While the title of this article might suggest I want to show you how to spend all your money, it is really an article about the different ways to invest your hard earned money.
Let's talk about voting with your dollars, living a rich and full life and understanding the fragility of a human being *.
* Sorry to all my mammal and marsupial readers out there. I will have your back next time!
The different ways to invest your money
To give you a little background, over the last few years my wife Caroline and I have aggressively accumulated debt to the tune of 124.000 US dollars settled.
You can read our full debt settlement journey here. TL; DR: During this time we made some important changes to our spending habits, one of the most important of which was to list ALL of our expenses and look closely at where we were spending too much and needed to make changes. (Pro-tip: We do this exercise every few months to make sure we don't fall off the financial wagon.)
One of the questions I received the most after we became debt free was:
What are you going to do with your money??
This is a great question, and I want to expand on the title of this article and help you spend your money, or at least explain the thought process of how we spend our money.
The first step in investing and growing your money is to cover ALL your bases
Enough wealthy (read: rich) people and non-crusty financial planners repeated the same thing over and over again, so I finally started listening and applying their advice.
What they repeated? Was it a hot stock tip? A smart investment strategy?
No. It was super boring. Everybody talks about insurance.
You don't understand the value of insurance until you really need it, and by then it's too late.
Car insurance
Sure, almost everyone reading this probably already has car insurance. BUT … Do you have the right coverage? Know your deductible if you get into an accident (and have a buffer of cash saved to cover that deductible)? Most importantly: they may pay for the cheapest coverage possible, but could you pay just a few dollars more to have much more coverage?
Our GEICO car insurance had adequate coverage every month for the $78 we paid. However, upon further review, we found that we quadruple our coverage, cut our deductible in half (5.000 to 2.$500) and could only spend $9 more per month. Yes, $9. Just based on the smaller deductible of 2.$500 is worth that extra $9 for the next 23 years (2500/9, then divided by 12).
Life Insurance
We always assumed that life insurance was a complete scam. Guys with slicked back hair wearing ill-fitting suits trying to get you to buy something you would never use. That was until we learned about life insurance * and how it not only builds a policy that your spouse (or family) can benefit from when you transition to the next life, but can also be used as an investment account (netting 3-5% returns annually).
Well, maybe you're like me a few years ago and don't have a spouse to think about when you die. But I bet you have family members who could benefit from the policy if you took a trip with No Longer Alive Express. And remember, it's an investment too.
Find a recommended financial advisor (from a friend) and talk to them about life insurance. Avoid investing in life insurance policies from people who call you unsolicited.
*I would like to point out that life insurance can get a bad rap on the internet. You can also find term life insurance in your search. Truthfully, for every positive article about Whole Life, I could find a competing negative one. At the end of the day, I trusted the people who recommended it to me (close friends and acquaintances), and none of them benefited financially. That's good enough for me.
The Oh-Shit-Everything-Went-Cray-Cray Fund (also known as the safety net of savings)
Turn on the "snooze" alarm. I want you to know, dear reader, I hate the idea of savings. I really do. You will read more about it in a moment. However, I hate the idea of being in a financial stranglehold when things go wrong in life more than I hate the idea of saving money.
When we were done reducing debt, the first thing we did was build up a cash reserve (savings). There's no proven rule here, but we wanted three months of expenses saved as "Oh shit, everything went Cray Cray" funds. This was the first thing we used money for after we paid off all our debts. We threw every dollar away and put it – and this is key – in a bank account that wasn't at the same bank as our other accounts. This external safety net account we rarely see and never touch (and that's how it should be). The peace of mind we feel with this 3-month cushion is absolutely fantastic and something you need to do for yourself.
The next step is to live YOUR "rich life" and invest money to increase your happiness
For as long as I can remember, I never believed in saving for retirement. I enjoy the work I do and want to enjoy my life at the same time. Does this mean I don't make long-term investments? No, but I don't buy the same long-term investment plans as other people because I don't have to. (We'll get to that in a minute.)
🚨 Deep question alert: If you knew you were going to die next week, wouldn't you change everything in your life??
Of course you would, right?? Now, I'm not going to tell you to spend all your hard earned money on Faberge eggs, lavish trips, etc. But I will tell you that we live our lives under the idea that humans are fragile creatures. We get sick easily. We can get a random disease, and our dreams of a long life can be squashed in an instant.
To me, it's actually a bit shortsighted to only think of a rich life when you're much older. So here are some things we prioritize in our budget:
Travel Budgeting
When we had paid off all our debts, we knew we wanted to take a big trip to celebrate. We called it our "moneymoon" (clever, I know), and we took a bucket list trip to Tahiti. Yes, my friends, over-the-water bungalows and all. This was our only big trip this year. A trip. The other trips we've taken have all been road trip based (read: b. By car to cheap AirBnBs or pet friendly hotels).
