MBA900 How Much Money Do You Need?

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Ready to Save on New Tech it's time for Dell Tech Day's annual sales event celebrating our customers with fantastic deals and benefits. Perks include Dell Rewards, free shipping, premium Support and more. PCs like the Dell 14 with Intel Core Ultra processors will help you do more faster and with a premium suite of monitors and accessories, you can upgrade your whole setup with amazing savings. Visit Dell.com deals. Welcome to the Hundred Dollar MBA show, the business podcast that's 900 episodes strong, bringing you practical business lessons. Wow. Episode 900 pretty. Pretty incredible. As always, I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of the Hundred Dollar MBA and webinar Ninja. I want to start this episode by thanking you, our listeners, for being a part of the show. You are the reason why we do this show to help you build your business. And as the show grows, it motivates us to keep on recording new episodes. And that's how we got to episode 900. In episode 900, we're going to cover a very important topic, an exercise I believe that will really help shape your life and your business. And this exercise addresses the question, how much money do you need? Seriously, this is a very important question to answer and many of us don't take the time to sit down and answer it. When you answer this question, how much money you need, it really allows you to shape the business you actually need or want. I'm going to go through an exercise that's going to take you about an hour, but it's going to be an hour well spent because you'll have a clear vision of what kind of business you need to build to have the life you want. And in most cases, you're surprised by the answer. Many of us, when we think about our life and how much money we need to live a life that we want, or even dreaming about, these numbers are very nebulous. We don't really know how much money we're talking about here. We might think we need a multimillion dollar business to live that lifestyle, when in fact you actually don't, then take my advice, you need to shape your business based on the way you want to live. A large business is not necessarily going to equate to a great life. We get into all the details and all the instructions on how to answer this very important question, how to get your number so you know what you're building for. So let's get into it. Let's get down to business. So in today's lesson, we're gonna be talking about your own personal number, your own personal finances. How much money do you need to actually take home every month to live the life you want? Now, the reason why I'm emphasizing this is because this is separate from your, you know, profits and losses in your actual business. If you're a small business or a solopreneur, this is really simple because you. You have your revenue and you have your expenses, and whatever the difference is is your profit or loss. So hopefully it's a profit. And that profit really is what you take home, right? Factoring in the fact that you are already allocating money to reinvest into the business in your actual costs. But this is an exercise that is really easy to do, especially if you have a small business with not a lot of moving parts. Once your business starts growing, this gets a little bit more complicated. But it's still important for you to do this exercise. Why more complicated? Because you just have more expenses, you have more employees. You might people that have stakes in the company. You might have investors that are looking for a return. You need to consider all these factors. But if you're a small business, if you're a solopreneur, if you're a freelancer, this makes your life a whole lot easier when it comes to really nailing your number. Now, regardless of how large your business is, this exercise is going to help, you know, that I need to take home this amount of money to be content, right? Whether that's my salary, whether that's my profit share, or the profit I get back after all my expenses in my business. So what you're going to do is you're going to write down all your expenses, but you're going to write your expenses in annual format. So if your rent is $2,000, for example, a month, then $24,000 is your annual rent expense. It's just going to be easier for you to calculate things annually and then divide later on by 12, because some things are going to be annual, some things are going to be monthly, really just going to make your life a whole lot easier. I like to do this in two steps. The first step is you're actually going to write down all your current expenses. Your rent, your utilities, you know, if you have a car payment, groceries, if you have allotted vacations every year, Put that down. Expenses like clothing or personal shopping, Christmas gifts, you have to include as much as you can. And if you're not sure, go on the high end, overestimate. You're going to sit down. It's going to take you about 10, 15 minutes to really jot down all your expenses in annual format. Now, remember, this is your own personal expenses, not business expenses. You know, don't include, you know, the. The cost of a new laptop, for example, or the rent for your office. That is going to be separate in your business finances. We're talking about your own personal spending money, the money that you need to spend to cover your bases, to cover all your expenses for your life. So once you write down all your expenses and you have a total number of how much you need to make every year to cover the expenses, some people are going to be really surprised. You're going to be like, okay, so all my expenses total up to, let's say, for example, $80,000. You might be lower than you're expecting. You might be thinking, wow, I thought my expenses were a lot higher. You may want to double check your numbers, may want to double check if you actually included all your expenses. And a good exercise. If you're not sure is go open