How to Expand Your Money Thinking with Chris Harder

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.

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.

What's the difference between those that actually build wealth no matter what their circumstances are, and those that don't? Well, in this episode, I'm having a special conversation with a dear friend of mine, Chris Harder, and he's asking me some questions about how do you bring an expansive mindset to your wealth game? Instead of cut, cut, cut, cut, cut, you know, expenses and live on beans and rice, how do you bring something bigger to it? And it's a great conversation that we had for his show, but what I decided to do is air it on my show because it was such a good conversation. We talked about frameworks, we talked about steps, we talked about the mistakes. We talked about some of the math. We talked about the pathway to get there. So I hope that you enjoy this episode. It's a special one. I'm bringing Chris Harder and me to you. Welcome this episode of the Affluent Entrepreneur show.

Here's what I want to make sure that we are catching their attention for today. We're going to talk about how to build a wealthy lifestyle using less money than you think. Right. That's kind of the theme. Like, people, they think you have to have a windfall. They think you have to sell a company. They think you have to have some big life event, but you don't. You just have to have some planning and some common sense and someone has to show you a path. And that's what we're going to kind of illuminate today. But we're going to do it mainly for entrepreneurs and for solopreneurs. Now, what we're going to talk about, what Mel's going to teach today, is applicable to anybody. So if you have a regular job, if you have a W2 job, if you're not a solopreneur, an entrepreneur, don't worry, this still applies to you. But we're really leaning into entrepreneurs and solopreneurs with some of the things that we say for a specific reason. Do you mind sharing that reason, Mel?

Yeah. Here's what I found with all entrepreneurs. So you've got two sides of the equation. Let's just break it down to the basics. Okay? To build wealth is no different than trying to lose weight. You eat less, move more. Okay. To build wealth, make more, spend less. The challenge is that the majority of the advice out there and the majority of things that people are trying to do is to sit back and say, how do I cut, cut, cut, cut, cut in order to have more money so I can build my wealth? And I hate to tell you, I think that the reality is that you can't cut yourself to wealth. You have to grow yourself to wealth. And the beautiful thing about entrepreneurs is that they actually can affect both parts of the equation, the expense side and the income side. Easier. Not that you can't if you're. If you're an employee, it's just easier. And so now we can go back and say, we need more income. So let's figure out the way to make that more income, which then can accelerate our path to financial freedom. Now, as an employee, that might be limited, although I think even as an employee, we ought to be having side gigs and side hustles and multiple streams of income as a security.

Element to knowing that we're not just reliant on one stream.

So we're really speaking to solopreneurs and entrepreneurs. Mel is a very successful accountant by background. It's not like he is an accountant today. He's not sitting there doing somebody's taxes, but his background, he owned a huge accounting agency back in the day, and that's always been his. His trade in the past. And today he's just trying to help as many people as possible, you know, realize what. You don't need a big windfall, you don't need a big win. You can rhythmically will yourself into a wealthy lifestyle. So, Mel, do me a favor. I want you to frame this for somebody who says, I work a 9 to 5, or, you know, here I am a solopreneur, and I work Hard. But I'm barely making ends meet. I have about as much month as I do money. How can somebody like me start to build wealth? Why don't you speak to the person who's going to count themselves out before you speak to the people that have a little extra to start using?

I think the first thing that we need to understand is actually wealth creation has absolutely nothing to do with money. As much as people will say, it's money, money, money, it has nothing to do with money. And in fact, no matter where you are, no matter what your circumstances are, I firmly believe that you don't have money issues.

Interesting.

Here's why I think you have money symptoms. They're symptoms of the behaviors, the decisions, and the choices you made in the past. And that's confronting for a lot of people because they go, wait a second, I got to take responsibility. But here's the empowering part. If they're truly a symptom of choices I've made and decisions I make and my behaviors, all I got to do is change them and I change the outcome.

