Are you staying in a job you hate because of money?
The #1 reason I hear from people when they tell me they can't quit is finances.
Whether it is too much debt, not being able to replace their salary, or not being able to cut back, money seems to be a big block from living the life they want.
But when I push just a bit, I realize that most people have no real idea of their actual numbers.
They think that they have a general idea. But specific numbers of how much they bring in and how much goes out...not a clue.
And I get it. Finances are overwhelming. So we just bury our heads in the sands.
And whether we realize it or not, we begin to play the victims in our own lives. We come to believe, falsely, that there is nothing we can do. That this is just the way it is and that we're destined to live this way forever.
Well, I don't have to tell you that this isn't true. There are tons of resources and plans that can help you tackle any financial situation.
But, if you want to start creating a plan for how to quit your career, you have to know your numbers.
Today on the podcast, I got to talk to Rob Bertman about actionable steps you can take to get control over your situation.
Rob Bertman, CFA, CFP® helps families improve their lives and reach their financial goals by focusing on the #1 key to financial success, managing spending.
Rob is a quitter himself. He left a successful career as a partner and securities analyst at an investment management firm to found Family Budget Expert. He knows first hand the upside and challenges of leaving a stable career to start a business and he's on the podcast today to share how you can get started on your journey to financial control now.
Here is what we discuss:
- What the most important step is to gaining control of your finances
- What things you can do to tackle your massive student loan debt
- How much you should be saving for a runway before quitting
- How to start saving when you're living paycheck to paycheck
- And so much more SHOW NOTES:
Goli: Hey Rob. Thank you so much for joining me today.
Rob: Oh yeah, happy to be here.
Goli: I am so happy to have you and I know that this is going to be so helpful. I've really been wanting to do a lot more episodes like this where it'll be more actionable advice. And I know that one of the number one things that people listening struggle with in this decision to quit their career and start something new is finances. So I'm so excited to jump in, but before we get into kind of the, what we should be doing and shouldn't be doing and how to help ourselves, I want to know a little more about you, cause I know that you are also a quitter, which I love. So why don't you tell us a little bit about how you started out your career in investment management and how that sort of led you to where you are today.
Rob: I'm definitely a quitter. I, I got exactly to where I wanted to go in my career. I did investment management and I always wanted to be a portfolio manager and manage like stock portfolio and pick individual stocks to try to outperform the market over time. And that was always my goal since graduating college. And, and I got there. I did it. You know, in 10 short years into my career I was doing exactly what I wanted to do.
My job was, you know, a five-minute walk from my house and working with great people and, but I remember sitting in my office and just thinking, gosh, you know, is this really what I want to do? I'm not sure.I don't know if I'm having the impact that I want to have in my life. I had my first, actually my first two kids and I'm thinking there's a lot of parents out there and people out there that need help, financial help and they may not have the investable assets to work with me. So I was thinking, how can I figure out something that I can do where I can help people where they really need it? And so I remember I was sitting in the kitchen with my wife and we have our ice cream at night and I remember saying to her, you know, Anna, I'm thinking about leaving my job and starting my own business.
And I was really nervous to see what her reaction would be because she has a job at a family office and I was doing my thing. And I was comfortable and I was thinking, how is she going to react to this? But to my surprise, she said, you know, Rob, I, I actually can tell that you're not really feeling your job right now. I said, really? How could you tell that? I just feel like I figured it out. She's like, Oh no, I've known for about six months. So she said, “Hey, if you want to go for it, let's plan for it and get it done.” Know she's very practical. She's very rational and she's a great guide when it comes to me getting advice. So anyway, so I ended up leaving my job and I started a company, originally it was called Money with Impact and the goal was to help people create their own financial plans.
So financial planning, unless someone has like complicated estate or tax issues is, is kind of simple. Now I'm not saying it's easy, but it's simple. So the idea was to start an online course and help people with that. And so I went through the first six months of the business. I thought, I'm going to have so much impact, I'm going to help so much. So many people, hopefully my income will follow because I'm adding value and I put like my blood, sweat and tears into this thing and in the group and to the course. And everyone was thinking, I got great feedback and people were getting results. So I launch it and I'm thinking, okay, this is excellent. You know, things are going to go well. I check my inbox, as you do when you launch some things, thinking like, okay, all the orders are rolling in, here's all the people I'm going to help.
And it was nothing. And then I decided, let me wait a little bit longer in the day and I checked and still nothing. And then as I was closing registration, I'm thinking, well, most people sign up last minute. So there's going to be some people and actually zero people signed up for the program. So probably my fault. I mean, there's a lot of things I did wrong. But it wasn't what I expected. So then what I decided to do after that was circle back and this is kind of like what you say about, you know, take action before you actually figure out what you're going to do. Exactly. Because you have to like figure out, you have to do some things before you figure it out. So I remember circling back with about 20 people who had expressed interest and I said what happened?
