Episode #075- Use THIS Budgeting Hack to STOP Living Paycheck to Paycheck!

Today hosts Braden Cheek, Brian Duck, and Joel Thompson from The Criterion Fund discuss the fundamental problem in how the average person budgets their own money, and what they can do to fix it!

you have got to take stock of what you can afford. And I promise you most of the stuff that you're buying you shouldn't be affording unless, unless that, that stuff is getting purchased with returns from your passive income investments. Okay. That that money you can spend as frivolous as you want. But if you're taking your active earned income from your job after tax money and buying stuff with it, that's a problem. You should be investing that. All right. Welcome back to how to invest in commercial real estate. Um, before we get into today's topic, I want to talk about the deal we launched last week. So this was a multi tenant retail deal in Owasso and we launched it friday. You know, friday early afternoon, Maybe 12, Maybe one Friday evening. It's filled. I mean, just immediately sells out Saturday. It's, it's 200% full and I'm checking the Commitments the next Monday morning and we ended up 221% committed. We didn't open the portal.

We, we didn't do anything. We made a pdf and put the important deal points. This was, this was pre launch on the portal and over funded 200%. What does that tell us guys? We got to either find bigger deals to pitch more deals. We gotta find more deals and more deals are not easy to find because we're gonna have to have some unhappy investors on this deal because we're not gonna be able to allow everybody in, especially not at their commitment level. Yeah. And to brian's point. We also have the sale of Plaza West going through, right? So we're gonna be distributing another almost $2 million on that to our investors at the end of august, the end of the third quarter is coming up before, before, you know it that's going to be here. We're gonna send another million dollars to the investors that's between the two companies and we're a million over subscribed now. So a bunch of money out there just us, you know, criterion, um, precision sending out a ton of money. But there, there's just money sitting on the sidelines. And, and it can, it shows us that shows me personally that there's interest out there that people want to get involved despite what the market's doing.

Maybe especially because of what the market's doing. People want to get their money in something real. Yeah, we've got to figure that out. And it may be that we kind of start doing with some of the bigger funds are doing is they get higher quality deals because there's a lot more of those out there that generate slightly lower returns because right now we're trying to find these, you know, maybe slightly more speculative, but really a lot higher returns. And, and we're sifting through a lot of those deals because there there is inherent risk with higher return. And we're trying to cherry pick those one out of 100. And so we're not, we're not producing enough of them to keep up with demand. So we may have to shift that, We could still do that one in 100 higher yield deal. But we may have to start, you know, changing our focus a little bit to deliver enough to get everybody's money invested. It will definitely be super interesting. But to dive into today's topic, I think a really important key, you know, one of the first questions, hey, you do commercial real estate, oh man, I'd love to get involved at the end of the day, you kind of need some sort of money, right?

Whether it's your money, somebody else's money, you need to be networked into some sort of money somewhere. And for most people, that's the hardest part is coming up with that seed money coming up that 1st 5, 10, 25,000 to say, man, I've saved this, I've, I've planned for this the time is right and I'm executing it into real estate Even just just to start paying for education, like a seminar could be $2,000, you know, flying to look at a property, you know, driving around, there's expense involved in getting in the game buying books and courses, and so you know, we're trying to come up with this idea that why doesn't anyone have any money and everybody that's listening is gonna think, well, you know, I don't make that much, but here's the thought that came to me that I think is interesting is that Everybody lives paycheck to paycheck but everybody makes different amounts of money. Think about that. How is that possible? How is it possible that a guy making $30,000 a year lives paycheck to paycheck. Can't save A guy making a guy a family girl making 50,000 a year paycheck to paycheck.

Only men make money. Sorry, it's not what I mean. Okay, someone making 75,000 a year still paycheck to paycheck. It's not even until you get to the 100 over 100,000 that people start to have some excess savings. And I'm trying to It's because they're pretty much boring people, they stop wanting to take vacations you know at 100,000 years. Like well I drive a nice car, I live in a nice house, like my kid's private school and I go on one vacation a year. What else do you need? That's right. Like they get their income gets so high that it's inevitable they're gonna have excess. But then I'm trying to think so why is it that everybody is allowing their budget to equal their income and we wanted to explore that today, we've mentioned it in a couple other podcasts because everybody wants the nicest stuff. I'm telling you for sure that they get a raise. I'm gonna get a nicer car, they get enough of a race and save enough money. I'm gonna get a nicer house. So there's a couple of points to today's podcast. Yeah, I did not. I drive a Honda. Okay. I drive a 2017 Honda accord. Tell us how much you paid for your house.