Damn, that hits. People don't want to accept. Wait a minute. What do you mean money symptoms? You tell me these are just symptoms from decisions that I made in the past from. From a lack of action or taking the wrong actions. I've put myself here. It's not that society is against me. It's not that wages are too low. It' not that inflation is too high. You're telling me it's me and this is my fault? That's a. That's a tough nut to swallow, buddy.

So first things first. I'm not. I tell you this not to take blame, but to take responsibility. Okay? And they're very different, because when I look at responsibility, that also means I have the ability to respond versus blame, which is just getting the big stick out and beating yourself up. And I live this for. So in 2004, I got involved in a. An investment. At least that's what it was presented to me as is an investment. And by 2005, I figured out, oh, Ponzi scheme. Here's a financial guy like me that actually would be hired to put people like him in jail to testify. And I got taken, literally wiped out one third of my net worth.

Wow.

Between me and two buddies, we lost over four and a half million bucks. Okay? So I'm not exempt from bad choices. I'm not exempt from bad decisions. I think that I probably lost more money than some people make in a lifetime. What we need to look at is to say my current circumstances are not the destination. They just happened to be my current circumstances. And it wasn't until I sat back and asked myself the question, what did I do to contribute to finding myself here? The rules. I ignored the voices, I ignored the criteria that I didn't look at, the due diligence. I didn't do all those things. That's my responsibility. Now, granted, the guy was a con. He was a thief, but there was some things there that I had to look at and say, I need to shoulder that burden. And when I shoulder that burden in not from a blame standpoint, from a responsibility standpoint, then I have the power to extract lessons from it that allow me to rebuild. And so 18 months from that point, not only did I recover what was lost, but we surpassed it by three times.

Dang. I love that because it took responsibility. Said, all right, fine. I see where I put myself here, but if I can put myself here, it means I can put myself where I want to go. So that radical responsibility can be a tough pill to swallow at first, but it can also be a very empowering pill to swallow going forward. You have something called the wealth priority ladder. I think this would help to start, position people into why they can recover from any decisions that they've made. Yep. No matter what age they are and still end up on the positive side of financial life that they want to live. Why don't you start walking us through this a little bit?

What this is, is the way I look at. At money. When you get money, people will ask, well, what do I do with it? You know, great, I'm making money. What do I do first? What do I do second? What do I do third? And so this is where we sit back and say, all right, what are the priorities to build wealth? And I think the first thing. So we look at it, and I have six different. Well, actually seven. Seven different levels that. That we go through in here. You might sit back and go, oh, it's like Dave Ramsey's baby steps. Okay. And I love Dave and the work he's done and he's makes. He makes a huge impact in this world. Okay. But it's very different than Dave's steps because Dave is spending time helping people dig themselves out of a hole. Most of the people are sitting back and saying, I'm in a hole. How do I get out? So the way they're doing it is, let's cut things. I want you to come at it from an expansive standpoint. The way I want you to look at your money is not how to dig out of a hole. Now, we can help people do that, and there's principles to do that, but this is really about you building your mountain. This is about building your wealth. This is about building a life that's meaningful, that gives you the freedom to. To have choice in life.

I love Dave. You know, obviously, number one financial show in the world and a lot of great advice. You can't poke holes in the fact that he is legit. But the thing that I've never been able to resonate with is this cut back, cut back, cut back, beans and rice mentality that he promotes, no matter what situation someone presents to him, Instead of teaching people to get bigger than the financial problem in front of them. Right? And it's a dangerous mindset, and it's a dangerous default to build. You don't want to build a default of, oh, something happened, what else can I get rid of? Oh, something else happened. Oop, what else can I strip myself of? Oh, here's another one of life's things happened. What else can I cut back on? Because pretty soon you run out of things to cut back on, and you train yourself to say, how do I get smaller? But, Mel, what you do and what I've always been a fan of is training yourself, how do I get bigger than the financial challenge in front of me? And that could be a real challenge. Like, oh, got these medical bills. How do I get bigger than the challenge? Or it could be like, hey, I've got this thing I want to invest in. How do I get bigger than that challenge? So it doesn't matter if it's negative challenge or positive challenge in front of you. When you have a financial challenge in front of you. Instead of this building this muscle in this default of getting smaller and smaller and smaller, you should be building the muscle in the default of, ooh, how do I get bigger? And then how do I get even bigger? And how do I get even bigger? Until you're so big and so strong that nothing that life throws at you financially will really phase you anymore.

You're so wrong point. It's the difference between looking at something and saying, God, I wish I could afford that, and saying, how can I make it affordable?

Yep. Oh, I need that. How can I make it happen? Yeah, I love it. Okay, so continue on.

The first phase is I want people to have breathing room. So the first thing I want people to do is get at least $1,500 or one month's expenses in a high yield cash account. This isn't an emergency fund. This is literally, I don't have to go break the glass. I don't have to go into debt if the transmission breaks. This is simply to sit back and say, how do I make sure I have that? The one way that I have, I'll have people do this and is that they sit back and say, well, how do I get the 1500 bucks in my one month's expenses? Well, I'm betting like if I went right behind me and looked at all the technology I got sitting in there that I'm not using, I'm putting that on Facebook Marketplace, I can come up with 1500 bucks. And it is a one time thing that just gives you some breathing room. So now we can sit back and say, now let's look at the rest of it. Because I know that for the most part, if there's a medical issue, I've got deductibles covered. If there's a car issue, I've got that covered for the most part without going deeper into debt. So that's the first stage is to sit back and say, let me get my comfort fund in place. Fifteen hundred dollars or one month's expenses.

Okay. Is it whichever is greater? Fifteen bucks, one month, Whatever is greater, Whichever is greater. So if somebody has one month of expenses of 4,500 bucks, they need to get bigger than the problem. Right. We're talking about growing, not shrinking. And they need to get radical and find a way. I got to go find a way to create $4,500 and put that into a high yield savings account. Yep.

And now you've got that comfort fund in place. And now we can tackle the next phase of which is where we're actually looking at do I have consumer debt and do I have what other people call emergency fund? I call it peace of mind fund.

Okay.

And the reason I use peace of mind fund is when I have the right amount in there, I just have peace of mind.

I'm okay.

The market went down 20%.

That's.

I'm fine. I don't, you know, when 2022 hit, we had a 22% decline. It didn't matter to me, and I could stay in the game. We've had an increase of, I don't know, 16% this year so far. But here's where the difference is. A lot of people will say get out of debt first, then worry about emergency fund and investing. I think it's a mistake.

This is where you differ from Dave. So keep going.

So I think It's a mistake, because debt management is. And I want you out of debt. But debt management is a different muscle group than wealth creation. And here's the other thing we know. The sooner we start investing, the sooner we get in the game, the more we have time on our side. Because there's one thing that no matter where anyone starts, that all of us have to pass through. If we think about the trajectory of wealth creation, it starts off really flat, and then it goes up in a hockey stick. And that flat zone is what I call the wealth flatline.

Okay.

So when you first start putting money away, and you may have experienced it, you're putting money in your 401k, you put it in your IRA, you put it in your brokerage account, and you're putting $1,000 here, a $500 there. And then you look at it three years down the road and you go, I made 67 bucks. It didn't really grow much. And there's this zone in there where it doesn't really grow much because it hasn't reached critical mass. And that's what I call the flatline zone. This is the dangerous place, because people get impatient. People look at it and say, I just made 67 bucks. Screw it. This doesn't work. And what do they do? They pull the money out.

They quit. People told me to invest in this, and it's. It's not growing. Screw it. I need that money to go pay off my credit card, without a doubt.

And so what happens is that that puts you right back to the starting line. And so when you start investing again, you actually have to start all over again. The only way to eat up that flat line is time.