And the theme and the pattern that I heard was, it's all well and good that I know what I need to do for my financial planning, but I can't come up with the money to fund my goals. I'm living paycheck to paycheck. I got some credit card debt, I made some student debt and I just really need help with budgeting. So at that point I thought, okay, well now at least I have something, you know, maybe I'll just focus on the cash flow budgeting piece. Cause that's the most impactful part of this, of the, of the plan. So anyway, rebrand it to Family Budget Experts. Now I help couples and families get their budgets in order so they can have extra money to save and pay back debt when, when really, you know, they're feeling like they're living paycheck to paycheck and not getting along with their spouse or partner.
Goli: Well I love what you're doing now and I do, I can see why it's so impactful. I think there's so many great lessons from what you just explained in your own journey. Number one being: the reason we talk on every episode about taking action is because again, you, you would never think your way to that, right? Cause you think that there is a problem and until you put it out there or talk to people, you don't really find out what is the problem that they have. And what I love about your example is because while that's a horrible feeling to go through where, it's like you put, you put all this time into a course and you put it out and you know, nobody wants to hear crickets. But so often we make that mean something so much more than it actually is.
We think, I'm not good enough or I'm not smart enough, or this business was never gonna work or I'm a fool for having left and whatever. And the reality of it is, okay, you just missed the mark on a couple things. Maybe you weren't as tuned into what, what your audience needed or whatnot. So let's just make a couple tweaks and you know, and I love that you just did that as opposed to taking it like, Oh, this was just a pipe dream. I should go back and get a job. Which is what I think a lot of people do when they encounter that first loss.
Rob: Oh yeah. I was ready to quit and go back. And, but I mean, I wasn't, cause I was like, no, this is something, I know there's something there. I just can't figure it out. And I was listening to this comedian talk about how he knows if it just gonna work because comedians just like entrepreneurs, like you get to test stuff out with an audience and see what sticks and what doesn't. And he said that there are some jokes where there's no reaction in those. You got to cut out. But even if you tell a joke and someone goes, huh, ( not quite a laugh) but sort of an acknowledgement that that could be funny. He always says, I got it. That's it. I just got to go further with that. And that's how I felt.
Goli: I love that and I think it's so surprising to me that more people haven't kind of gone into the space that you are because I see you see so many financial advisors and people that are talking about investing in retirement and it seems obvious that that's for such a small percentage of the population because a lot of people either don't have it or don't realize that you can really invest with a small amount. We have these preconceived notions of how much money you should have before you start investing. And so this seems like such an incredibly important audience to serve because so many people are just really struggling to make ends meet and to be able to tackle their student loans or their other debt stuff. So I think that that's wonderful.
But just going back a couple steps,when you have this conversation and your wife is supportive, which is amazing. You've put in 10 years into this career, you've kind of rose through the ranks. You have a steady paycheck. You know, I think a lot of times people have these inklings of, I want to start something else or I know that there is, but we quickly go to, well, I, I've never started a business. I have no idea what I'm doing. Why would I leave this and that stability. And so did you, even before you put out this first course, did you struggle with some of that doubt about jumping into entrepreneurship when you haven't been an entrepreneur before?
Rob: Oh, absolutely. I mean, no question. I always felt like I could do a job just fine. And in fact I'm a pretty good number two in command I got to say. But I always wanted to see, can I be the number one, can I go out and create my own business? Can I go out and generate an income for myself without relying on what someone else created or from myself and something that I truly believe in wholeheartedly. And it's definitely a struggle.
I mean, I didn't do nearly enough research that I should have and I thought we were perfect prepared financially too, but I didn't realize too. And of course this is me like an investment manager and securities analyst, like not understanding that things migConht take a little bit longer than I thought to get off the ground and to generate income. And so I go looking back on our finances and everything like that and just what I thought I knew about jumping in, I learned so much so quickly. And there's a lot that can be done to shorten the learning curve, but I think a lot of people have doubt around can I actually afford to do this?
Goli: Yeah. So I want to get into that and how we kind of figured that out. And I think you just raised such a good point because we're sort of sold I think these days, a lot of people say I started online business and I made six figures in six months and a lot of that's usually just kind of BS marketing. And so I think it's really important for people to remember that you shouldn't do it just because it's going to take longer because that time is going to pass and you know, but I think knowing that it might take longer, like always preparing maybe even more financial aid before you're going to actually make a jump. So let's kind of jump in a little bit. We'll get into all of it like, how do you have a runway to jump for quitting? But kind of going back to like the first step of when you meet with families now or a couples or you know, whoever your, your clients are and you're dealing with these finance issues and it's people that are really not, maybe not struggling but have debt and kind of, you know, don't have a ton of left over money. What is the first thing that people should be doing when trying to get a handle on their finances?
