059 Forget Budgeting, Give Your Money a Job Instead

Hey there, real quick, before we jump into the episode, listen, if your earnings treadmill hasn't set you free yet, running faster won't either. Listen, hustle without principles just going to burn you out. So here's what I want for you. I want you to join me for my money machine experience live. It is three free trainings. Deep dive into how to escape the treadmill and build a money machine that actually works for you. All right, grab your spot here by going to moneymachinelive.com and I'll see you in the free training. Forget budgeting, because most people are getting it wrong anyways. And if you do it wrong, you feel suffocated and it probably isn't going to lead you to your financial freedom line anyways. So welcome to this episode of the affluent entrepreneur show. This episode, we're going to talk about how to give your dollars a job and how to lead it all the way to the financial freedom line. I will see you in the episode.

This is the affluent entrepreneur show for entrepreneurs that want to operate at a high level and achieve financial liberation. I'm your host, Mel Abraham, and I'll be sharing with you what it takes to create success beyond wealth so you can have a richer, more fulfilling lifestyle. In this show, you'll learn how business and money intersect so you can scale your business, scale your money, and scale your life while creating a deeper impact and living with complete freedom because that's what it really means to be an affluent entrepreneur.

All right, welcome to this episode of the Absolute Entrepreneur Show. This one is going to be a fun one. Well, I don't know. We're going to talk about budgets. We're going to talk about cash resource plans. We're going to talk about what do you do with your dollar bills. Fact of the matter is, we're going to start to draw the map from where you are and where you want to go to get financial freedom in your life. Now, here's the deal. I get it. If someone mentions the word budget, people end up cringing in fear, in angst, in resistance. They sit back and say, oh, my God, you're going to suffocate me. Here's the deal. Your financial future depends on what you do today with your money, your behaviors, your habits. Remember that the majority of your financial independence and financial freedom is a result of the behaviors, habits, and decisions you make today. Where you are.

In your world financially today is a result of the behaviors, the habits, and the decisions you made in the past. Now, I don't mean this for any reason for you to sit there and blame or to beat yourself up or to feel bad about it. What I tell you this for is that you're in control. That's the beauty behind it, is that you're actually in control. And although it may not be easy to take control back, to take responsibility, it is simple when we understand the place behind it. So this episode is really a result of a comment that was left on my YouTube channel about one of my other training videos. And so I think that it's important enough that I said let's do a special training, a special episode solely on this. I want to read the comment because I think it's important to understand perspective in as we start to move forward and then we'll get into the episode. And this is from Jeff. Jeff says that. He says thanks for all you do, my friend. And well, thank you for being on the journey with me, Jeff. He says, I've learned a lot about money and how to use it as such from you and I really appreciate it. I had a question about the cash resource plan, which is. A cash resource plan is something that we use with the Affluence Blueprint. It's one of the things that I do with our Affluence Blueprint members, my master's members, because it's important for us to decide what our cash is meant to do for us. And too often we don't. We leave it to chance, we leave it to time. We leave it to whatever comes our way. The, the whims and everything. And so, so he says, my wife and I have, have been using only cash for a couple months. So they went to a cash system and we've noticed our spending has decreased quite a bit, but there's still a drop off because we don't have an actual plan. And, and so this is really important.

To think about is that too often people with finances, they don't have a plan. And there's that old saying that says if you fail to plan, you plan to fail. And, and it's, it's real. It's real in this situation because we don't just live for today. And I get the whole YOLO movement and you only live once. I get it.

I only live once. But I also am going to live for a long time. So I want to make sure that this once is done right. I don't spend my future for my todays.

