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This business coaching episode focuses on improved ways to managing your money.

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Featured Coaching Excerpt - Notes & Transcript, Part 1
  • 7 Principles To Manage Your Money: 2. Know Where You Are
  • Notable Quotable: "An unexamined life is not worth living." - Socrates
  • Lesson Nugget: It is impossible to achieve your financial goals without first knowing where you are and how to get there.
  • Lesson Nugget: Automating your transactions creates a series of recurring decisions that save you time and reduce your stress.
  • Lesson Nugget: Use one of the many automatic systems that keeps a detailed record of all your transactions so you don't have to do it manually.
  • Action Step: Set up an automated payment system through your bank (or directly with the vendor you owe) to eliminate the hassle of remembering to pay each month.

[MUSIC PLAYING] coursera for accounting and time management

-So your principle number two says know where you are and the idea is to know where your money is. Know what's coming in, what's coming out. Now, Tim, Socrates once said an unexamined life is not worth living. What is he talking about and how does that relate to this concept of knowing where you are?

-All right, so unexamined life is not worth living. You can probably say-- I'm sure Socrates probably said his next statement was your unexamined finances is probably not worth sustaining you. We want people to thrive. Thriving is the whole concept of growing and increasing. Not just with stuff you own, but your influence and your peace of mind and the relationships you have.

So if we don't know where we're at and this is an unexamined part of our life here, it's really a place of irresponsibility. How can we know-- how can we get to where were we want to go if we don't know where we're at. It's like if we have a map and we want to get to a place, and the map is wrong and we don't know where we ever are to start with, we're going to get lost along the way here. And so this is really-- the power we have is if we're going to take responsibility, we've got to know where we're at.

-So are you saying that every entrepreneur needs to set up some kind of financial tracking system? Is that what you're saying?

-Yeah. It is something that I recommend with everybody in your business, even in your personal life. To set up some kind of tracking system like Quicken-- like an electronic system, Quicken. Some people use a spreadsheet, some people use old ledgers-- that they write it down manually.

What I recommend nowadays is they have programs like Quicken or Money or there's all kinds of different--

-Is there in particular that you would recommend?

-I personally use Quicken. That's the company that ended up buying the company that I grew up and we sold it to them. And so I'm preferential towards them. We want to get a system, Clay. It's very important that automatically pulls in our transactions from the bank and the credit card, and that's where most of our transactions are.

So where is our money coming from and where's it going to if we can have it automatically pulled in for us instead of having to keep track of all these things manually, and most people aren't detail minded. Most of my clients are brilliant businesspeople, but they're not detail-minded towards that. And so we want to create some kind of tracking system on this.

-Tim, I know you're a big proponent of automating the transactions when possible. Why is that? Why wouldn't you just want to manually take care of bills?

-OK, so automating has two aspects. One is the thing we just talked about here. We have transactions from our credit cards or debit cards and the bank from transaction. Those are automatically coming into our tracking system.

What I have as much as I can-- I want to reduce the number of decisions that I make. The most effective people that I know become effective because they stay creative on the most important problems to solve, and they try to automate or reduce the number decisions. Really, setting up a system is setting up a series of decisions that you want to have made every time. That's what a system is.

And so we set up a system to automatically get all of our bills-- utility bills, our mortgage payment. Even the income coming in-- direct deposit, which is an automatic deposit process for your pay. Even if you have your own company, you can set up direct deposit where things are automatically done. Even money that you have come in, you can have your bank set up a percentage that goes into a savings account for every dollar that comes in.

So you want to do this just so that you pay your bills on time. You don't have to think about it. You're not worried about it. There's no anxiety there because you know it's being taken care of.

-So you-- is there a specific-- Quicken is the software that you use. Is there a deal where you, with your bank-- is there a certain process or a certain-- like if I'm watching this and I'm totally unfamiliar with this idea of automatic deposits or automatic withdrawals or how to do that, is it all within the Quicken suite? I mean, I can do all this?

-They may have all the stuff that can do within Quicken. I think they've come out with those features. Most banks now will have a bill pay process. And most vendors like your utility company, you can actually set up an arrangement where they give-- you provide them your bank account where they can get-- or your credit card, and they get direct access to that.

So you set this up. They test it to make sure it's really you. And then once it's set up, it's automatically taken care of.

-See, that's an action step anybody watching this can do. This is something you can do.

-Either using your bank or going directly to the vendor that you owe and say, listen. I want to set this up where it's automatically paid. And they love that because they get paid on time. You pay on time. Everybody's happening and you're not wigging out about what's being paid and what's not being


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Featured Coaching Excerpt - Notes & Transcript, Part 2
  • The Three Types of Expenses: 1. Mandatory Obligations, 2. Discretionary Expenses, 3. Desired Expenses
  • Self-Justification: When you justify a desired expense as a mandatory obligation.
  • Lesson Nugget: Mandatory obligations are expenses that must be paid each and every billing period.
  • Lesson Nugget: Discretionary expenses are necessary items that vary in amount each month. You have the power to lower these discretionary expenses by living below your means.
  • Lesson Nugget: Desired expenses are things you want, but don't need (i.e. vacations, NFL Sunday TIcket, or the latest model phone).