up your bank app on your phone and take a look at all the expenses you have on a monthly basis, whether it's Netflix, whether it's, you know, a monthly membership to a gym that you forgot about. Include all the nitty gritty. Now, once you've done that, what you're gonna do now is you're gonna just open up a clean sheet of paper, forget about your current expenses, forget about all that stuff, and you're gonna start brand new, as if you don't have any of the expenses, and you're gonna write down how much things would cost for the life you wanna have. Now, this is not some sort of dream exercise. You're really actually writing down, you know, how much would the house I wanna live in cost? How much would the car I wanna drive cost? If I'm gonna be, you know, financing or releasing it? This is an actual important exercise. Why? Because a lot of. And if you could solve the money equation in your life, you're going to reduce a lot of stress. It doesn't solve all your problems. It doesn't solve all your problems, of course, but it does make things a lot easier in your life. Wealthy people will tell you this. Yes, there are some downsides to having money or being, you know, wealthy, but poverty is a whole lot Harder. So by doing this, you're really trying to reduce the stress around your life when it comes to finance. So we're going to really take this seriously. This is not some sort of, like, pie in the sky exercise. You're gonna write down exactly, hey, I currently live like this. I'm pretty content where I wanna go, where do I wanna go in the next couple years? What does that look like? And really, just put down everything you want. If you wanna go on two vacations a year, how much are you gonna be spending on these vacations? Are you gonna be flying business class? Are you gonna be going to exotic locations where the hotel night is, you know, 500, $600,000 a night? Whatever you want. If that's not something you want, choose something else. You might be somebody who loves cooking and would love to install something, some professional equipment in your kitchen so you can have a better, you know, cooking station. And that's gonna cost you some money. So the point is just to jot down everything that you want to have in your future life. Regular expenses, you know, and just write them down. And then you're obviously gonna put the annual price again, again, line by line. If you need some help, look at your banking app, see what you're spending already. Just to remind you of some of the expenses that you normally spend on. You may wanna take those expenses to the next level or like a better gym or better classes. If that's something you do, just write it down and put the annual price, then total them up. You might be very surprised at the difference of the two numbers. The first number, where your current expenses total up for the year, and your dream number. A lot of people are just shocked at how close those numbers are. They're not even. People might think, oh, it's going to total up to like a million dollars a year. But in fact, it totals up to maybe $150,000 a year. Now, okay, I recognize $150,000 a year is not chump change or whatever that number might be, but it's definitely attainable. So now what? I want to take your dream number, the number that you want to achieve. Let's say it's $150,000. And you're gonna divide that by 12, 12 months. So that equals $12,500 a month. You gotta take home that amount of money every month in order for you to fulfill this goal. Take a look at how much you're actually making or taking home now. What's the difference? Now we're gonna jump into your business Okay, I want you to take a look at how much money you make your profit at the end of every month. That's after all expenses. Okay? So let's say that Profit number is $8,000. Okay? You have $8,000 after all expenses. I want you to write down that number so you have it handy. That's how much money you make every month. Now I want you to take a look at how many sales you make every month. Whether they're reoccurring sales or one off sales, SaaS business or E commerce business, it doesn't matter. How many sales did it take for you to get to that profit number of 8,000? For the sake of simplicity to say you made 100 sales, that means you made $80 on each sale. So 100 sales gets you $8,000. So you make an average again of $80,000 a sale. What was that dream number a month? We said it was 12,500 in our example. What we're going to do is we're going to divide 12,500 into 80 to know how many sales we need to hit our number. And in our case, 12,500 divided by 80 is, is 156.25. So let's just round up and say 157 sales. You need 157 sales in order to hit your dream number again in this example. But hey, you're going to have to take your business from 100 sales a month to 157amonth. Now you don't have to do that from one month to the next. If you did, that's awesome. But if you increase your sales by 5 in this example, which is also 5%, the next month you'll make 105. The next month you'll make a little over 110. And before the end of the year, 12 months, or you'll hit your target number. So within a year you go from your current number to your dream number. Pretty incredible right? Now obviously all these numbers will be different for you, different for me. Depending on what you spend on, depending on how much you're currently making versus what you're making now. But in my example, I literally doubled my number. So it was 80 and now 80, it was 150. So it was a pretty big jump. But when I broke it down to how much money, how much profit I make on each sale, how many sales am I making now? How many sales do I need to make to hit, My number became more attainable. But most of us don't do the math. And I always say, math is your friend. Math really helps you make sense of all these nibbless thoughts. It really makes you feel like you're empowered to really take control of what you want. This is why I think this exercise is so important, so powerful, because it really