Hey guys, welcome back to the Homework Assignment Podcast.
I'm your host, RJ Patino, and today we are going to discuss a very important attribute
or perspective to have when you are trying to discover how to balance your home and work
life.
So that topic is finances, how to run your finances, how to manage it and be able to
anticipate good times, bad times, all that fun stuff.
I've been asked how I run my finances before and I used to think growing up that I was
kind of doing it not the right way.
I think over time I've realized that there's obviously multiple different ways that you
can control, manage your finances and you've got to find the best way that works for you.
I will say from a business perspective and from the game of business or the hustle, I
do have a very strong opinion on spending money specifically.
I know a lot of people or one of the main things that I do hear about finances and that
I've seen a lot on social media is Dave Ramsey.
Dave Ramsey has had a great curriculum that has worked for a lot of people.
I know some of my clients have used Dave Ramsey's curriculum to help them gain the money and
the savings that they need to do a remodel or buy a new home.
I think that works in a lot of people's situations and in what I call the normal life structure
of 9 to 5 and having a typical day to day, Monday through Friday job.
But I think when you are running a business, scaling a business or you are creating something
for yourself to finance your family, that doesn't really apply as much.
It may not even apply in a normal, ordinary job, 9 to 5 job.
I do think, well I read this book not too long ago, it was a few months back, it was called The Millionaire
Next Door.
This book talked a lot about how a normal average household with an average household
income can become a millionaire.
I remember a specific example from this was there was a teacher and a firefighter that
they were married couple.
The wife was a teacher, the husband was a firefighter.
The example talked, and this was a real life example, this wasn't fiction, they were able
to over years bring in together about $65,000 a year.
Now this is the early 2000s, so that's a very important aspect to understand.
I know out here in Gilbert, Arizona, the average household income is I think over $100,000
or just below it.
Early 2000s, this couple was bringing in $65,000 a year and by using their money right, they
were able to become millionaires.
So like I said, I think there's a lot of ways that, one, you can save your money, you may
need to, depending on what your job is, depending on what your profession is, and obviously
there's nothing wrong with that.
You know I'm really trying to focus on business owners and really finding that balance between business
and work life and your home life.
So with that perspective of running a business, and again, it depends on where you're at in
your situation, but here's the way I've always lived.
This is before I had an actual very successful business because it does take time to make
money, just because you're pulling in $3 million a year in revenue does not mean you're making
money.
You need to make sure you're making money.
In the beginning of your business, those are the hard years.
Really it's going to take three to five years to actually be able to finally turn a profit
in a business.
So it does take time, but the way I've always lived my life is I've never worried about
spending money.
Okay, I think there's two things to really consider here.
Number one, I've talked about this before, the broke mindset.
Always bringing yourself down to zero, even when you have something, even if you have
a million dollars in the bank, wake up the next morning, look at your bank account, see
those six figures, get it out of your mind, act as if you have $0.
And what that's going to do for you is that's going to keep a flame lit under you 24-7 all
day long to go and get your money, go and get what's yours to hustle.
And that's the number one aspect or trait in my opinion that we need to have when we're
thinking about finances.
And number two is understanding that money makes the world go round.
You need to spend money.
Now don't be stupid.
Okay, you obviously we all have bills to pay, we all have responsibilities, but understand
that you do have to spend money.
Do not be scared to spend money.
Don't be scared to invest.
Don't be scared to just buy things that you may need for your personal life or your business
or whatever the case is.
Because when you spend money, that is good for the economy.
You go to buy another dump trailer, you pay 10 grand for a dump trailer.
That guy makes his profit.
And if that guy knows how to spend money, he's going to spend his money and that's going
to go to somebody else and it just it makes the world go round.
So spending money is very important.
When you get too many people hoarding their money, so you get a whole city that is on
this Dave Ramsey thing and they're just saving every dollar they can.
They're sacrificing going out to eat.
Okay, say I think in Gilbert, I don't know fully, but let's say there's 100,000 people
in the city of Gilbert.
If everybody hops on the Dave Ramsey train and they're all saving going out to eat, to
eliminate it, to maybe once every two weeks or let's say a couple of times a month, what's
going to happen?
There are a lot of restaurants that are going to go out of business.
And when they go out of business, what happens?
They don't have money.
And when they don't have money, they don't go spend money.
And it ends up coming right back around to you and the way you make your money.
So understanding that spending money is not a bad thing.
Understanding that, yes, have a savings.
Okay, save up.
Great.
That's what you want to do.
Fantastic.
Even if you run a business, but understand that you need to spend money.
Okay.
Share your money.
Hire companies.
Okay.
Support small businesses.