I don't take what I desire today more important than what I desire most in life. And the way we do that is we figure out what that desire most in life is and we create a plan to acquire it, to achieve it, to accomplish it. And so Jeff goes on and he says, we have an idea of what to do after this step. But after watching this video, it made me realize we don't know how to make a plan. Would you do a video? Or maybe you have one. I couldn't find the link about creating a cash resource plan. I'm tired of aimlessly navigating from month to month with no plan and I want something to change. Since this is, this is step one, it seems like this would be a good first step. Thanks in advance, Mel. So first things first, Jeff, thank you for posting that. Thanks for, for, for being vulnerable and open and transparent and everything. And second, because you posted it, here's what I want you to do. I want you to send a note to successlabraham.com and I want you to get on a one on one laser coaching session with me so we can go deeper, specifically to your, your information, your situation and see if I can help you out. So, so that's 1, 2. Let's do this thing. Let's, let's talk about why this is important, this cash resource plan. Too often, especially I think in today's environment, we're sticking our head in the sand. Now I get it. You know, I had a good friend at one point come to me and he says to me, I need to come up with a plan. I haven't been planning financially. I haven't been doing any of that type of stuff. And here's the problem. Now this was back a number of years and he had an adjustable rate mortgage, okay? And he said, my mortgage is going to adjust and I can't afford it anymore when it does. I said, when is it going to adjust? He said, in three weeks. I'm like, ah, really? Three weeks? I said, how long have you known about it? And he says, well, honestly, since I took the loan out. I said, did you not plan for it? He says, no, I stuck my head in the sand. You know, the unfortunate thing is fixing a problem like that in three weeks.

Wasn'T possible, you know, without trying to get money in this and that. He had to start trying to create income streams and it was a challenge for him. And quite frankly it didn't work out for him. He lost the house. He gave up the house in foreclosure, but it was an avoidable situation. It was a horrible situation. He waited too long. I mean it wasn't. And it actually Wasn't even three weeks. It was less than three weeks. It was two and a half weeks. When we got into it and tried to do it, I tried to forestall it. I tried to do some things for him. And the other side of it is that he wasn't willing to change certain behaviors. He wasn't willing to do the things that he needed to do to keep the house. And therefore he. He lost the house. But the. But the bottom line of this is.

We all need to plan because our days are coming. It could be, I got to pay for medical, I got to pay for retirement. I got all that stuff. We need this in place. We need to decide how our dollars are going to be be used. Otherwise, what's happened. What's going to happen is it's going to be forced upon us by circumstance. And our financial planning, our financial future is never. Is never in a good place when it's forced upon us by circumstance. And so the important thing is to take a proactive role, just like Jeff is asking. He says, we want to be proactive. What do we need to do? And so I want to walk you through something. I don't buy into the idea of budgeting in the sense of confining you. I believe in the construct of budgeting, defining your financial future. See, the purpose of the budget is not to limit you. The purpose of the budget is to dictate what you need to do to accomplish the ultimate goal of the lifestyle. You want that financial freedom line. And so it's important for us to understand that. And this is why I look at it and say, it's a cash resource plan. Imagine this. Every dollar that comes in is a dollar that gets to work for you. And you can choose for it to work for you. And in the sense of it pays your mortgage, it pays your rent, it pays your car payment, it pays the credit card bills. It's working for you in that way, but it's also working for you and working for you in a better way. If it says it's paying to a financial future, it's investing to build that money machine we talk about in the affluence blueprint. It's in that space that all of a sudden your dollars are working harder for you than you did for it. That's the gain. That's the goal.

Of what we're doing on this financial freedom journey. And so what ends up happening is we see the money come in, we watch the money go out, and we don't know what happened in between, and we go to the next check or the next bill or the next thing.

But what if we looked at our dollars coming in, our money coming in, as little employees, and those employees are going to work for us and they're better than any other employee out there because you know what? They're willing to work seven days a week. They're willing to work 24 hours a day, 365 days a year. They do not take holidays, they're not unionized, and they're not going to go on strike.

But here's the deal. Would you hire a group of employees to work for you? Not give them a job description, not give them goals, not tell them what tasks they need to perform, not tell them what would be success and failure for them to not interact with them at all.

And if you did, would you expect that they would reach.

Your vision or your goal? And I think that that's an absolute no, we wouldn't do that. Yet many of us do that with our dollars. We don't tell the dollars what to do.

We need to drive what the dollars and the money do for us. Otherwise it will drive us in a different direction. And so the importance of a Cash Resource Plan is to specifically define what every dollar that comes in is going to do for you for your future. Some of it will be to pay your current expenses. Some of it will be pay, paying and getting out of debt. Some of it will be the four year future to build that financial vision, that financial freedom and move you on the journey. And, and Jeff gets this, and that's why this all came about. So how do we go about this whole idea of a cash resource plan? And so I'm going to walk you through the Cash Resource Plan plan flow. And those of you that have a chance to watch this on YouTube, you'll see it. If not, we'll make sure that we hook up the graphic for you in the notes, in the description so you can get access to it. But the Cash Resource Plan really starts off with your current reality.