I mean I did buy a new house but it was well freaking deserved brian. It was about time for you. Well, so number one is the stuff, that stuff, that's the number one thing is people look around at people that are making about what they're making or in the same social circle and they drive, they bought a navigator, they bought a, you know, an escalade, they bought a car. Well, I need that, right? Why can't I do that? The dealership's gonna let me trade in my beater and they're gonna give me a low interest rate on something new. I'm sorry, but you're losing on that transaction. If you're listening, you're losing right there making money or they wouldn't do it. Uh, you need the new $1000 iphone. I'm sorry. You don't, now I broke down and got a, and got a new iphone for the first time in a while. And I mean a lot of people are getting the upgrade and for me, I was frugal for two decades before I started to finally allow some of the money I've accumulated to uh, you know, give me the freedom to purchase some of these things you're gorgeous, watch and you're, I'm pretty simple and still still, I'm pretty simple, but and I personally never purchased a new car and my wife got her one finally a few years ago, but I've never had a new one.

Um But I think so that's something that we can encourage people to do is really examine what is necessary. And I don't necessarily want you to do the Dave Ramsey, you know, sell everything in a garage sale. Uh But most people, as he actually said that, well I mean it's it's pretty intense uh and it's not bad because most of the people that are coming to him aren't trying to say they're they're buried in debt, buried completely buried in debt. But he does have a couple of good principles consider going and getting your mortgage. Most people, oh okay, my mortgage payment can equal 40% of my take home pay on a 30 year M. And Dave Ramsey was one of the first people that said, hey that's ludicrous, you need a mortgage that's on a 15 year am and that can equal no more than I think 25% of your take home pay. Now we're talking okay, But nobody wants to do that because the house is what people see and we're trying to impress everyone we don't care about. Uh And so you have got to take stock of what you can afford and I promise you most of the stuff that you're buying you shouldn't be affording unless unless that that stuff is getting purchased with returns from your passive income investments, okay that that money you can spend as frivolous as you want.

But if you're taking your active earned income from your job after tax money and buying stuff with it, that's a problem. You should be investing that. And so the other problem as far as the spending goes is that people don't appreciate what that money can do if it's compounded right? When you spend it, it's gone, spend it, it's gone. If you borrow against an asset, uh well now you're paying interest on that so you're even losing. But i if you can convince yourself that every day Today can turn into $2, and compounding and it can be working for you, then you almost can't let it go well because you're thinking of the future cost that you're you're saying, hey, I'm not only spending $10,000 on this or you know, $1000 on this stupid item, but that $1000 could be worth 10, 10,005 years Or 100,000 or whatever down the road. And so if you see money is that valuable, you'll you'll start to invest it instead of spend it. Uh so that's a big point. But one of the other things that we wanted to go over today just we're just gonna hit at high level is the problem people have with budgeting going back to the idea that everybody can make different amounts of money.

And yet still nobody has any savings or their budget always creeps up to their lifestyle. And I think it's a fundamental problem with how people approach a budget. And so let's talk about that. Here's what I see is that people think real, uh, simply about their monthly expenses and then they add up all their monthly expenses that they know they pay every month And then they put in 10% for savings and they call it a budget. I think they actually skip a few items though. Right? I've had that conversation with my kids because now they're all making jobs, what they don't realize are, um, monthly cost for car insurance. All these things that I paid for when they're growing up and then they don't really realize, oh, well, let's see, oh, this car is gonna need new tires in two years and uh, you know, it's gonna need, uh, you know, a whole new brake job or whatever. I remember the first time I got a tag on a car, I mean, I, I remember calling my dad explicitly like dad, what the hell is going on the tag off? Yeah, I had an accident. I had to pay the Deductible um, things that they don't think that are gonna come up.

I remember my daughter's specifically saying when she was about 23 or 24, she said, I hate being an adult because all these expenses came in that she had no clue I was paying for. Right? And so, so that's what people do is they just, they just check off the boxes of things that only happen every month And then they build in a miscellaneous budget 10% or 15% or whatever. And, and every uh, and then at the end of the year no one has any money. And they're like, well what happened man? And then they give themselves an excuse. They say, oh well this year, the reason I don't have any money at the end of the year is well we that medical expense, you know, so and so had had broke their leg or you know, I had to go to the doctor or my, you know the needed a new set of tires. I think it's an outlier. Yeah, that's an outlier. And I might find next year new tires today I got new tires I guess how much set of new tires Is? $1,200, 12:00 dollars. I told brian before the show $1200 right? You got ripped off, You should have got them Online. You don't think about the fact in your budget to put $100 a month for tires.

