how to break free of scarcity and fear around money

Summary

Emily and I started our marriage $100,000 in debt. minimum payments ate over 50% of my take-home as a junior officer. we used the Dave Ramsey approach and clawed our way out over about three years. it worked, and it had a side effect, we developed a brutal scarcity mindset around money that lingered long after the debt was gone.

1. step one to break out, spend money. strategically. on purpose. upgrade your life in places that matter and let yourself enjoy it. nobody’s coming to give you permission, so I’m giving it to you. if you have the cash and the math works, do the thing.

2. step two, build reserves on top of reserves. before every upgrade. our rental properties carry three months of reserves each to cover the mortgage through a vacancy. personal finance carries a much longer runway. if I’m about to take on a bigger mortgage, the cash runway is in place first. then I sign.

3. step three, have a worst-case-scenario plan. I call it the shrinkability plan. if every income stream dried up tomorrow, where do we live, what do I do for work, how does the family adjust. Emily knows the plan and is fine with it. that single conversation removed an entire category of fear.

4. dying with $20 million in a savings account, driving a beater, AC that doesn’t work, that’s not admirable. that’s not knowing what to do with money. life is short. you might be dead in two weeks. life insurance covers the family if you go. you don’t squirrel your one life away to leave a nest egg.

5. you can’t do any of this without value. you have to be good at what you do, you have to bring real value to customers, the business has to actually work. that’s how the money keeps coming. then you can spend it without panic.

if doing the work to earn it and the work to manage it sounds like too much, try harder.

Transcript

$100,000 in debt and broke

The most impactful business is the business that genuinely improves another human, a better human business. And to grow a business like this, you have to continually improve yourself. This podcast is a documentation of that thesis, scaling businesses and also personal growth. My goal is for you to shortcut this journey.

So if you’re ready to try hard, subscribe. If you like what you’re hearing, please share and enjoy. So how can we break free from this scarcity mindset, this fear based mindset around finances and actually live our lives in abundance and be okay with spending money and live happily ever after? This is the Better Human Business Podcast.

I’m Jerred Moon. And I want to talk to you about finance a little bit today. Personal finance. When I’ve done some of these podcasts in the past, I’ve gotten some great feedback on them. So I’m going to do one today and I got to give you a little backstory first. When Emily and I, Emily is my wife, when we first got married, we were $100,000 in debt, which was a ton of money.

It’s a ton of money now. It was a ton of money back then. And it was very stressful because I made very little money and Emily did not work at that time and it was just stressful. Our debt payments, our minimum debt payments were I think over 50% of my take home income and we had no idea how we were going to pay this money off.

And it wasn’t like I hit it big as an entrepreneur and we paid off all this debt. No. What we did was the Dave Ramsey approach. So you can go familiarize yourself with Dave Ramsey, but be sure you listen to this episode all the way through before you do. But we used a lot of his methodology to get out of debt.

So we budgeted, we wouldn’t spend money, we didn’t have cable, we didn’t have Netflix, we wouldn’t go on vacation, we didn’t do anything and we lived so minimally. We did that. It only took about three years, maybe a little bit more than that. We were able to pay off $100,000 in debt and it was awesome.

A lot of great things came from that one, being debt free of that kind of debt. Also a lot of financial discipline and then also a lot of marital financial discipline. I know that a lot of couples struggle spouse to spouse with finances. One may look at finances one way, the other might look at it a different way, so on and so forth.

the dave ramsey side effect

I know a lot of marriages end in divorce because of finances and I know that won’t happen to Emily and I because of where we started with no money, $100,000 in debt and we worked as a team together to get out of debt. And so we know, I know how she works, she knows how I work when it comes to finances and so a lot of good came out of it, a lot of great things for a relationship and being debt free, all that good stuff.

But the bad that came out of it and this is the asterisk to working through Dave Ramsey stuff is it gave us a ton of scarcity mindset and fear based mindset around finances and we would never spend any money on anything, it almost didn’t matter how much money we had sitting in our bank account, we were just scared.

We had so much scarcity around finances and everything else and I don’t necessarily blame Dave Ramsey, like I think he helps a lot of people get out of debt, but I just think that following that methodology and being really strict, it can get you to an outcome but every outcome has consequences. If you’re on a calorie restricted diet for three years, you can start to jack with your hormones, you can start to jack with your immune system, a lot of bad things can happen if you chase a desired outcome at all costs and it’s no different with your finances.

So that’s where we ended up, just like this scarcity mindset, fear based mindset, even when we were making more money and so how do you break free from that? I feel like I’ve really broken free from that and it was really two things for us or three things. One is actually spending money and I know that sounds crazy, wait, so you get out of the fear based scarcity mindset by spending money and the answer is yes.

If you can strategically upgrade your life and I don’t mean go spend all your money on new houses and new cars, but if you can strategically upgrade your life and spend money wisely in the process and actually spend it though, just be okay spending it and realizing more money will come, like you’ll earn more money and you can spend it.

Again, being financially smart, invest some, like you have to have your own, what are the percentages you feel comfortable with, but you ultimately have to set aside some money, some percentage of money that you’re just like okay, I’m willing to spend all this money right here, this is okay to spend money.

Now if you’re in the situation where you’re just a mess with your finances and like you just get to the end of the month and there’s no money left, you need to go do Dave Ramsey stuff. I’m talking about if you have money, but you’re just like unwilling to spend it, you have the scarcity and fear based mindset.

spend money strategically

If you’re in that situation, one, spend it, two, spend it strategically. The second thing, making sure that you always have some sort of a reserve and now we’ve gotten to the point where our reserves have reserves. If I buy a new investment property in real estate, we have that property, but I also make sure that in the bank account that manages real estate, that property by itself has at least three months of reserves to where the reserves could pay for that property’s mortgage if we were to have a vacancy and that’s for every single property.