Rob: Well, a lot of people make the mistake of thinking they have to do everything and get everything perfect and it's just not the case. So I like to break things down into simple, easy steps. Like what's, there's this book, The One Thing written by Jay Papasan and Gary Keller, which talks about what's the one thing that I can do such that by doing it makes everything else easier or unnecessary. And a lot of times be, a lot of people struggle with the day to day stuff. Doesn't matter. Even six figure earners struggle with cash flow and have credit card debt, obviously there's a level below of income where, which below it's like really, really challenging for a lot of people. But for most families that are earning six figure income, they struggle with the same with some, some of those issues too. But we think we have to like dive right in and create our budget and, but our spouse doesn't get along with us or we've never done this before.
We don't have the tools. But the first step is really just like anything, it's awareness of what's happening. It's kind of like, you know, imagine you're visiting a city and, and you know, you're new to the city, you don't know your way around and there's a brunch place you want to go to and you have the address of the brunch place and you know where you want to go. But your map, can't find out your current location. And what do I do? I walk out of the hotel, do I, is this a five minute walk? Cause it's a 20 minute drive. Do I need to, you know, what do I need to do? And so we need to have an awareness of where we are today. And that's the current location on the map in order to then plot where we're going.
And I've worked with many clients on their budgets and it's always, it's not surprising to me more, I think it's just a fact that a lot of people underestimate what they're spending. And so for example, I met with this couple, I'll just call him Dan and Liz and they brought, I said, okay, just prepare to me, prepare me your budget or prepare me what you think your spending is. And they gave me the budget. Everyone knows their fixed expenses, their car payments, their rent or mortgage payments and then they put a little bit in there for food, little bit for clothing, love and for travel. Well, this couple, they came to me and said, we spend about $7,000 a month and, and, but they were there. Their take-home pay was like 8,000 a month, but they had credit card debt.
I'm thinking, well how come you have credit card debt if you have this $1,000 difference? So anyway, I set them up with the tools to kind of like dig into their, what their actual spending was. It turns out they were spending $11,000 they were underestimating their spending by $4,000 a month just because they weren't tracking it. And had we not gone through that exercise, they would have no idea what their problem is. And now we know they have a $3,000 gap in what was coming, what was going out. And a lot of times it's hard for people because they might know and so they don't want to face that. But at the same time, if people want to get to where they want to go, if they want to quit their jobs, you have to know where you are and face it so that then you can make the changes you need to get to where you want to be.
Goli: 100%. I think that finances can be very overwhelming and it's a very emotionally charged subject for a lot of people. So many of us have so many money issues from childhood and growing up and we bring all that, but I don't think we realize how much that is affecting, you know, we think we're just normal functioning humans and adults and it's like, no, there's so much scarcity. And so what happens, I think a lot of times, when something is so overwhelming, we want to just bury our heads in the sand because it's too much. I don't know what these numbers mean and I don't even want to look at it. And I think it is so powerful. I've seen the same thing with so many people that I've talked to now about finances.
It's like as soon as you just know what your numbers are, so much of it becomes clear. Like so much of like, Oh, Hey, I can save by not doing this thing that I was, I didn't even realize I was spending so much on, or I can, you know, and, and the next steps, it becomes so clear. But the problem is you never took the time to actually figure out what those numbers are. And so I love that it's so simple but so powerful to just really understand what's coming in and what's going out.
Rob: Oh yeah. And, and to give people a, a tactical way to look at that. So there's obviously some free budgeting apps like Mint or you need a budget and things like that. And so you can sign up for that. Some of these places will actually import the last 90 days of your data. So you can look at the last 33 months to see where things land. And sometimes there's some cleaning up to do, but it's not all that bad and even simpler way to do that. So if someone is thinking, well, you know, I don't want to mess with that. Just take a look at the bank statement. So if someone has a bank statement where all the income is coming in and all the credit card bills and everything is in student loans and everything is being paid out of just open up the statement. Usually at the top of the statement there is the net of what is come in for the month, what has gone out and, and and that's like the simplest way to do it. That the number one thing is what's coming in, what's going out. And then a little bit further from there is what I help people do is, and it's important to know is separating these, the spending into what's what's fixed, what's possible and what are the debt payments that someone has.
So for example, fixed is like a mortgage or a car payment that would be really, really hard to get out of. Flexible are things that people can actually have more choice or it's easier to make spending decisions on a daily basis and cut back in those areas. And then the debt payments are something separate. So once the debt payments are cleared up or some of them are cleared up, then we know that will also reduce the outflow. Because if we're, if we're trying to figure out our finances, we need the engine, the fuel that drives where we want to be in setting ourselves up so that we can quit our jobs is how much money is left over after what comes in and what goes out. And it's just a simple equation. And then when we break it down further, we can then see what choices can we make to get to where we want to get faster?
