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This business coaching lesson provides financial tips to gaining financial freedom.

Results-Focused Training, Tools, and Workshops from Expert Business Coaches.

Featured Coaching Excerpt - Notes & Transcript, Part 1
  • Lesson Nugget: Most people haven't learned how to properly manage their finances and often associate money with negative emotions.
  • "Most of the things we buy are wants. And we call them needs, but they're wants." -Dave Ramsey
  • Accounting Principles: 2. Start Buying Assets and Stop Buying Liabilities
  • Accounting Principles: 1. Waking Up To Reality
  • Lesson Nugget: When you purchase something that doesn't make you money you have added a liability. When you buy something that will make you money you have added an asset.
  • "For people 10 years away from retirement, the median savings is $12,000. Of the people between 55 and 64, one third haven't saved anything for retirement." - USATODAY - 10/13

learn business practices like lynda.com, time management

[INTRO MUSIC PLAYING]

 

[DJ SPINNING HOP HOP MUSIC]

-My name is Clay Clark, and I'm the CEO of Thrive15.com, the online platform with trainings on marketing, time management, sales and more. Today we are joined with Tim Redmond. This guy grew a company from two employees to 450 employees, and he ended up overseeing the team where they actually sold the business to TurboTax back in the day, the guys from Intuit.

And he's going to be teaching us specifically this financial planning 101, the road to riches. He's going to teach us some specific principles that we could all apply in our own life and business so that we can financially get on the right path to move from just surviving to thriving.

Remember, at Thrive15.com, we all believe that knowledge without application is absolutely meaningless. So as you're watching today's episode, make sure to ask yourself, hey, self. What could I do to uniquely apply these principles in my own life and business? Otherwise today's episode may be more meaningless than becoming an expert in the field of twerking.

Tim Redmond. Thank you for being here, sir.

-Yeah. It's great to be here again, Clay. I am excited about-- (ENTHUSIASTICALLY) I am excited about this topic.

-Well, I think that financial planning and accounting and these sorts of things are things that a lot of people maybe don't get excited about, but that we have to know. And so we're talking specifically today about financial planning 101, getting on the road to riches.

So here is the idea. First principle is waking up to reality. Tim, being completely financially in the hole is something that most people are very familiar with. In fact, on October 21, "USA Today" had an article where they said-- this is crazy statistics, here-- but they said that for people that are 10 years away from retirement, the median savings is $12,000. So people who are 10 years away from retirement, they only have $12,000 saved.

TIM: Wow.

-And one third of the people between 55 and 64 haven't saved anything. So in your mind, what is going on where most people are living completely in the toilet, financially? What is happening?

-Well, just a little bit of background on where I'm going to come from, because I think as I began to talk, if people can know a little bit of my background-- I am a CPA. And so don't turn me off right now because I said that. Because we know what a CPA stands for, right?

-Uhh--

-"Constant Pain in the Abdomen."

-Abdomen. Abdominal region.

-Or another body part. But what I have done is I'm really not active as a CPA, per se. But I'm active in business coaching and teaching clients financials, teaching them how to read it. How to have a healthy relationship with money and cash is so, so important.

So why do people mess up so much in this area? Well, I think there's just a lack of knowledge of what to do. And another thing is there's such negativity that they see with finances that they almost run the other way. They've seen their parents fight over it or get divorced over it. They've seen business partners betray them. And so they've got a lot of emotion on this thing, and it's almost like it's this radioactive thing that they know they ought to learn more about it, but it's like this radioactive thing that's created so much pain in their lives.

-So do you think most people just don't look at their financial statements until they're 55 or 65, or what's going on?

-I think there's a number of reasons why people are in such a mess financially. I think, first of all, the way they were raised, they really haven't learned about managing finances. They haven't learned it from their parents.

And what they've seen is not only lack of knowledge, but they've seen a lot of pain attached to cash and money and shortages. Their parents fight about it all the time. Their parents may have gotten a divorce over it. A business partner may have betrayed the mom or dad.

And so they hear about all this negativity about finances, and so what they want to do is they want to say, listen. That's a really painful area. I don't want to learn about it. I don't want to touch it. I want to stay away from it, but hey. I want this. I want this. We're very impulsive, compulsive. There's no discipline. And so we live in the moment, and we find ourselves on less than $12,000 and we're just 20 years from dying.

-OK. Well, principle number two, here. Buying assets and stop buying liabilities. So principal one, you just need to wake up to the reality. Now, the second is, we got to start buying assets and stop buying liabilities.

Now Tim, Dave Ramsey who-- I love this guy. He's a best-selling author, financial planner, radio show host. Just a great guy. He says, most of the things we buy are wants, and we call them needs. But they're wants. So Tim, in your mind, what kinds of things are most of us confusing as needs, but they're really wants? Because you coach a lot of clients. You see them just go through massive amounts of cash.

