everywhere. Krista spotted the insanity and shouted, "Stop it!" Jake froze mid-chew and spit out the crayons. I stood there stiff as a saluting soldier. In that single second, the madness stopped. Only then was it time for the cleanup. Debt works the same way. You can't stop sorting it out until you stop making it worse. That's what you're about to do, and that's exactly what Dom did when he joined the Money Habit program. He stopped digging into deeper debt first, then he sorted out his circumstances. When he pulled his credit reports, Dom discovered his situation wasn't as dire as he had feared. "I thought I was in tens of thousands of consumer debt and I'd never pay it off. But aside from a student loan, we owed only $8,000." The Money Habit program gave Dom the confidence to face what he had been avoiding, the truth about how much he owed. In fact, he had built his debt up to be much worse than it was. Our tendency to believe things are greatly different from the reality is called cognitive distortion. We humans amplify or minimize situations in our mind without considering what is true. Even if you've never heard of cognitive distortion, you've experienced it when someone jumps to conclusions before they hear you out, or when someone mistakes feelings for facts. In Dom's case, he was caught in magnification, a kind of cognitive distortion that makes a mountain out of a molehill. When we magnify a situation, it can cause additional worry and stress. Or we may disengage from the situation entirely, numb to reality, just like Dom's unopened envelopes and my pile of unlistened-to collection calls. Either way, being caught in a cognitive distortion is a disadvantage because we don't know how to respond properly. The solution is to always get the facts and just 'Just the facts, ma'am.' Then tackle it one step at a time, no matter how small the step. Following the Money Habit System, Dom paid off the $8,000 within 10 weeks. He then started redirecting a portion of his monthly debt payments to that student loan, and the rest was redirected toward investments, the beginning of his distant dream. And that 800 credit score club? You don't grow that kind of credit muscle in mere weeks, but it did improve to levels he hadn't seen in years. Not too shabby. "Looking at my money habit accounts daily, that changed everything," he said. "I'm no longer scared about money. I look forward to handling it." Well done, Dom. Well done. Say goodbye to cognitive distortion. You're already well on your way to getting a handle on your debt. You've removed the temptation of accumulating new debt, the biggest reason for ongoing debt problems. Next, you'll start paying down your old debt using one or a combination of the human-wired techniques I'm about to share with you. So if you've been avoiding dealing with your debt, know that no matter how much you owe, you can knock it out. The first step is to stop digging. Phase 1: The Debt Freeze Method. Debt, like a mother-in-law, is not necessarily evil, just misunderstood and best handled in small doses. Over time, your relationship with debt, and maybe your mother-in-law, doesn't grow. It festers. Debt feeds on misuse, thrives on avoidance, and turns a stream of small mistakes into a deluge of drama. But there's good news. You can stop this storm before it starts. In Chapter 1, I shared the story of the relentless debt collection notices and phone calls I faced almost daily. I paid it all off, every penny, in 5 years and 9 months. But who's counting? That's not an overnight fix, but big problems don't disappear overnight. What did happen on the very first day I took control was I felt power over debt because I could stop the onslaught. So what happens on your day one? You'll do the same as Dom and I did. You'll stop the cycle. We'll start with the debt freeze. In simple terms, this means reducing your expenses and modifying access to your credit so you immediately halt the growth of your debt burden. This process forces you to tackle a very human tendency called status quo bias. Once we establish a routine, even one that harms us, such as overspending, we tend to cling to it because it feels familiar. Breaking free means putting intentional barriers in the path of your bad money habits, forever disrupting the downward debt cycle. You know the saying, "If you're in a hole, stop digging." That's the essence of the debt freeze. It doesn't fix or reduce your debt per se, but it fixes your debt habit. On day 1, the debt freeze will align your mind and actions with a new identity. I'm not a debtor anymore. Debt and me, we're never, ever, ever, ever getting back together. The debt freeze is easy to implement. It has just 3 steps. Step 1, cut unnecessary expenses. The first step in the debt freeze is to cut back on anything you don't need to survive. And yes, this is a deliberate exception to what I said in chapter 4 about keeping a few joys. When debt is piling up, you need to stop the bleed fast. The debt is killing your future financial self. By slamming the brakes on spending, you free up cash to crush the debt. And when it comes to cutting, it's actually easier to strip everything out at once then let a few joys seep back in, then to tiptoe through gradual cuts. Don't carve, slash, then rebuild. Me? I broke the rule and carved slowly, like a ding dong. First, I cut HBO. Didn't miss it. A couple of weeks later, I asked the fellas to skip our monthly guys' night out for dinner and drinks at the local bar and instead meet up at one of our homes. The irony? The conversations were better. There was no bar tab, and my buddy, nicknamed Silverback, casually said, "Glad we're doing this here, boys. I was starting to think I couldn't afford to hang out with you anymore." My slow approach to cutting stuff went on for 3 months. At first, I realized I didn't miss the things I needed. In fact, everything was replaceable with an alternative that was inevitably better. Then I realized dragging the process out triggered a repeating painful conversation in my head that went like this: Can I really do this? What will others think? Can I delay the decision? Eventually, I had enough of my own self-imposed mother-in-law drama. Enough was enough. I'd finally faced the awful and now was ready to rip off the Band-Aid, as Amber Duggar advises. I remember selling my last bastion of ego, my Dodge Viper, and feeling an enormous sense of relief. Wash over me. I got cash for the car and used it to pay down a huge chunk of debt. I also was free of ongoing costs like car insurance and maintenance. But it wasn't just about ditching debt. I also shed the weight of an image I couldn't afford to keep. The massive relief was not just financial, it was emotional. I dropped my $49 a month gym membership and started working out with my neighbor Art Muti, which was way more fun and got way better results. And just as a side note, that is back 15 years ago or so. I still work out with Art and we're not neighbors anymore. We moved to a new town and so did he. And just last week we hit the trail to go for a run and then later a bike ride. And by the way, if you ever wanna have a little bit of fun, go to my website. You can go to mikemichalowicz.com or Mike Motorbike.com. .com, as in the motorcycle. Go to mikemotorbike.com and scroll down on the homepage. It should still be there. There's a section where I talk about celebrities. I don't like when other people say, look at all these celebrities I'm with, therefore I'm important. So I'm the anti-celebrity guy. And you'll see a picture there of me holding up a framed photo of a dude from the '70s. That's art. That's my old neighbor. Uh, I pretend to call him Bill Gates, and you'll see why when you visit the site, but that's Art with his '70s mustache and all. Take quick action. You listed expenses in Chapter 4. What things can you go without, even if it's just for a little while? What's redundant and begging to be consolidated? Which of these expenses do you vow to stop? Because nobody's going to stop you from financial independence. Got your list? Good. Do it now. Step 2: Reduce credit card limits. I then put in place a commitment device, a technique designed to keep us on course with what we truly want, especially when we know we might resist. Using a commitment device is so human you can even find it in ancient Greek mythology. To prevent himself and his crew from following the sirens' call into dangerous rocky waters, Odysseus stuffed his crew's ears with beeswax, and had his first mate tie him to a mast so he couldn't move. We still use the metaphor of a siren call today to reference something that seems awesome on the surface, but is actually super destructive. See, we've been doing stuff that isn't good for us for thousands of years. You can use commitment devices to prevent yourself from giving into a bad habit or to help you stick to a good habit. For example, to ensure I work out, and remember I told you about this earlier, I place my sneakers on the toilet seat, forcing me to grab them first thing in the morning when I go to the bathroom. Credit cards are a great tool. They offer convenience, rewards, protection from fraud, and even insurance for rentals. But I'm only human, and I know what I fall victim to if I don't protect myself from myself. Parkinson's Law. If I have a credit card limit, I find a way to justify spending to that limit. Since I have a natural tendency to abuse credit cards, I invoke a simple commitment device. I call my credit card company and ask them to lower my credit limit. On one card, I had a $5,000 limit, which I had them reduce to $2,000. It was an unusual request, but they honored it. At the time, my debt was maxed out at $5,000, but the new limit forced me to pay it down to $2,000 before I could use the card again. This commitment device instilled discipline, helped me pay down debt without canceling the card, and set a lower ceiling to control future spending if I started to slip again. When I asked the credit card company to lower my limit from $5,000 to $2,000, The agent said, "Sir, no one does that. More credit is better for your credit score when you manage the ratio." The thing was, I knew I couldn't manage, so all that nonsense didn't apply to me, and it doesn't apply to you either, so don't fall for it. You could also hibernate a card without canceling it entirely. Some credit card companies allow you to temporarily deactivate your card for a set period. This serves as an effective temptation control while keeping the account open to preserve your credit history. To do this, call customer service and request a temporary deactivation. While your credit history won't be affected, the hibernation will cancel automatic payments linked to your card and prevent new purchases, and that could affect your credit score. You may be wondering why I don't advocate canceling all your credit cards. The goal here is not to be cardless. In modern society, most of us depend on credit cards to go about our daily lives, and there are key benefits beyond the points. We simply want to put up guardrails that work with our existing habits rather than try to become a person who never gets into trouble with their credit cards. If you don't, amazing, but most of us struggle with that, especially when life shows up with unexpected expenses like medical emergencies. Hence the massive credit card debt Americans carry, which at the time of this reading is over $1.16 trillion. Take quick action. Pick up the phone and call your credit card company or companies right now. Tell them to lower your credit limit or temporarily deactivate the card. Pick one or play varsity level and do both. And as a side note here, I haven't seen people have difficulties increase their credit limit at a future point when they were ready for that or to reactivate their card prior to the automatic reactivation. So neither of these circumstances will put you in a situation where if you have a dire need, you can't adjust back. We good? Good. Step 2, done. Step 3, ask for lower credit card interest rates. While you're asking your credit card companies to reduce your limit, request a reduction in your annual interest rate 2. Say something like, "Thanks for adjusting my limit and setting up the temporary hold. I really value being a customer and want to continue using my card, but I'm considering switching to another company offering a lower introductory rate. If you can reduce my interest rate, I'd prefer to stay with you since I've been a loyal member for so long." You may be met with resistance at first, but keep trying. Personally, I'm batting around 800, meaning about 80% of the time they move me to a lower rate and 20% of the time they won't. So I cancel my account and go with a new no-interest card, or wait it out for a while with no new card at all. And I got a little bonus pro tip for you. The sequence may matter here, so just make a note of this. You can call and ask for your limit to be reduced and for the card to be on temporary hold and then ask for a reduction in interest rates. What I've also found is sometimes just call before you do those first two steps and ask for a lower interest rate. Once they confirm that and your rate is lowered, then say, "I'd also like to lower my limit." Sometimes that actually works more effectively. So the sequence can matter. And if you do cancel a card, remember, you don't have to pay the full balance all at once. You can keep paying it off as you were before. The debt freeze is about stopping the dig down. On day 1, you're not just preventing new debt, you're paving the path forward. From that moment, debt becomes your past, not your future. And once you start, you'll realize that the hardest part wasn't doing it, it was deciding to begin. Take quick action. While you've got your credit card company on the line, Ask for that lower interest rate. Don't overthink it. Just say the words. If they say no, thank them, hang up, and call the next card company. You've got this. One call at a time. You're making debt your history, not your future. I'm assuming you got this done. Congrats. That's step 3 checked off the list. Go ahead and have a sip of that gross bourbon tea of yours. Or better yet, celebrate with your own no-cost version of a victory lap. Phase 2: The Debt Snowball Method. The best way to eat an elephant? No, it's not one bite at a time. The best way is to not eat it at all. Instead, grab a burger or veggie patty if that's your thing. You need to feel good, enjoy the process, and get those good internal juices flowing. If it feels miserable or unnatural, you'll quit before you're done. Starting small with something