MONEY FRUGALITY

A quick note before we jump in…

I know quite a lot of people who make an great amount of money, but few people who are rich. Rich is having passive income greater than your burn. People on a path to money focus on their earnings; people on a path to wealth also focus on their burn.

I like Scott Galloway's story about his father and stepmother:

Collectively, they take in $48,000 per year from social security payments and their pensions.

“They spend 40 [thousand dollars per year]. They are rich. They have more money than they need without having to leave the house and work.”

Meanwhile, Galloway says people making million can be “poor” if their expenses are high enough.

“I also have friends here in New York who make between $1 [million] and $3 million a year as investment bankers or partners at a law firm,” Galloway says — incomes which would put them in the top 1 percent of all wage-earners in the US.

But says Galloway, “between the alimony to their ex-wife, their house in the Hamptons, their fat co-op on the Upper West Side [of Manhattan] and private school tuition, they may make $2 million but they spend $2.1 million — they are poor because they have the stress of knowing if there’s a hiccup in the economy or they lose their job there are deep s---,” Galloway says.

The upshot: Bringing in a lot of money doesn’t make you “rich” if you spend more than you earn and you depend on a salary.

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When you start your next venture - there is a period in your life where you need to cut your costs.

A billionaire Ted Turner, there was a time for him where even though he had money, he didn’t turn the air conditioning on. And Atlanta, it’s a hot place, but he said, “We need to double down on what we are doing, we need to have every available resource.”

What makes the journey easier is that everyone is on the same page when it comes to keeping costs low…

Partner up with someone who doesn’t have many expensive needs (both business wise, love of your life wise).

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If you really want to do something, get serious about it. This isn’t a game. You have to double down, take things seriously.

Look, the world doesn't owe you a living, anyone can complain about their situation. It could be financial, it could be family, it could be education, there are a million things you can complain about. BUT FINALLY, if you really want something, you have to eat, drink and sleep for it.

If you strap yourself into having a mortgage, car lease, those things. It’s dangerous, you can’t try new things because old things need to be paid for.

You need to have an investment mentality, you put off temporary pleasure, for a higher long-term goal.

One of the smartest things you can do when starting and growing a business.

MONEY FRUGALITY

What is an expense you can cut?

Going extreme…

Can you even make money with it?

Five years ago, while living in Melbourne, Australia, I started my first successful small business.

I didn't have a car and I rented my apartment to 4 people and slept on the couch (literally).

Living on my own cost me $2,500 + expenses, but when I rented out to other people while sleeping on the couch myself, I made almost $800 a month.

It covered all my expenses and I was able to invest all my funds I had into the business.

(People tend to forget the hard times; luckily I had my roommates take a picture of me.)

Today I’m not living in Europe anymore, but I’m still always looking for ways on how to turn our liabilities into assets.

Here is an example on what my gf and I did with our cottage:

Quick (true) story number 1.

A few years ago, we hosted a well respected quests at our home, my step-father’s business partner and his wife from Norway.

The gentleman was in his 70s — had run his construction business for decades and was generally doing very well — building over 100 houses in Norway in a good year.

Anyway, next moment he the gentleman was sitting with one leg over the other and I said to him, "Excuse me, you have a whole in your sock."

Surprisingly, he said, "Oh, I'll have to tell my wife to fix it."

Later that night I asked my stepfather, "What was that?" And my stepdad said, "Funny, huh? But that's his mentality. You don't even want to know what it's like to work with him… Dude is frugal AF!"

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Quick (true) story number 2.

My friend had the opportunity to meet a very wealthy man in Zug, Switzerland.

They stayed at his super-fine winter cottage.

The gentleman said he rebuilt the whole house because it was too old.

Okay…

The next moment he lifts the rug and says, "I didn't change the floor under the rug, no one's looking here anyway."

The guy himself burst out laughing when he showed it.

Good stuff, I know!

Again, these are real old school folks living life as I just shared with you. These are the people you will be competing with as you build your business.

So…

I hope you enjoyed today's emails.

Take care,

Mikk aka PrivatEquityGuy

P.S. Never be cheap in investing in yourself. I believe I’ve spent around $20K in the last few years on personal development, mentors, plane tickets to meet these people, events, etc.

I know it will gradually and consistently pay off.

What about you, what extreme frugal stories have you heard, let me know?

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This last 10-days, I believe I spoke to 6-7 people — learning about business, finance, investing, etc. and everything needed to make ourselves as well as our investors rich. (Many of them said their goal was to make sure we become very successful. "Mikk, if you're successful, we'll be even more successful. You win = We win!”)

What a humbling experience overall.

Here's one of those meetings, the others were via Teams or Zoom: