Episode 096 - The true power of frugality
We have a lot of arguments in today’s society. Arguments over politics, ideology, methodology, etc. But the one thing you can’t argue is math. And when math tells you the truth of how to live a rich & unconstrained life, you can’t ignore it. Better to understand and embrace it. In this episode I will tell you a very simple formula that will increase your power and reduce your stress by doing what the rich know – stop spending money you don’t have.
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You can’t argue math.
We are being systematically swindled in the 21st century with the ball in the cup trick.
Facts are distorted by those with an interest in distortion.
Simple fact: Banks want you to be in debt until the day you die. Why? They get Smart income from the interest you pay them for the use of someone else’s money.
So everything around you supports this narrative. How about you do what they are doing and you become the rich person? Sound interesting? Hear me out and I’ll explain how you can do it. I do this all the time, so I can attest to how it worked for me and made me a multi-millionaire.
You are expected to use other people’s money for everything – you buy your groceries with a credit card, you buy a car not because you want a long term transport solution, but because you can afford the payments each month. You buy a house – not because you need shelter, but because the interest rates are low and you can impress yourself and people that you can afford to have something you haven’t earned yet. You use other people’s money to go to an ivy league college because you think that the other people there that you will associate with, will open the door to a future of wealth and prosperity.
The difference between what society and the media tell us is a “rich” 1st world country, isn’t that we have nicer roads, cleaner streets, better education, less crime, longer life expectancy, etc. It is that we are in debt for all of this, so our country and our society have things we haven’t earned yet. We are punting on future earnings and growth, but before we get the rewards of that growth, we’ve spent more money we don’t have for a perpetual future of better quality of life – until we don’t have growth and then we are in the toilet twice as bad and we never get the reward of that better life.
This macro economic method is not something that we have much control over, and if you go against the system (ie. You produce more than you consume, and you save it), then you are not rewarded. The interest rates on debt currently is so low that it pushes down returns on savings, forcing those that want to get anything from their hard work to take on more risk in their investments. When the financial news media spend more time on speculations like Wall Street Bets, Gamestop, AMC, and Bitcoin, than they do boring industrials, it is a sign that people are wanting.
So in this world, we have a cultural message that it is all about JOBS. JOBS, JOBS, JOBS. The govt rate their success at the creation of good paying JOBS.
Each month that they publish the labor unemployment rate, the stock market goes crazy. The jobs trigger the Fed Reserve base interest rate, and that triggers asset purchases or sales, valuations, etc.
But you and I know one thing:
THE RICH DON’T HAVE JOBS
So this whole Jobs narrative is another swindle. They don’t talk about the plight of the average person – you get one life, you want to spend more time with the family, friends, on your personal projects, to expand your mind, have life experiences, see the world, challenge yourself, etc.
What is the antithesis of this? Being shackled to a JOB.
Yet your very government tells you YOU MUST HAVE A JOB.
When they issue some form of temporary stimulus that allows those who lost their job some bridge financing until they get another one, and then find those who don’t have a job, would prefer NOT to have a job, doesn’t that tell something?
Isn’t that the key indicator here? People don’t want a shitty JOB.
Is that lazy? Nope. If you are some RICH person, and you need worker ants, then you want to sell a narrative to the worker ants that it is your patriotic duty to have a job. You MUST have a job. If you don’t, you will be smeared in public as a lazy leech of society. You need to get off your ass and go get a job.
But do the rich do that? Hell no. They are not stupid.
The rich own things. They own assets that generate a dividend (ie. Rent) and they enjoy living off the dividend. Their assets keep going up and up, but they don’t sell them. Do you think that back in the days of Victorian England that the rich land owners would sell their plots of lands? Hell no. They retained the title of “Lord” and “Lady” because they owned assets. The monarchy held them in high regard because of that. And who is the largest landowner in the UK now? The monarchy itself.
They know the power of owning assets. And for centuries they would never give up the land to the people.