Effectively. There's a couple things that we need to have in this current reality. And the first is this is that you need to know what your net worth is. And I've done an episode on net worth and we'll hook that episode up.

At the end of this so you have access to it. And so we need to know what our net worth. In other words, I need to know briefly what I own and what I owe. Again, if you owe a lot of. Rather than stick your head in the sand because listen, we can stick our head in the sand anytime we want. The fact of the matter is, just because you're sticking your head in the sand doesn't mean that it's not happening.

If the train hits you with your head in the sand, it's going to hurt just as bad. You just didn't have any warning because you stuck your head in the sand. So we need to understand our current reality. It starts off with understanding our net worth, what we own and what we owe and, and then from there it's also then looking at our sources of income, really truly understanding what our sources of income are, as well as then the outgo, which is our expenses and debt. Okay?

So at the very beginning, what we need to do is start to break down what our net worth is, what our expenses are and where our income is coming from. And in detail, okay? In detail to make that happen. Then the other part of this journey is to truly understand what we call in the affluence blueprint, your affluence vision. Okay, Your affluence vision is this picture, this vision of what it is you want in your financial life. What does your lifestyle look like? Too often, this is a big mistake. I think with the financial services industry, we, they plan from an income based approach versus a lifestyle based approach, and that is this. They look at you and they say, oh, you're making $60,000 a year. We need to figure out how to replace that $60,000. In fact, they don't replace the 60,000. They say, well, your taxes are going to go down this, so we'll replace 50,000 of the 60,000 and you'll be okay. Well, that's fine. If $60,000 a year would give you the lifestyle that you actually envision. But what if the lifestyle you truly want requires $75,000 a year or $100,000 a year or $200,000 a year, then planning for 60,000 does you no good. Yeah, it gets you closer, but doesn't get you there. So what we need to do is start with lifestyle first and start with what does that lifestyle look like? What are our financial goals? What are the things that we're trying to create? Because it's about the goals, it's about the target, and it's about the legacy. And the legacy is funded by creating the money machine. And when we understand the lifestyle, we can then put the price tag on it. So one of the things that, for instance, in my world.

Stephanie and I, we love to travel. And so part of that affluence vision is the Cost of all that travel. I mean, we literally want to. We'll be traveling one quarter of the year or more.

To places. And it doesn't have to be.

Ostentatious. We simply want to experience travel. We love traveling together. Now, for you, it may not be that for you, it might be you, you want to go on and do some, some charity work. Whatever it is, I want you to put that into that affluence vision. We have a whole process that we do in the affluence blueprint for this. But the key is this. If we understand our current reality and we understand what that affluence vision is, what truly is what we want now, we can look at and say, well, what is that going to cost? What might that cost? Now we won't know the exact cost because we don't have a crystal ball. We're in an inflationary time. We don't know. But we will be better off making an educated guess, if you will.

The no guess at all.

And in the process, you start to define the priorities of what you want that future to look like, how we take into consideration that. So the affluence vision is built on your lifestyle, it's built on your goals, it's built on knowing the target, and it's built on the legacy that you choose to create. And that affluence vision gets funded by the money machine. That's what gives you the true financial freedom. Now, here's something that I think is important for us to understand. There's, and I've had this, this as a recent conversation. There's a couple of different ways that you can do this.

There's a couple of different levels to start with, and it depends on where you're at. And again, I've done an episode on this also. So the first level is this is that we want to get to financial security.

And financial security is all about paying for survival. This is, this is actually just paying your necessities. This is paying your.

Your food, your medical, your dwelling, your, your home, your rent, your transportation, your utilities. It's the necessities of life. Because when we know our necessities are taken care of.

We have a little bit of security. And the idea is this, to build a money machine, a portfolio of investments, whether it's real estate, stocks, combination alternative investments, that you create a portfolio where the income off of that is at a level to pay for your necessities. That is financial security. In other words, it's not dependent on your effort. But then the second level that you go to is, okay, I've covered my financial security. And so when we start on this affluence vision, we may just sit back and say, I just need to get to financial security first. The next level up is to move you to financial.