satisfying is the key to tackling anything massive. And really, who the hell eats elephants anyway? You may have heard of the debt snowball. Dave Ramsey, author of The Total Money Makeover, popularized this term, but the concept goes back to 1938. Harvard psychologist B.F. Skinner documented reinforcement theory Identifying how small, early wins condition us to repeat them. In a nutshell, Skinner's theory applied to finance serves us by wiping out small debts fast to get those wins under our belt. As Ramsey positioned it in his book, rather than try to pay off the debt with the highest interest rate first, pay off the smallest debt first, regardless of interest rate. The idea is you will get a dopamine rush and a big dose of pride when you pay off a debt, any debt, once and for all. That in turn will help you sustain momentum until all your debt is paid off. This approach does not make logical sense because higher interest rates cost more, but it surely works with how you are made. When I read Ramsey's explanation for the debt snowball, I got it right away. You see, I'd been trying to pay back a $3,500 loan my longtime friend Chris gave me when I badly needed the money. I kept trying to pay down that loan and became more and more frustrated with my lack of progress. After nearly 3 years of trying to pay back Chris and dodging bill collectors, I felt defeated. It seemed like I wasn't making any progress by chipping away at everything. So I tried the debt snowball method of just getting the first debt off my plate forever. I had a store credit with a low limit maxed out at a balance of $500. I kept paying minimum amounts on other bills and periodic bits and pieces to Chris's loan. I agreed to pay him whenever I could. But I cranked up the installments on my store card by concentrating any spare cash I could find here. That meant I stopped my attempts to pay above my minimum payments on my other cards. And I adjusted down my wants allocations. Combining these two moves, I freed up enough cash to move from the minimum payment of $25 a month to around $150 a month for the store debt. Within 3 months, the debt was paid in full. Done! It felt so good tearing up that statement and then burning it. True story. The best part was calling the store and canceling the card. Then I cut it into as many small pieces as I could and tossed it into the recycle bin. Don't burn plastic, it's toxic. The debt snowball worked with the very first card. It seemed manageable and felt satisfying. I downed my first non-elephant burger and I was hooked. With the minimum installments I'd been making to pay off the store card, $25 a month, now freed up, I added them to the payments I was already making on the next debt with the smallest balance. An outstanding $1,500 medical bill. I again looked for extra cash I could spare to target this next debt. I quickly paid it off and then did the same with the next. All the while, I kept paying minimums on everything else, shared my strategy with Chris, who supported it, and gave him updates to stay accountable. Over time, I realized the debt snowball technique is a really good place to start because of the behavioral necessity to feel a sense of accomplishment, particularly after a long time feeling badly about yourself. But staying with the same method exclusively is not fiscally smartest. I had a credit card with a $12,000 balance. I had convinced the credit card company to lower the rate from 25% to 22%, but even with that minor reduction, I would still pay a huge amount of interest because it would take a year or more before the credit card was up in my debt snowball lineup. The key is to align emotion, what feels good, with logic, what is good. So in your book is a graphic called the Debt Snowball Method, and what it shows is a series of debts like the store credit card, a personal loan, furniture loan, and so forth, sorted from the lowest balance due, in this case $500, to the most expensive, which was a student loan for $35,000. The interest rates are also associated with the loan, but they are not sorted out by rate. We are sorting by smallest balance to biggest balance. So the store credit card, for example, has a 10% interest rate while the furniture loan is 15% and the student loan is 5%. So when it comes to interest rate, of course, 15% is higher than 10%. You would start there. But this is sorted out from the smallest balance due to the largest balance due. Allowing you to get early wins. That's the debt snowball method. And let me read what details right below the graphic explaining this. Rooted in B.F. Skinner's reinforcement theory and popularized by Dave Ramsey, this method tackles debt from smallest to largest balance. List all your debts, the interest rates and minimum payments to get a clear picture of what can be tackled first. Sort your list from smallest smallest to largest balance. Extra dollars go toward the smallest debt first, in this case the $500 store credit card, while minimum payments continue on the rest. The goal: score quick wins and build momentum. We start with the snowball process to build confidence and establish behavioral momentum. However, true financial optimization doesn't happen when you're chipping away at a 0% loan while a 22% debt lingers. The objective is to get a few quick wins under your belt, then flip the script into something far more powerful. Take quick action. Identify your smallest debt now. Don't overthink it. Pull up your balances and pick the smallest one. That's our target. Commit every extra dollar you can to paying it off quickly. The quick win of wiping out even a tiny debt will build good habits and and create momentum. Once that small debt is gone, celebrate, no pricey splurges, and move on to the next smallest debt. You're on a habit-building winning streak now. Phase 3, the debt avalanche method. The debt avalanche gives you financial momentum. This method tackles the costliest, high-interest debt, which makes the most financial sense. By now, you've experienced the satisfaction of clearing debts, so you're ready to optimize your efforts. When considering how to pay down debt, you should consider 3 logical factors. First, the amount of the debt. Second, the interest rate. Third, the consequence. What do I mean by consequence? Missing a credit card payment can lead to penalties or collections, adding to your debt. Failing to repay a personal loan, like the one I owed Chris, could damage a valuable relationship and my self-respect. While the amount and interest rate matter, the consequence often carries the most weight. Now, with all three forces aligned—amount, interest rate, and consequence—plus the behavioral momentum from early wins, the debt avalanche becomes the final tool we need in debt destruction. Step 1: Build on wins from the debt snowball. Continue paying minimums on all debts while now redirecting the focus to the highest interest debt, or the one with the most severe consequences. Direct as much as possible toward this priority debt. Step 2: Pay one priority debt and then another. Once the highest interest or highest consequent debt is gone, shift to the next. By this stage, you're tackling debts in in order of financial impact, ensuring the least amount of money is lost to interest. Continue redirecting freed-up funds to accelerate payments on remaining debts. Moving from the debt snowball, early wins, to now the debt avalanche, big wins, you optimize your money habits. This method balances the emotional payoff of early wins with the long-term financial benefits of reducing high-cost debt. The avalanche I got going meant splitting freed-up funds between high-interest credit cards and repaying Chris more aggressively. Small debts and big debts that were low interest were still being addressed with minimum payments, but my focus was now on crushing the costly, high-interest, and high-consequence stuff. Along with the falling debt came the best part: falling stress. As I worked the debt avalanche method, I stayed in close communication with Chris about my strategy. The last part was the smartest thing I did because it maintained trust. I remember the day I sent Chris the final payment on the loan. I said, hey Chris, we agreed to interest. I owe you another $500. Are you kidding? He said, you owe nothing more. Thanks for being true to your word. True to your word. That's the greatest moment of my debt-free journey. In the book is a graphic that now shows the debt avalanche method, and we have the debts that we already addressed crossed out. These were the ones using the snowball. Now we change to sorting not by balance but by interest rate, addressing the highest interest rate debt first, which in this case was a credit card at 22%. We're now going to address debt in that sequence, and here's the note below the graphic. It says this: Once you have a few small wins under your belt, shift to tackling debts that have the highest consequence for nonpayment. Each crossed-out debt builds confidence, and by eliminating the most damaging debts first, you reduce your debt load and emotional weight faster and more efficiently. That's why the personal loan, while interest-free, comes before the student loan, because for me, risking a friendship costs more than 5% interest ever will. Just going back to that graphic, the 4 debts that remain are in this order: credit card at 22%, furniture loan at 15%, personal loan at 0% but high consequence—there's a relationship at stake—and then the student loan at 5% comes last. With the debt avalanche, the focus shifts from the smallest debts to those with the highest interest rates while factoring in personal consequences. The store credit card and medical bill, already paid off using the debt snowball method, remain listed but are crossed off because they are done with. Nice. Now the focus moves to the credit card, which carries a 22% interest rate, making it the most financially draining. All freed-up funds from previous wins are directed toward the credit card while maintaining minimum payments on the remaining debts. The minimum payment for the personal loan, however, is active communication, a promise kept, and a relationship maintained. Once the credit card is paid off, the next priority is the furniture loan at 15%, given its high interest. After that comes paying down the personal loan. While it has a 0% interest rate, it carries significant personal consequences if left unpaid. Active communication buys some time, but it doesn't eliminate the obligation. Delaying too long risks lost trust and possibly a lost friend. For this reason, the personal loan takes precedence over the student loan, which has both a higher interest rate, 5%, and balance, but a lower personal impact. By tackling debts in this interest/consequence sequence, the debt avalanche has you now financially optimized. That is the ultimate money habit. Take quick action. Identify your highest interest debt now and shift your focus to crushing it. Keep making minimum payments on all others, but throw every extra dollar at that costly balance. Start your avalanche and feel the financial weight lift as the high-interest debts fall. The power of negotiation. Humans are made for negotiation and compromise. That's how we thrive. Start with an intention and then go for the ask. Approach it with integrity and compassion for both the person you owe and for yourself. Debt isn't set in stone, it's written in sand. When I pressed Dom Anderson to tell me how he paid down $8,000 in debt in 10 weeks, I was surprised to learn he didn't pay that amount in full. A big chunk of that debt was $5,000 he and his wife Princess owed on their car. They had purchased it with a subprime lender, which meant they were paying outrageous interest on the car. They probably already paid for the value of the car a couple of times over. With the newfound confidence the Money Habit System gave him and a quick check of his fixed account, he was able to negotiate a lower payoff for the car loan, and the amount will surprise you. Sure surprised me. I called the finance company, Dom explained, and I said, look, We're paying this car off. We have the money. There's no point in continuing to make payments when we can just knock it off. But I'm not paying $5,000. What can we do here? The agent offered Dom a payoff of $4,700, a $300 reduction, but he wasn't having it. He said, that's too much. I want to speak to someone else. So she passed Dom off to another department. The next agent offered Dom a payoff of $1,500, a huge difference. But Dom still wasn't having it. And listen, my weak soul here, I'm like, oh my God, that's the deal of the century. I would totally do it. Dom, no way. He's pushing forward. Wow. I hope you do the same. Dom told them, nope, I still don't like that. We did subprime lending because my credit was horrible. I've already paid you the worth of this car 3 times over. You have already made a killing off of me. So why do you feel you need to kill me off? Let's get this knocked out. The agent offered him another payoff amount, $950, and Dom took the deal. The finance company had initially offered him $4,700, and he negotiated it down to $950. Well done. And I gotta say this, everybody won. He was being fair to himself. He's being fair to them too. Next, Dom tackled his past due AT&T bill. He and Princess had switched phone service companies mid-billing cycle, and AT&T claimed he still owed $300. Dom learned this only after pulling his credit report. The amount was in collections. He called the collections company and offered them a deal. He would pay $150, half of the bill, and that was it. The collection agent said he had to talk to his manager, and then he came back and said they couldn't do it and we'd have to pay the debt in full. Dom explained, "I told him, 'Have a good one. It was nice talking to you.'" The agent tried to keep Dom on the phone and said he would take his $150 as a monthly payment toward the $300 debt. Dom said, "I told you this was my offer. I know you bought my debt from the company for less than I owe." "Either I'll never pay this bill or you take what I'm offering you now. Up to you." Dang, that's intense. When Dom told me this story, I wanted to go back in time and see the look on the debt collector's face, let alone my own face. The best part is Dom didn't give up. You see, he did want to pay the debt. He wasn't trying to get out of it. He just didn't want to pay all the inflated fees associated with it. And he leveraged his knowledge of how collection agencies work to get the deals he wanted. Integrity happens when you know the truth of both your position and the collector's. Quick