Spread your money so that it comes back because if you hoard it and you hold on to it, it's
not going to come back.
And that is a very important aspect to understand.
And I'm not, I don't know a lot about economics, the statistics or anything like that.
I'm not really into any of that, but I do understand how money works.
And I do understand that cashflow is very important for an economy because I know it's
important for my business.
That is the number one thing that takes priority 98% of the time on a day to day basis is making
sure that I have cashflow.
Okay.
Because if I don't have cashflow, what happens?
I can't pay people.
All right.
So understanding that money makes the world go around.
It's a circle of life and Benjamin, he's all up in there.
So if you are trying to save money, like I said, that is great.
But going back to my experience, I really have kind of always sucked at saving.
I've always spent money.
And I think for me personally, and again, this is an opinion when I'm spending money,
I know I got to make more money.
Right?
So if I, my wife's fantastic.
First and foremost, I want to make that very clear.
She was with me when I was making $3,000 a month and had a beat up truck till now.
And so she she's never been very high maintenance from the day that I met her.
I think that I may have turned her into a little bit of high maintenance, but that would
be more of my my issue more than hers.
But I know for a fact that she being with me from the beginning, she knows how to live
without money or with no money.
And now she knows how to live with money.
And the one thing I like about our relationship is that I know my wife is, you know, she's
going to spend money and in turn, I know because she's spending money, I need to go get money.
Okay, it's it's and again, this is an opinion.
Okay.
This doesn't may not work for many people, but for me, this is just this is my experience
is what this is what drives me.
Okay.
If I know my wife's getting eight packages from Amazon a day, what do you think I'm doing?
I'm not sitting on the couch moping, yelling at her not to spend money.
That's one way to go about it.
No, in turn, I'm going to work.
I'm like, okay, I need to go land six more contracts because my wife is about to go order
a freaking thousand dollars worth of baby clothes that we don't need that my daughters
are going to grow out of in a matter of a week.
So and I of course, there's limits that I you know, we've had great conversations about,
you know, our finances and where we need to be.
And you know, my wife's not out there blowing $4,000 on Louis bags every single week.
Okay, so that's not my point here.
My point is that allowing a little bit of freedom in your finances can have some benefits.
Number one, just like we talked about the circle of life, the economy, what you give
comes back around.
And number two, it keeps you aware that you constantly need to be bringing money in.
Okay, so finances can be tricky.
And I think number one, if you are in a relationship, you have a spouse, you I mean, having that
communication is super important.
If you guys are not on the same page, you guys are going to have problems.
If you are stressed at work, and you know, going back, for example, to the times I mean,
my wife have talked about finances.
There are low points in business, you know, nothing stays great and smooth 24 seven.
That's just not reality.
If you are expecting that going into building a business or scaling your business, you are
being fooled.
That is not going to happen.
And I'm gonna go on a tangent there in a minute on that.
So I'm gonna put that over here.
But if you can understand how to have freedom with your money, you will be able to create
a better life for yourself.
And again, I'm speaking on experience, and I believe if it works for me, it can definitely
work for other people.
And going on to this tangent about, you know, high and lows, there's a lot of people and
I was I was a little bit subject to this.
I had a little bit of understanding from a mentor of mine of how it works.
But you really don't understand anything until you experience it, right?
You can learn it all day long.
You can hear about it all day long.
But until you actually get some experience with what that is, you don't fully learn it
and understand it 100 percent.
So when you when you're building a business, a lot of people, they may have a great business
idea.
You know what?
Okay, we're going to take 20 grand.
We're going to put it into this pizzeria and we're going to just make a bunch of pizzas
and we're going to get customers and have them come in and you know, our profit and
we need this much revenue.
We're going to profit this much.
Everything sounds great and dandy.
And you guys, your plan is guaranteed on, you know, 10 people a day buying an extra
large pizza and you guys will hit your profit margin.
Okay, you could have the most solid plan in the world.
But if you are not accounting for the low points, if you are not accounting for the
unpredictable life and world we live in, you are going to fail immediately.
Okay, nothing goes as planned.
I don't care how bulletproof your plan is.
I don't care how bulletproof your finances are.
You need to expect the unexpected and it's hard to do that because it's going to be unexpected.
You don't know when it's going to hit.
You don't know how it's going to hit.
You don't know what's going to happen and you need or you're going to have to be ready
to deal with it and find a solution to limit your, you know, your profit believe or limit
your losses.
And so I've seen a few people have amazing ideas and they get started super strong and
some of them even get lucky and have a great couple years.
But what happens?
Okay, these unexpected events come into play and they go right under and they go quick.