-Now, Tim, there's three different types of expenses that all of us have. First, there's the mandatory obligations. Second, there's the discretionary expenses. And the third, there's the desired expenses. So describe to me what the first one is. Describe to me what the mandatory obligations are.

-Mandatory obligations are-- those are commitments you have to make every month, or every week, or whatever the arrangement is. Mandatory obligations are like a mortgage payment, utility bills-- if you want to keep your house cold in the summer and warm in the winter-- student loans, you know, whatever loan product--

- --sweet student loans. I love them.


- --love student loans. Student loans are good.

-And if you borrow money, you've got to pay it back. That's my own personal viewpoint here. And so all these that you have to make payment of-- and there's no mercy from these people-- if you don't pay them, they're going to sue you. If they don't pay them, they're going to turn off whatever you're buying from them. So car payments, whatever types of loan payments that may be.

-Now, the second you talk about is discretionary expense. What does that mean?

-OK. Discretionary expenses are needed expenses. You can't just like not do those expenses. They're required. But how much you spend of those really is determined by you. It's determined by the income you have and you living below those mean-- below that means. OK? So living below your means is not this negative, scarcity-minded process. It's really a disciplined effort for you to get powerful control over your finances.

-What's an example of a discretionary expense?

-So discretionary expenses could be, like, your clothes. Like, we would like, if you show up for work, we'd like for you to wear clothes. That would be a good thing.

Or if you go in public, in most situations, most societies, they want you to wear clothes. So you ought to buy clothes at some time. But you don't know how much-- like, let's say your mortgage payment is $800 a month. Your clothes expense is not $800, or $400, or $200. You're not required to spend that much money. It's discretionary.

You need to buy clothes, or you need to buy food, or you need to buy-- you know, go out to the restaurant with your wife at least once a week, or once every three years, you know, on these dates-- you know, but it's up to you. It's a discretion-- it's a decision that you make to determine how much of it you want to spend.

-Now, the third is called desired expenses. What do you mean by desired expenses?

-Desired expenses are expenses you don't have to spend at all. OK? Now this has slipped into some of our needs. You've got somebody making $100,000 living in Tulsa, Oklahoma, or Broken Arrow, or Coweta-- which has got this huge cost of living increase, here. I think it was like 0.3% increase. Hit their front page of their paper.


-And so we have this $100,000 a year coming in, and we need to have this, and this, and this. And so this desired expenses, that's stuff that we don't have to spend. But it's like saving up for a vacation, saving up for your kid's wedding, or education.

-If someone watching this-- there's a couple things that I want to bring up here that-- When you described this-- I'm thinking of things where we confuse it is a need. I talked to a business owner the other day who has a totally safe vehicle-- about 2004, 2005-- it's a, it's like a truck. And this vehicle works great for daily business stuff, right? And he comments, well, I'm getting a brand new one, because I want it to be more safe for the family. You know? And then, I look, and I notice there's a super sweet, just, brand new-- like, one of those Samsung tablets. You know? A brand new one-- nothing wrong with Samsung-- but a brand new tablet. Just awesome.

- --the latest.

- --latest one, yeah. And a brand new phone-- and the whole thing was that he'd commented, oh that's a nice phone you have. I just got that, you know, all this kind of stuff-- and this guy's barely making it financially. And I just thought, in his mind, he's confused, you know, what is a want-- because he has a car that works. But instead, he's choosing to get a brand new one, because he needs to be safe. Or he needs a phone to better communicate with his client. And he needs the-- he keeps adding all these things.

-Yeah, so that's self-justification. You are going to justify, well, it's only-- I'm only-- that's going to be a mandatory obligation, because I'm going to justify it as that.

-And it's a deal where I think all of us are guilty of it. I know at some point early in my career I was doing it. I know that a lot of people do that. So I just want to make sure as you're going through these-- because these are powerful here-- you have the mandatory obligations, the discretionary expenses, and the desired expenses.

I think it's really important that you might bust out a sheet of paper, or type it on the screen here, and sort your expenses. Go ahead and go through the process of doing this, because if not, you might confuse categories.

Featured Coaching Excerpt - Notes & Transcript, Part 3
  • 7 Principles To Manage Your Money: 3. Know Where You Want To Go
  • Lesson Nugget: Your brain rises to the occasion to solve questions that it encounters. Ask yourself "strong questions" that challenge your mind and refuse to allow complacency.
  • Lesson Nugget: Having desired expenses are not bad, however they need to be recognized as wants and not needs.
  • Lesson Nugget: Write down your specific goals and desires that provide a plan and purpose for your life.
  • Ask Yourself: Am I implementing the financial strategies needed to move from drifting to thriving?