tip for you right now is if you're in debt and you have collections against you, go on to an AI system and tell the AI your situation. Ask them how much the collector spent on acquiring your debt. What they spent is their cost, and what you owe them is their gain. So if you're even $1 over their cost, it starts becoming a gain, and that puts you in a position to negotiate well. So just do your research first. Dom shared, the next day I just called the collection agency back and tried again. I got a different person who was willing to make the deal, and we got it done. Dom called every single collection agency some multiple times on different days, and negotiated deals. With every call, he was polite, told them he wanted to pay the debt, and asserted that he would not pay the full amount. This is where integrity and tenacity are the ultimate debt-destroying one-two punch. You don't have to play the collection agencies' or lenders' games. You can negotiate big reductions that will help you pay off your debt faster. You just need to be poised, polite, and persistent. And looking at your fixed account will give you the poise and confidence you need to make these calls as it tells you how much you are willing to lay out to pay off that debt. If you need inspiration to tackle negotiation, take it from Dom, who told me, "Who can stop me from doing this but myself?" Take quick action. Check your fixed account to know how much you can offer. Call a creditor or collection agency and say, "I want to pay this off, but I can't pay the full amount. What can we work out?" Stay polite, be persistent, and don't settle on the first call if it doesn't work. Once you strike a deal, confirm it in writing, pay, and celebrate. That's it. Simple, direct, done. Don't sacrifice your wants and dreams. We've been taught to focus on needs before wants, on paying down debt before funding our dreams. It's the same in business. We are taught that profit is whatever we have left over after we pay all our expenses first. They say you make money only after everything else has been addressed. They say you need to be debt-free before you will have money for your vision. They are wrong. I mean, logically it makes sense. You will have money left over only from what you haven't spent. But behaviorally, they are wrong. If we don't address the savings first, we never get around to it. Flipping the formula is the cornerstone of the Profit First system that has helped save more than 1 million businesses worldwide. Simply by taking their profit before they pay any expenses, even if it's only a tiny percentage, Business owners ensure they will always be profitable, and man, that profit account sitting there at their bank changes something in them. Even if it only has $5 in it, that account makes them feel differently about the blood, sweat, and tears they are putting into running their business. The same principle works for anyone who earns an income. Think of your wants and dreams accounts like a business owner's profit account. You must pay yourself first, meaning you must give yourself some of that financial joy first. Paying necessary bills doesn't make us feel good necessarily. Waiting to do something fun only once everything else is done makes us feel deprived. We are more likely to spend money on things that make us happy now because when we do, we get a dopamine hit. This is a classic example of temporal discounting. A behavioral tendency first studied extensively by psychologists George Ainslie and Richard Herrnstein. The human inclination is to value immediate rewards and desires over future needs, wants, or even dreams. Our brains are wired to prioritize the instant dopamine hit of spending now, while the abstract idea of a rent payment 2 weeks away holds little emotional weight. By transferring a small percentage of your income to your wants and dreams accounts, you harness your natural desire for instant gratification and use it strategically. This simple act satisfies your brain's craving for a dopamine hit, the chemical rush we feel when we indulge in something enjoyable like buying new clothes or going out for dinner. More importantly, seeing that money set aside creates a powerful shift. It transforms your desires into tangible goals, making them feel real and attainable. Your mind begins to visualize the reward, reinforcing your motivation and satisfaction. In essence, you're turning the dopamine hit into a tool that works for your financial success rather than against it. I found that when people who participate in the Money Habit System have a lot of debt, they believe they can't use their after-expense money on anything except paying down the debt. So they sacrifice. They say no to a night out with their BFF. They eat peanut butter and jelly for lunch every day. Been there. They cut all their luxuries and niceties and devote every last penny to paying down credit card principal, interest, and fees. But then the humanness kicks in. Eventually, that deprivation gets to us and we cave. We buy something on that same credit card Or we blow part of our paycheck just to get that dopamine fix, man. From a psychological perspective, it is the pattern of scarcity and overcompensation. We deprive ourselves until, damn it, can't take it anymore, and then the collapse of a spending binge or other financial indiscretions happen. All of this is preventable, not through more discipline, but through more reward. We need to experience wins while gaining control of our finances, and those wins come from accumulating money in our wants and dreams accounts. We are made to accumulate. It's in our DNA. This tendency is rooted in our evolutionary past and explained by optimal foraging theory, OFT. In the past, survival meant gathering resources efficiently. Today, instead of physical stuff, The Money Habit System helps us accumulate cash on a simple, efficient basis. OFT shows that humans naturally focus on actions that provide the greatest benefit with the least effort. Early humans didn't just gather berries for one meal, they stockpiled enough to last for days. It wasn't, "Ugh, me get woolly mammoth steak for dinner tonight," but, "Ugh, I go on big hunt to feed family for a long time." Then when they caught the woolly mammoth, they carved it up and would feed their families for weeks. That instinct to maximize results from their effort and stretch resources over time ensured survival. The same principle applies to modern humans, particularly around money. Income comes in bursts, a handful of berries, you know, the paychecks, or big mammoths, which would be bonuses. While prehistoric humans were reminded constantly of their hunger, prompting them to ration, our modern life doesn't come with those relentless pangs. Instead, we experience rolling financial waves. Payday brings a false sense of abundance, making us feel flush with cash and eager to spend, spending often too much, too fast, on too many things. But as the weeks pass, the money runs thin, and suddenly Payday can't come fast enough. Then the cycle repeats— overspending followed by overstretching again and again. The Money Habit System channels this instinct by allocating money into wants and dreams accounts, making it easy to see what can be enjoyed now— a few berries— and what should be saved for later— the rest of the berries. Pro tip here with the Money Habit System: when you pick the day of the week where you're going to allocate money. When you do this manually, do it the same day your paycheck arrives. The longer that money lingers in your income account, the more tempting it becomes just to spend it. But once the money's allocated to its intended use, it starts putting containers and control around you. Now, ultimately, you're going to automate this process, and I encourage you to do the automated allocations also on the day the income arrives. You don't want that whole woolly mammoth sitting there. You want to carve it up fast. As these accounts grow, we get dopamine hits, not just from spending, but from anticipating future rewards. Seeing progress feels like a win. Dopamine is released, reinforcing the saving habit. And when we've saved enough to make a guilt-free purchase, we get another dopamine rush from rewarding ourselves. The beauty of this system? These aren't reckless splurges. They're planned, joyful indulgences that keep us on track with bills and obligations. And let's face it, dopamine, the brain's natural joyful juice, is the most powerful drug out there. When we use it to our advantage, it doesn't just flow, it fuels our financial success. Every year my family goes on a trip. One year it was a nice vacation rental and a trip to Mount Vernon to see George Washington's home. Another year it was cave exploring. As I read this to you, we are planning the biggest of Big McCallowitz family trips. We are heading to Ireland. That's a lot of McCallowitzes on an island of lots of Mc-somethings. Time with our family is my greatest joy. And so with each disbursement to our dreams account, I get a little buzz knowing that trip is rapidly approaching and will be guilt-free. My wife and I have no worries about the money we spend on the trip. We will be fully present, enjoy ourselves without any concern for how we will cover the trip because it's already covered. Kind of like going on an all-inclusive cruise where everything is paid for in advance. Now, interesting little side note, at least interesting to me. Krista came to me and her best friend Renee that she grew up with and their family wanted to get together on Catalina Island. I think this is in California. And so we are making a shift. Our plan to Ireland that we were just finalizing. We're going to have a— actually, by the time you hear this, we've had, but we're about to have tonight a family call and say, hey, what about putting Ireland back a year or two and go to Catalina Island instead? We have a vacation budget for the family and it's good enough to do one big trip, but two in a year, it's not within the money habit system. So one thing has to shift. Let self-punishment go. Talking to Dom, I remembered my own insecurity about facing debt collectors, the way I stalked my mail carrier daily to make sure my wife and neighbors didn't see the envelopes with red lettering and big bold fonts that read "Account Delinquent," "Collection Notice," and my favorite, as in bury my face in shame least favorite, "Legal Notice." I kept my monument of unopened bills stashed out of sight while I tried to come up with a way to win the lottery or the equivalent. And I tried to cloak the shame I felt because I'd gotten my family into so much debt. "When you're scared about money and avoiding it, it can cause a lot of problems in your marriage," I said to Dom. Dom nodded. "I used to be a horrible piece of crap. I started changing my ways and gaining my wife's trust with the finances and all that other good stuff." And that changed everything for us. Of course, Dom wasn't a horrible piece of crap, no more than I was, but it sure can feel that way when you struggle with debt over and over and one more unopened bill over again. You aren't horrible either. You're human. Yes, you may have regrets, and that's okay, but punishing yourself for your regrets is something else. You may think, easy for you to say, Mike. You don't know my mistakes. Fair enough. But here I'll tell you one of my biggest mistakes, a real doofus move that I deeply regret. I took out a $100,000 Small Business Administration loan to help me grow my business, then started to siphon some of that money to cover up some of my living expenses. I put the rest of the expenses on a credit card, so I was draining the loan while watching my credit card balances climb higher and higher. You may think that was the doofus move, but really it was when I had $10,000 left of the loan, and rather than invest it into my business, I played financial roulette and invested it in the stock market. I had this desperate idea that the best use of the last $10,000 was to gamble it on penny stocks. Of course, the stock I invested in tanked. Of course, self-punishment is debilitating. It keeps you from taking action. As the bills pile up and the debt skyrockets, self-punishment keeps you down, digging your hole deeper and deeper. I had every reason to punish myself for that doofus decision, but I didn't. I paid back the loan and made it right. Though I will always regret that move, I won't rake myself over the coals for it because that would keep me tied up in the cycle of shame. If you're in debt, that's not a sign that you're a bad person. It's not even a sign that you made bad decisions. Some credit card debt is just unavoidable. Stop berating yourself so you can start climbing out of the hole bit by bit. If Dom and I can do it, you can too. I'm sure of it. A final thought on debt and its emotional weight. The term mortgage originates from the Latin words mort, death, Engage, contract. A mortgage is quite literally a death contract. Ain't, ain't that something? Get 'er done summary: stop digging, start climbing. 1. Get the facts. You can't fix what you won't face. Visit mymoneyhabit.com for tools to pull your credit report and repair any damage. Write down exactly what you owe, to whom, and at what interest rates. No guessing. 2. Implement the debt freeze today. Cut one unnecessary expense today. Then call your credit card companies and: 1. Lower your credit limit. 2. Ask for a reduced interest rate. 3. Request a temporary deactivation. Do one, two, or all three. It's time to step off the debt treadmill. 