TMBA 440: What's Your Lifestyle Ladder?

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Dan and Ian know that today’s episode is about a rather sensitive subject.

Not too many people in American society feel comfortable talking about their personal finances. It’s somehow taboo to share how much money you are making, or to speak freely about your financial position.

Maybe this is part of the reason that so many entrepreneurs don’t open up about selling their businesses. They think that nobody wants to hear them complain about how much money they made.

In this week’s podcast, we aren’t holding back. Dan and Ian share how they feel about money, how much money they want, and what actual financial freedom looks like to them.

Transcript

Listen to this week’s show and learn:

  • The ways in which your personal finances can influence your business decisions. (6:35)
  • How to construct your “Lifestyle Ladder”. (8:50)
  • How having access to debt affects our behavior. (12:57)
  • What happens when you start to build a basic amount of savings. (18:56)
  • How to determine what your “Freedom Line” is. (25:53)

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In the entrepreneurial world, it’s rarely questioned that “exiting” is the end goal of a smartly built business and a prestigious waypoint in a successful career.

In 2015, Dan Andrews and Ian Schoen sold their business for multi-seven figures, and although they don’t regret selling – there are many mistakes they made that were avoidable.

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Published on 05.10.18
  • Agreed if you want to get out of debt. Cut up them cards and pay for everything with cash! It will be a rough journey but you will be happy and “broke” in the end!! Great episode guys!

  • make a party of it! :) Glad you dug it.

  • Americans are definitely more private/shy when it comes to talking about money (but ironically they’re not shy flashing the “lifestyle” on social media, which is quite often based on debt, but that’s a whole separate discussion).

    This was episode was a good first stab at the topic. Of course, the numbers will vary quite a bit from person to person, especially based on where they live and cost of living. For example, $100-250K isn’t much in Southern California.

    instead of thinking of those figures in absolute dollar terms, what I’ve found to be helpful is to think of it in terms of Time. A typical business cycle and cycle in the stock market is 5-8 years. So, take your monthly expenses, and try to keep a few years of expenses in the bank. How many years will vary by person. If your monthly expenses are $10K, then $250K is just a couple of years of expenses. How many years of expenses to keep in savings will also vary person to person. You can look at monthly income the same way. Look at what multiple of your expenses are you pulling in.

  • I like that!

  • Great episode guys.

  • thanks Chris. Getting a lot of interesting feedback, seems like this concept could be fleshed out with new levels, cash flow concepts, and ideas of relative wealth. For another week! :)

  • Tom Rohlf

    Love this episode. A topic we should all be talking more about

  • Glad you dug it Tom thanks for listening.

  • Much needed episode. Any personal finance content by you guys is GOLD. Entrepreneurmobile was a hallmark blog post and this episode is even better.

    To really sear this into my head (and the other listeners as well), here’s the summary version to review:

    Step 1: Being in Debt
    – Less-than-0 net worth
    – Majorly debilitating state putting a huge drag on you (usually due to credit cards, student loans or irresponsible car purchases)

    Step 2: Being Broke
    – 0-20K
    – Free from the crushing mental strain of being in debt, but still living very lean

    Step 3: Basic Savings
    – ~20-40K –> 100K
    – Can start making moves (changing job) / hustling / etc. In my view, this is the first stage where you can realistically start taking risks (which obviously lead to major rewards for entrepreneurs)

    Step 4: Platform Level
    – 100-250K + Biz generating lifestyle cashflow
    – First taste of “maxiumum lifestyle” (don’t need to worry about a restaurant bill, vacation accomodation, etc). Major purchases (like a porsche) can still F you over, but by nature of having made it to step 4 you are less at risk that someone at step 3 for making that kind of mistake.

    Step 4.5: Investor Level
    – 2.5-5M
    – Enough to do Real-estate / Angel / mini-PE (small company roll ups)

    Step 5: Freedom line
    – 5-10M
    – Never need to even think of work again. Passive investment income covering more than expenses even at lifestyle peak

  • This episode was really good. Please do some more like this!

  • Appreciate it Scott can do.

  • Cheers Ben thanks for that! Since we’ve published a lot of folks have helped us to refine this idea, so perhaps we do more on it in the future. I really enjoy it as well and feel like I have a lot to learn as bossman is much better at this stuff than I am.

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