Goli: Yeah, no I love that. And just to piggyback on what you just said about like these apps. So I had never, I just did a financial challenge and in our Facebook group, and it was like a 30 day trying to get to know your numbers and try to save some money. And all this stuff. And one of the first weeks we focused on just learning our numbers. And I signed up for mint. And as a caveat, most of my banking, everything is done with one company. So my credit cards are from the same bank and I have all of my checking and savings and everything. So I will say that. But I was blown away cause it took three minutes. I just linked it to my bank and the amount of information it gave me blew me away. Like breaking down how much I spent on food, how much we spend on recreation, how much we spent on clothing… Because it goes through all of your spending on your credit cards and all this stuff. So it's really mind-blowing how these tools can help. And so they're there. I know sometimes it seems overwhelming because you don't know what to do, but it was - I'm not a techie person and I figured it out within five minutes - it was really eye-opening.
Rob: Yeah, absolutely. And another important thing is there is a lot, especially with mint, I mean there's all these different tabs. You can look at your transactions, you can set up budgets, you can look at trends. The most important thing again is just to know the inflow versus outflow. If people just understand that they're on their path to victory.
Goli: Awesome. Well, and then now going on to how you were just talking about you know dealing with debt and kind of tackling that. And I know that a big issue for this audience is student loan debt. And a lot of times it's so much that we are just overwhelmed by it. And so we sort of resigned to the fact that I'm going to be paying this off for the next 30 years. And it is even people that you know are making over six figures, but they might have six figures or multiple six figures in student loan debt. So do you have any advice on what is the best way to tackle student loans? Or what are some options that people maybe don't know about that they can think about in creating more of a plan to get it under control?
Rob: Absolutely. In fact, I work for a company part-time, one or two days a week called student loan planner. And we do consults, individual consults on people who have six-figure student debt. And so the company itself has done 3000 over 3000 consults and advise on over $800 million a debt. I've done just working part-time for two years. I've done over 700 consults and advise on almost $170 million a debt. So when I can tell you is that anyone who has student debt, like you're not alone if you have six figures that you're not alone. There are 3 million people out there with six-figure student debt and a lot of more graduate-level professionals, you know, highly educated, you know, potentially high income earning professionals.
I'm like in a wealth optimizer, so it’s like, Oh well you got debt at 5% well then just invest the rest and pay off the debt on payments and that kind of a thing. But what I realized is that all debt has to be paid off. It's all about the term that you pay it back on. But today with all these income-driven repayment plans, so there are two ways, basically two ways to pay back your loans. You can pay based upon how much someone owes or it can be base pay based upon your income. And so there's so many confusing options are there are out there, these income driven plans are called ID RS, but one of them they named income-based repayment.
And then there's like pay as you earn and revised pay as you weren't. They named these things so similar and they're close but a little bit different. So there are two rules of thumb. There are really two paths to paying back student loans in terms of like strategies. So you either want to go all in and throw everything you can to get rid of the debt as fast as possible. And that's usually like a 10 year or less plan, but hopefully five years or less. And generally that works for people who know about what their income is or maybe one and a half times their income or less. So someone earning 200,000 with $300,000 a debt for example. That would be like an all in strategy, pay it off unless they're eligible for something like forgiveness. But anyone who has more than twice their income, so maybe someone earning 150,000 who has 300,000 chances are an income-driven plan is going to be the way to go, where not you're not paying out the loans aggressively, you're trying to keep the payments low but maximize savings and because the payments are lower, there's extra money left over to save.
And so, and I'll give you a couple examples: I had a client who was working in big law and just starting out. So they had about 150,000 in debt and they were making about 200,000 and you know what that big law pay scale and bonuses is... You can clean up 150,000 pretty quick if you're focused. They were paying on an inefficient plan. They were on the standard 10 year plan, which is basically where you pay the interest rate that's on the loans and you pay it off. It's kind of like a 10 year mortgage where the payments are level and you pay it off. And what we found out is that by refinancing to a lower interest rate and taking the bonuses that they had along with some extra cash flow, that they could actually be debt-free in two years. And so rather than stretching this debt out 10 years, yeah, they're done in two, right?
Goli: I mean, that's exactly what I did. I went to big law in order to pay off my student loans and I didn't refinance. I just wanted to have it off because I wanted to have the freedom to do what I wanted without worrying about this insane amount of money that I owed. And I think that a lot of times we're just resigned. Like, okay, the loan is a 10 year loan so I have to stay with the 10 years and I have to just end. So we ended up spending the rest of the money that we make just because we think this is our only payment. And I think that this is just so eyeopening. I'm sure a lot of people don't even know that you can refinance your student loans and that there's all these ways to go about figuring out how to tackle it.