-And I would recommend, if you're married and you want to stay married, to actually do this with your spouse, where you decide together what is mandatory expenses, what are discretionary expenses. And with your income you're at right now, how much is this discretionary income do you want to spend? Like, we have to go out here, we've got to take a break. I mean, I can't be cooking every night in the kitchen, we have to go out. OK, well how much is that that's discretionary?

Then the desired is-- by all means, have desires. Have plans and goals, or places you want to go to, and people you want to meet, and things you want to experience. Begin to save for that, and begin to work to where you want to spend money you have, not money you're going to eventually make. And that's when we get into trouble here with this whole spending thing.

-Now, Principle Number 3 is, know where you want to go. So let's talk about this, Tim. You know, Napoleon Hill, the bestselling author, once said that the starting point of achievement is desire. Keep this constantly in mind. Weak desire brings weak results, just as a small fire makes a small amount of heat.

Tim, what are some powerful questions that we can all ask ourselves to identify where we really want to go with our life?

-OK, this is good. And just take the whole thought here, Clay, of the power of questions. Questions unlock our mind. Questions-- our brain begins to answer the questions we ask it. And so if we ask weak questions, we're going to get weak responses. If we ask it strong questions, it will solve for those strong responses.

And so what I have found, as I have worked with these precious people, my clients, and people that I talk to seminars, and humanity-- myself, when I look in the mirror.


-Humans, people that are humanly human. And what we're talking about here is most people, when you ask them where they're going, or what they really want in life, they don't have a clear answer.

-And I think for a lot of people, when we ask the question to you, we say, what do you want to do, or what you want to do with your life, or what goals do you have? I think a lot of people will just say something like, well, I want to be successful. I want to own a-- be financially well off. And that's the kind of answer we respond with.

-Right. We want to be successful. Well, if you make one more dollar than you did last year, I guess you're successful, in that you're growing. That's the problem here, Clay, is when Napoleon Hill wrote that very powerful, powerful statement, he talks about definiteness of purpose, and that definiteness of purpose is tied to, I can say, a definiteness of desire, a very specific desire. Those smart desires, they're specific, they're measurable, they're attainable. They got some risk attached to it, and they're time activated.

So to know where we want to go, most people don't know where they want to go. They know about where they want to go, but there's no jet engine of-- the fire of desire has got to be very specific. And so I like to ask these questions here. What do you want out of life? What are your key goals that you're working towards? Are they specific goals? Are there places you want to go?

What in your life do you want to stand for? There are certain things that you want to have said over you when you die, in your eulogy. What are people going to say about you, when they're looking at your corpse and saying, there is a good man, and here's why. What do you want them to say over you?

What are some things you want to buy? What are some things that you never gave yourself permission to buy that you really want to give yourself permission to buy? Write them down, be specific about it. That's what we're talking about here. Where do we want to go? Be specific about it.

It comes to mind here, when you think about thriving, which is what this organization is just passionate about, just being contagious and activate the thrivingness within people, you think, what is the opposite of thriving? You think, well, surviving. But here's what I want to think about. The opposite of thriving is drifting. One is very specific, and they're purposeful, and they're going for it. The other one's just drifting along, well, I don't know. I don't want to have a goal. What if I don't know reach it? Well, you probably won't.

-Your thinking is so dangerous.

-It's very dangerous. It's this horrible sense of existence, where you shut down your creative energies on the inside.

-I think drifting is dangerous, because you have the illusion that you're getting somewhere. And so I think a lot of entrepreneurs watching this, maybe you've always wanted to start a business, or maybe you have one now. And what you're doing is on a daily basis you're not actually saving money, but you're saying that you're wanting to get ahead. And you're saying the right thing. You actually are professing that with your mouth, but you're not doing it, and you're just kind of drifting. And I think what you're talking about is a lot of specific ways that we can begin to build some financial momentum here.

-Yeah. Where do you want to go? That's this principle we're talking about. Where do you want to go? Why do you want to go there? I mean, you think about what kind of savings do you want to set up? How fast do you want to pay down your debt?

I know when I was running the software company, wed' have these big bonuses that would get, and my wife and I agreed to have x percentage of those bonuses pay down our mortgage. So we just paid down our mortgage, down, down, down, down. So we had a specific purpose that whatever came in, this percentage of it would just apply to it against that. We want to really make sure that our Thrivers, in order to thrive in the cash management, you got to have a plan to where you want to go. And don't think you have to have this grandiose plan. If you've never done this before, start small. Start-- but get something very specific you want to work towards.

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