3, choose your first debt snowball target. Target your smallest balance and hit it with every extra dollar. Don't worry about the interest rate yet. This is about momentum, not math. Crush the first debt, feel the win, and roll that payment into the next one. 4, trigger your debt avalanche. After a few wins, aim higher. Target your debt with the highest interest or biggest consequences. Keep minimum payments on the rest. Funnel every extra penny to this monster until it's gone. Then repeat. Logic now takes over where momentum started. Chapter 7: Build a Better Financial Future Now. You may think this chapter is about investing your money. You're not wrong. I do want you to start investing some of your income to help it grow. But there is a single investment that yields the most monetarily, has the fastest returns, and you'll likely enjoy. And yet this investment vehicle doesn't require a financial manager, a financial platform, a financial anything. If you haven't figured it out by now, the number one investment vehicle of all time is investing in yourself. By expanding your mind and abilities, you expand your wallet. I want you to invest in your future self, and I want you to start today. And this is exactly why your future account is so critical. This account isn't just a placeholder for your future retirement. It is also a fund dedicated to actively building your future self. It's there to help you acquire new skills, enroll in that course, attend that seminar, or make that career move without hesitation. To build an even better future you. In his book, Be Your Future Self Now, Benjamin P. Hardy wrote, as a species, we haven't evolved to plan 20 years into the future. As a rule, our decision-making is myopic, short-sighted, and lacks imagination. We're heavily incentivized to seek rewards in the present, which can greatly cost our long-term future selves. Hardy says we're wired to be distracted by the short term, rather than make decisions for the long term. So this is why, when we're just trying to get by, it's nearly impossible to think about what we need to do today to have a better day tomorrow, let alone a better day two decades down the road. And these decisions we make to get by can be darn expensive. As Hardy says, prioritizing short-term wants will cost your future self greatly, putting them deeper in debt in all ways. In all ways, not just literal financial debt. Your mental and physical health, your relationships and connections, your earning ability, your spiritual well-being. The fantastic news, as you know well by now, the money habit works with your natural tendencies. It doesn't require you to become someone else. That means while you, as in all of us humans, are wired for the short-term rewards, The system ensures that you don't have to try to focus on the long term, at least not when it comes to financial investments. You can, as the saying goes, set it and forget it. You'll be investing in your future without thinking much about it. In fact, you probably won't notice it at all. Don't think about it. The best financial investment is the one you put in place and give space. Some people have a compulsion to look at their investment accounts and tweak them. Hoping to buy low and sell high, predicting stock market trends. In real estate, it is the flippers mentality. In crypto, it's the buy by dawn and sell by dusk mindset. When we try these approaches, we turn investing into a lottery game. Our investments will most likely underperform, or worst case scenario, we'll lose them all. A study documented by berkeley.edu revealed that 99% of day traders consistently underperformed the long-term set-it-and-forget-it investors, not to mention the emotional swings of the dawn-to-dusk investors. The same article points out that traders rarely acknowledge that luck is the main factor when they do get a hit and instead attribute it to skill and gamble more. Everyday investors can also get too involved in trying to play the game. They see the stock market plummeting on the news and race to get out before things get worse. But their haste is what makes things worse for them. Let me give you the shortest, most effective lesson in investing. If you're not a professional investor who has dedicated your entire life to mastering the markets, real estate, or crypto, here's all you need to know, distilled from decades of experience and advice from the greats. Do two things. I have to do a disclaimer here. I am not your financial advisor, and this isn't investment advice in the legal sense, but I would tell my best friend the same thing. Skip the hype, skip the guesswork, and stick to what works. 1, invest in stock index funds. These are mutual funds designed to mirror the performance of a market index like the NASDAQ or S&P 500. 2, employ the dollar cost average system. This means investing a fixed amount of money at regular intervals no matter what the market is doing. That's it. Two things. History proves you will outpace every speculative investor and the majority of the pros to boot. Warren Buffett, arguably the greatest investor in history, said that for nearly everyone, these two things—index funds and dollar-cost averaging—are the best tactics for success. I majored in finance in college, worked with dozens of hedge fund clients, and studied the strategies of countless experts. And after all that, one guy and his one minute of advice could have saved me years of distractions, confusion, and misunderstanding. The unnecessary complexity I thought investing required, and, and the losses, of course. The countless missed financial gains because I stepped out when I should have stayed in. According to Investopedia, many investors fail to remain invested in stocks when a rebound occurs. In fact, they tend to jump back in only when most of the gains have already been achieved. The buy high, sell low practice, the website notes, tends to crush investor returns. We let our emotions, our fears, and our regrets rule our decision-making. There's that short-term wiring Stick with your investments—ideally forget about them—and never let panic or emotion drive your decisions. Why does this strategy work? Because the most powerful force in the financial world is compounding. If you put a percentage of your income into historically good investments, regardless of the momentary ups and downs, over time they grow. All you need to do is set up an automatic allocation for investments. Don't touch them and let your money go to work for you. An easy way to do this is through your company's 401(k) program or similar, which automatically deducts a percentage of your paycheck. Another account you don't have to think about, just like your money habit bank accounts. The account is just there and it does its job. Your employer may even offer a contribution matching benefit where they put in an additional portion on top of yours. That's free money. But can putting away a small portion of your paycheck really make that much of a difference? From pennies to millions. Let's imagine you place a bet on a round of golf. For the first hole, the wager is 1 penny. At the second hole, the bet doubles to 2 cents. The third hole doubles again to 4 cents, and so on for all 18 holes. At first, The penny bets seem trivial. 1 cent, 2 cents, 4 cents. For the part of life we're living right now, the hole we're playing, it feels like nothing. Even by the 10th hole, the bet is only $5.12. But by the 18th hole, that small, seemingly insignificant penny has grown to $1,310.72. Yeah, you heard that right. One penny. Grew to $1,310.72 in a single round of golf just by doubling the bet at each hole. This is the power of compounding. What seems tiny at the beginning, barely noticeable, becomes massive over time. And the earlier you start, the more impactful it becomes. The key is to play the long game and trust the process, even when the growth is invisible. And even when you, like all us mortals, get caught up in emotional short-term thinking. Playing the long game is easy when you follow the Money Habit System because your investments are out of sight and therefore out of mind. A penny may seem disposable, valueless, and on its own it is, but a penny paired with time is profoundly valuable. So what is your penny? What amount is small enough that you won't feel it in your day-to-day life. Can you store away 1 penny per day? What about a dime or a dollar? For most folks, $1 per day is disposable. So let's apply that no-brainer amount to compound interest. The average rate of return over time in the stock market adjusted for inflation and using the S&P index is 7%. Bonds yield about 2.5%. 5%, also adjusted for inflation. Stocks are considered riskier than bonds. If your investments included an equal mix of stocks and bonds, you would have a return of 4.75% after inflation. After 1 year of saving $1 a day with a 4.75% annual interest rate compounded daily, the balance would be approximately $373. $783. After 2 years of saving $1 a day with a 4.75% annual interest rate compounded daily, the balance would be approximately $765.85. $700-something bucks might seem like squat. I suspect with your current lifestyle, you could find a way to use up that money within seconds. As the years go by, that's when things get interesting. If you don't access your $1 a day account and keep the daily contributions going, here are your balances by the end of years 3, 4, and 5. Year 3 would be $1,176.93. Year 4 would be $1,608.01. Year 5 would be $2,060.06. What if you simply saved $1 a day in a cash stash spot you bought in your house for 5 years. You'd have $1,825. In an investment account, the 4.75% compound interest gives you an additional $235.06 that you wouldn't have earned stuffing George Washingtons into a cookie jar. Maybe an extra $200 and change is not worth it to you. Remember, we're playing the long game here. So let's look at 10 years into the future. That may seem far away, but if you look at your life, doesn't 10 years ago seem like it just happened? Maybe that's just me. After 10 years investing $1 a day, you would have $4,672.34. If you stuffed the money under your mattress, you'd have $3,650. That's more than $1,000 of money you didn't have to clock in to earn. Now we're getting somewhere. Let's leap ahead in 10 and 20-year increments. This is where I have a table in the book, and I'm going to just share the details with you. It has the number of years, which is 20, and the investment balance of $12,185.28. That's the interest-bearing account. If you did the cash stash technique, just putting that money under the mattress, The balance would be a mere $7,300 doing the exact same thing, $1 a day. Now looking at 30 years, the investment balance is $24,265.84, while the cash stash is only $10,950. More than double in the investment balance. And if you did this for 50 years, this is when it gets serious. The investment balance is $74,925.82. Under the mattress, it would only be $18,250. Did you hear that? In 30 years, investing $1 a day with a 4.75% annual interest rate compounded daily more than doubles your contribution. You see how fired up I'm getting here because this is a big deal. In 50 years, it quadruples the amount you invested. These examples are based on investing just $1 a day, 100 pennies. Imagine what you could do with $20 a week. That's $2.86 a day. For that, you would get the following. At $20 a week, after 5 years, the investment balance is $5,891 and change. The cash stash, $5,219. Not much of a difference. But in 20 years, the investment balance is $34,000 $845 and change, and the cash stash balance, it's only $20,878. 30 years, the investment balance is $69,391.27, and the cash stash balance, it's $31,317. And check this out, 50 years in, the investment balance is $214,259.97, $0.07. The cash stash, it's only $52,195. And here's another example. If you invest $100 a week, after 5 years, the investment balance is over $29,000. The cash stash balance is $26,000. After 20 years, the investment balance is over $174,000, where the cash stash is $104,000. Now you know this, this is where the magic starts happening. At 30 years, the investment balance is over $346,000 and the cash stash is only $156,000. And the real magic is at 50 years. The investment balance is $1,070,229.62. And stashing away that cash, it's only $260,000. And, uh, the last example, let's just say you can do $500 a week. After 5 years, the investment balance is over $147,000, where the cash stash is $130,000. After 20 years, the investment balance is over $870,000, where the cash stash balance sits at $520,000. At 30 years, the investment balance is $1.7 million plus, and the cash stash is at $780,000. And at 50 years, the investment balance is over $5.3 million, where the cash stash just surpassed $1 million. It's pretty amazing. The key is to start investing your pennies and dollars now, truly right now. Don't wait until tomorrow. Don't wait to finish the book, let alone this paragraph. Don't say you are too old, and oh please, don't say you are too young. Take quick action. Put money into an interest-yielding account starting today. Make it routine. Make it automatic. I do it daily. You can do it daily or weekly or when your paycheck hits. To be clear, I put money into an account that says investment on a daily basis, which I then transfer to my investment fund, and I invest in index funds on usually a monthly basis. The reason I do this and don't invest daily in the index funds, there's also a transaction fee that I incur. And so it was pretty hefty doing it as a daily investment right into the fund. And I found monthly just to be much better fee-based, and I still get all of the aggregate benefits of the gains year in, year out. As I shared with the frequency times amount equals time to goal formula, I found that if you contribute smaller amounts more often, You don't feel or see big drops in your accounts. Putting a dollar away each day is $30 once a month. These small, consistent actions quietly build into a substantial compounded fortune. What is your investment goal? If you aren't sure how many dollars you will need to save to live the life you want in the future, I've created a chart to help you figure it out. First, find your goal on the chart. Don't worry, I will help you if you don't know what your goal should be. Do you want $100,000 in reserves, $500,000, $1 million, or even $10 million? Then set your timeline. Do you want to reach the goal in 5 years, 10 years, 25 years, or 50 years? Looking at the chart, you'll discover how much you'd have to allocate for investments each day or week to reach that goal. Before you say, "I don't know how much I want or need to save. I don't know when I want or need it by." I get it. And don't worry if you don't know. I surely didn't, but I found a way and I will show you. Know this, the feeling of not knowing has a name. It's called being human. Feeling unsure or uncomfortable is completely normal, so embrace it. It's okay not to have all the answers right now. I'll guide you through a strategy to determine how much to set aside for investments. First, let's look at some charts that show you the investment you need to make to achieve a goal in savings. The book has a large chart here that defines the saving goals and the funding frequency, but it is big and I don't want to belabor it by going over this in the audiobook with you right now because It could just be distracting. So I'll give you a brief setup. You know where to get this. You can go to mymoneyhabit.com. You can download these charts. I also want to share that these have it in savings increments, these charts. So it's $100,000 or $250,000, goes all the way up to $25 million. But you may have a different number you're targeting or a very specific one. And so there's tools also at the website to help you identify that. In these charts, what it says is if you want to achieve an outcome of, let's say, $100,000 in savings within a time frame of 5 years or 10 or 25 or 50, it gives you those 4 increments. It tells you exactly what you need to save on a daily, weekly, or a monthly basis. So it's a very way quick— so it's a very quick way to find what your number is. So if I determine I want to save $500,000 within 10 years, I go to the $500,000 chart, I go to the 10-year row, and it says in that case, on a daily basis, I need to save $107.28, or on a monthly basis, $3,263.22. And I shared a little earlier with you the technique I do. I allocate that money daily. If that was my goal, it would be $107.28 to an investment account I have using the money habit. And then on a monthly basis, I'm making the investment into the stock index fund. So that's the strategy that I use when leveraging this, and you can too. Pick your frequency. I just encourage you to lean toward a daily or perhaps a weekly. Monthly numbers, of course, are bigger by necessity because you're only doing it once a month, but they can feel overwhelming. Daily and weekly feels more tangible, even though it works out to be the exact same thing. The numbers I just referred to apply regardless of the financial season you're in. These are fixed dollar amounts, not percentages, that you'll need to save in an interest-yielding account with an average return of 4.75% over time. While the season doesn't directly impact the required amounts, your approach may differ. For instance, in the Activate season, your focus is on utilizing money, so your investing goals might be minimal. In contrast, during the fund season, you might aim for more ambitious investment targets. Oh, and that reminds me, I just gotta say one more thing before we continue on, because there may be someone listening in right now saying, "But Mike, if you save daily, but only invest monthly, and that daily savings is not yielding interest, you're off." So one technique that I specifically use is I determine what the monthly number is Divide that by 30, and that gives me my daily allotment, which will actually be a little bit higher than this daily because the daily in the chart assumes you're making the investment and getting interest immediately. So I know I'm getting a little bit into the weeds on this, but just wanted to give you that clarity. Other factors such as your age and future lifestyle aspirations also play a role. For example, if you're 40 years old and in the fund season and you want to enjoy a more lavish lifestyle by the time you're 50, you'll need to set up a 10-year investment goal accordingly. If you'd like to really dig into the numbers and nail down the investment goal that will work best for you, I do have a free calculator and something even better at the website. The something better is an AI tool. You can simply plug in any numbers you think of, just like if you and I were doing this together over a couple of beers and a plate of nachos. I know, I know, bourbon tea for you. And although the chart I shared shows you million-dollar goals, You don't have to choose those numbers. Maybe you want to figure out how to invest enough to buy an RV in 20 years. You can use the calculator to figure that out too. The American dream is not synonymous with being a millionaire. That's just a number. You get to decide what your American dream looks like and how much you need to live it. But I think I know what it basically is for you and all of us. Time to do what you want, how you want, when you want. And the right amount of savings will get you more than the RV. It can set you up to have money coming to you automatically because your savings are earning your living for you. That is the financial freedom I'm talking about. But what if you already have savings? Here's how it works. Say your goal is $500,000 and you've already got $250,000 saved, which would be very well done, by the way. Just subtract what you already have from your goal. $500,000 minus $250,000 equals $250,000. That $250K becomes your target, and that's the number you select in the chart. Simple. It's not about starting from scratch. It's about knowing your gap and closing it. 2 rules to plan by. I won't tease it anymore. Here's how to find your investment goal. If you want to fund your financial freedom, you need to think about how much you'll need to live on after you stop getting a paycheck. The best rule of thumb is to live on interest only, meaning you don't have to chew down your principal, the balance in your investment accounts, because that's when the clock starts on when the money will run out. For example, a man we will call Frank chose to reverse mortgage his house so that he could stay in the house and put food on the table, and now he has 2 years left before his house will be depleted of equity. He's in his 90s And because he doesn't have enough money saved to cover the taxes on the property he no longer owns, he's at risk of being homeless. How sad is that? I don't want you to worry about having to dip into your principal. Let's position you to live off the interest of your investments and fund your financial freedom. And if you can do that, and you won't be dependent on the government, will Social Security be around when you need it? Your guess is as good as mine. So how How much can you take out of your investment accounts before you're depleting your principal? According to the Trinity Study, which was really a category of studies designed to determine safe withdrawal rates, you can safely take out 4% of your investment balance each year without affecting the compound interest. I'm not going to get into the ups and downs of it all, but that's too much math for me. This 4% rule may not really be 4% when you take all the variables into account. Like interest rate fluctuations, market swings, and the shifting value of money each year. For example, do you remember when gumballs cost a penny? Me neither. No perfect scenario can generate perpetual income forever, but for all intents and purposes, if you can live entirely off 4% interest, you've reached financial freedom. When you make 4% of your savings a doable number to support your life, you can live off that money for a very very long time. But how much money do you need in your investment accounts to earn enough interest to live on? Do you need a million each year? Maybe $100,000? Here's another simple percentage rule to help you figure this out: the 75% rule. When you can live off interest only and are in the golden years, expect to live on 75% of your current annual income. The reason you can live on less in the later stages of life is you will likely have fewer expenses. You hopefully don't have to pay for big life events like weddings. Your kids are grown and hopefully supporting themselves. Most or all your loans are hopefully paid off. You may own a home outright, or its market value has increased while you've chipped away at the mortgage. Remember Parkinson's Law: with more, you spend more, and with less, you adjust to living on less. Plus, with most of your big spends in the rearview mirror, You may not even notice. So let's say your household makes $70,000 a year right now. You'll likely be able to live off of $52,500 a year just as comfortably in the future. To be clear, I'm not trying to rain on your parade. If you want your future self to live large, go ahead and plan for that goal. I'm just saying, if you can live off $70,000 today, living off of $52,500 in the near future will be a piece of cake. Red velvet cake ideally. The psychology around the 75% rule is about loss aversion. Once we are used to living a certain lifestyle, we want to maintain it. The drive to sustain what we have is much greater than the drive to get to the next level, meaning we will do anything to keep what we have because the pain of losing it is too great. That's how Frank ended up reverse mortgaging his house. He didn't want to face downsizing from his 4-bedroom home into a smaller home or an apartment, even though he didn't need all the space. I understand why Frank didn't want to move. I love my home and lifestyle too, and the thought of having to scale back is almost unbearable. That's why I'm determined to work hard to maintain it, even if it means compromising my most precious resource: time. This instinct, driven by loss aversion, is deeply ingrained in all of us. To counteract it, we need a strategy that that allows us to avoid loss in the future, one that ensures we can sustain the life we enjoy today without fear or sacrifice. If you want to maintain your lifestyle in retirement, what's your investment goal? Let's break it down. We have concluded that living off $70,000 a year today means you want your investments to generate $52,500 annually without dipping into your savings. That means building a portfolio large enough to yield $52,500 in interest alone. In your book, I have a chart here. It says Annual Savings Withdrawal Goal, and it has multiple rows. The first column says Desired Annual Income, and the rows include $25,000, $50,000, and continues in increments up to $5 million. The second column says Principal Required, assuming the average yield of So if you want to have a desired annual income of $25,000 every year, the principal required to sustain that without pulling down on the principal is $625,000 in savings. If I want to have $500,000 a year in interest income coming to me every single year on automatic, I need to have $12.5 million saved up. So to use this chart, Determine your desired annual income and estimate how much you will need in savings to live off interest alone. You can understand from this chart that if you want to withdraw $52,500 from your investments every year without eating away at your principal, you'll need a balance of over $1.25 million. Now that you have that number, review the savings goal charts earlier in this chapter to figure out how much you need to start saving now to reach that investment goal by the time you want to achieve it. Let's assume you need an investment balance of $1.25 million within 25 years if you want to live off interest alone. In the chart, you see that $1.25 million yields an annual income of $50,000. So to hit your target, you'll need a slightly bigger chunk of savings. In the savings goals charts, we can estimate that to save $1 million in 25 years requires contributions of $402.19 every week. But that gets you only to $1 million in savings, and we are targeting $1.25 million. So you need a bit more than that. You can get that exact number from the free resources at, say it with me, mymoneyhabit.com. Use this shortcut. Here's the ultimate money habit shortcut to determine how much of your current income to save annually to live financially free. This shortcut applies the 75% rule for the income you will want to sustain annually and the 4% rule for the interest you can take without affecting your principal. We're also assuming a 4.75% return on your investments, which compound. Financially free in 5 years. Save 325% of your current income annually. This requires a significant windfall—thanks, Grandma—or major sacrifice like working 3 jobs to get your total income level up 3.25 times your current level. Financially free in 10 years: save 150% of your current income annually. This goal is extreme but slightly more achievable than doing it in 5 years and likely achievable only when money falls in your lap or you get a rockstar income raise. Financially free in 25 years: save 39% of your current income annually. This goal requires you to be hardcore in saving your pennies, but now it's doable. Financially free in 50 years: save 9% of your current income annually. This goal is very achievable and realistic for most people. Let's break this down with a current income of $100,000. 25-year goal: If you want to earn $75,000 annually in interest 25 years from today, you'll need to save 39% of your income, $39,000, each year. 50-year goal: If your goal is to earn $75,000 in annual interest within 50 years, you'll need to save just 9% of your income, $9,000, annually. For households with higher incomes, The same principles apply. For instance, if your household income is $250,000 and you aim for financial freedom within 25 years with an annual income goal of $187,500, that's 75% of $250,000, you'll need to save 39%, or $97,500 annually. If your goal is within 50 years, you'll need to save approximately 9%, or $22,500 annually. By using the shortcut and starting early, you make financial freedom a realistic and achievable goal. Remember, the key is consistency and leveraging the power of compounding. My goal is not to overwhelm you or, God forbid, have you throw your hands up in the air and give up. I want to show you that time is your friend. The earlier you start, the better. I also wanna point out those windfall moments, like when Grandma passes and please, I love Grandma, and she leaves behind the cherished apple pie recipe and a chunk of change, any unexpected moment you come into is an opportunity to sprint forward in your financial freedom journey. Invest it, save it, and you'll compress the time you need to live off interest alone. I think Grandma wants you to have freedom from financial worry more than a new car. Plus, who needs new wheels when you are regularly feasting on the world's best apple pie. My buddy in high school, his name is Craig, um, when we were in high school got hit by a car and collected insurance money to recover from the injuries he sustained, which were pretty darn bad. And, uh, with the excess money that's left over, he decided to buy a new car. He had the sweetest ride in high school, and years later he said that was his biggest financial mistake. I actually ran the numbers without him because I was curious. We're both now 53, and that happened 40 years ago. He would be a multimillionaire today if he simply put that money into an investment account and it yielded that 4.75%. But he didn't. I mean, listen, he had a sweet ride, but he regrets it. And I think his future self does, too. Your most precious resource. One morning while on a trip to Arizona, my friend Rich Manders and I decided to hike Camelback Mountain, the famous peak in the Scottsdale area. Rich is an incredible guy. He's an accomplished athlete. He's completed 5 Ironman triathlon races and counting. Not bad for 60. Heck, not bad for anyone of any age. He's built a life filled with love, family, and purpose, and he is financially free. As we hiked up the mountain at a strong