Independence. And when we talk about financial independence now, other people might talk about it differently. Here's how we talk about it here. This is about lifestyle.

This is about not only paying for your necessities as they are today, but your lifestyle as it is today. In other words, if I built enough of a money machine that the cash flow off of it would fund my current lifestyle.

And my necessities. So it pays my bills, it pays my mortgage, it gives me food, transportation, it allows me to have the car I want and, and it keeps my current standard of living, my current level of living. That's financial independence. So that's the second stage that we can plan to get to. So we have to go through these stages. I got to go through security to independence. And then the last one, the last one is, is the freedom level, financial freedom.

Now financial freedom is not only funding your survival, your necessities, it's not only funding your current.

Your current lifestyle, it's funding your visioned lifestyle, the affluence vision. It's the desired lifestyle. So we need to build the machine so the cash flow out the machine will fund that. So hopefully you see that there's three levels, three stages in this process of creating cash resource plan is that at the first stage we might simply say I need to allocate the monies that's going to start building the money machine. You'll see how we're doing that to a point where it's going to create cash flow, it's going to allow me to get security, then it's going to allow me to get independence, then it's going to allow me to get free Hope that help when we start to look at this whole, whole thing in the construct of, of understanding our current reality and understanding the affluence vision, there's this space in between that I call the affluence gap. Then the affluence gap is truly all about understanding a couple of things that are going on here. And one, I want to make sure that you have.

A peace of mind fund in place. Okay. Then I want to make sure if you have a.

Debt, I want you to have a debt play debt pay down plan in place.

And then I want you to focus on investable assets. Okay. Now I go into.

This in more detail. In my episode called what to do with your cash, I'll make sure that we hook that up at the, at the end here too. So. But the key is that depending on where we are in our current reality and where we want to go in the affluence vision, there are steps along the way that get us to security and independence. And so the important thing then is to look at this and say, how do I start to fund money into this gap and fill that gap? Okay. That's why we use this idea of a cash resource plan is now we look at it and say, okay, I get it now. I look at where I'm at right now, I know where I want to go and I got to pass through the security line, the independence line, to get to the affluence line. I get it. How do I get there? Well, there's some steps and I'm going to walk you through the five steps in a cash resource plan that will help you start to dial down. What you're going to need to do is get out a piece of paper. You're going to have to get out a pen, you're going to have to get your checking account and your bank statements on. You're going to have to really sharpen down to do this because it'll take some discipline, it may take some behavior change, it'll change some habits. But just like Jeff is already finding out, when you do this, things will shift for you and you do this consistently. One, it becomes a lifestyle for, for you. And it's not restrictive, it's instructive in, in doing this. So the cash resource plan is not meant to be restricted. It's meant to be instructive with, with what, what we're doing. So the, the steps go like this. The, the first step in the plan is this is to understand and define what your income sources and amounts are. We gotta know what's coming in. So here's what I want you to do. I want you to look. Now some of you might just simply be in a job so you know what your pay is every month, every week or every two weeks, however you get paid. Some of you might be self employed, you might be in a business, so your, your income may ebb and flow based on what you're doing. So it's important for you to understand how that flow is. But what I need you to do is look at it. Look at it. And part of that, maybe if you're in business is looking at your profit and loss statements, your financial statements, looking at the deposits coming in, the sales, all that stuff. And we got to look at it from a cash standpoint. I don't care if you make sales, if you don't collect the money, they're not sales to me. They don't do you any good. Just someone owes you money. So let's focus on what's the cash in that's coming to you, okay? And list it out. List out every income source and every amount that's coming in. And when it's coming in. I don't want you to do this in a sense, I don't want you to necessarily do this on a, on an annual base. You could do it for a year. But I want you to break it down into, I do things in 90 day sprints. So I want you to look what's the next 90 days look like? Okay, what does the year look like? But what does the next 90 days look like, how much income is coming in and what are the sources? Okay, that's step one. Because when we understand that now we know what we have to work with. And listen, being straight, if we don't have enough to work with on the income side, then the next step, the sub step here when we get done will simply be to look at how do we generate more income, how do we scale the income that we have? How do we do that? Now, some of it might be creating a side gig. I get it, taking a second job, at least for the time being. But others it might simply be, look, I got expertise, I got experience, I've got knowledge, and I'm going to take it out to the world and sell it as a coach, as a mentor, as a speaker, creating an online program. I mean, our ability to reach an audience now and create income streams with the virtual world we're in is unlimited and very low barrier to entry, very low cost of entry and a high margin type of business or endeavor, if you will. So it's something that you might have to look at. Okay? And I don't know, with respect to Jeff, I don't know the situation there. But if we're trying to accelerate our path to wealth, the more we can increase our income and allocate that income towards wealth building to build that money machine. The faster we'll get across the security line, the independence line, and the freedom line. Hopefully that makes sense to you. It's like sitting back and saying, I've got a house fire. Am I better off trying to use the garden hose or a fire hose? I mean, the amount of water coming out of that fire hose is far greater than a garden hose. It's going to do a better job. It's the same thing. If I can create a fire hose of income, we'll get ourselves to that place faster if we do it right. So number two, step two is I want you to determine your needs expenses, all the needs expenses. These are the survival ones, these are the shelter, the medical, the food, the utilities, the transportation. This is the stuff that if it's not paid.