just breaks it down to something that you can comprehend, gives you a goal. It says, hey, your sales are this much. You need to make this amount of sales every month in order for you to hit your number. You don't have to do it all at once. You can just increase it every month. And hey, momentum is a powerful thing, and you might even reach that number before you even expect. Now, a few caveats. A few things to look out for your expenses in your business will affect your profits, obviously, right? So you gotta make sure your expenses are in check. So if you are investing into your business, meaning you're gonna be spending more money in your business, whether it's a new hire, whether it's a new service, whether it's something you're using that's costing you money to try to generate more sales, whether it's like Facebook ads, for example, you gotta make sure that's a profitable investment. You gotta make sure your profits are not suffering because of that investment. So you gotta evaluate every month how those changes of expenses are affecting your bottom line. This is why I always encourage to run a simple business, keep things simple. The simpler your business is, the easier it is for you to understand it, to hit your goals, to be profitable. The more complicated things get, the murkier the waters get, the harder it is for you to really nail down what you want and to reach those numbers. I love businesses that have very simple pricing, that have very simple offerings, simple policies. Whether you offer a free trial, whether you offer no refunds, it's just clear. Everybody knows where you stand and you know what to expect. One of the reasons why a lot of people build iPhone apps is that the app store has no refunds. They know that if they sell a certain amount of apps, you know, get enough downloads, they're going to make x amount of money. There's no question about it. Because no one's going to refund, because they can't. Simple, easy, clean. Keep your business simple and the way you offer things in a simple way so you can have more predictable income. Now that we have all the instructions for that exercise that you're going to do, of course you're going to do it right? Let's talk a little bit about knowing what you really want. So before you actually write down, hey, I want X, and this is how much it's gonna cost, and I'm gonna put this in my dream list, and I'm gonna add that in my total. You wanna really evaluate what's on that list, because if you could trim it, it's gonna be a whole lot easier for you to hit that number because there'll be less expenses, of course. So one of the things I like to do is really ask yourself, what is really important to you in your life? What do you really enjoy doing? How do you like to live your life? Let me give you some examples. There are some people that just absolutely love traveling. They love traveling, they love seeing the world, they love experiencing new cultures, and they really like to travel to the point where maybe they're traveling six months out of the year, and maybe that's the reason why they started an online business, is so they can be flexible and be able to run their business from wherever they are. So if that's the case, if they're away six months out of the year, if they really enjoy travel, and that's really something that they really enjoy, then that's really where they're going to spend their money. They may want to travel in style, where they're going to really nice locations or really nice hotels, or flying business class or whatever it is. It's a really high priority for them, and that's something that really gives them a lot of joy. So they're going to spend a lot of money on that. But do they really need to spend a whole lot of money? But somebody like that that really values travel, do they need to really have a lot of expenses when it comes to their home? Do they need a huge home, which they're not even there half the year? Yeah, you can Airbnb it and you can do all that kind of stuff. But do you really need it? It's a huge expense. Or are you fine with an apartment? Do you need an expensive place in the heart of the city? Can you be a little bit outside the city, still accessible to the city, and save some money that way? Same thing with a car. Do you need a car the whole year you know where you live? Transit is great. Maybe if you do live in the city, you don't need a car. You can save your expenses and, you know, don't have a car at all. Use a subway, use buses, use whatever it is, or walk the year you're not home. So you might as well save some money in these areas. You see how we have to pinpoint what's really important to us. In this case, this person's really in love with travel, will invest a lot of money in having the best experiences when they're traveling. Fine with having a modest place at home. Again, we're coming from a place of privilege. Everybody who has these options is coming from a place of privilege. I mean, come on, this is incredible. You even have this choice in the first place. We're all talking about still having a roof over our heads and, you know, eating our meals and having some security in our life. So these are really great choices to make. But you can really hit your number, your dream number if you prioritize what you really love and not spend money everywhere. Hey, and you might be the opposite. You may not enjoy travel as much. Heck, maybe for you, a vacation is just some downtime. And even if you just travel locally within your country just to have a little downtime by the beach or by a lake, you're fine with that. And you maybe don't need that much time off. Maybe you would like to have, you know, a few weeks out of the year and you're a real homebody and maybe you want a big house, maybe you want a farm. And that's where you invest your money and that's where you spend your money. So really ask yourself what you want. It's gonna be a whole lot easier when you just focus on what's important and not say everything's important.