Nobody does that and you only need tires every five years. So really it's like $20 a month. But this is a Perfect example. Yes, he could have, he could have got him for $700. He's going on a trip tomorrow. He doesn't have time he had to go by. But that's, that's what happens. Right? So I'm gonna give this a name and maybe we'll change it because I just him coming up with this on the fly. But monthly cost averaging we have to, we have to get people to consider the concept of putting all future expenses into the monthly budget. And the only way to do that is to take your $1200 that you're gonna do every four years and you divide 1200 by 48 months. And whatever that amount is, you put that in your monthly budget, the car tag and license registration fee. That's an $800.01 One year expense, divide that by 12. What is that, $72 or whatever it is. Well, but you also think about insurance goes up every year, right? You can never, your card value goes down but your car insurance goes up. Well, you got a budget for that. I mean there's just all kinds of and we can go through that list. Um, so people that are that are listening think about your budget and think about what's not in there.

Uh, think about a budget in a larger frame of time. You know, I think it would be easier if you try to sit down and say how much, yeah, what do I spend in a year? I definitely don't do it in a month a month is a disastrous way to build a budget. 10 years would be decent and you can even build in 3% a year raised to your income, but in 10 years you're gonna have new cars, you're gonna have your vacations clothes or a huge one. People, you know, they don't put in clothes whenever they need a new pair of shoes or sure, or your pants or a suit, they just buy it and you know, maybe they put it on credit card, but you have to average in what is my yearly or 10 year budget on clothes gonna be. And how do I build that into my monthly budget? What you'll find is that you're broke, you don't have enough money and you have seriously got to downsize your spending in order to build up cash reserves to even start to get into the investing game. Uh, so if you're 40 years old, I'm 43. If you're 40 years old and you don't have a bunch of money in the bank, This is why, right here, you have not budgeted appropriately and it's not a knock on you, you weren't taught how to do it if you're 50 years old and you don't have a bunch of money ready to invest, right?

It's because you didn't budget appropriately. You've made enough money in your lifetime from the time you started working to 50, you've made enough money to be in the investing game. Everyone. I mean, I think if you work at Mcdonald's for 30 40 years you make a million bucks make a minimum wage, right? But I mean uh there's all of that money is going to just pay for for rent and and stuff like that. I mean that is really an extreme. But yeah people make more money than than they think and like you said it's we don't even use money anymore. So we're so desensitized money, you're just swiping this piece of plastic that goes, it lets you spend more than you have every single time you have multiple of those. So it's just it's it's uh it's a behavior that's been ingrained to us. I mean when you look on social media, most people and and commercial like if you look up Grant Cardone, I mean you're gonna see his million G wagons and planes and watches so much of social media is that way. It's just this keeping up with the joneses crap. But at the end of the day if you need to come up with five or $10,000. I think what we're trying to say is you can do it, you can do it, you can do it, you just have to knuckle down and be purposeful about the fact that I'm not going to Starbucks today, I'm not buying a bunch of stupid ship this month and I'm not going on vacation for the next three years.

It is such a mindset, you just have to go for that delayed gratification because if you uh you know a lot of people are gonna say oh that guy got a new car. I sure wish I could have one. But if you, if your mindset is okay, well five years from now, 10 years from now I'm gonna have a whole lot more money than this person is and I'm gonna buy new cars. Is well yeah, that I was, I was working at a job with a bunch of people that made decent money and I saw what they were spending and I knew what I was saving and what I was investing when I was building. I was building a tidal wave that was gonna drown all of that because they weren't, they literally were just keeping up with the joneses and I was trying to build an empire on the side behind the scenes. I think it's it's really funny vic victor, Whitmore, your business partner and precision. So he drove the crappiest car I've I mean I've ever seen and I remember there at the end the Xterra, do you remember that dude? He drove that Xterra until it broke down. He drove a year after the A. C. Went out and then he like gave it to a family member. It was a nasty car but he was committed to the dream and he was committed to building that tidal wave.