You guys are in the streets, you guys are struggling, you're not eating, you're at risk. This is, this is going to define your security line, okay? Because that's the thing that we need to generate, we need to get across. So we need that income to at least cover that at that point. If step two is going to get us across the security line, if I look at this, this is the security line.

Then step three is about determining your wealth allocations. What do I mean by that? Now if we know that our necessities are taken care of, I can now start to look at this whole idea of building wealth. This is where we start to take the additional amounts of cash coming in. And I want you to allocate it to make sure that you have a peace of mind fund in place. You hear me talk about this in the, in the construct of the wealth priority ladder and I do that. We're going to hook that, that episode up that I go deep dive with how you know what to do with your cash. We'll make sure that is there. But I want to make sure that you have a good peace of mind fund. People will call it an emergency fund. I don't like considering it an emergency. I like to consider it something that gives you peace of mind. And so I want to make sure that we allocate it to the peace of mind fund. So how much is going to go to that peace of mind fund? And if you have consumer debt destructive at non real estate related debt or extremely high interest debt.

That'S what's going to happen. So the income literally is going to come in and then you're going to start allocating it to the peace of mind fund, you're going to start allocating it to the debt pay down plan. Okay? And now once I know that I have my peace of mind fund in place, so you're allocating that and maybe that's all you've got right now until you scale that income or until you get the debt pay down, but, or you get the peace of mind fund in place. Once that's in place now, the wealth allocation will turn towards investable assets. It'll turn towards all right now I need to sit back and say get into my investments, building my investment accounts and all that because I've got the peace of mind put in place which in a sense is an investment. It's just not going to be put in the market or at risk or in volatile assets. You're now going to build investable assets. The first place for you in my opinion. If you're employed in a company that doesn't employer match, I want you in that 401k and at least contribute up to the employer match. Then you can look at other things like Roth and maxing retirement. But the key here is start to build investable assets. So first dollars in have to pay for your needs. The next level is to pay into your debt pay down plan and your.

Your peace of mind fund. So I'm going to allocate those numbers and the next level beyond that is that cash that I have left over is going to go towards building the investable assets. That's the money machine that's going to fund everything in the future. So it's going to be investable assets that get into there. That's the wealth allocations. That's number three. Number four. This step is really about sinking funds. Now what I mean by sinking funds. So let's say that you are in a situation that you want to put a down payment on a house in say five years or you want to.

Remodel the house or you want to go on a trip. Big dollar purchases, I want you to plan for them and make them a line item in the budget. Okay? Make them align it in the cash resource plan. If we know that I need $20,000 in two years, that means I've got to put, let's make it 24. So it'll be easy. I can do the math on the fly. I need $24,000 in two years. That means that $1,000 a month needs to be going into a specific account for that specific versus the 24,000. Might be a remodel in the house. It might be buying a new car, it might be. But there's what we call sinking funds. These are advanced funding of expenses that are going to come down the road that are bigger. So could be like I said, remodeling a house, a down payment on a house, a vacation, a wedding, those kinds of things that you can allocate for. So then beyond that, so I've got my Needs. I've got my wealth allocations, I've got sinking funds going into place. And then step five, this last kind of step is really about other lifestyle desires because now whatever leftover cash, I have the ability to allocate them to other things that we want to do. And it may be travel, it may be missions beyond what you're already generous and giving towards other lifestyle desires. And so if it were me, and I'm looking at this, the key then really is sitting back and saying, if I'm penciling this out, I simply want to go in and say, okay, what's all my income? You're going to get this on a piece of paper, you can do it on a spreadsheet and list out all my income amounts, okay, by source. And I'm going to allocate them by month.