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Guys, to wrap up today's lesson, I really encourage you to do this exercise to get your numbers. This makes your life a whole lot easier. And then break it down to figure out how many sales you need to hit those numbers. Now, obviously, if a little bit more complicated, a little bit bigger, where not all your profits are yours or you take home, you will have to modify that. But hey, you ultimately will have a take home number. How much money you make that could be yours at the end of the day, and that's where you're going to Figure out how you need to increase that via sales so you can hit your dream number. A word of caution. A lot of people don't do this exercise because they kind of feel like this is just pie in the sky dreaming. Like I'm just dreaming here. I don't really feel comfortable with this. And what's the point? Well, the point is, is that you're trying to take things out of your head and onto paper and really quantify them with a dollar value. How much does this cost to have this thing in my head that I want to have this life I want? You need to get practical, really, that's what you need to do. And it's one of those things you just gotta do. You just gotta get it out of your system and actually do the exercise to really see the benefit. And so what if you dream a little bit and think about the things you want in your life? I mean, what are you working for? To have a better life, Right? To enjoy your life. Yes. You want to make a difference in this world. Yes, you want to build a great company with great teammates, but you want to reap the benefits as well. You want to enjoy your life. You want to have a life that you feel comfortable in. So do yourself a favor and do the exercise. And remember, not everything's important. Not everything is a priority in your life. What do you really value in your life? Focus on that. Go big time on that. And if there's some areas that are not so important in your life or are less important in your life, you can save up on this. You don't have to spend so much on those things. This is a concept that I picked up from Ramit Sethi, who's a great personal finance blogger as well as course maker and best selling author of I will teach you to be rich, where you really spend money on the things you care about, but save on the things that are not so important to you. All right, that wraps up today's lesson. I hope you enjoyed episode 900. Heavy topic. We wanted to make sure we cover it because it's so important. We got a lot of great topics coming in upcoming episodes you don't want to miss. You want to make sure you hit subscribe. We're going to be talking about why I quit social media. Five businesses you can start today. Exploring the option of not selling your products during the holidays. Giving yourself some time to enjoy your family and life, but at the same time still make money before you actually close down. We talk about all that in our upcoming episodes. Hit subscribe so you don't miss a beat. All right, that's it for me today, guys. But before I go, I want to leave you with this. This exercise I described today is something you want to do every couple of years. You're going to change, you're going to grow, you're going to hit your goals, you're going to want to reevaluate. Maybe you're spending money on things you don't want or don't care about anymore. Maybe you have some new goals which will require you to spend some money. Maybe you want to learn a new musical instrument, so you need to spend some money on some lessons. That's just an example. But the point here is that this is not a once and done get comfortable with it. You're going to be doing it every year or two, depending on how quickly you achieve your goals. And please pass on this concept, this exercise, to your friends, your family. Let them know about this episode and teach them what you learned today. It's a great way for you to really digest and comprehend what you learned by teaching others. All right, I'll check you in the next episode. Take care. Gas snacks, tolls. This trip is draining my wallet. Yeah, but we'll be with family. You're in a good mood. What's your deal? What's my deal? I saved at Metro with no activation fees and I got one line of 5G for just $25 per month. Kept the phone I love and a 5 year price guarantee on my top tuxt and data detour to Metro.

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