How To Manage Your Finances as an Entrepreneur
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Hey, it’s Aleksander. So I’ve been asked this question a lot, also lately ’cause it’s summer and people just spend a lot of money in all kinds of stuff. So entrepreneurs, what do they actually spend their money on and what is the recommended method to do this?
What is the recommended method to re-invest your money and just manage your money in general as an entrepreneur? There’re several schools of thought here, there’s the one where people, including myself, would basically say, don’t do any kind of cleaning, cooking or any menial work at all at home no matter what. So that’s priority number one; don’t waste your time, don’t spend time on things that can be outsourced easily. and I do you agree with this to a large extent.
However, there is a few little details that are often not mentioned. So, for example, should you outsource cleaning? Mostly, yes, absolutely. It’s like 100 bucks a week, maybe 100 bucks a month depending on the country you live in, sometimes even less to have your entire apartment that you live in or house cleaned to no brainer, in most situations. Cleaning, don’t waste you time on that. You just spend a few $100 or $100 and you’re done, you don’t have to run around, broom, etc. Don’t waste your time on that.
Whereas for food, there is a few things here, right? So there is people who actually love cooking, and I have entrepreneur friends, they love to sit down or stand and get some cooking done. It’s just relaxing, it’s just their thing and they don’t wanna outsource it. For me, I love outsourcing cooking because it’s a huge time sink. Going to the shop and buying the groceries and then having them cooked and doing all that work is such a huge time sink. For me, at least even though I like cooking, I don’t like cleaning up afterwards and so on. And it also, because
you don’t cook yourself and you don’t do any of the grocery shopping, you don’t need to do any of that. So basically, you save maybe 10 hours a week, so that’s a huge thing.
However, should you go to a restaurant every time you eat? Well, it sounds like you’ll save time ’cause you don’t have to cook but in reality, if you go to restaurants, actually, there is waiting for the bill, finding the restaurant, waiting for a table and so on. Actually, it turns out that if you go more than once or twice a week, you’re actually spending more time than if you were cooking yourself during those times.
So, I just do that as a social thing, once or twice a week, going out for food. I don’t constantly go out for food. What about deliveries? I’ve seen guys spend anywhere between $400 and $2,500 on food delivery. So I’m not really into the whole 2.5K on food delivery thing where entrepreneurs, they try to save so much time and energy that they spend $2,000 plus or euros on food. I’m not really into that.
But if you can spend maybe double of what it would take to go shop and then cook the food and then have the food delivered and you don’t have to clean ’cause there’s just boxes, why not? Well, there’s one little thing though, it has to be health food and a lot of protein and vegetables which is quit hard to get with standard food delivery.
So there are special services that allow you to spend five to 900 euros or dollars per month, and they do the macros, they do vegetables, they do protein, everything is on point. So if you do it like that, then it’s actually worth it and it saves time so that’s actually a good thing. Whereas if you just go and do random food like hamburgers and sushi in restaurants, just random pilling it on, you actually gain weight really quickly. I made a mistake for a month and then I kinda gained two pounds or one kilogram by accident, woops!
So then I just stopped eating all the crap and random food and then started tracking my macros, had a chef prepare it, and then weight started going down again. It’s a huge thing right? Decreased weight, more energy, better performance at the gym means I’m better with business. I’m performing better, this is a huge thing. Another thing is people spend tremendous amounts of money on travel.
There is hidden cost in travel as well. So if you are an entrepreneur, you wanna travel, you can actually do that all year. It’s different from being a regular employee in an office because you can actually work from almost anywhere. I recommend nice, clean countries. There’s countries in Asia like Taiwan, hidden gem, Japan is nice, Hong Kong can be nice, Singapore can be nice. In North America, most places are quite good, and then depending on a city of course, and then Canada is quite nice. But the thing about travel is, three months at a time is recommended, not less than that, less than that, there’s a lot of loss of productivity, it gets messy.
What else, so there’s lots of other stuff going on here. I’ve seen people just think that once you’re an entrepreneur, you can raise your standard of living to this huge level. Well, a smart entrepreneur, you can do that if you want but smart entrepreneurs, also, I’ve seen guys get to eight figures and spend all their money. Smart entrepreneurs, they do raise their standard of living in the sense that they save time, and they’re more clever about things. They don’t necessarily spend 10 times more money, right?
Even my friend who is very successful, seven or eight figure earner per year, he bought a yacht for example, he didn’t by a new yacht, he bought kind of an antique that he’s repairing. He’s spending a few thousand, $10,000 on that. So he’s repairing it and then he’s going to be able to increase the value of that thing, right? So smart entrepreneurs, they don’t just spend and throw money in a way where it’s gonna depreciate.