-I look at it, there's two kinds of things you buy. One of the things you buy, you buy it to make you money. So if you want to buy a computer because you're a writer, or you're a graphic artist, or you want to do something on that computer, you want to do data management or analysis or whatever, you can do that. Or, you can buy a computer-- same thing-- you can buy a computer and spend the whole day playing on Facebook and surfing the internet and doing nothing to make money.

And so what people do, Clay, is we buy a bunch of stuff-- clothes, which I'm glad you're wearing clothes now. I mean, that's a good thing.

-Yeah, it's a new-- it's a good thing.

-We have to buy clothes and we can say that's a need. But when we go in to buying things with money we really don't have, it's money we're going to make some day. Because I know I'm going to get a paycheck on Friday, so I might as well spend that money now because I need that new dress, or that new suit, or that new shirt, or that these are the coolest jeans, and they're only $350,

CLAY: Only $350?

-They're normally $500. I mean. I'm saving $150. And so it always makes me nervous when my wife tells me how much she saved. That's like half the equation. Well, how much did you spend?

So anyway, the idea here is when we buy stuff that doesn't make us money, those are expenses. When we buy stuff that we can make money with it, those are the good kind of assets. And I think that's what Dave Ramsey and other people are making that

differentiation.

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Featured Coaching Excerpt - Notes & Transcript, Part 2
  • Lesson Nugget: Purchasing a car for non-business related reasons that requires a monthly payment is a liability, not an asset.
  • Lesson Nugget: It's simple: if something cost you money and doesn't generate you any money, it's a liability.
  • "During hard times assets feed you, and liabilities eat you. Liabilities are anything that take money out of your pocket, while assets are anything that bring money into your pocket." - Robert Kiyosaki
  • Ask Yourself: Have I developed a habit of luxury items for necessities?

[MUSIC PLAYING]

-Well, Robert Kiyosaki to kind of hammer home your report, he says, "During hard times assets will feed you, and liabilities eat you. Liabilities are anything take money out of your pocket," like you said there, and then assets are anything that brings money in to your pocket.

-That's good.

-So let's kind of get right down to the brass tacks here, get down to the bottom line. Let's pretended that I'm one of your consulting clients, OK? And I am confusing assets versus liabilities. And we'll just kind of make a little game here, OK?

-Yeah, yeah, absolutely.

-So I'm gonna throw out an item, and you tell me if this is an asset or a liability. Again, an asset being something that puts money in my pocket, a liability being something that takes money out. So here we go.

Coach, can I buy a car?

-You certainly can buy a car. What are you gonna use the car for?

-My wife would like another car. Something a little bigger, something a little newer, something a little safer, 2014.

-Yeah, all right, so when you buy a car and it's just because you want the newest model, and--

-It's safer.

---it's safer. We can have all kinds of things that justify us. That is actually more of a liability unless you're paying for it by cash that you've already got in your back pocket.

-And that's a liability, because it's taken money out of my pocket every month.

-It's taking money out of your pocket every month. Now if you're buying a car, because you run a taxi service, now we're talking about that being an asset.

-OK, here we go. What about if I buy a cellphone where I have a cellphone that works, I can make calls, I can talk to people. But now I'm upgrading to the super tricked out version where it's got every bell and whistle possible.

TIM REDMOND: Yeah, does it actually make phone calls?

CLAY CLARK: Yeah. I go from about $60 a month to about $185 a month, because I've got this unbelievable plan. I've got the Wi-Fi, I got the hot spot, I got the bam.

-Yeah, so that would be a big liability unless your business, you're going to make money on those new features, and you're showing clients different aspects of that new feature to say, you see how this thinga ma jigger works? Bam!

-What if I use my phone for business and I can write it off?

TIM REDMOND: Well, do you actually use it to generate money?

CLAY CLARK: No.

-That's the whole thing. If you don't use it to generate money, we're loading up liabilities. We're load up. These things are just going to drain our cash.

CLAY CLARK: I feel like a lot of business owners say, though, to you all the time, they say, but I can write it off.

TIM REDMOND: You can write it off.

-What does that mean?

TIM REDMOND: And too, we get into financial challenges, Clay, because we're compulsive in our decision making. We turn something that's just a desire, a luxury item, and we say, no, that's not a luxury item, that's a need. I have to have that.

So that compulsion, what happens is it causes our brain to justify it. I can write it off, I might use it for business someday. Might use it for business. And so what we do is we get in this habit of coming into our compulsiveness. We say, well, it's just how I feel. It's just who I am. You can be just who you are, and you could be very poor just who you are. When you're looking at cash draining out of your pockets through these luxury items, through these wants and these things that aren't going to generate money for you, then you're setting yourself up to be poor.