So you got to power through. You can't get tempted by what would feel good.

Yeah.

Let me ask you this. So many people would say, hey, you know, you got to pay off that 20% credit card instead of making 8% on your money, because that's a delta of 12% working against you.

Yeah.

How does that reconcile in the plan of debt management over debt elimination?

In the beginning, mathematically, yes, you would sit back and say, I'm going to pay the 20% credit card off first. The problem for me is that when you do that, you are stalling out, putting any money away, and you're not creating the wealth creation behaviors. Yes, you. You're paying off debt, which is another behavior you want. But we're not taking care of the. Building the muscles. So even if now, what I haven't said is that you split it equally you may not split it equally. You might sit back and say, I'm put 75% towards my debt and 25% towards my peace of mind fund and my investing. That's fine. Just know that that's what you're doing, is you're doing both at the same time. Because I don't really care from a wealth standpoint if we're putting $5 away or $105 away. What I care is the muscles getting moved.

Okay, this is more about building the muscle then.

Yes, it is.

It is. Okay. All right.

And this makes great sense, right?

Because mathematically, people can poke a little hole in it. But from a, hey, when are you going to start building this muscle? Then? If you wait till all your debts paid off, when you can start building this muscle. And when are you going to start getting on board of this power of compounding interest?

Here's the other other way to look at it. If I'm 20 years old, every dollar I put away at 20 years old will turn into $88 by the time I'm 65.

Wow. Can you explain to people why real quick?

Because the power of compounding.

Listen to what he said. Every dollar you can put away at 20 turns into 88 when you're 65.

Yeah.

But let's break it down. So Rule 72 says take whatever your return on investment is divided into 72, and that's how many years your money will double, right?

Yes.

You're basically saying a dollar turns into 2, into 4, into 8, into 16, into 32, into 64, into 128 and so on. Yeah, that's how we get there.

Exactly, Exactly. Now, let's play this out, because this is where you start to realize, if I delay putting the dollar in at 20 and wait till 30. Mm, it's still a good number, but it's not 88. It'll turn into $23.

Whoa. That's a difference.

Waiting at 10 years, 88 times to 23 times.

Let that sink in, folks. And this doesn't matter what age. You don't have to be 20 for this to have to have a wow factor on you. The point is, go ahead, wait five years. Wait 10 years. Look at the difference in multiples from 88 to 23.

So now I look at it and say, if I'm paying a little bit of money in and extending a little bit of the debt payoff, but I'm getting an $88 investment versus a $23 investment, I'm going to do that all day. Long. That's one of the reasons that I kind of look at it the way I do.

Not only that, Mel, when you're paying off a debt you're paying on a balance that's declining, or when you're paying a percentage you're paying on a balance that's declining, when you are putting money into a compounding investment fund, you're earning interest on an amount that is compounding, that's getting larger.

Yes.

So it's not as simple of an exchange of, well, I better get rid of the 20% while I'm earning instead of earning 10%. It's not that simple. It's because one is a snowball that is melting and the other is a snowball that is growing in a snowstorm. And you want to be able to put that momentum.

We get we momentum with our money as it grows.

So what if you're hearing this, you're like, well, I'm 40. I'm 40 and I. I have made the bad decisions. I accept the responsibility. It's too late for me. What do you say to that person?

Oh, God, I hear this all the time. So here's, here's the thing. What you did in the past is what you did in the past. We can't change it. The next best time to decide to take control of your financial destiny is today.

Yeah.

And so even if you're 40, even if you're 50, even if, okay, at 50 years old in today's world, you've still got two decades ahead of you. Okay? So the real question is, what can I do in that time? Because let's say that we set a number. We say, I want to have $2 million and I'm 40 years old, and you go, well, I'm too late. So do you not try? Because aren't we still better off if I got to a million two instead of zero?

Amen.

I would rather get 60% of the way there than 0% of the way there. So there's no reason and there's no age to never to. To ever stop trying.