( Obligatory Tahiti photo, I'm sorry, I'm not sorry.)
As we've made a little more money each year, our travel budget has increased, but we think about it every year and are honest with ourselves about our priorities. There was a time when our annual travel budget was $0.00 because we had no money to spend, and it's likely that this could happen again if something more interesting comes up on our radar.
Semi-professional tip: If you feel like you are in a $0.00 travel budget, I would recommend using a savings app like Acorns. It's free to use and can aggregate your daily/weekly purchases to save a little money here and there. You can also set monthly withdrawals (I have $50 with us). Last year my Acorns account went over 1.100 U.S. Dollars accumulated without me thinking about it! Boom. Travel budget.
Repetitive joy spending (aka monthly entertainment budget)
I think the reason people (maybe people like you) feel guilty about going out to dinner or a movie (or spending money on other discretionary things) is because they don't have a budget for it.
If you have an idea of what you can spend on non-necessities, create a cap on it, and then don't feel guilty about spending it.
We have a budget of 1.000 US dollars per month for entertainment. This includes:
- Going out to eat
- Going to the movies
- Local coffee shop visits
- Miscellaneous
Our budget didn't start at $1.000. A few years ago it was something like $150 and included a good meal and movie night a month.
Here's what's really important about this spending category: it's one of the things that gives us the most joy in our lives. Discover new restaurants. Seeing artwork on the big screen (or just huge explosions and 360 degrees, thanks Michael Bay). We bring this happiness into our lives and are incredibly intentional about it.
I often think of Ricardo Semler's TED Talk about "terminal days" and how similar it is to the idea of being intentional about how we spend our time. This is a paraphrase, as Ricardo puts it:
"On Mondays and Thursdays, I learn to die. I call them my last days. A lot of people in my family died from melanoma, and I kept thinking that one day I might be sitting in front of a doctor who looks at my research and says, 'Things don't look very good. You have 6 months to live. And I started thinking about what I would do with the last bit of time I had left. Spend more time with the kids? Visit these places? Up and down mountains? We all think we will do all the things we didn't do when we didn't have time. But I decided to do something different. I won't wait to be diagnosed with a terminal illness. Instead, I do what I wanted to do every Monday and Thursday throughout the year, ALS I had received a terminal diagnosis."
Pivotal Money Mindset Shift: What if you invested in yourself and your ideas first?
I have done this naturally for as long as I can remember, but my friend Greg Hartle explained it to me in a way that made more sense as a business owner. I'm paraphrasing, but he said a version of this…
"Invest your money in your own projects because unlike stocks, bonds and other standard investments, you can usually get 100% of the returns (or more!)"
This mindset of investing in myself has drastically changed my thinking, especially when I start considering a new project. Yes, new projects are shiny and fun and give you all kinds of dopamine responses, but they also come with pressure, stress and a whole lot of work. Work you're not sure will pay off.
Invest in projects that are already working: A Teachery case study and growth plan
For me, Teachery is one of those projects that I continue to invest in and consider my own long-term investment. If you don't know, Teachery is an online courseware that I co-founded in 2014, and it's always been a side project.
Lately, however, I've been thinking about creating a more predictable monthly income, and Teachery was the logical place to start (especially if you use the "invest in yourself first" mantra).
Here's how the numbers break down when it comes to investing time and energy (another form of currency) in Teachery:
- Current work hours per week for teachery (support / dev): 3-5 hrs
- Current monthly revenue (aka MRR): $6,000 (ish)
- Current monthly paying customers: 120 (ish)
- Invest in a second developer to improve our features: $18,000*
- Investing in a designer to spice up our look: $3,000
- Investment of my time: 2-3 additional hours per week
Goal: Increase Teachery's monthly recurring revenue (MRR) by 3-4x in the next year
Our investment of time and money in Teachery will pay for itself in four months if absolutely nothing changes. But I know things will change, because the money we spend is on things our potential customers ask for (but that we don't currently offer, so we lose their business).
With a 3-4x increase in clients and revenue, we go up from $6.000 MRR to $18.000 – $ 24.000 MRR (or $ 72.000 annually to $216.000). There is no stock or fund to put your money into, resulting in a potential 300% increase! Plus..
One of the best things about investing in your own project (like Teachery) is that no one can pull it out from under you.
You own it. You control it. It's your playground and no one can steal your bouncy ball.
Have a project that is already generating revenue and needs some love? Maybe a small investment and some time could drive your business forward?
* The $18,000 hired a second developer for six months. We could have done all the work ourselves, but because of our limited time investment, this accelerated our roadmap immensely!
Investment in new and bigger ideas: BuyMyFuture / BuyOurFuture Case Study
You may not have a software product like Teachery to invest in, but you may have a big idea that gnaws at your mind day after day. I've had a few of these over the years, but most recently BuyOurFuture was this project.