And what I've found from people, myself included and other people that I know and that have tackled their very large six-figure student loans is when you don't know about it... It's like whatever, you're just paying monthly. But once you know it and it's like in the front of your mind and you are paying a certain amount, like any windfall that you have any extra money, you're like, Oh I can pay this off quicker. And it's so front of mind that you end up tackling it even faster. I've known so many people that had plans and they were going to pay off their loan in five years and then in two and a half years they paid it off because they kept budgeting and figuring out like, “Oh if I do this and if I add this then I don't have to pay anymore” because you're paying so much in interest. And so once you start realizing this little game that you have to play in order to get it off, the sooner you can eliminate it and then be free from that additional stress.
Rob: Yeah, I'm sure it felt great to take, I mean if you're in big law to taking the job to pay off your student debt, then that's exactly what you should be doing with your money. And you did that and must've felt amazing when that was done. I had another client who had about $200,000 in student loans from business school and a little bit from undergrad and they were working in HR and making about 80,000 and the payments were crushing them. I mean they were paying on the 10-year standard plan. But honestly, when you owe more than twice when someone owes more than twice their income, generally an income-driven plan is the way to go.
Especially if someone thinking about quitting their job and it's like a huge mountain to climb, but they feel like they just really need to get out of there. These income-driven plans can be really powerful. So for this person, there's a program where you can pay 10% of your income and get an interest subsidy that cut that like basically half the interest that would accrue on the loan. The government wipes away on a monthly basis. So for example, it's called revised pay as you earn. So for example, if someone has 200,000 in debt at 7% that's $14,000 in interest a year. If their payments, if they're not making any money cause they start a business and their payments are zero, then their income is zero, then their payments are zero. Well rather than $14,000 of interest accruing on the loan, repay will wipe away half of that.
So basically the government is paying about $600 a month in interest on that person's behalf. So while someone's getting their business going, plan and keep their payments at zero without having to put their loans in forbearance or deferment, which is a big mistake. We see a lot of when people are starting out their own business, go on an income-driven plan with zero payments, get the interest subsidy and then once the business gets going then you can kind of come back to the student loans and see what, what the optimal plan is at that point. So I guess the point is that no matter what situation someone's in is in or whatever career choices people are trying to make, there is a student loan plan that can fit around that, that goal. So in your case, go on aggressive and paid off was the way to go for someone else who might have more debt compared to their income or their thing. They're just like ready to start their business now they can. There's a way around that too.
Goli: Totally. Oh my God, I love this. I mean, again, I did it cause I didn't really know that there was anything else out there. And that was my own ignorance of not...At the time, I didn't have kids. I wasn't married. And so I could do that. And I realized that's not the situation for most people, but this is just so eye-opening because again, I don't think a lot of people realize there are all of these options out there. And so there's people that can help you figure it out so that you aren't like stretching this crushing debt for 10, 15 years and having it loom over everything you do so that you can't take a step towards your dreams or leaving a job you hate. And so it's just so comforting knowing that there are a lot of other options that people can take advantage of. So definitely look into that and look into Rob helping you, cause I think that's amazing. But okay, so then moving away from student loans, let's say you tackle that or you know what you're going to do or you have that under control.
So let's say you know your numbers at this point, but you haven't done anything right. And so you want like what should we be sort of doing? What is advisable for the amount that you're saving or the amount that you should be saving? What advice do you give people on basically making sure that they have a good plan of attack of their budget once they know their numbers?
Rob: A good plan of attack of their budget once they know their numbers? It's a great question. What I've found is the most effective is when people, a lot of times people use the word like, afford, I can't afford that, or I can't afford that. And that's sort of a passive mindset when really we're just making a choice. So when people are trying to choose between two things, they're going to choose either the more comfortable or the more compelling one for them. So if someone wants to quit their job, then any extra dollar that they spend is a dollar that they won't have as a runway for their job. Because the last thing that I know that you would want for anyone or that I would want for anyone starting on their own venture is to not have enough and they have to quit. They have to quit their quitting before because they run out of money.
But think: I really want to start this business, I've been dying to do it forever, I just don't know how to get there. Well then we have to figure out what is it going to take to be in a comfortable financial situation so that you can give it a go have enough runway and then any extra dollars out spending on drinks or whatever. We want to make sure that the spending is done in an efficient way. It's kinda like time with kids and family. Time shrinks big time and so we have to make different choices. But before kids, you know, anyone can really just say, Oh, you know, I think I play basketball like five days a week and I watched like five hours of TV and I still work.
I still worked hard, but I held this extra time. But when kids take out that time, you have to make choices about what's the best use of that time. And it's the same thing with money. The thing is that we have to have something that we are choosing not to spend on because we want to have something else instead. And I guess what I'm getting at there is if someone's goal who's listening to this podcast, which a lot of people on this podcast, I'm sure the reason you're listening is because you want to get things going with just a simple goal would be to set up a runway so that when you quit, you don't have to give up too soon. And it's a pretty simple equation. So what I like to see people have is number one, any credit card debt needs to be paid off because we don't want to enter into business land with consumer debt.
