How to Buy Anything You Want Without Going Broke
Alex Hormozi presents a short financial framework for buying large items without depleting savings or incurring problematic debt. He defines four money sources—past money (savings), income (monthly flow), debt (future earnings), and "new money"—and focuses on "new money" (also called "sawdust money"): using underutilized existing resources or extra work to earn a one-off revenue stream dedicated to a purchase. He illustrates with buying a 36,000 sq ft building, writing songs for income (Paul McCartney), driving Uber, Airbnb, and spinning up advisory services; the behavioral rules are: don't touch savings or regular income, avoid long-term debt unless paid within a year with clear plan/no prepayment penalty, and generate time-limited extra income to fund non-essential purchases.
Chapters
There's four ways to buy anything, and I'll show you one unique way. That's what actually got me this building. And so let me walk you through it. You've got what I would consider past money. So that would be savings. So that's earnings that you had in the past, and that's money that you put away. The next money is you have income money. So this is the money that you make every single month. You can spend this money rather than touching your savings. This makes sense. Then you've got debt money, which is basically future earnings. Like, this is money. I'm going to take debt and I'm going to pay with future money, right? And I'm going to have to pay this debt off. And then finally is the category that I like to have, which is. And I'll call it new money. Now you're like, what does that even mean? That's what I'll explain. So I've noticed amongst the friends that I have that are the best with money, that they're wealthiest with money, they're okay buying things that are big, grandiose. Now, some of them buy big houses, some of them buy big cars and buy big yachts, big buildings, whatever it is, right? And I had a business owner who came here, and he was like, hey, I'm choosing between two offices. I've got basically a sensible office, and I've got a much bigger office that I'm really excited about. He said, which one do you think I should take? And I said, which one do you want? And he said, the big one. And this guy was a very good salesman. And I said, okay, here's the deal. You can buy the big one. It was two and a half times the size or at least two and a half times the price. And it was a little bit nicer, whatever. I said, but the deal is you got to pay it off in a year. He was like, I can do that. I was like, right, then don't worry about it. And so the thing is that I would say these are kind of almost like different personality types in terms of where people are taking the money from. Now, the reason that I bring up this building being a significant purchase is it was less that the price was a significant purchase and more so that I didn't need this building at the time. I just wanted to have a place to have a home gym that was. That would be more than like. It'd be like a commercial gym. And I wanted to have place for meetups and things like that. And I could come up with a rational explanation that between all the portfolio companies, we were spending about $4 million a year in event spaces. And I was like, well, if I had a big enough space for all of them to do their internal meetings, their quarterlies, fly out their staff and their team and have a venue, then I could probably save that and it would pay for the building. But I remember Layla was like, hey, you know, we should maybe. Maybe we should just get like a 5,000 square foot building. So this building is about 36,000 square feet, much bigger. And I remember hearing this, and I was like, I mean, that's appropriately sized for where we're at now, but it's not the size building that I would want it to be for where I want to go. And so I remember telling her, I said, I promise if we buy this building, I will make sure that it makes us more money than it has cost us. And I would say that a behavior that has served me extraordinarily well is looking at new money. Meaning if I buy this building, can I find something that will pay off the building? Now, of course, I had the expenses on the portfolio side. We could have just saved the $4 million a year that we spend in venues and all that stuff. Sure. But I was like, is, I'll bet you there's something that we can do with our existing resources. And this is the key part, is that it's sawdust money. It's money using your existing resources that you're currently underutilizing to generate new money for a specific project. And so my favorite way of doing this is like, hey, if Daniel wants to buy a boat or wants to buy a car, I love the idea of him being like, so I'm just going to work one extra day per week over the next year, and then I'm going to buy it. The richest people I know, that is the behavior that they typically use. I want this thing, and so I'm going to go make the money to buy the thing. I'm not going to use my existing income, I'm not going to use my existing resources. I'm not going to use my savings to buy it. I'm not going to go into debt unless I know that I'm going to pay it off within a year. And I have no prepayment penalty. And I have a clear plan of how I'm going to do it. They have a clear plan of how they're going to make the money on a very defined time period. And it's from doing above and beyond. It's looking at all the stuff you got. And the reason that I like this is I was talking to a good friend of mine, Sharon Tsarvatsa. He's a president of real. Actually just became a board member. Excuse me. And he said, oh. He said, you just want to write yourself a swimming pool. And I was like, what does that mean? He said, so Paul McCartney, the Beatles used to say he wanted a swimming pool. And everyone's like, well, like, how are you going to pay for it? Now, obviously, he has the money for a swimming pool, but he didn't want to use his savings, he didn't want to use his income and his royalties. He didn't want to go into debt for it. And so what did he do? He was like, I'm just going to go write a song. And so he writes a song, and he writes himself a swimming pool from the money that he collects from selling the song. Right? And so I think about this a lot because I think it's a different way of thinking about money. It's like, I'm gonna. I want this thing. And so I don't want to limit that thing. If anything, I want to use that thing to motivate me to find other resources. So what I'm being is resourceful. Rather than draining resources I have, I'm finding new resources by utilizing existing assets that are