And I mean, using a simple example, if some start at 40, by the time they're 68, based on average returns, their money would have doubled four times. Yeah. So there's two things at play here. Your money can still double four times by the time you're 68. That means one turns into two, into four, into eight. Or that might mean 10 grand turns at 80. Or it might mean 100 grand turns it 800 grand. Right? Yeah. So that's point number one point. Number two, this is where you say, we're speaking to solopreneurs, entrepreneurs specifically because they can get a bigger shovel. They have the muscles and the talent and the skill and the ability to say, okay, I'm making, you know, $8,000 a month right now, barely making ends meet. But dang it, if I just made an extra $2,000 a month by creating one more widget, one more thing, one more service, one more whatever, and I didn't touch it, other than that was my investment snowball. Not $2,000 a month for that 28 years. Plus the power of compounding. Now we're talking about some, some real.

Money here, some real big money. And I think that's the beauty of being an entrepreneur, is you have the opportunity to adjust it. You have the opportunity to look back and say, all right, I'm not going to buy something until I create an income stream that actually supports it. You mentioned about where we live. We live in a nice house and yeah, it costs to live here. But I look and I go, when we did it, we looked at and says, what's the machine we have in place and will it support it? Not going into debt, not going into, into the hole every month. So we looked at it. Perspective of that whole perspective of how can I make it affordable.

Yep. Is this decision I'm making affordable based on my future goals? Yep. So just let's talk about some sacrifice. You got some great examples that you and I have chatted about in the past. Real life stories, right? Kid that bought a watch, woman that wanted an office, things like that. And you showing them. Wait, that decision wasn't blank dollars. That decision was this much. Walk us through some of these examples. Because whether you're 20 or whether you're 40 or whether you're 50. This. These hit.

Yeah. So the first one is, so I get my hair cut by a 23 year old kid and he knows what I do. So we're constantly talking about money investing and all that stuff. So I'm sitting in his chair and he looks at me, he says, hey, man, one of my best friends just bought a $5,000 watch. And I looked at him, I go, really? He said, yeah, now you and I are watch dudes. So that. Okay, I get it. But at 22 years old, would I have done? I said, how? I said, is he making a lot of money? He says, no, he's 22, he's not making any money. And I thought, huh? I said, what made him do it? He said, well, his Buddies thought, you know, we all thought it was a cool watch. So he did it because we thought it was cool. I said, all right, so let's do some math. Remember I said earlier that if you put money away at your 20s, $88. I said, so he spent $5,000 on a watch. Had he invested that by the time he's 65, it would be $400,000. He spent $5,000 to impress a bunch of dudes that probably are in his world in three years. And I look at it as he's foregone. $400,000 out of his financial future.

Wow. That's a. Not a $5,000 watch. It's a $400,000 watch. And that it is.

And I don't want people to take away. Well, you know, Mel's saying not to spend. I actually am not someone that'll ever tell someone. Well, not very few times will I tell someone not to spend it. All I'm saying is, if you're going to spend, make it intentional, make it conscious, and be completely aware of what the overall cost is. Because every money decision we make today should be in service of the lifestyle and the financial future we want tomorrow.

Yep. Amen. Okay, so that's a great example. You got a office example. Someone's like, hey, should I upgrade my office?

This one? This one happens. This is some. As an accountant, I used to hear these. These kinds of things all the time. And so I happen to be speaking at an event, and this person raised their hand to ask a question, and she says, I'm thinking. I'm thinking about getting a new office. And I said, cool. She goes, it's going to cost me about $20,000 more a year. And I said, great. I go, do you need the new office? She goes, no. I said, okay, then why are you going to get the new office? Well, I like it. I can afford it. But I also. It'll save me in taxes.

Yeah.

I said, okay, so let's. Can we break this down? Because there's two things here. This is so you're willing to spend $20,000 to save taxes, but your deduction will save you. Only if I just do the math. 7,000 in taxes.