The original idea behind BuyMyFuture was to give me maximum customer value for my projects (1.000 USD per customer) and provide maximum "Jason's projects Value" for my customers (pay me once, get all my current AND future stuff).
As I began crunching the numbers on what it would take to make BuyMyFuture a reality, the costs mounted. How much, you ask? Just shy of $9.000. That included:
- Website design and development
- Promo video
- Legal fees
- Promotional Products
- Software (podcast hosting, website hosting, etc)
Although these 9.000 was a scary number, I knew it would be an investment of my own idea from which I would get 100% of the returns.
- On the first launch of BuyMyFuture I achieved a turnover of $178,000 USD.
- The second time I started, I achieved sales of 123.000 US dollars.
- In the third launch (BuyOurFuture), we achieved sales of 107.000 US dollars.
This first investment of $ 9.000 brought me over $408 in just two years.000 *. Show me a stock, mutual fund, or other typical investment that offers this kind of immediate return on investment.
Of course, not all ideas come up and bring in hundreds of thousands of dollars. I've been hunting for ideas that barely broke even. I've had ideas that have ended up in the red. But the important way to look at this is that you don't put all your eggs in one basket (diversify, as they say), and that you do things that YOU actually control the outcome of (to some degree).
I will invest in my own ideas instead of investing in ones where I have no control any day of the week.
*I share revenue numbers because they are obviously bigger and more awesome. However, the winning numbers are worth sharing for transparency: The total cost for all three BuyMyFuture launches is $105.000 US dollars. The total profit is then 303.000 US dollars.
Where do you "vote with your dollars"?"
This topic has become increasingly important to me as I've been in the entrepreneurial game longer.
If you are completely honest with yourself, you really want to see more great stores in the world? More great companies that get so much profit out of their people and products? Or would you rather spend your money supporting world-changing businesses, industry-changing entrepreneurs, or maybe just a hand-crafted brand run by one man and his family?
Why I have an "Ugmonk budget"
Jeff Sheldon started a simple apparel company around the same time I started my IWearYourShirt idea in 2008. The idea behind his company Ugmonk was to create well designed and high quality clothing (instead of contributing to the fast fashion world that makes things as cheap and mediocre as possible).
I have bought something from Jeff every year since Ugmonk started. Whether it was a t-shirt, a mouse pad, a Chemex coffee collar, or one of his anniversary sets, I set an annual Ugmonk budget.
(Not only do I spend money on Jeff's products, sometimes I create content about them because I want more people to know about them – a la his Kickstarter for "Gather.")
As a minimalist, I don't often need the things Jeff creates / sells, but I want the Ugmonk brand to continue to exist. I want to do what I can to ensure that Jeff continues to create beautiful, functional and carefully crafted treats. That's why I have an Ugmonk budget * and will continue to have it as long as Jeff runs Ugmonk.
💡 Ask yourself this question: what would you like to see more of in the world? Spend your money on more of these things (and people).
* The best part of my Ugmonk budget is $200 per year. This may not make a big impact on Jeff's bottom line, but it makes a big impact for me to know that I am supporting Jeff annually.
And of course, don't forget charity…
Donating to various charities is something I have done since my first business in 2006. Sure, I didn't have a lot of extra money to donate, but as a small business owner, I knew how much impact a small amount of money could have.
I'm not one of those people who brags and shares every time I make a donation. Still, an important part of my money spending mantra is to carve out a portion of change that goes to people doing good in the world.
Investing is great. Building a Nest Egg is great. But much like supporting businesses (like Ugmonk) with your dollars, it's important to support the causes you believe in. Much like anything else to do with spending money, if you're budgeting and prioritizing for charity, it doesn't have to become an afterthought (or worse, the first expense you cut when money gets tight).
- Start with a budget of $100 this year.
- Double next year.
- Then double it again the following year.
In a few years, you'll be donating thousands, and it will have become a positive habit you can't live without.
Let's summarize the different ways to invest money
There's a lot to chew on here, and I love focusing on action items. Here's your quick hit list of what to invest in and where to spend your money:
- Get your insurance in order (auto and life)
- Build your "oh shit savings" in a separate bank account
- Start a travel budget
- Create a travel budget
- Find out if you have a current project you can invest in right now
- Look for bigger opportunities to take risks (and see bigger payouts)
- Define your "Ugmonk budget."
- Set aside money for charity
We live in a time where you can always make more money. You can always work more. But if you don't really enjoy your life, what is it for?
I wanted to go into long term investments before I put a pen to this article. I absolutely believe in "safe" long term investments (like index funds, etc.). At this point, I don't have the excess money that makes sense for long term investments. It's absolutely on the list – it's just not the highest priority for our money spending strategy (plus that whole life insurance counts as a long-term investment).
Then again … Maybe I'll never have a boring long term investment because I'm always creating my own things to invest in?