pace, my heart pounding out of my chest, we started talking about money and life. At one point, Rich stopped, turned to me, placed his hand on my shoulder, and said something I'll never forget. There comes a day for every person when time becomes permanently more valuable than money. Make sure your money is addressed before that moment so you can focus all your energy on what forever will matter most—time. Rich's words landed. My heart slowed and I took it all in. Then he turned and jogged up the trail. Yes, he jogged up a mountain. You may have noticed in the previous section I didn't ask you to think about how much you would need to fund your retirement. I asked you to fund your financial freedom. The reason is that retirement has historically been associated with a person's age. At the time of me reading this, in the United States, retirement happens when you turn 67. Or whatever seemingly random number society assigns. Waiting for retirement seems like we are programmed to chug along to hit that magic age and suddenly stop working. I have a different perspective on this and a different set of goals. Rather than focus on the day I won't have to work, I focus on achieving financial freedom so I don't have to work. And because I'm also committed to doing the work that gives me purpose and joy, I may choose to keep working long after official retirement age. Let's be real, I will probably be writing books and trying to help folks like you and me for many years to come because I'm on a mission and that mission gives me energy. I may slow down so I can spend more time with my wife and family, but I'm not going to cash it all in on some government-appointed magical day. Not a chance. My dad followed the traditional retirement script. At 64, he left work. Taking what his company called early retirement. For a few years, he enjoyed the time freedom, playing golf, traveling, and relaxing. But I vividly remember him eventually saying, "Many days are empty. I have nothing to do." My father, who was an engineer, was basically Star Trek's Spock minus the pointy ears and awkwardly tight uniform. He had expected, based on actuarial tables, to live until about 75. Instead, he lived 20 years beyond that, Financially, he was comfortable living off the interest from his investments. Before he passed, he ensured my mom was provided for, and she has continued to live off that interest. As I read this, she is 91 years old, living comfortably in the house I was raised in. I saw her last night after I was reading this book and went for a quick visit, and she still has that shrine room there, and the green shag carpet is staying, she said. My dad made the time-money inversion, which Bionic Rich told me about, very abruptly at age 64. Others do it more gradually. Some do it sooner, others later, but all of us will come to the moment where time is the most precious thing. And it is a shame if when that happens we don't get fulfillment from it. As William Penn, the founder of Pennsylvania, said, time is what we want most, but what alas we use worst. Don't let that be you. Your financial freedom empowers time freedom, and the best way to experience time freedom is through meaningful activity, something that brings you purpose and fulfillment. The ultimate win is making money while experiencing joy. And when your paychecks stop, let's make sure your finances are secure. Most importantly, may you always use your most precious resource, time, in the ways that matter most to you. Get 'er done summary. Invest in your future you. 1, know where you are going. Visit mymoneyhabit.com and use the free calculator and AI tools to figure out how much you need to save to hit your financial freedom number. 2, fund your future you account. Allocate money specifically for skill building, courses, certifications, or Anything that makes future you stronger, smarter, or more valuable. 3, set up an automatic investment. Choose a small, consistent amount you can invest regularly, daily, weekly, or when you get paid. Use index funds and dollar-cost averaging. Let compounding do the work. Krista and I lived through this ourselves. Back then, our money conversations were, shall we say, lively. Krista would ask, "Mike, do we have enough for groceries?" My response, classic in its unhelpfulness, would be something like, "How much do you plan to spend?" On the surface, it seemed like an exchange of facts, but it was laced with the subtext of blame. I interpreted her question as a lack of planning, and Krista heard my response as an accusation that she was being frivolous. The conversation would spiral from there. "How the hell don't you know?" until we fell into an icy silence. You and I both know it wasn't about the groceries. It was about clarity, or the lack of it. Without clarity, money discussions become minefields of guesswork and misunderstanding. The Money Habit System changed everything for us. I still take the lead in managing allocations and paying bills, but Krista is fully engaged. Whenever she wants, she logs into the accounts and immediately sees what's available. What we have for groceries, a date night, or a splurge she's been considering. If a balance looks tight, she might say, "Mike, it looks like we've got a situation in the end groceries account. Want to take a peek?" No accusations, no drama, just clarity. Now, instead of playing the parent and child, we're partners. The system takes on the bad guy role when necessary, delivering the hard truths with cold, impartial numbers. Our conversations shift from, can we afford this, to what should we prioritize? What used to end in icy silence now feels like a cozy, warm collaboration. Rachel Werner saw this transformation in the couples she coached in the Money Habits System. One husband who had previously felt disconnected from financial decisions shared, for the first time, I feel like I have authority over my hobbies. I don't have to ask permission anymore. Another couple described how their conversations went from finger-pointing to focusing on shared goals. As Rachel explained, when the system provides clarity, it replaces emotional tension with progress and positivity. Kelly Ruda is my go-to expert for people struggling with the mindset around money. Kelly is no BS, let's get results psychotherapist and behavior expert who dove into why this system works. At the root of many money conflicts, Kelly said, is a clash between control and autonomy. One partner feels they have to report to the other, or when financial decisions are made in a vacuum, it stokes defensiveness, resentment, and shame. But when both people have clarity and autonomy within a shared framework, those emotional triggers diminish. There's that rebel nature again, the stuff psychologists Howard Farkas discovered on why people cave into emotional eating habits, which we talked about in chapter 1. Seems we can't help ourselves. We just gotta be free. Chris's journey with money has also evolved. Traditional budgeting used to amplify her fear of not having enough, but with the Money Habits System, she always knows exactly what's available without crunching through spreadsheets or financial systems.. There's no guesswork, no need to ask for approval or avoid conversations out of anxiety. This clarity isn't just practical, it's transformative. Krista once told me, if something ever happened to you, Mike, I need to know how to handle everything. And now I feel I can. That conversation stuck with me. Financial transparency isn't just about the present. It's about equipping your partner to navigate the future with confidence. Money conversations don't have to be heavy or stressful. With a clear system in place, they can be simple check-ins, celebrations of progress, or collaborative planning sessions. If you've been avoiding money talks, start small. Sit down with your partner this week, log into your accounts together, and look at the balances. What do the numbers tell you? Are there areas to adjust or goals to celebrate? Take quick action. Schedule a money meeting. I love alliteration. With your partner. It doesn't have to be formal. Pour a couple of coffees, sit down at the kitchen table, and talk about what you see. Let the system guide your discussion. As you do this regularly, you'll notice that clarity replaces confusion and collaboration takes the place of conflict. A bonus discovery: when you can talk about money, you can talk about anything. When your partner doesn't want to participate. Sometimes one person in a relationship is ready to take control of their money and the other, well, isn't. Maybe they're skeptical, overwhelmed, or just tired of yet another system. Maybe they've had bad experiences in the past, or maybe they don't even realize how unsafe money conversations feel to them. Whatever the reason, a partner's resistance isn't a permanent roadblock. It's usually a sign they don't feel safe empowered, or included in the process. That's where your leadership, not pressure, comes in. Maggie Reyes is a marriage coach and the host of the Marriage Life Coach podcast. When I interviewed her for this book, she said something that stuck with me: when couples struggle to communicate about money, almost every communication problem is really a safety problem. It's not as much about the numbers as it is about how the conversations happen. So start by creating emotional safety. That doesn't mean ambushing them for a budget beatdown. It means soft starts, transparency, asking for input, acknowledging frustrating finances, giving them room to consider. One client of Maggie's used this approach and was shocked when her ultra-practical husband responded not with frustration but with his own spreadsheet because she'd given him space to think. Not react. If your partner still doesn't engage, that's okay. You start. You don't need a big announcement, and you don't need permission. Just begin managing your side of the finances with clarity and consistency. Set up your accounts, stick to your categories, and let the results speak for themselves. As Kelly Ruta put it, your motivation can't be getting a specific reaction. You're not doing this to change them. You're doing it because it's who who you want to be. Often when one person leads with calm and clarity, the other follows, not always immediately, but eventually. And if they never want to participate, then the system still works. You can still gain peace, clarity, and control for yourself. And over time, you might get closer or you might get clearer. But no matter what, you'll get stronger. Because the truth is, the money habit system isn't just about finances, It's about stepping into who you are and who you're becoming. You don't need to change your partner to change your financial life. You just need to start. When other people see you differently. The last time I heard from Carol Piper, she was drinking a tropical drink and smiling big for the camera with lush green mountains behind her. The email read, in Costa Rica with sister for the next month, gonna head back to my condo later tonight to do some remote work. After that, she seemed to drop off the face of the earth. Carol was in the first group of Profit First professionals— accounting, bookkeeping, and financial service pros who are certified to help people implement Profit First. I worked with her personally, and I coached her and a few other people on an early version of the Money Habits System. I remember asking her about her vision for financial independence. Carol said, I'll know I have arrived when I have a vacation condo in Costa Rica near my sister. I want to go there, have my own place to stay, and spend time with my family. That's my dream. We assessed Carol's income and allocations, set up her accounts— we called them buckets at the time— removed wasteful spending, and increased her income with extra projects. Within a few years of using the money habit system, Carol had saved enough money to buy her vacation home. About 4 months later, I started hearing from other people in the money habit group that she hadn't been around. They met monthly to hold each other accountable and offer strategy and support, and since buying her condo, she missed all the meetings and hadn't responded to emails, phone calls, or texts from other members. Carol seemed to be active online, so they knew she was physically safe. But why had she ghosted them? A few months later, the story came out. Carol lost her condo. She was back home in Kansas, and she was struggling financially. We heard through the grapevine that her old friends had given her a lot of attitude about the positive changes she had made. They'd been telling her, "Oh, so you're rich now? You think you're better than us?" They gave her a hard time about her new friends, the money habit group, and her new life. The pressure to hang on to her old identity, the life she knew, was too great. So Carol started pulling away from the group that shared her new beliefs and goals. Eventually, she abandoned her new friends so she could hang on to her old gang. Sometimes when we improve ourselves, people in our lives give us crap about it. And if we're already feeling uncomfortable in our new reality, that could be enough to cause us to revert to our old ways, the habits and routines that matched our old expectations of ourselves. That's what Carol did. She let go of her new money habits so she could keep her old life. Eventually, she sold her condo in Costa Rica at a loss. So not only did she kill her dream, but also she ended up in deeper debt. The people who truly care about you will show up for your new life. They'll be proud of you and supportive of you. They'll stick around. And the more financially free you become, the more people you'll find who share your values and goals. Besides, anyone with half a brain knows it's a good thing when your friends get a condo in Costa Rica. I mean, free vacation, right? Be aware of whom you surround yourself with. They influence your money habits more than you know. A pair of really expensive shoes. My wife is one of the best dressed people I know, a true fashionista. She loves a bargain and has an incredible ability to put together stunning outfits on any budget. For years, she dreamed of owning a pair of Christian Louboutin shoes, glossy black high heels with signature red bottoms that reveal their elegance with every step. They are unmistakable, and they are expensive— $800 for a pair. Krista bought them. She told me how for years the idea of buying something like this had been unthinkable. In her formative experience with money, buying shoes like these was more than a no— it was shameful. Spending in one area always meant taking from another. Shoes could mean no rent for our apartment. Fixing a broken knee could mean no food for our family. Every decision carried the weight of a trade-off, the constant calculation of, does this qualify? But with our money habit system, life was different. Before she made the purchase, she checked her slush fund, the W. Krista's debit account. The money was sitting there, specifically allocated for moments like this. When she approached the cash register, her heart raced and her thoughts whirled, but not out of fear. This time, there was no worry she was taking from something or someone else, no anxiety about whether the purchase qualified. The system had already answered that question. The racing heart and whirling thoughts were anticipation, Excitement, thrill. In that moment, Krista experienced her turning point to financial independence. Yours is coming too. Ironically, financial independence isn't about how much you make or save. It's about having every dollar accounted for without needing to do any mental gymnastics. The money takes care of itself. You know exactly what can be done now, what is coming your way, and what needs to wait. You know what qualifies. For the first time, Krista felt what it was like to spend without guilt, fully confident that everything else was secure. The cashier asked, "Would you like me to wrap these?" "That's not necessary," she said with a smile. "I have another idea." And with that, she walked out of the store in those Christian Louboutin heels. #WorthIt. Gitter Done summary: change the conversation, change everything. 