Chapter Two: Bringing Home the Bacon, Bling & Benjis
When FU-ing uncertainty, you still need a degree of certainty, and that starts with bringing in and managing money so that you can move out of a survival state of mind and into a creative state of being — in other words, so that you can do what you’re meant to be doing.
The brain is a one-trick-at-a-time pony. It’s almost impossible for your brain to survive and create at the same time. In his groundbreaking book, Breaking the Habit of Being Yourself, Dr. Joe Dispenza talks about the importance of transcending our survival state, which encapsulates stress, contraction, fear, anger, energy loss and limitedness, in order to free up our frontal lobe so it can focus exclusively on creation.
If you are constantly fearful about money and have a good reason to be, neuroscience will prevent you from creating. Your lack of creation will then prevent you from earning money from doing what you love. Your survival instincts will kick in and not dissipate until you start bringing in the do-re-mi. It’s a vicious cycle that we want to end now — as swiftly and simply as possible.
I know no one told you there would be math today, but the IRS views any business that is not profitable after three years as a hobby. It turns out, hobbies don’t pay the bills. So that’s why we’re going to spend a little time on what I call critical math. Here’s what you need to know:
BASIC ACCOUNTING + MONEY ORGANIZATION
One of the most basic and important steps in managing your hard-earned pirate booty is to have a very clear understanding of your incoming revenue and outgoing expenses. While this may seem simple enough, you’d be surprised how many people have no idea of what their fixed expenses are per month. This makes it all too easy to dip into the red and put yourself in a precarious financial position over time without knowing it. Money mogul Robert Kiyosaki says that the biggest mistake most people make is not understanding the difference between assets and liabilities. An asset puts money into your pocket and a liability is something that takes money out of your pocket. While accounting is not the world’s most exciting subject, it is a necessary evil in wealth and running a creative business.
Exercise: List all of your outgoing monthly expenses and calculate the grand total.
Can any of these be reduced? Insurance (health, home, business, life, car) is often an area where we overpay and don’t negotiate aggressively enough. Are you deducting your home office? Do you have recurring subscriptions that you’re being charged for but not using (gym memberships, apps, etc.)? Scour through each and every expense and make sure it’s necessary and worthwhile. I recently realized I was overpaying for business insurance by 400%. In about 15 minutes, I was able to cancel one policy in favor of another and save close to $1,000 per year. There are many overhead expenses we often don’t think about. Those $9.99 subscriptions to no-name apps start to add up overtime. Pay attention to where your money goes. It will help you make wiser financial decisions and also alert you when you simply need to make more moola!
Other red-flag areas are dinners out, gifts, storage units, last-minute expenditures, online shopping for sh*t you don’t need, overspending at Starbucks, bank fees, and phone and TV services. Be diligent about how you spend and you will (sometimes immediately) experience greater financial freedom. Knowledge is power if you use it!
Go back at least three years, if you can, and look at your revenue patterns. While freelance income is sporadic there usually are some patterns or consistencies between years. Are there clients that could be on retainer to the benefit of both parties? Are there known slow periods that you could start drumming up business for or plan to work on a personal project? Are you making more or less than you think you are?
What’s your back stash of cash? How many months can you live on your savings? If the answer is 0, we have a problem Seymour. Having a stockpile of dough is essential to being a creative and will keep you feeling free. Start saving immediately and/or consider alternative forms of income generation to get a base started if you are currently living paycheck to paycheck.
Debt is a four-letter word. Consolidate and get rid of it ASAP. It’s the not-so-hidden albatross around your neck that weighs you down and severely limits your freedom to create. If you need to live in your parents’ basement to clean up your cards and improve your credit score, do it. Keeping up with the Kardashians will only keep you in the not-so-golden prison of life. You can’t change the past, but you can give yourself a better future by paying down debts and spending within your means.
If you have a lot of debt and suffer from a lack of self-discipline, then have a friend audit all of your transactions. Look for your Achilles’ heel. Is it late-night online shopping? Where are you burning money? Stick post-it notes around your landmine spending zones (computer, TV) and in your wallet: Do I absolutely need this? Will the world end if I don’t buy this? Is this product going to make me money? If you can’t answer yes to all three questions, the buying decision should be no.
List your current debts:
Do you have your money working as hard as it can for you? Are you saving for your retirement? Are you tax sheltering as much income as you can? Get your accountant or financial advisor to help make sure you’re not overpaying the government. Especially this one!
Based on this information, we can see our base expenses and how much we need to cover. From that amount, we can project our monthly and yearly goals of a more ideal income.
Discretionary Expenses I’d like to Add:
· four international trips a year at $6,000 each
· two new Macs
· new Maserati
· house in the Hollywood Hills
Now add these into your monthly costs to figure what your ideal monthly and yearly goals are. Paying attention to the numbers and just doing basic accounting of money coming and money going out is huge. What you measure grows!
It’s always less scary when we get it down on paper and can see it. Look at this paper at least quarterly, if not monthly. It will help you move forward in a way that’s economically efficient and it’ll allow you to use your financial resources to the highest utility.