Even when they spend on leisure like a yacht, traditionally very expensive and you lose a lot of money, they’re doing it in a smart way that’s not gonna make them lose the entire amount instantly. Right, so for example, should you buy Gucci or any of these overpriced junk? Absolutely not. Be clever about these things.
You can be very, very smart in the sense that you don’t spend money on stuff that depreciates instantly,you don’t increase your expenses unnecessarily,so you’re not spending a lot more on living expenses compared to someone who has a job.And you’re more productive,you have more time to spare because you’re spending the money in a way that freeze up time.That’s what entrepreneurs do.And it’s not necessarily expensive watches or whatever,unless an investment.
So entrepreneurs, they treat everything like an investment. So even a Rolex watch, if you know that you can buy a certain Rolex watch, but you can resell it in five or 10 years and even make a profit potentially, that actually may not be a bad investment. And you could insure it in case it gets stolen, right?
Whereas some one who is basically an idiot in many cases, not everyone’s an idiot who does this, but many people who are idiots, they buy a new one and it gets stolen or it breaks or they scratch it and poof, gone. Investment is pretty much vanished at that point, right? So how do you invest? Basically, the safest things is to put money on high-interest bank account. You just put it there and it counteracts inflation, the current inflation. That’s the least risky thing you can do. ’cause if you put it on the S&P 500, for example, yeah, it can go up six to eight percent a year, but if there’s a crash, you can actually get your money stuck there or even lose part of it in the crash ’cause you can’t always sell on time or predict, right?
So you’re gonna have to leave it there and you can lose your money in the system for like another four years unless you wanna take it out at a loss which of course is a terrible idea.
So here’s what to do. Basically, reinvest most of it in the business and education in a way where you can leverage it and earn more money in your business that’s something you understand. Don’t try investing in stuff you don’t understand. If you get into real estate,
make sure you understand real estate. Don’t just randomly put it in the real estate or randomly into stocks, but understanding how it works. Any thing you put your money in, you need to understand. Otherwise, people who do understand it will extract it from you using whatever investment vehicle you happen to choose. That’s how it tends to work.
You’re never gonna be able to no learn anything and then just invest and more money comes out.No investment works like that.That being said, that’s why I recommend for someone who’s gonna spend literally zero time researching, just put it in a high-yield bank account like savings banker.So that one’s pretty much safe.It’s not 100%, but it is pretty much safe, like 99.9% safe.
What else to do with your money? So 15% or your income, unless you’re running some huge business but I assume you’re not, 15% of your income can go to self-development and education.
Things that are evaded by a lot of entrepreneurs, things that get results, not just some dancing and waving your arms around and networking. I’m talking about real ROY stuff, and that’s what I mean by education and self-development, okay?
If you can spend your money in that, there’s usually ROY for an extended period of time which makes it worth it. Education, for example, it’s very, very easy to get an ROY from education. I can use sales process, new funnels, new strategies for your business, new way of approaching your business model and so on. Tends to be very valuable, but only for vetted, reviewed sources that are recommended by friends, not some random stuff. If you do it like that, then education’s one of the best things to invest. I’ve spent tens of thousands of dollars in education, tens of thousands of dollars.That’s not college and stuff like that,’cause that’s also expensive.
But I’ve spent tens of thousands in education, dollars in education taught by actual entrepreneurs and actual professional who know what they’re talking about, not some professor in a university teaching some outdated stuff. So it’s worth it. Even things that are not worth it, long-term over 10, 20 years, they tend to be worth it when it comes to education, right? There’s just some things that have an ROY over months and some things that have an ROY over years.
And if you’re clever and you know the right people, you can get referred to things that have a faster ROY in terms of education as long as you work hard. All of this assumes that you work hard. There is no such thing as passive or anything like that, just forget all that stuff. It’s about hard work and putting your time in, and learning the skills.
So what to invest.Things you understand, things with ROY.Don’t put it into black holes,don’t put it in depreciating stuff more than you gave to and do track how much you’re spending.It’s very, very easy to get get overloaded with recurring fees of all kinds and then you look at your bank account,doing $30,000 and actually,there’s like $5,000 left even though it seems like you don’t have a lot of expenses,but you do ’cause all the little recurring things add up,and then you look at your bank account,there’s nothing left.And there’s the tax bill that comes in,you’re like, oh, shit!
All right, another thing about taxes, again, none of this is financial advice or tax advice, but another thing about taxes is, always keep more money around than you expect to have to pay it in a year on taxes. Right, and speak to financial advisors. I spend thousands of dollars a year on financial advisors just to know how things are moving, where to put money, what is good, how to minimize what you’re paying legally or course. You don’t wanna overpay things you don’t have to pay.