In the late 1800s, Mexico had a president who gained power and would not give it up. Much like things we see in countries like China, he effectively gave himself perpetual presidency. Until he was ousted in a bloody revolution that left 1 million people dead around 1920. When the people took over control of their country, did they give everyone jobs?
No. They redistributed land to everyone, so that all people could own land and be their own farmers. This land redistribution is a core part of the Mexican culture and the reason why there are strict laws regarding land ownership today. They realize that the only hope for the people was to own land. And in 1920, after their bloody revolution, everyone did.
Why is any of this important to the concept of frugality?
Because there are two parallel challenges implied:
1. If you want to be able to transcend the normal existence in the 21st century to do that, you must first regain control of your expenses
2. If you want to have a rich & stress free life, you must acquire assets that generate you income
The concept of “Passive Income” (a term I am not a fan of because it has been destroyed by countless scammers on 3AM Infomercials all the time) requires a lot of patience. It could take you 10 years to generate enough money from passive income that will cover your burn rate.
But if you are looking down the barrel of 40 years of “career” – a term celebrated by society, education, government, etc. then realize that with the US male life expectancy at 75.3 years, that is more than half of your life. And consider that at the turn of the 20th century, the average US male life expectancy was 47 years old, then you are giving up most of your 1900’s life to work.
What if you want to be a rebel?
What if you choose to want to buck the system here and have a meaningful life that you call the shots on? What if you choose to “go rogue” or apply some “Punk Rock” mentality to a system that is clearly not serving you?
Then you need to acquire assets that serve you. So that you don’t serve “the man”.
To me, it is simple. To most people, it is some brain explosion of an idea.
It shouldn’t be. The lords & ladies of medieval times have known this for centuries. Those that control the land (the assets), have unlimited and ongoing wealth. And they get to pass that down to their lineage.
OK, Myles, how do I become a Lord or a Lady myself?
Well first, realize that everyone around you that is patting you on the back for having a JOB, is a fool. They are all hypnotized by the rich people (the banking class) that want you to be their worker ants. Because if they rely on your toil to make them money (ie. You pay them interest for the use of their money because you haven’t earned it yet, by willingly being shackled to the treadmill of a job), then you will never be rich. You might win the lottery, or make it big on AMC stock or whatever, but you will never be rich. Rich requires you to have a game plan BEFORE you get the monetary reward and know what to do with it. Deploy the capital into assets that pay you to own them. That’s rich.
But most people that fall into money through one way or another, lose it in 2 years. Why? Because society programmed them to think that buying a fancy car, a big house, boats, toys, etc. is the rewards of wealth. Type into Google the search phrase “rich life picture”
Now look at the images presented to you. It is cars, yachts, people in rich clothing, sipping champagne in Monaco harbor, etc.
Are there any pictures there of vast real estate holdings? Or massive dividend stock portfolios?
Nope. Because society (and Google it would seem) have you swindled that rich = physical items that devalue faster than most, leaving the so called RICH person with an expensive to maintain toy that the fun disappeared out of within a month of the acquisition.
That’s the antithesis of rich.
So how do you become rich? Easy. First, you must get a handle on your expenses.
Have you ever gone through a weight loss ordeal? Maybe you put on too many pounds from the COVID pandemic lock downs, as it seems most have? Maybe you over did some eating over the holidays and made your new years resolution to lose a few pounds? Or maybe over the course of years, you have found yourself in a rut and put on more than a few pounds?
We’ve all been there. It takes a radical change in your habits of eating and physical exercise to turn around this. And although you might not wish to embrace the change because no one likes the anxiety that comes with changing paradigms, the truth is that you know it is in your best interest and you want the long term benefit of doing this.
Well that type of change has to happen to your mind if you want to be rich. You have to reject most of what you have been told in culture, in the media, in society, even by your government, as to what a good life looks like. It is NOT about jobs. It is about capital deployment. The rich know this, but they won’t tell you because they want you to be their worker ants. Why? So they don’t have to be the worker ant.