We do that. We make sure that there’s three months reserve and that’s just at the base level. For personal finance, we like a much longer runway. So even if I’m going to upgrade my life, if I’m like, okay, we’re getting new cars, we’re getting a new house, we’re getting all this stuff, that’s all fine, but I would never do it until I had the reserve runway first.

So if I’m like going to upgrade my mortgage cost, then I’m going to make sure that I have still that long runway reserve of cash to be able to weather the storm if I needed to for six, eight, 12 months, something like that. So that’s the second thing, making sure that you always have a reserve before you make a decision.

And again, this is just getting us more comfortable with, okay, maybe I can buy that thing and I don’t have to just live in this scarcity mindset forever because I think somehow it’s become admirable, this like secret millionaire, right? I’m not saying you have to go flaunt your money, but if you die with $20 million and you’re in a savings account and you drive like this crappy car and this crappy house like where the AC doesn’t work and you can’t like open the door on your car without jiggling it like that, I don’t see how that’s admirable.

I feel like somehow like people have made that as like an admirable thing. To me, that’s stupidity. You didn’t know what to do with your money. You like didn’t know how to invest your money so it could pay you for the rest of your life and so you wouldn’t have to worry about saving every nickel and dime.

So anyway, I don’t wanna go off on a tangent, but that’s not admirable. You wanna be in a position where you can spend money, but you just don’t wanna do it to where it’s all crap. I spend all my money like I’m living at my means or beyond my means. You wanna make sure you always have that reserve.

So that’s the second thing. If you’re gonna start spending money, that’s step one. Cool, go do it. Step two, if you’re gonna upgrade your life in any capacity, making sure that you have the runway reserve to be able to support the new things that you are buying or getting into. Now the third thing for me is basically a backup plan.

reserves on top of reserves

This is like a plan Z, right? And I’ve talked with Emily through this stuff and I just have to make sure she’s okay with like my worst case scenario plan, because I’m a worst case scenario guy and we have rental properties and like we’re, anyway, we have a lot of other things going on, but I’m like, Hey, if something happened in the world to where my, all my income streams are cut off tomorrow, here’s the plan that we would work in reverse.

Here’s where our family would live. Here’s what I might end up doing for work. All that, like all that’s planned out and it might sound crazy to some people, but me personally, I need that plan. I call it the shrink ability plan. Like how much can I shrink if things were to get really bad, really fast?

And again, that would have to be like the world’s collapsing type stuff. But I have that plan. Emily’s cool with that plan, right? Like even the worst case scenario, we know what we’re doing. We know where we’re going. You know what, where we’re going to live, all those kinds of things. It’s at least mapped out.

Now I feel okay making decisions about upgrading my life or doing other things, right? Because I don’t want to live in a scarcity, fear-based mindset with money for the rest of my life because I could very well be dead in two weeks. And will I have been happy that I squirreled away all this money, didn’t travel, didn’t buy anything, didn’t upgrade my life, didn’t, no, I wouldn’t.

And if you’re like, oh, you could leave money to your wife and kids. That’s what life insurance is for. I have a ton of life insurance. If I die, my family’s taken care of. I made sure of that with life insurance, not with me squirreling away a nest egg that I hope will be enough for them. Life insurance will do that.

So that’s how we have gotten away from the scarcity and fear-based money about mindset is one, forcing ourselves to spend money when we have it, like when it’s strategic. And just a quick example of that is like taking a slightly more expensive vacation than we might feel comfortable with, but we save for, we have the cash and we’re like, okay, we can actually do it.

It’s more than we would like to spend, but ultimately we can afford it and it’s fine. So we’ll go do that thing. And then after you do it, it’s like working out, expand your threshold for, okay, like I can do this. And then you can work harder to earn money and do that again. So it gives you something to work towards.

the shrinkability plan

month reserve for everything in your life, whether it’s rental property, whether you’re taking on a new debt, whether that’s a new house or new car or whatever, just making sure that you always have this reserve with no matter what your decision is, you have the reserve first, then you make the decision because it’s stupid when you’re like, okay, I want to go buy a new car and I’m going to go buy this car, but it’s going to take every dollar in my checking account to buy it.

And then I hope and I can afford the monthly paycheck. You can upgrade and then you can, if you can’t buy it in cash, you can upgrade with a loan, but then making sure you have at least three to six months of reserve that for that car payment alone, then you can go make it right. Okay. I have the reserves for this.

Then I buy it. So you’re just getting it a lot more strategic decision when you’re upgrading your life. And then for me having a worst case scenario plan and having the love of my life being okay with what that is, Hey, just so you know, if shit hits the fan, here’s the backup. And she’s like, yeah, cool.

Sounds good. But let’s hope it doesn’t happen, but you know what? Let’s keep living life. And if it does, we’ll work that plan. So those three things have really helped me break free of that scarcity mindset. And I don’t have a fear based mindset around money. Now I feel that stuff creeping in on me sometimes, but I always go back to, is this reality?

Do I have everything in place that I’m talking about now on this podcast? I do. Okay, cool. We don’t have to be pretending to worry about that stuff and we don’t need to worry about it, but it does all come back to you. If you want to do any of this stuff, getting good at your job, being a good entrepreneur, bringing a ton of value to your customers, making sure your customers are happy, taking care of getting amazing results.

If you can do all those things, then you can go through this process and start upgrading your life. If you don’t want to do all that, maybe you should just try a little bit. Yeah.