Let's take COVID-19 for example, okay, when we were signing contracts pre COVID, I had
a lot of contracts going on, a lot of money out there and COVID-19 hit and a lot of businesses
shut down.
That stopped a lot of the cash flow going on for a little bit period of time.
I don't know if Arizona got hit as hard on some other places.
We kind of went through a construction boom in my, you know, in our industry.
So I don't know how bad it really got out there, but I know in Arizona, it did affect
that cashflow a little bit.
And that was an unexpected precedent or event that happened.
And I remember trying to, you know, hey, I was prepared for something that was a little,
I mean, that was different.
I feel like I was prepared for some normal scenarios in my head, things that like, you
know, have been common enough that I need to be prepared for it, whether it's ultra
tragic or not as bad.
COVID-19 was just an absolute, I mean, game changer.
And on top of that, during this boom, so many places shut down.
So one of the main things that happened in construction is the price of materials shot
through the roof.
Okay.
In Plywood, for example, 17 or 20, $25, you know, it always ranged a little bit per sheet
and they shot up to 75, $80 at one point.
I even think it got higher than that.
So what happened with our contracts?
Well, I signed an addition or a new build, whatever it is before COVID-19 and we're building
and all of a sudden COVID-19 hits and what happens?
Well, all my prices of materials shoot up.
So there was only a few options, stop production and wait, charge the client more money or
me build with what I have and lose money.
And I got to deal with each and every one of those scenarios and I got dealt by each
of one of those scenarios.
So number one, stop production.
Okay.
We had to breach or terminate our contract because the client couldn't afford it and
it was just outrageous and it wasn't, you know, I couldn't afford it to be able to pay
for those materials.
Number two was, you know, the client was like, hey, you know what?
Okay, we'll pay for it.
And this client was absolutely fantastic in that.
And I think they were very prepared for what actually had happened.
And number three was, hey, there was a couple of jobs where, you know what, it wasn't as
bad.
I did lose some money, but I was able to keep the relationship.
I was able to keep that job going.
And so I was able to experience all three of those situations and I was able to find
solutions, but either way it still sucked.
I lost a lot of money during that time.
Okay.
And if I was constantly having this business formula of where everything was based on all
things going to plan, I can promise you, I would have went so far under it would have
been absolutely traumatizing.
But because I was prepared for inevitable event or unexpected events, I was ready for
the unknown as ready as I thought I could be.
I was able to limit my losses.
I was able to deal with this situation and each of those cases and be able to find the
solutions for it and come out winning or come out with that lease, being able to go forward
without having to go backwards.
And so when we're building businesses and we're talking finances, okay, we have to be
prepared for the unknown.
We have to be prepared for the unexpected.
And I think that goes into the same thing in your home life.
Even though I try to have that mindset to spend money and not worry about money knowing
that it's going to come back to me, I do still have to be prepared and make sure my family
is taken care of.
And so I do have a plan.
I do have finances set aside, but at the same time, I'm just not very, like I said, I'm
not strict on it.
I'm very free with it.
I kind of just, we just do what we want.
We go with what we want.
And that is not to say do not know your finances.
That's another great, you know, tangent to go on with this topic is that if you do not
know your finances, you're already on the road to failure.
You have to know your finances.
You can be, like I said, you could be pulling in 3 million a year, but if you're making
0%, all that money just looks good for a fraction of the time.
That's it.
You have to know where your numbers are.
If you're pulling in 3 million dollars in revenue, okay, gross, what is your profit?
What is your overhead?
What are the, you know, the unsolicited charity in a business that's super important for those
of you who don't know what unsolicited charity is in construction, it's easy to point out.
It's, oh, you know, we're doing a job.
Oh, hey, can you add an extra light fixture over here?
Run a cable and add a fan right there?
Oh yeah, no problem, Sam.
I'll do that.
It cost me $450 for material and labor and overhead and insure, but yeah, I'll go ahead
and do that.
No problem.
Those little things add up and guess what?
End of the project, I'm giving away 6, 7, 10 thousand dollars without even knowing it.
Okay?
10, you know, whatever, 5, 3% of, you know, the total contracts gone in unsolicited charity.
It's easy to give those little things away.
So you have to be very cautious.
You have to be cautious with, you know, your unsolicited charity.
You have to know your numbers.
Okay?
Know what you're pulling in, know what you're giving out, know what's going out.
And it's hard.
And if you are scaling a business right now and if you're growing faster than you can
run like I experienced, it makes it even tougher.
Okay?
Because when you're, you know, for me and my company, we had this outrageous boom because
we, you know, we put systems in place.
We had great quality and we made great relationships.
We did great work and that led to great referrals, quick referrals, which are easy sales because
someone already trusts somebody and they're saying to use you.