-What about this one, cable from my office. Cable TV, satellite TV for my office, though.

-All right, that would be like, what in the hades are you doing? That would be my question for you.

-I'm just asking because I have clients that have asked me, they have asked you. Hey, I want to put cable in my office.

-We put cable in our office, I'll admit this. We put it in a break room. When people had lunch time, whatever. They just wanted to unwind, because we had a very intense, high tech company. And we had people, you worked there at one time. And it's just very intense, so for them to go and stare at an image that they don't have to interact with. They just look at it. That's OK. That becomes something that is a specific purpose set aside.

I have gone to my clients and they've got TVs all over the place. They've got this huge cable bill. It's not that I don't want to have fun, but I see employees stopping what they're doing. They're walking over here, ready to get going on something, then they stop. And then they watch a news story. And then they watched this, and they're a half hour. This is draining productivity for their business.

Featured Coaching Excerpt - Notes & Transcript, Part 3
  • Lesson Nugget: If you do not know the difference between a necessity and a luxury, and fail to budget efficiently, you end up spending money that you do not have.
  • Ask Yourself: Am I focusing on growing my business and positioning myself for power in the future or am I forced to focus on paying the bills?
  • Lesson Nugget: Some meals can be considered assets if they build your business and put money into your pocket.

[MUSIC PLAYING]

-What about going out to eat all the time? Like I want to go out to eat with my wife, but we're going to talk about business because I can write it off, Tim.

-Well, I say you ought to do that every now and then. It's good for a number of other things in your life that that adds to. So [INAUDIBLE] talk about that.

[BUZZER]

-Now you can just get lazy, if you will. I'm trying to look for the word. You're just like, well, I don't want to do this. I don't want to mess with this. I don't want to think ahead. And you burn through your income by eating out all the time, which maybe is like twice as much, or three times as much as eating at home. You can do that, and then the middle of the month, you've run out of money.

And so, you still have to eat the rest of it, unless you want to have this two week fast. And so, what happens is when you run out of money quickly because you're having these high expense items, you end up going upside down. You end up spending money in the future.

-I think a lot of business owners say, I'm going to go out to eat, and therefore, it's an asset because it's helping me make some money. We kind of like say cause I can write it off. It's a business expense. But really it's not making us money, right? So you're saying if it doesn't make you money, bottom line, it's not an asset.

-Right. Now if you were a client, or you were a prospect, and you loved this certain kind of restaurant. Let's say we go big time, and I invite you to my favorite spot, which is McDonald's. That's where I take my wife for the top dog dates. I'm just kidding, honey. That's just an illustration here.

If I were to take you there, and pay for this, and we're talking about this, and I'm using my suave language, and my incredible service I'm going to have here, then that's like an asset, Clay. I'm using that to build business. We justify stuff all the time though, and that's the thing.

-OK. I've got a couple more here for you. What if I buy my first home? I buy a home, and I go out and get a loan to build this house. I build this dream house, and I say to you, Tim, we're going to buy this home. I had a client just the other day who's just now starting to make-- this person makes about $1,500 a week now after paying his staff. First time in his life, after paying everybody, all expenses, he's making about $65,000 a year. And he says, guess what? I just got pre-approved to build my own house. And it's the best investment you can ever make, right?

-I don't agree with that. When you are barely getting by, and you don't have cash in the reserve, and you don't have any-- see, with cash, you're positioned with power. And when you have things in your life that drain you of that cash, it's draining you of power. And so, when you buy a house before you've got the money to really pay for that thing, or you've got an income that's several times higher than the mortgage payment-- now here, if he's clearing $1,500 and he's buying this house, chances are he's probably going to take half or more of his income just for the house.

-This is true.

-He doesn't have any money for savings. He doesn't have any money to put aside to be positioned for power in the future. And so, he's living in this barely get by, struggling to get ahead, and so he's not thinking about creatively growing his business. He's thinking about, how can I pay my bills? Which zaps his creativity.

-And I don't think a lot of people realize that Warren Buffett's lived in the same house for 30 years, or whatever. That before Bill Gates bought the big house, these guys sacrificed. You hear about these celebrities.

-Yeah, but Warren Buffett lives in a-- I mean, he spent $35,000 for his house.

-That is true. That is true.

-Which was a lot of money about three days after the dinosaurs died. That's about when he bought the house.

-I think what a lot of people don't realize though is that this particular person I'm mentioning here, trying to show this example, is that he takes the cash out of his business too. So now he can't advertise. He can't hire new staff. He can't grow it. He just zapped his cash.

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