1. Schedule a money meeting with your partner. Sit down at the kitchen table and log into your money habit bank accounts together. Look at what's there. Talk about it. Let the system, not your assumptions, guide the conversation. This one small habit turns confusion or conflict into clarity and commitment. Conclusion: Go get your moments. Imagine you wake up one morning and hear a ringing sound in your ear, like you went to a way-too-loud concert the night before. Now imagine that sound is constant, a squealing note that never pauses and never ends. You hear the ringing under everything: music, fire alarms, The sound of your own voice. And the sound is loudest when your surroundings are the quietest. You hear it every millisecond of your conscious life. That is tinnitus, a condition that I've had since birth. The high-pitched ringing sound is with me in every moment, in every conversation, on stage, when I'm giving speeches, when I'm alone in my thoughts, and as I say these words to you right now. I can't will the sound to go away or meditate it away or drown it out. I can redirect my attention so I'm not fixating on the sound as much, but it's always there in the background of my life. This is why I use background music whenever the opportunity presents itself. The music doesn't drown out the sound, but it pulls my attention away from it. The funny thing about tinnitus is I had no idea I had it. I thought that everyone had the ringing sound. You, me, shoot, I assumed mosquitoes even had it if they could hear. I assumed everyone and everything heard the ring. When in actuality, about 5% of the world population has chronic tinnitus like I do. When I was in my 30s, I was hiking through the woods with my friend Mark, and he said, "It's so quiet." I said, "Yeah, just the ring." Mark had no idea what I was talking about. Do you know Simon and Garfunkel's moody song, "The Sound of Silence"? When I first heard it, I was convinced they were talking about the actual sound of silence, you know, the ring. That must be the sound, right? I've never experienced total silence at any point in my life. I can't even fathom it. When I tell people about the droning in my head, They assume it's a struggle for me, that it's nature's version of torture. New technology is becoming available that could reduce the squeal, maybe eradicate it. My audiologist proposed the process to me. He thinks it may cure the maddening sound I hear. Every time he mentions it to me, I've declined. I don't know any other way. The droning is part of me. It's just who I am. In a way, the uncomfortable sound is comfortable. I've learned to live with it. I have accepted it, and that I will never really know what the hell Paul Simon and Art Garfunkel mean by the sound of silence. For most of us, money is an uncomfortable topic, and managing it is an uncomfortable task. But this discomfort feels normal. That financial struggle is like that droning. An ever-constant sound. It becomes so ingrained in us that it feels normal, almost comforting. You're used to it. Maybe you even get a little rush when you find the money for an overdue bill or solve some other financial crisis. Yes, worrying about money is stressful, but you don't know any other way. It's part of you. It's just who you are in a way. The uncomfortable feeling is comfortable. The financial struggle was like that for me too. I didn't grow up with that worry, but from the moment I went out on my own after college, I was in it. I had my own young and growing family, so the pressure was on, and it stayed on for decades. I can divert my attention from the ringing sound by using tricks to temporarily forget about it, but it's always there. I do it so often that it's subconscious. Music will always be playing in the background if I can access it. Tapping a table with my hand works a bit, but I found that annoys other people. Know what makes noise for me but you can't hear? Clicking my teeth together. I am so good at it that I can do it without anyone noticing. It's not a distraction for anyone, but what a wonderful temporary reprieve from the squeal for me. We do the same thing with money too, right? We distract ourselves from the discomfort with impulse buys, television, social media, whatever it takes. You can use countless tricks to ignore it or dodge the money discomfort for a bit. You can go to the movies with your friends, focus on work throughout the day, go for an adventure with your kids, but that financial struggle is still the relentless undercurrent. A constant annoying drone that makes you feel as though you are just months or weeks or even days away from a financial crisis, and the fear that the next crisis will be the one you won't be able to handle. Before I started using the system that would become The Money Habit, my financial worries consumed me. And because I was so freaked out about impending crises, I did the only thing I knew to do. Work more to bring in more. If I could just finally once and for all make enough money, I wouldn't have to worry. Except when you don't have a system to manage your money, there's never enough. So the worries drone on and on and on. Because I was always trying to make more money to provide for my family and keep my business running, I worked all the time, all the the time. And because I prioritized work, I missed a lot of important moments with my family. I almost never attended my kids' sporting or school events if they were scheduled on weekdays. I also missed weekends if I had the opportunity to make money. The money worry was urgent, more important, and so Christa attended the kids' events without me. My worry was bigger than my want. I wanted to go, but I worried about money more. So I told myself I couldn't go, that I had to sacrifice life's moments to hopefully have future moments when I finally earned enough. On the weekends, when I did make it to a game, I wasn't really there. The ringing thoughts of working more to make more to cover the next thing was incessant. I'd be hanging with people I love, but I was only half there. This was true for years. Decades, actually. I missed so many moments because I was checked out or couldn't be there at all. Long after I got our money challenges under control and we were using the Money Habits System, I still clung to the work mode because it was part of me. The drone of make, make, make was the new normal. It was all I knew. The moments ticked by And before I knew it, our youngest son, Jake, was a senior in high school. Christa called me one day and said, "Hey, can you come to Jake's final track meet?" Immediately my mind went to default mode. I started to say, "I'm sorry, I'm so busy." But my heart screamed, "Go to the stinking game. Go to the freaking meet. This is your literal last shot. Go to the meet." Meet. I went. Leaning against the fence around the field, holding hands with Krista, I noticed so many parents and several other couples. I thought, that's pretty miraculous to devote time to this in the middle of the workday. Doesn't everyone have to work? Doesn't everyone hear the drone, the need to make more money? And then Jake came around the corner, running as hard as he could. He spotted me and his face lit up like it was Christmas. His gait changed and he pushed even harder. He seemed almost cocky, like he was showing off and thinking, "My dad's here, my dad's here." In that moment, in that present moment, I became overwhelmed with the joy of watching him run. And as he ran the final section, I thought, this sliver of time is majestic. I don't recall where Jake placed in the race, but for me, this was the winning moment. I don't know if he remembers that day, but I'll never forget it. On the drive home, I thought, holy cow, that's the first time I've been truly present in years. I'd robbed myself and the people I love of my presence, and I'd robbed myself of so much joy. Once I got a taste of it, I wanted more. I wanted all of it, all the moments, and I want that for you too. The constant droning worry didn't just cause me to miss important moments. Sometimes it got worse in the moment, like when Krista would order a glass of nice wine at dinner. I'd start freaking out about the bill. She would feel ashamed and embarrassed that I got uncomfortable, and the evening would be ruined. I couldn't even count the number of times my fixation about how much money we were spending on dinner or movie popcorn or whatever prevented me from enjoying our time together. But the moment I started using the money habit system for myself, I got better at being present, enjoying the moment, and giving my family my undivided attention. It wasn't long before I was able to do that no matter the circumstance. I made this change because I knew what money was available for what purpose before I spent a dime. You see, I no longer worried about the money because the system gave me a set of instructions about what I could or couldn't do with the money. Alas, my worry and yours is rooted in uncertainty. I mentioned this concept earlier in the book, but it's worth repeating: not knowing is the greatest cause of anxiety and worry for humans. According to uncertainty theory, people often experience higher anxiety while waiting for results, such as during a breast biopsy, than they do after receiving a confirmed cancer diagnosis. In other words, people feel more comfort hearing "you have cancer" than "you may have cancer." Experts suggest that once a diagnosis is known, even if it's serious, Patients can begin to act and make informed decisions, which alleviates anxiety. And that is what the money habit did for me. The day I started using it, I knew my diagnosis, and I've never stopped knowing it since. Sometimes it is good, sometimes it is bad, and occasionally it is ugly, but the worry of not knowing is gone, and I can take action. The constant churn of money worries is a loss of freedom, emotional freedom. You're not free to be fully engaged with your life when the undercurrent is always, how are we going to get by? You may not even realize that ringing sound is always with you, droning away, because you're used to it. It's part of you. It's just who you are, but it doesn't have to be. You can be free to live in the moment, to enjoy your life, to be fully engaged with the people you love and the things you love to do. To go out for dinner and not worry about the check. To take time off from work to celebrate your mom on her birthday. To have fun even if things go wrong because you're not worried about how much the wrong will cost. To spend an afternoon in nature or listening to your kids make up songs or exploring something you love without worrying that you should be doing something more productive, to live into who you were always meant to be. I don't want you to miss the moments anymore. I beg you not to miss the moments. I want you to have all the moments and to be emotionally present for all of them. And now you know how to do that. You have learned a proven system that will free you from the ever-present worry about money for the first time in your life. You know how to customize the money habit system to suit your life and goals, and you know how to adjust it when you shift into a new financial season. You've got tools and skills and clarity, and you've already started taking action. I titled this book The Money Habit because humanity is wired a certain way. We are built to accumulate Portion and consume. Early humans foraged for food, stored it for later, and ate portions when hunger dictated. So that instinct to collect, divide, and distribute is hardwired into everyone. It is exactly how you are hardwired, and these same principles apply to your finances. If you are uncomfortable with money, that's nature's call for correction. If you are regularly uncomfortable, that's her decree for correction. We need to fix that before we accept it as just the way things are. They aren't. Being at ease about money will feel odd at first. I get that. It's like having tinnitus. There's an invention that could be a cure for it, a haptic bracelet that eradicates the condition. Every time you notice the sound, it vibrates. And the vibration trains your brain to stop hearing the sound. I can't even imagine it. In fact, I'm nervous about it. Scared even. What does total silence sound like? I'm not sure I want to know. Part of me doesn't want to lose the ringing sound because I'm afraid. Who will I be without it? What if I can't go back? We cling to financial struggle in the same way. We're used to it. It's part of us. It's just who we are. This morning, Krista reminded me, do you remember when Adela gave up her piggy bank? Those years were dark, but I felt oddly comforted. I told myself, I've been here before. I know how to handle having nothing. Just focus on tomorrow. Survive just one more day each day. She was ready to return to that place. Not because it was better, but because it was what she knew. Bad can feel good when it's all you've ever known. But I, she, and now you know there's another way. You've already