And so, you know, our schedule just loaded up and deposits were coming in left and right.
And so it's hard to really care about numbers when you start seeing all, you know, all this
kind of money that you're not used to into your account.
And so, you know, there, I'm not gonna lie, there was a time where I didn't know my numbers
and when I finally did taxes, guess what?
I found out what my numbers were and I'm like sitting here.
Wow.
We only made this much money.
You're telling me I pulled in millions of dollars and I made less than 5%.
I mean, that is a little bit heartbreaking because it's not just the jobs.
I mean, it's all the time, all the stress, all the blood, the sweat, the, you know, the,
the lows that you go through.
And then you look back and you're like, how much more of that money could I have made?
I can tell you I lost hundreds of thousands of dollars just for not knowing my numbers,
for not job costing.
Okay.
How much did this job actually cost me?
If I am anticipating 30% of, you know, revenue, 40% revenue, did I make that?
Was I less?
Okay.
You know, were my guys at Home Depot for 18 hours that week when they should have literally
been there for three?
Are they taking longer?
You know, there's so many profit bleeds.
And again, I'm talking about construction and construction.
There's so many profit bleeds and it's very hard.
And I think, I think every company has profit bleeds, but I do believe construction has
as a GC, we have more profit bleeds than I, than I think we can really count.
And so it's even more important for me to know my numbers, know where we're at.
And I am nowhere near perfect on this.
I guarantee I'm still losing money right now as I'm sitting here due to profit bleeds.
But you have to start somewhere.
You have to start knocking them out.
You got to start identifying them and you'll be able to obviously solutionize them, right?
And make the system better.
There's always going to be profit bleeds.
There's always going to be someone who wastes a piece of my material, throws away a roll
on accident or breaks a window trying to transport.
I mean, there's always going to be that, but you have to anticipate it, right?
So understanding your numbers and your finances is a huge part to everything.
And I wish I were learning that early on in my business because I didn't have a bookkeeper.
You know, I was doing all my invoicing.
I was doing all my projected, you know, costs and revenue and profits and all that.
And I had no idea what I was doing.
So go hire you guys.
Go hire somebody if you don't know what you're doing.
Hire somebody who does know it's going to save you a lot of money.
It took me a while to figure out, OK, I'm going to hire a bookkeeper for two or three
thousand dollars a month or whatever the case is.
And you know, realize it's actually going to save you money.
It really it really is because you're losing that somewhere.
So, again, knowing, knowing your numbers and knowing your finances and where you guys stand
and making sure that you're not making dumb decisions with your money and reinvesting
into yourself and spreading that money out, go to places, go to other businesses, support
local businesses nearby.
They're going to go around and support local businesses.
And that, like I said, that money just comes back around.
It's like karma.
What you put out comes right back at you.
So I think, yeah, I think for finances, I mean, it's it's very it's a very sensitive
subject and I know you guys have to find the best way that works for you.
And I guarantee there are very, you know, all these other successful people that I know
out here, you know, they may do it differently.
But for me, that's what works, guys.
I have freedom with my money.
I know my numbers and I'm able to understand that money is what makes the world go round.
So don't be don't be greedy.
Dave Ramsey.
Hey, you don't work for me.
You may work for other people, but not for me, because the more you teach people to hoard
money, the less money goes out into the world.
So that, yeah, all in all, finances, guys, are super important and I think, you know,
cash flow and your your business specifically has to be a top priority because again, if
you do not have if you don't have money to pay people, you're not in good shape whatsoever.
I mean, you're you're on the path to to fall it apart.
You need to have a good amount of cash flow and you need to be able to control that cash
flow.
That is very important.
So all in all, guys, homework assignment for this podcast today is figuring out if you
actually know your numbers.
Go home, go to the office.
Do you know your numbers?
What are you pulling in?
What are your overhead costs?
Are you accounting for your your rent space?
Are you counting for your Wi-Fi bill?
That's one hundred dollars.
But guess what?
You better know where that's coming from.
You better know what account leaves out of and you better know how much it is to the
dime.
Are you tracking your expenses on food?
Are you tracking your mileage and your expenses on gas?
Again, as we go through everything, it sounds very overwhelming.
Hire somebody who knows how to track this.
Job cost, product cost.
Track everything you possibly can and you will realize that you're losing money in places
you never thought you were losing money.
And when you find that, guess what?
You get all that money back.
Then you guys can go out there and you can go spend more money.
Come hire me for a remodel project in your bathroom.
I'll take those funds.
I'll live off them.
I'll spend it.
And then that customer is probably going to come right back and buy from you again.
This is the way the world works.
OK, this is a homework assignment, guys.
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