490: The #1 Money Habit That Makes Entrepreneurs Rich with David Bach

Summary

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Podcast Summary

The BossBabe Podcast

Host: Natalie Ellis
Guest: David Bach
Episode: The #1 Money Habit That Makes Entrepreneurs Rich
Date: May 19, 2026

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Main Theme

This episode dives into the foundational money habits that create lasting wealth for entrepreneurs. Natalie Ellis and financial author David Bach explore how to create financial freedom, why living below your means matters, the timeless debate of renting vs. buying, and actionable steps women entrepreneurs can take now to achieve money confidence and true lifestyle flexibility.

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Key Discussion Points & Insights

1. Entrepreneurial Sabbaticals and the Importance of Taking Breaks

[01:28–05:12]

• David shares the story of relocating his family to Florence, Italy for an intended nine-month sabbatical that has turned into seven years. The move changed their lives, offering personal transformation and closer family bonds.
• Natalie reflects on her own break for motherhood, contrasting the recharge potential of a sabbatical with the unique demands of early parenting as an entrepreneur.

“We have to intentionally recharge our batteries. And when you take a break... you actually replace your batteries.” – David [01:43]

2. The Power of Choice in Entrepreneurship

[03:00–05:12]

• Natalie highlights that building financial and business foundations leads ultimately to choice—the freedom to structure life and work in ways that truly suit you.

"If you have the choice, I think it's the biggest luxury you can ever have." – Natalie [04:37]

3. Financial Planning for Lifestyle Freedom

[10:01–13:08]

• David explains that laying the groundwork early (paying himself first, managing finances with spouse, getting educated) allowed his family to pursue big dreams.
• He encourages listeners not to overestimate the financial barrier to living abroad, sharing that many people do it with far less wealth.
• Contrasts American and European cultures around work-life balance, stating most Americans “live to work,” while many Europeans “work to live.”

"The number one thing I would tell anyone who is an entrepreneur: You have to put yourself first when it comes to your money...have a pay yourself first plan." – David [18:53]

4. Financial Habits for Entrepreneurs: What Works vs. Common Mistakes

[17:45–21:54]

• Mistake: Entrepreneurs often believe wealth will come from a big business exit and keep reinvesting everything back in rather than building tangible net worth along the way.
• Danger: Running all possible expenses through the business each year to minimize taxes can leave you with little long-term wealth.
• Key Habit: Treat yourself as an employee; take money out for yourself, set up retirement accounts (SEP IRA, solo 401(k), defined benefit plan), and buy real estate (especially the building your business is in).

“The amount of wealthy clients I have...that became rich by accident—they bought their building early on. 10–15 years later, they didn’t need to sell the business, because the building was worth more.” – David [20:29]

5. Managing Cash Flow & Avoiding Lifestyle Creep

[21:54–26:06]

• Natalie shares her approach of regularly taking money out of the business for investing, treating every year as a mini-exit.
• Both agree: Living below your means is key to long-term freedom and resilience through downturns.
• Lifestyle inflation—ramping up expenses in step with income—can become a trap that creates stress and vulnerability.

"There's a lot of beauty in quiet wealth." – David [25:58]

6. Frameworks for Big Decisions: Relocation, Renting vs. Buying

[28:25–34:19]

• Natalie: After years of living well below their means in Austin, her family is reconsidering a move back to California. She wonders how to framework the decision: rent or buy, cost of living, etc.
• David: Advises running thorough financial projections (“run the numbers”) before leaping, considering taxes, school costs, and the true cost of desired lifestyle. Recommends “test-driving” big moves by renting for a period before buying.

7. Renting vs. Buying: The Data & Debate

[34:19–39:45]

• David is firmly pro-ownership for most. He says recent debates suggesting it’s smarter to rent are new (last 10–15 years), mostly fueled by housing price rises and media narratives.
• Generational wealth is most often built through homeownership and passed down via property.
• While there are seasons when renting makes sense, homeownership is forced savings and provides unmatched leverage through equity and tax benefits.

"All of wealth in America is in two locations: home equity and the stock market. The way people got there is they bought a home and invested in their 401k... Boring stuff, but that's what they did." – David [39:06]

8. Investing: Stock Market vs. Real Estate

[40:07–43:09]

• The argument: Stock market averages higher returns over the long run, but neither market is predictable.
• In hot markets, leveraged returns on home equity can far outstrip stock market returns. Owning and investing in both assets is ideal.