It's the hardest one. It's might be a symptom that we're maybe not organized enough yet. We don't have our finances in order enough yet to start our own business. So after any credit card debt, we're credit card debt-free. Then I usually say it's about 12 months of expenses. But if someone is single and starting their business, they need a full 12 months of expenses. If someone is married and their spouse is earning an income, then whatever the monthly expenses are minus what the spouse is bringing in is the extra cushion that they'll need. And it doesn't have to be that big for people like you and me where our businesses, honestly, they're not that capital intensive. We don't need to come up with a bunch of cash to buy some manufacturers or anything in particular. We’re just us, right, and our teams. So for that, that's, that's the only, so credit plan to get credit card debt-free and build up their share of the expenses that aren't covered by a spouse if there is one and a for the year, that's the simple equation.
Goli: I think what a lot of people might be thinking right now is, but I have all this student loan debt that we just talked about. So how am I also saving money for a runway? This is impossible. How do people do both?
Rob: Well, so if this is federal student debt, then it's honestly not as big of a problem. Private debt, you know, debt that is with a bank or needs to be paid back in full no matter what. That could be cleaned up. But as long as those payments can be afforded and depending, it just depends on how, how much someone really wants to get out of their job. If someone feels like they’ve had it because you can refinance to a longer-term with private debt on the federal debt. They can go on an income-driven plan, quit their job and say they have zero income cause they do and go on an income-driven plan that way. So the student debt actually has a lot more flexibility in how to handle it. The credit card debt does not.
Goli: So what I’m hearing is that once you can get your student loan on a plan that you've come up with that you can allocate a certain amount every month to then the additional, whether that is like you saving money or making more money or whatnot, you should focus on putting that in a savings for a runway in order to then be able to quit your job?
Rob: Absolutely in savings. A lot of times when we think we're doing a good job when we are maxing out our retirement plans. We're putting a bunch in there or maybe we have a house that we have a lot of equity in. But when it comes to running a business and a runway, we want to have it in liquid cash. That other stuff is expensive or hard to get to and we don't really, we want to kind of, we don't really want to have to borrow money to do this if we can avoid it at all costs.
Goli: And what do you recommend for people that are listening that don't necessarily want to start their own business? Like they might hate their job and they want to find another job and maybe they want some breathing room or maybe they're going to get a job that doesn't pay them as much as they're currently getting. But just in general, if it's not even a runway for quitting a job, I mean, how much do you typically think people should have just in savings for whether it's an emergency or being able to kind of take a pay cut? Is there a general practice for savings?
Rob: Yeah, the typical rule of thumb is the three to six months of expenses. And it just depends on cash in a savings account and it just kinda depends on someone's risk tolerance or their earning potential. But I think that's a good one to go off of. I like to keep things simple and if that's the common thing that people hear, I don't think there's anything wrong with that. If someone's trying to start a business, I think that that 12 months of their share of expenses or whatever expenses their spouse's income doesn't, doesn't cover as is good, is a good way to go because trust me, things will, things will go on much longer and income will be a lot lower for longer than what we anticipate. Like I remember talking with my wife and I was a year in and I still wasn't making really any money and I'd given up, I had a 15% stake in my old company. I was making a six-figure salary and everything. And I was just thinking to myself, I felt like a failure. You know, I'm running out of money. Like I need to do something fast just to earn a buck. And my, my wife again, the practical one, she was like, Oh no, this is, you're exactly where I thought you would be. Cause it's true. She has like that rational mind. Like you start a business, it takes some time.
Goli: I love that. That you had that and that she thinks like that. Cause I think if you have a spouse that's in a traditional job and maybe aren't entrepreneurs - It can cause a lot of discord because they question when is this money going to start coming in? And that usually leads to a lot of stress. So that's amazing that you have that. But is there, I think one thing that maybe we haven't talked about, and I know you had mentioned to me earlier that you have like this method that people can maybe look at how they can just save some money from what they're already doing. I think a lot of times we end up, even if we have six figures, we end up just spending what we make. And like we were just saying, when you know your numbers, a lot of times you don't even realize how much you're spending. And so what are some ways that people can maybe really start a savings if they don't have one? In a way that’s not like they're becoming minimalists and never buying anything and moving into a one-bedroom apartment, you know?
Rob: Right. I had a client conversation two nights ago with Samantha. So she said they're making a good living. And she said it's actually more dangerous with spending when you make a good living, cause it doesn't matter as much where you spend your money. And so when I work with couples and families, the higher-earning families can actually cut a greater percentage of their income without feeling like they're missing out. So the thing is, number one, traditional budgeting doesn't work. All right, let's just throw that out there. My company's called family budget expert, but budgeting doesn't work. And the reason is cause it's restrictive, it's complicated.