You have two levers you can control here. INCOME and EXPENSES.
If we make the assumption that you want to change how you make income, and that it will take years to get your smart income serving you, then the most logical place to start that will have the most immediate benefit is your EXPENSES.
That means getting control of them – just like your diet in a weight loss plan. You have to stop eating 10 pizzas a week if you want to lose weight. The same is true of your over consumption and over spending. If you get that under control, then you can take the (now) surplus capital from your earnings and begin to deploy it into dividend producing assets.
And this is when you come to the math part.
It costs you a lot of money to earn money. When you start to pair down your expenses so you can keep more of what you earn, you start to realize that much of what you spend money on supports a lifestyle designed to work in a job.
The car you drive was probably purchased to support your commute to work. The computer you have was probably purchased to support being able to work from home, the phone you carry was probably justified because you needed a phone for work, the budget you have to eat lunch is based around the options available to you that are close to your work, etc. Although much of what we spend money on can be directly related to a job, imagine if you didn’t have a job. How much would you save on not spending money on those expenses?
Now let’s further add to it that the more you make, the more taxes you pay. So if you needed to earn less, you would consequently pay less in taxes. And since the rates are much better at lower levels of income, you pay far less in taxes on your earnings if you don’t need to earn much.
The thing here is that if you want to begin the journey towards being rich, you must realize it is like the weight loss journey. You have to start with changing your mindset around earning money just like a weight loss regime needs to change the mindset around food & exercise.
If you only think about saving money by not spending as much on your expenses, it is an empty motion. What you need to do is to deploy the surplus capital on assets that generate a dividend. For me, the biggest of these is rental real estate, but you can also start earlier with dividend stocks, vending machines, websites, commissions & affiliate income streams, etc. All of these things combined need to meet 150% of your burn rate so you can avoid the job culture altogether.
And this means redirecting your mind towards the small gains of smart income in order to reach financial sustainability. It is purely a mind thing, btw. It doesn’t change that much in the way that you operate. It is that you will learn to carve down your expenses to the point where more and more money goes to dividend producing assets, and you track the growth of those assets. Growth that comes from you NOT working. Ie. By the time you reach 150%, you quit your job. The wonderful thing that the rich know about dividend producing assets are that they have natural inertia and they grow on their own. You put effort to push them to get them rolling, then they roll on their own. Picking up speed, and the returns become exponential and the best thing you can do at that point is get out of the way and let them grow on their own.
That’s it. Very simple. And you can start it today.
What if you have a short attention span, or need to have immediate results? No problem. If you focus on reducing expenses, you get the benefit of that immediately. Cut out superfluous spending on things like Cable TV, food, gadgets you don’t need, stop using Amazon all the time, consider the cost of fuel before you jump in the car, look at what you can sell off that you have that is surplus to generate more income, etc. If you spend a little time on these things (and it doesn’t take much at all), then you will start to see the stress relief and you will start to feel like you are regaining control of the downward spiral.
What’s the worst thing that could happen? You save some money.
What’s the best thing that can happen? You put that saved money into some dividend producing assets, or begin to save towards the down payment on your first rental property. You start to think longer term now, because you may not need to work as hard if your expenses are reduced. Think of it like a game. The more you focus on expense reduction, the closer you are to the finish line.
The challenge is to get your burn rate WAY down, so you can live without a job. But realistically, you have to earn money for food, shelter, clothing, etc. So that means not pulling back (just yet) on the job or earning, because the goal here is to make a massive profit of your income less your expenses, so you can deploy that money into dividend producing assets.
This is a “whole of life” strategy. Expenses are just one thing, but they are the one thing you have control over, and you can start today to reduce.
It really is this simple. Anyone telling you otherwise, isn’t telling you the simple truth. Produce more than you consume. And deploy the profit into assets so you don’t have to toil to produce in the future.
Now let me destroy a myth that most of the western society would like to tell you. That the true wealthy don’t care about expenses, because to them their time is valuable and better to pay someone to do something than do it themselves. That’s pure BS. Most poor people that pretend to be rich believe that. Rather than doing things themselves, they outsource the responsibility to others. The fallacy here is that they are always spending their time toiling on something, because they don’t value their freedom. Sometimes they have hypnotized themselves that they can put aside the needs of their loved ones, over the need to work a bit harder on a project, or at the office, etc. There is no end goal in their methods – just keep working, “Go big or go home”, etc. They see the guy in the fancy suit, with the big talking words and 7 figure income, etc. and they want to be like that guy. But that guy knows they are selling a dream to most that will never have it. And because of poor spending habits even those that get the 7 figure income, suffer from lifestyle inflation, lack of purpose and lack of intent. That’s not rich.
If you take control of your life, and start to slow down a bit and focus on keeping your money, rather than spending it, then you will become rich. But it will come not from you and your actions, but from the assets you acquire. Because if you own the means of production, you are truly rich.
Here’s a few things I’ve learned in life through the school of hard knocks.
Rich is not arrogance. Rich doesn’t give you a license to think you are better than anyone else. That your time is MORE valuable than anyone else. That is not rich. That is how you will fall down and fail. Those that I see with that pompous attitude, treating wait staff like their own personal slaves, are openly showing their insecurity. The true wealthy don’t need to do that, and value everyone as important and made in God’s image. And they live their life that way – not just talk about it.
Pride is only a positive if actions are performed with humility – that we all have the same value in our lives and we respect each other. We must treat each other as how we wish to be treated. In life, some choose to give more to others in service. Most of us would probably want that. It is that we have to first clean up our own backyard before we can help our neighbors and that means getting to the root cause of what created such a mess in the first place.
The systemic problem of mis-information and lack of wisdom & guidance.
The rich know that you can’t change things in the margins to get massive returns like that. You spend all of your time seeking out purpose and truth and trying to be radical in the way you do things, but the real answer – the most extreme thing you could do, is stop spending money you don’t have and get control over your expenses.
Yeh, that simple.
There is one exception to this. Use debt to purchase income producing assets, like a business would take out a loan to buy capital equipment. If you understand that you need plant & machinery in order to make something, it is no different to you buying (for example) income producing real estate. Rental real estate is one example of capital asset acquisition that can be done with other people’s money, but you won’t be paying for it. Your tenants will. So since you are not going to be paying the mortgage on that property, then it is not a part of your expenses. Hence this doesn’t affect your overall personal expense standing, so as long as the property generates a profit & a dividend, I’m all for taking on debt for that.
And be strategic in how you pay for things. Try and make your business pay for as many of your personal expenses as you can. This means that the organic income that your business gets from the assets that it manages will serve you – not only in reducing the debt on the asset acquisition, but also in that your assets start to pay for your lifestyle directly.
Do not take on debt for that new car, boat, big house you don’t need, etc. Those things can be carved way back, giving you more capital to deploy in your “business” of making money so you don’t have to work. The day will come when your assets are routinely exceeding the 150% of your burn rate, and that is the time when you can start to think about lifestyle purchases. Maybe that vacation home, or better car, etc. but you haven’t earned that yet. For most people, it will be decades before they are there. That’s ok. Learn to live without those things and appreciate your freedom from being frugal.
This is so simple, it really surprises me that more people don’t do this by default. But when I turn on the TV and watch the subliminal messages from the rich to the people that “The unemployment rate is ….” Or “We’ve added X jobs to the economy”, they are telling you a bunch of information that is not in your best interest. Unless you have accepted the social mantra that you should work hard and one day you can retire.
If you believe that, then I’ve got some swampland in Florida to sell you. Oh wait, no I don’t. I don’t sell my real estate assets to anyone.
We’ll see you on the next episode.