experienced it. And with the Money Habit System, you don't have to change who you are. The system works because it works with your habits. In the silence, in the absence of worry, There's only the present moment. Who will you be now in this present moment without the constant churn and stress of getting by? What is possible for you? What moments do you want to experience and with whom and doing what? You have enough money, but you may not have enough moments. Go get them. Stack them up. Stack all the moments up and live them fully. Give them to the people you love. Give them to yourself. Collect the moments and keep them with you. Being present in your life, that is a present for you, and that present is priceless. You don't have to accept the money problems that have been a constant in your life. It isn't even normal. The freedom you will have, which you can't even imagine right now, will change your life in so many positive ways. I promise. In the absence of worry, in your own ease, you will become who you were always meant to be. It will be awkward at first. You may even worry because you are not worried, or that it's only temporary and the other shoe will drop at any moment. It's okay. You are ready. You are ready to live fully in the moment. As I share these final words, I feel you are speaking to me from the future. I know that makes no sense with time and space, but I also feel this need to go for freedom. Freedom from the squeal. I am off to make a call and schedule an appointment for the haptic bracelet my audiologist wants me to use to extinguish my tinnitus. I'm excited. And kind of scared, tearing up a bit. Oh my God, maybe I can experience silence for the first time in my life. Imagine that you experience real financial freedom, perhaps for the first time in your life, and I will experience silence. We'll both be even more present, more in the moment. If I ever have the privilege to meet you, let's make a vow. Nod and put one finger to your lip. The one that signifies quiet, and I will nod and do the same to you. Not a word said, maybe just a single tear shed. In this way, we will acknowledge each other and the courage you had to step powerfully into a new life where you silenced the financial worry. Oh, the sound of silence, that beautiful sound of silence. Congratulations, you've finished the book, but don't leave me yet. I got something else for you that I think will be transformative in your life. It's the appendix, and I have tips and hacks to save money. And this first one in particular, I think will blow your mind and could be a game changer for you financially. So hang with me, get ready for some, or quite a few, I should say, hacks and tips. Appendix, tips and hacks to save more money. Find and manage subscriptions. Subscriptions are the bane of the financially fit. They're the modern mini version of timeshares. According to C&R Research, the average American spends $219 per month on subscriptions as of this reading. Let me do the math for you. That's $2,628 each year. It's so easy to fall into subscription creep, where those $10 and $20 subscriptions start to add up to a hefty amount. What's worse is you can easily sign up once and then be on a nearly impossible to cancel auto-billing forever. We forget about the sock of the month club and the rando streaming service we signed up for just to binge watch a TV show we didn't even like. I forgot we'd signed up for a wine club on our trip to Napa until we had way too much wine in our house. Nobody needs that much wine. Most subscriptions get buried in with regular credit card expenses, and we don't notice the charges. So in good old money habit fashion, we first need to make you conscious and aware and then give you control. So big tip number 1: get a dedicated card for subscriptions. Put all all your subscriptions on one credit card or one debit card. That way the fees won't be buried among all your other payments and bills. This technique will clarify what you're spending your money on and how much. I did this with all my subscriptions and was shocked at the over $400 a month I had been spending, nearly 5 Gs for every lap around the sun. My God, that kind of money is a pretty good vacation every year. One of the subscriptions was for my Hydrow rowing machine, a $40 monthly charge. I like to row, but damn, that was rich. I didn't even need it. Discovering how much I've been paying for the service inspired me to use YouTube videos to get rowing, elliptical machine, and other cardio and weight exercises. A TV in my home gym for $250 now has all the videos and coaching in the world. No subscriptions. When I don't feel inspired, I just search workout video that will inspire me and boom, instant and free access. Here are a few other tips to help you find and manage subscriptions. Subscription pause. Pause your subscriptions for a month or two. Don't let them renew automatically, only manually. When the break is over, you'll have a clear sense of which services you truly missed and are worth keeping, and which ones you can cancel for good without a second thought. I bet you may even forget you needed them so badly before. Report your card missing. This is a bit extreme, but it works in those situations of paralysis analysis that I talked about in Chapter 6. Call your credit card company and report your card missing or stolen. Your subscriptions will notify you that they can't charge your card. If you don't give them your new card number, the subscription will be canceled. Note that some credit card companies continue to allow your autopay bill charges to come through when issuing you a new number, so make sure you ask them about this and confirm that any charge against your old card will be rejected. Streaming subscriptions. Start watch parties with your neighbors or friends. Whoever has the subscription hosts the party. Plus, cook meals together. Camaraderie, shared meals, and fewer subscription costs. Boom. Align your credit cards with your habits. As you've learned, it's far easier to work with our our habits rather than try to change them. Sometimes credit cards are just too tempting, and we need to set up other guardrails to make it easier to curb spending. Here are a few different techniques to help you align your credit cards with your habits. Use debit cards. The easiest way to handle overspending on credit cards is to use debit cards instead, because the pain of spending money is immediate. Just make sure you use a debit card that does not charge you for transactions. Cut credit card limits. Now, we talked about this earlier, but let's revisit it. To prevent overspending, call your credit card company and ask them to lower your spending limits. Yeah, it is an atypical call, and the customer service rep, cough, cough, salesperson or AI bot on the other side of the line will try to prevent you from reducing your limit, or at least will ask you why. You can tell them, "That dude Mike Michalowicz told me I need to do this, so..." Or you can have fun and say that you caught someone abusing your credit card and this will fix it. Then give them a dramatic pause and say, "And I am that someone." Pause again, this time for laughter from no one. You're welcome. Freeze your credit reports. This is one of my personal favorites since it both curbs spending and keeps you safer from identity thieves. Call each of the credit bureaus—currently they are Experian, Equifax, and TransUnion—and ask them to freeze your credit reports. Once this is done, no one, including you, can apply for credit in your name. You can unfreeze your credit reporting when you need to apply for a loan or a big purchase. Fair warning, freezing and unfreezing your credit can be a nuisance, but in honor of channeling your habits and preventing you from taking on new debt, that is a good thing. Hide your cards. Ask a trusted friend to hide your credit cards in your home. When you have a justified reason to use it, call your friend and explain the reason why you need it. Of course, if you are in panic mode, you could just tear apart your house. It's usually taped behind the TV or under the coffee table anyway. Before you open it to take out your card, you have to wait for the preset timer of 30 or 60 minutes. You can't access the card until the timer runs out. This gives you a much-needed delay and time to think about using the card. Do you really need it? If not, reset the lock before it unlocks. Unnecessary spend averted. Pay your minimum payment automatically. If you have a predictable minimum payment for your credit cards, set up an auto payment to cover that minimum amount plus a small additional amount. That way, you avoid paying late fees and the risk of an interest rate increase. For example, if you typically have $1,000 of credit card debt at the end of each month and the minimum payment is $50, set up an automatic payment for $25 each week for a total of $100. Now you've made the minimum payment and won't ever get spanked by a late fee and an additional $50 toward paying down debt. Beg, borrow, or deal. You might remember my friend Rich Manders. He's the one who taught me about the time-money inversion, which I shared with you in Chapter 7. Rich has a vacation home in Vermont. When we were still in our recover season, I wanted to give my family a nice vacation, but we didn't have enough in the dreams account to cover more than a weekend at a motel. So I called up Rich. I'd like to ask you a favor. Please feel free to say there's a conflict I can't right now, or simply no, and you don't need to explain why. I want to give my family a vacation. We don't have access to much money right now for that purpose. Is there ever an opportunity to use your vacation home for a handful of days? Rich was happy to offer up his beautiful place for a week when it was empty, and my family had an amazing time thanks to him. Another friend did the same huge favor for me and and my family with his house in Colorado, minutes away from South Park, the namesake for the TV show. We have unforgettable stories from both trips. You may have heard the phrase beg, borrow, or steal, which means you'll get it by any means necessary. I like the passion and determination behind that phrase, but I'd rather skip the jail time. So I swapped steal for deal. Here are a few creative ways to get what you want without spending any money. Beg. This strategy sounds negative because no one wants to beg, but really it's just asking for what you want. You could always ask someone you know or post your request in an online pay-nothing or buy-nothing group. Many people want to get rid of things they don't need or want anymore and are happy to give it to a good home. When asking, always give the person you are asking an easy out so as not to burden them. I often will start by saying, "I have an ask, but please know I have no expectations, and a no is A-okay." Borrow. The day I bought my first pickup truck, my friend said, "Everyone is gonna want to borrow it." Guess what? Almost no one asks. I borrowed Rich's Vermont vacation home way back when. And even though I can afford one of my own, I borrowed my workout buddy Art Mutie's chainsaw to cut up some fallen trees. Actually, I borrowed Art too. He wanted to operate the chainsaw. I guess he saw me coming. We had a great afternoon cutting up dead trees together. If you don't plan to use something more than a few times, don't buy one of your own. Borrow one instead. Did you know your local library lends other stuff besides books? You can get museum passes, kitchen tools and equipment, and so much more. Deal. Do you have something of value and you can strike an exchange with someone to get what you want? An example of this is a house exchange. I wanted to have a place to stay when we traveled internationally, so we made a deal to swap houses with another family. The deal we agreed to was to stay at their home and they would visit the United States at the same time and stay at ours. Not only did we have free lodging, we also got a free house sitter. Then COVID scratched that plan, but future house swaps are in the works. You'll find house exchange and barter communities online. Just be sure to do your homework before you commit. Gamify saving for big purchases. As I read this, I'm saving to buy a new 12-string guitar. I don't need it, I want it. And at around $1,000, it's not cheap, at least not to me. So I set up a bank account labeled D-Guitar. Then I bought an $8, 100-piece Lego guitar set, as in you build the guitar out of Lego pieces. First, I put in the $8 into the D-Guitar account for the set. Then for every $10 I save, I add one piece to the guitar. When I add $50, that's 5 pieces. As I save for the guitar, I see the Lego version coming to life right in front of me. The day the set is built, I will purchase my guitar and jam out the ultimate 12-string treat: Pink Floyd's Wish You Were Here. Saving for a big purchase purchase in the distant future can feel like you'll never get there. So find a way to gamify the process with a visual or other sensory representation of your goal. This leverages the behavioral tendency of dopamine reinforcement, where tracking progress visually or tangibly—ideally both—keeps you engaged with the frequent satisfying feedback. How can you see your progress grow? Here are a couple of ideas. Use a map. For a dream vacation, tack a map onto a corkboard and draw a line between where you live and where you want to go. Then determine the distance in miles or kilometers. Assign a dollar amount for each mile and add a pushpin to the map for every 100 miles or whatever number makes sense. Watch as you get closer and closer to your destination. Piece together the puzzle. For the new TV in my workout room, I marked the spot on the wall with painter's tape. Then I cut up a picture of Arnold Schwarzenegger's robot character into 10 pieces, you know, the Terminator. Every $25 I saved earned me a piece of the picture, which I added to the taped box. After saving $250 and completing the puzzle, I ordered the TV. This time I watched the original Terminator. I'm classy like that. Use a fitting representation. For a down payment on a house, you could try the Lego idea or the stones in the jar method. Assign a dollar value for each stone and watch it fill up as your savings grows. If it's a beach house, fill it with seashells. A lake house? Use cork stoppers. A cabin in the woods? Acorns. You get the drift. Avoid impulse purchases while shopping in person. It happens to all of us. We go to the store with one goal in mind and come home with a trunk full of stuff we didn't know we needed. And here's a pro tip: we didn't need any of