Just spend 20 to save 7.

Exactly. Because I'm assuming a 35% rate. So in the end, she saves 7,000 in taxes, but she spent 20. In the end, she's still $13,000 out of.

Yep.

Then I said, and to you, you're looking at this $20,000 over a couple of years as I can afford it is 20,000, but you don't need to spend it. What would happen If I put $20,000 away and let it grow? Well, at her age, it was going to be 23 times.

So wait, $20,000 times 23? If I'm doing the math right.

460.

Yep. It's another half million dollars.

So we have a $400,000 watch and a $460,000 office upgrade. Except people saw it as a $5,000 watch and a $2,000 a month office upgrade. Yeah, you touched on something. So basically we saved almost a million bucks right there in those two examples. By the way, I am. My life has been ridden with examples of what not to do when I was young. All of these exact same decisions. It's like you're describing me to a T, by the way. So someone's hearing this. This is not finger pointing. This is, again, acceptance of. Well, nobody opened my eyes this way until this exact point in my life. So now who cares what I did in the past? I can do it better if I decide to in the future. That's what this is really about.

It really is. And just so everyone realizes, I'm you. I did the same thing until I started to understand it and run things through this new financial filter. Yeah, because you know us, we're certainly not living on beans and rice. We travel. We're taking off to Scotland in October and we're staying at a nice hotel. We're traveling first. I mean, so it's not that we're not spending money, but we're very deliberate on the things that actually matter to us that give us joy, that give the richness to our life. And we're willing to spend on it. And we do it wholeheartedly and without guilt.

And you can do that with confidence once you know the financial rules. I think that's the kicker is people are like, screw it.

It's intimidating.

So I'm just going to live a good life. Or they're like, I'm going to cut back because I'm scared of any decision to any buying. So I'm just going to live this life of nothing and cut back, cut back, cut back. Neither one has to be the answer. The answer is become educated. It's not as intimidating as you think. And once you have that education now, you can make these confidence into these decisions and confidence, what is for me and what is not for me based on my future goals. You said something. I don't want to skim over this. Talked about the allure Of a tax write off. You know, I see people out there giving advice all the time. Buy a six thousand pound vehicle, G wagons count. And by the way, we have a G wagon, but we didn't buy it for the tax write off. G wagons count as a tax write off. And that's why you should rush out and give all these stupid TikTok advice. Individuals. They're all over wheels too. It just makes me cringe when I see it. So technically speaking, are they right? Yes, you can. If you can show the need, you can write off a 6,000 pound vehicle. But are they right that this is the move you should rush out and make? Well, no, because you have to spend 250,000 bucks to get a G wagon just to save what $100,000 on the street says, hey, man, I got a deal for you. You give me $250,000, I'm going to give you a suitcase with 100 grand back. Do we have a deal? You'd say, hell no, get out of here.

I would do it all day long with them if they wanted me to do that in reverse, I'll give you 100.

Yeah, exactly, exactly.

Here's what I would do instead. And in fact, I do this. I opened up a defined benefit plan, which is a pension plan that gives me the ability to put more money away. So Instead of putting 250,000 into a G wagon, I put $250,000 into a defined benefit plan. Get the tax deduction, but keep the money, let it grow, tax deferred. And then when I take it out down the road, it's part of my wealth.

Yep, absolutely. But when do you drive? Do you just walk everywhere?

Then me, I do drive a Tesla.

I mean, we have examples all day long that we could share. The point that we're trying to make is if you become educated, you don't fall for the bad advice. If you become educated, you get to make these decisions in confidence, not out of scarcity. And when you build the muscle of, hey, let's get bigger than the problem, Part through our education, part through our action. Instead of just cut back, cut back, Cut back to the point where all we know how to do is cut back. And now we're too small to handle any problem. When that becomes your default, you become unstoppable financially.

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 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.