You gotta track all sorts of stuff and chances are maybe there's one person in a relationship that is good at it and loves doing it, but if they're there is that one, I guarantee the other spouse is not like that. And so how do you have someone who is budget-oriented and spreadsheet oriented try to play that game when their spouse is not like that. Doesn't think like that. You know, the more, I don't want to say free spirit, but just not as conscious about spending. Right? And so when my first son was born, I created a type of time management. Time shrinks money, strengths, etc. How do we maintain our lifestyle, but also cut our spending so that we can afford what I call the three D's of parenting, daycare, diaper and doctor bills. And so what I came up with after a little bit of tinkering was this strategy, I call it keep, cut back, eliminate and keep.
Eliminate is, is a three-category budgeting system that prioritizes spending based upon what's important to the couple and as individuals, because we all have different interests in our spouse, right? We have something that we spend money on that drives them crazy and vice versa. But we need to keep that individuality in our relationship. But we also want to keep spending money on things as a couple to, to maintain a strong relationship. And also, obviously family is the thing that usually takes over the budget. And so how do we have a prioritized way of spending our money that we is in line with what we want as individuals, what we want out of our marriage and what we want as a family? Well, while still spending less money. So keep what to keep is this is something that if someone were to look at their bank account or their bank account statement or their credit card statement, they would look back and find a transaction that makes them smile.
And it wouldn't only make them smile because of what they did, but the amount they feel like it was an appropriate amount. That's a keep. And the good thing about this, if someone's working with a spouse or partner, then keep... There's no veto power. So I like going out to movies and I already have my star Wars ticket. My wife will never go with me to these movies cause she doesn't get it right. But that's okay. That's my thing. Right? But she doesn't give me a hard time. It's kinda like how my wife likes peppermint ice cream and I like chocolate ice cream. It's kind of like, you know, spouses argue about the stuff that's important to the other one.
It would almost be like us going out to ice cream and she orders peppermint ice cream and I start berating her because it's a waste of money. And when really it's just, I'm just not understanding what's important to her. So there's no veto power. So keep for one as a keep for both. And what this also does is it dissolves the arguments that trip people up and couples from having the, the conversation around spending so that then they can work together on the things they agree on that they can reduce. So that's key. And the same three categories keep as individuals, keep as a couple, keep as a family. Cutbacks are things that everyone's on the same page. We can reduce. So think about something that you know you like to do, but you could probably do it less often or for a lower ticket expense.
So, for example, I have a client who goes out to lunch five days a week, and he's spending a lot of money on going out to eat for lunch. He tried before but couldn’t cut down on his food spending. He tried to pack his lunch every day and it just didn't work out. What happens is inevitably is the first day someone packs their lunch and everything's fine. The next day a friend comes a coworker and says, Hey, let's go and grab lunch. There's this new place. And you're like, well, I dunno, I got my lunch, but okay. Yeah. And then he would go out with his buddy and then feel like, well, I already went out once, so might as well just go out the rest of the days.
Okay, this isn't working when really a better approach would be how about we just go from five days to four days a week and just going from five days to four days, that's a 20% cut in the lunch expenses. So it's just packing a lunch once a week. So a lot of times we feel like we have to ramp down to zero when, when really if we just reduce in those areas by 20 to 25%, that's a win. And so that's a cutback and these are things that the couple agrees on if they're working with somebody you know, if they're having to make financial decisions with someone else eliminate our 100% reduction. So these are things that someone would look at their statements and say, I can't believe I did that or what a waste of money or if it's a habit that's counterproductive to their health or wellbeing or where they want to be in their business.
And so those are just a 100% ramp downs. And at the end of the day, the average couple I work with who's spending in the 10 to $15,000 a month range, they can actually cut their spending by 18% on average using that technique. Wow, so then what do you do with that money? Then you take that money and you build that runway to start your business or you use that money to pay off credit card debt on top of the payments that are currently being made. So there has to be a purpose to what that cut. What are those cuts in spending? What does that provide to that person? And that's really important.
Goli: We have this idea that it has to be all or nothing. And if we can't do it right, then somehow we're a failure or it's not going to ever work. And I think everything in life is just little baby steps. And you've said it now too. It's like you don't have to just pick one thing or just do, you know, just know your numbers. And try to figure out one aspect of it that you don't have to tackle. And become basically a financial guru in the first month. It's just like, okay, let's start this month. Just know our numbers and then maybe next month we can cut back something or whatever it is.
I think it’s a simple thing. It doesn't mean if you're going to tackle your finances, you have to have everything figured out and you have to go, you know, research all these student loan programs and you have to, you know, start saving thousands and thousands of dollars a month. But can you eliminate one subscription and then use that money and put it somewhere else and put it into a savings as opposed to just ending up spending it somewhere else. It's so important because that is the secret to everything, to building a business, to saving your money, to, you know, organizing your house, whatever you want to do. Just start with one step and don't make it a bigger thing for yourself than it is. And I love that. That's your approach where it's like let's just start small.