currently under my control. And so this is fundamentally like, people like, well, you know, you could Airbnb one of the rooms out and like, okay, that's one of the things I'm gonna do. But I also have some time, so it's like, maybe I'll drive Uber. There was one of my favorite customers ever at my gym. She was a mom of four, single mom. She didn't have the money for the gym membership. And she was like, well, I could drive. I could drive Uber one day a week and that I would be able to afford it. And I was like, great, then do that. And so that's what she did. And she was one of my longest standing members, lost £100. And it's like, there's a shift that happens when you decide to do it that way. And I think there's something to be said about creating a vacuum, about creating space. I've heard the saying, like, make yourself poor, right? Of the idea of, like, how do I create this deprivation? How do I create this threshold that all of a sudden increases my demand for money, right? Because everybody has a demand for money. Like, you have a certain lifestyle that you have grown accustomed to, and and so that's your minimum threshold. That's your minimum requirement for living. The real wealth comes from being able to continue to jack this up while keeping this low, of course. But in those instances when you do want to buy the sweet ride, because I'm not like people think of me as an aesthetic and I am to a large degree. But if I want to buy a sick ass home gym, which I do have, I would rather that money come from new stuff. Either you can do extra stuff to get the thing, or I think the 201 version of this is how do I use the thing to make even more money? And so part of the reason we spun up the advisory services was actually like me fulfilling a promise to Layla of like, okay, we'll find a way to use the building to generate income to cover the building. Because I do want to have this sick home gym, which will be a complete and other waste of space besides the fact that I think it's dope. And why have money if you can't spend it and you can't take it with you anyways? And so this may seem like a wild departure from some of the content that I make, but this is obviously targeted someone who probably has a little bit more, a little bit further along. If you are broke, don't do that. If you're broke, just focus on the new money stuff, right? But if you have some, I think that you stay ahead of your spending by not increasing your lifestyle relative to your income, but by increasing the new money relative to the new purchase, which typically are defined. And so it doesn't have to be forever. So. So if you're like, well, I don't want to work overtime all the time, fine, then you can just work overtime for a year, work overtime for six months, work overtime for a month so that you can afford the thing. And I think it's always when you think about it like that is I have to take, I have to add this on top. I don't touch my flows, right? I don't touch my income flow. And I don't want to create a liability with the debt. And savings is like, that's my nut, right? I don't want to use up my nest egg, right? So I got to go make it. And if this has just been this behavior, this that I have observed from the people that I know that are the wealthiest and the people who enjoy their money the most, and I think that's the thing, is it's one thing to have money because I know plenty of people who obviously have money, but some of them, I don't think they enjoy their money and it's because they're always, they're like afraid. And there's some of this whole idea of like you have to be abundant and all that stuff. I know tons of people who are super scarcity mindset and they have a lot of money because they just don't like spending it. And so like there's something to be said for that. But that's if you make money, the goal is and if you do make money the goal, then by all means don't spend it because then money is the goal. So fine, but if money isn't your goal, then the people that I've seen that are the happiest that I think spend money. Well, they use money like a tool is they use an expense or use something that they know they're going to consume. They know it's not a good investment and they say fine, I know it's not a good investment. So I'm not going to use my income to buy it. I'm going to use something that I already have that I'm underutilizing, which might be just your time. You might take on a new client project, you might take on some one on one services that you wouldn't normally take on. Right? Those types of things can be defined, period. Because you're like, well it's not going to increase the enterprise value of the business. It's not going to be some sellable asset. But I do want this thing and I don't want to touch how my existing infrastructure functions. It's just one behavior. And I think many of you like, if you're like me, like I don't like, I don't like spending money and I've tried to learn my way out of it, which is I don't like spending money. That's like my main money. It's like my core money. It's the money comes in from businesses, distributions. That's my main thing. But if I want to buy something crazy, then I've just got to be willing to do something crazy for it. And the weirdest thing happens is that I get almost more excited about making that money than the money that I make every single day because I know that that money's going towards this specific thing. So I'm like, I'm building a home gym right now, I'm buying equipment right now. Like that's my, as I'm doing this, I'm almost like more joyful of about doing the work Because I know exactly what it's going towards. And so just a little behavior that I've picked up over the years, something that I've observed in other people that I've used myself, that has been wildly valuable. And if you have that, you know, if you've got two machines that you could buy for your business, you know, and one's a little bit sweeter than the other, and you can't really justify the expense, then just take the Delta and be like, I'm gonna go make that myself. Cause I think it's sicker. And I have never been disappointed about doing that. Not once have I done that and been like, this was a mistake. And the thing is that I bought plenty of things that I that I think were expensive, right? But I can minimize my regret by saying I'm not using money that I otherwise wouldn't use somewhere else. And so that's my little money behavior that has served me very well, and I hope it serves you well. And if you like this one little framework, I have 28 frameworks that I teach in 22 minutes on how to reprogram, how to think about money, enjoy.