To see where they're coming in. I'm then going to turn around and, and bring in my needs, expenses, what is my, what is my mortgage or my rent. And I'm going to allocate those out every month. And I'm going to look at utilities and all those. Then I'm going to look at, beyond that, how much cash is left over to now fund my wealth allocations. Now I know if I've got my needs done, I can now look at the wealth allocations. And I have, maybe I have a thousand dollars left over and I have to allocate that out. Then this is where I go with my wealth allocations. And then I see what I have left over then.

And from there, then I go into, into my sinking funds. What do I have left over then? And then I go to my desired lifestyle. So I literally would just do this manually. I would do it on a spreadsheet. I do it on a spreadsheet. And so, and I would, it may be tedious, but here's what ends up happening now. You start to look at the numbers and go, do I really want those things that, that I get to live off of? You know, do I, am I using this software? Am I using Netflix? Am I using these things? And I start to carve away at the things that are wants that are the fat. So I can use them specifically in the wealth allocations or my needs or my sinking funds. But what this is going to take is to sit back, I'm going to tell you, go get yourself some, some, some drink of choice, tequila, wine, coffee, water, whatever it is, orange juice, I don't care, spread it all out, Allocate a day, allocate two days and Start to work through it. But before you work through it, I want you to take some quiet time. I want you to take some quiet time with you and your significant other, your spouse, your partner.

Whoever you're trying to envision this future life with, if they're in your life currently.

And define what that lifestyle is. Define what that lifestyle is. Because when you start to define what that lifestyle is, you now have the ability to put the price tag on it, to know that that's the goal we're going after. And so instead of detouring over here and say we're going to spend over here you go, well, wait a second. It's not moving us towards our goal. This is a detour. And this is why it's instructive and not restrictive when we give each dollar a very specific role and task. Okay? So I hope this helps and I hope, Jeff, that this gives you a little more guidance. Let me know if you have questions. If anything comes up, just like Jeff, send me a DM post in the comments. Let me know if need be. We'll do another video. We'll help you out. We'll keep you going in the process. Now here's the thing. I'd love for you to go out there and take a look at some of the other things that we've got going to help you out in this process. And so when we talk about this, I've got a couple more videos out here that I'm going to give to you. One is what to do with your cash. If you're trying to really understand the hierarchy to fill that affluence gap, if you will, I want you to look at episode 24 and the video is going to be up here. We're going to hook it up so you have the ability to make that happen. Also, also, if you're trying to understand more detail about what net worth is and how that, how that plays into this and how do detail it out, what's the difference? Because not all net worth is Created equal. Episode 54 will mark. We'll put that in here also so you have access to that. And let's get your net worth dialed in. Let's figure out your income and expenses. Let's start to allocate them. Let's be deliberate, intentional, conscious, aware about the things that you're doing with your money. Because when you do that, those workers are the best workers out there because they're going to work 24, 7, 365 days a year for you. And when you do that, over time you create a money machine that will cover you from a financial security standpoint, a financial independence standpoint, and a financial freedom standpoint. That's the game we're in. I hope that this helps you and I look forward to seeing you in another episode, another show, or on the road. And until we get a chance to see each other again, always, always strive to live a life that outlives you. Cheers.

Thank you for listening to the Affluent Entrepreneur show with me, your host, Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the Affluent Entrepreneur Facebook group now by going to melabraham.com forward/group and I'll see you there.

And that's it for this episode of Building your Money Machine where we help you learn how to master your money, eliminate financial stress, and live a life of choice. If you found this valuable or helpful to you, here's what I'd love for you to do. If you do me a favor, go to Apple, Apple Podcast, or wherever you're listening to this podcast and rate and review the show. It helps us tremendously to keep us at the top of the list so we can continue to get this information and this message out to people. Because I truly believe that financial freedom is your birthright and I want to help each and every one of you claim it. Thanks so much.