Rob: Absolutely. In fact there was another book that I read, it's called getting things done by David Allen. He's like an organization productivity guy. And he always talks about, you know, you have projects in the name of your next action. Cause when we'd have traditional to do list like get my finances in order to start my business. And that's not a to-do. That's a project. That's a huge, massive undertaking. And so the next step thing that he uses is what's, what's the very next action that I need to do to move this forward? And so if someone is just starting on this, you know, if, if, if after listening to our conversation here, the people listening, if, if you are struggling with what to do next, the only, if you only just started tracking your spending, that's a victory. That's all you have to do.
And then from there, you start to get momentum. You say, Oh, now I know what I need to do. And you know, if you get past asset, then step two is how much runway do I need? How much credit card debt do I have to pay off if I have any, what do I have to do to get to the expenses that I want to get to or to get that savings that I want to and then plot the course. Because a lot of times we create these goals, but we don't put a timeline on it. But I was working with this other couple, Amy and Joe, and they were spending $11,000 a month and had about $75,000 of consumer debt. And they, they didn't know when they'd ever be debt-free. They had about, I think they had about $2,000 a month going towards debt payments, excluding their house.
And what we did is we were able to cut their spending from 11,000 to $8,500 without feeling like they're missing out. They're getting along, they agree on it. So now they got an extra $2,500 on top of that $2,000 to pay off their debt. So now they're out of that credit card debt and consumer debt in two years and then six months from there, then they can create that runway. If they wanted to do a career change if one of them wanted to do career change two and a half years, as opposed to like when this ambiguous when, and you know, if someone is in that time, we're like, well, maybe two and a half years is a long time. It is. But guess what they can do? They start doing research on what you wanna do with your business. Start testing it out in the marketplace. Because that way, when that two and a half years is up, you got the runway, you got everything paid off and now you know exactly where to go with your business. And I'm off to the races. Right?
Goli: Absolutely and we've talked a lot about how it could take a while for the businesses - it's going to take longer than you expect. And so often we're discouraged by that. Or we think, Oh gosh, two years, five years, that's so far away. That time is gonna pass and then you're going to get there and you still haven't done anything and you're in the same position. So yes, it's not a quick fix. It's not going to happen in two months. But if you are unhappy now, why not start taking those steps? And if it is even a small step of reducing a lunch once a week, you know, or doing something small that can start getting you on this road of figuring out how to tackle this.
And then in two years you're at a place where you are miles ahead of where you were and you've set yourself up to then spend the next 20 or 30 years of your working career, being able to, you know, do what you want to do or have the runway and not have the crushing debt. I mean, we don't, I don't know, we don't look at our future self. We look at right now and it's like, gosh, doing this for two years seems so long. And that’s okay, but what about the next 40
Rob: Right, exactly. And if someone doesn't get started, it'll never happen. I mean, I'm sure a lot of you listening out there, maybe you've been thinking about this a lot longer than two to three years. Maybe I'm thinking about it for five years. And once you start getting things moving and you know, a timeline, then finances can no longer hold, hold you back from making that decision to make the jump.
Goli: Absolutely. I couldn't agree with you more. This is so helpful. Thank you so much, Rob. Is there any way I don’t if you have any tools that they can use or any parting advice and then why don't you let us know where people can find you. So if they need your help and they want to work with you, where is the best place for them to contact you?
Rob: Yeah, sure. Well, and all of the stuff we were talking about here, you know, whether someone wants to launch into their own business and be a quitter or not, this is stuff that people should be doing anyway. Because money arguments and money stress is the top cause as we know of divorce and other things. But the money part is kind of vague. I would say spending in debt and all debt is, is a, is just, you know, money that has been spent that hasn't been paid yet. So focusing in, if people are trying to do super complicated things with their finances, just focus on the cash flow, focus on what's in and what's going out, try to manage what's going out. And then take that difference and apply it to these goals. So we don't need to over complicate it.
I went from being a wealth optimizer, you know, someone who's trying to play the spreads to someone who's like, just keep it simple, execute, get it done. And a lot of that came out from running a business cause that's kinda how you have to operate. But no I appreciate being on here. If anyone wants to reach me, they can go to family budget expert.com and they can sign up for a guide. It's a five-step guide and workbook to cut spending. And once they register for that, there's also a link on the thank you page where they can sign up for a free 30-minute session with me. It's a, you know, complimentary. So if anyone's thinking about quitting or they have financial issues that they're having trouble working around, you know, I'm happy to help anyone that I can. So family budget expert.com, they can go sign up for that and then sign up for the consultation too.
Goli: Well I really appreciate that. Thank you so much Rob. I think you guys should all take him up on that cause that's very generous and I'm sure it would be super helpful. Thank you. Again for coming on here. I think this is going to be extremely helpful and we can't wait to have you back to maybe tackle some other sticky financial topics.
Rob: Thank you for having me on.