Yeah. And guess what he drives now guys, guess what? He drives a Tesla because he wants to don't just shout it out. Give me a chance. It's the idea right? That he, I mean for the lack of a better word, he ate ship in the car for a long period of time saying, man, I don't know what I'm gonna get, but I'm gonna get something nice and it's gonna be right around the corner and when he got it, he didn't think twice about it and now you can buy any car he wants. Sure, sure. What's interesting, you know, 90 days ago, remember when when gas prices were really high, part of, part of being an astute investor would have been forecasting some level of risk and a fluctuating commodity like gasoline was gasoline never gonna go up. Did you plan to have more money in your gasoline budget the following year than you did the previous year? Everybody was complaining that, you know the news would interview these people and yeah, that the new gas prices they really hurt. And I'm thinking how many mocha lattes at four bucks? Uh, you know, not a gallon, not four bucks a gallon, four bucks for like 12 ounces.

Right? Think about that. And so I agree. I feel bad that they were being pinched by gas prices, but it's just the old adage that, that those, that prepare are the ones that win when it comes to money and if you're out there thinking that nothing's ever gonna change. No pricing is ever gonna go up uh you're, you're just gonna and and nothing bad is gonna happen and no one offs are gonna be there this year, you're always gonna find yourself chasing the ball down the hill and you're never gonna catch it and so hopefully we can encourage you guys, you got to revamp your budget no matter what income level you're in, if you're making 30 if you're making 100 you have to sit down and revamp your budget and set some goals and think about in 10 years time, what are every single expense, I could come across every negative that can happen divided by you know the, the amount of times it happens in 10 years and put that monthly amount in your monthly budget and you'll find that you don't have any money at the end of the month and you have to drastically change how much you spend on your car, your house is your vacations and your going out to eat.

Yeah, I was gonna say food, clothes bill, all of that and once you do that and you readjust your life plan now you're gonna see yourself when those one offs don't happen, you're gonna end up at the end of the year with 10,000 extra dollars, maybe 15,000 extra dollars, then you get that invested and that makes a return the next year and then the next year you have even more at the end of the year and you start to build and the tidal wave guys that build small. All right. It built incrementally and if any of you have taken math, it's exponential growth that you're looking for. But if you look at the graph, the exponential graph doesn't even look like it's moving and in the later years it just skyrockets through the roof and you've got to give it enough time to get it moving upwards like that and it'll change your life. I think it's such a good point. But when you hang around wealthier people and and everyone should always try to aspire to hang around somebody well healthier than they are because you're gonna pick something up. Words of wisdom, a way to live life, a little life hack whatever. But you'll notice that these people are probably cheaper than you.

More frugal. They pay attention to the money more and it's so easy to say, well that's why they have money, but people don't actually stop and and think that and it's it's not like the pattern of behavior changes. It's not like people knuckle down their whole life, they're not big spenders and then all of a sudden they wake up one day and there, you know, So rich and then they just start spending all the money. I mean they just buy a yacht, they go on 50 vacations, they buy their momma house that doesn't happen, right? You rarely see a difference. They may get a new car. They may get a nicer house. I mean you may barely notice it, but the wealthiest people in my life are the most frugal people in my life. And it's, it's, I'm starting to appreciate that. It's a pattern of behavior. They'll, they'll just always live on that percentage of what they make. It's just always substantially less than what they're actually making. It would be interesting if we could all see what everybody makes and what everybody's net worth is. So then when someone buys that new car, we can see, Hey, is that new car? 10% of their net worth or.1% of their net worth. So this is a good social media app. We'll put a like and dislike button on there. You know, if somebody buys a car like share, but we don't know that.

And so we think everybody can afford it and whether they can or they can't, we don't know. Uh, anyway, I think we've covered it pretty well, Take time, take out your budget, redo the whole thing and start getting a nest egg together where you can begin your real estate investment career because so many people come to us and say, hey, we don't have any money. We have very little money and we want to help you change that. But it's got to start with you. So I would also say make sure to go to the website and join the investor list, right. We launched a deal last week on the os a deal. We talked about it the week before and, and it was out there for a few hours. We figured it would fill up fast. We gave everyone a warning like, hey, we're opening the portal, monday, be ready. And I feel they just responded back like, oh man, save me 20,757 100,000. It's full. We can't even launch it. We can literally can't even open it and we're gonna have to and people are gonna be disappointed. So more importantly, they're getting on the investor list is respond right? Like there's people who, there's still people texting me that say, hey man, do you have more information? I'd love to get involved if somebody texted me right now and wanted to get involved at 5 10 15 $25,000.

I would probably try really hard to get them in, you know, because we want to get people in. That's why we do this, right? So sign up to the investor list, respond ask questions and learn something. Where do they do that? The criterion fund dot com precision equity dot com. Boom. That's those two. Alright guys. Until next week. Thanks for joining us. Hit the like button. Thanks guys, talk to you later.