"You can't just look at these numbers and be like, 'Just rent and put it in a mutual fund.' I think you're better off to hedge your bets... It's not either/or; I think it should be 'and'." – David [42:58]

9. Learning by Doing & Building Financial Confidence

[43:09–47:01]

• Natalie shares her "accidental" real estate investment in the UK, learning by doing.
• David reinforces: Each time you buy a home or make an investment, it gets easier; patterns emerge and confidence grows.

10. Investment Mindset: Stay the Course Through Volatility

[47:01–52:13]

• Missing the best days in the stock market devastates returns; "time in the market" beats timing.
• "Benign neglect"—buy quality assets and don't obsess daily—is often the winning approach.
• Natalie admits she rarely checks her portfolio to avoid panic-selling during downturns; David supports checking in quarterly or twice a year.

"If you miss the best days, your returns will be half what the market's returns are...It's time in the market, not timing the market." – David [47:44]

11. Overcoming Money Avoidance & Mindset Shifts

[52:29–55:03]

• Both hosts share difficult money backgrounds that led to avoidance of financial realities.
• Confronting finances (even when they're scary) is the first step towards building stability and confidence.

"People basically play this game called, 'If I don't know, I don't owe.' But that game doesn't work...You need to know so you can go fix it." – David [54:28]

12. Home Buying Frameworks & Final Advice

[55:03–58:11]

• When buying a first home, always borrow less than the bank will lend you—build in cushion for unforeseen changes.
• Stretching is okay, but don't overstretch; "nothing motivates a salesperson like debt" only works if you're able to take on more risk.

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Notable Quotes & Memorable Moments

• "You have to put yourself first when it comes to your money...have a pay yourself first plan." – David [18:53]
• "There's a lot of beauty in quiet wealth." – David [25:58]
• "If you have the choice, I think it's the biggest luxury you can ever have." – Natalie [04:37]
• "All of wealth in America is in two locations: home equity and the stock market...Boring stuff, but that's what they did." – David [39:06]
• "If you miss the best days, your returns will be half what the market's returns are...It's time in the market, not timing the market." – David [47:44]
• "People basically play this game called, 'If I don't know, I don't owe.' But that game doesn't work." – David [54:28]

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Important Timestamps

• 01:28 – David's story of moving to and staying in Florence, Italy
• 10:01 – The myth of needing massive wealth to live abroad; American vs. European work culture
• 17:45 – Major financial mistakes entrepreneurs make & essential habits
• 21:54 – Living beneath your means, lifestyle creep dangers
• 34:49 – Renting vs. buying: why the debate is recent, and David’s stance
• 47:01 – Timing the market vs. time IN the market; dangers of missing best days
• 54:28 – Addressing "If I don’t know, I don’t owe" mindset

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Closing & Book Mention

• David’s book The Automatic Millionaire (updated edition) is out now, focused on getting the next generation started right with money habits that run on autopilot.
• Natalie praises David’s books as life-changing and recommends them for anyone—especially couples—beginning their financial journey.

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For more financial tips and inspiration, check out the full episode or explore David Bach's books for actionable guidance on building wealth and freedom.

Transcript

[A]

Welcome back to the Boss Babe podcast. All right. I am so excited about today's guest, David Back, because I discovered his work through one of his books, Smart Couples Finish Rich, and it completely changed the game when it came to mine and Steven's finances. So I went on to read many of his books. I got to know him in person. He is incredible, and he's such a powerhouse when it comes to all things finances and money. And interestingly, with this episode, I was like, wait, I'm getting an hour of his time. I'm gonna get coached on some money stuff. So I share a lot of mine and Steven's financial philosophies and the way we think about money. And I asked him some of the burning questions that I really don't have a definitive answer to, like, should we be buying or renting? So we get into all of those details inside of this episode. And before you dive in, I want to remind you that I have a book coming out so, so soon. It's called the Freedom Based Business Method, and it is designed to help you build an incredible free freedom based business from scratch. We go through every single principle and tactic you need to actually make it happen. So if you're Ready, head to boss, wave.com forward/buythebook or check the show notes. Let's dive in. I feel like I'm just like a complete newbie all over again.

[B]

That's beautiful, though.

[A]

Yeah, it's lovely. Well, I'm so glad you're here. I feel like we have so much to talk about. So. So, yeah, last time I saw you, was it five years ago, six years ago?

[B]

20. 19. Because I was just getting ready to launch the latte factor. Then I was getting ready to move to Florence, Italy and take a nine month sabbatical.

[A]

Yes. Okay, tell me about it all.

[B]

Well, my God, there's so much to talk about. But, like, I mean, what's beautiful about this conversation is you're coming back from taking a break. And so I want to hear about your break too, because as entrepreneurs, it's just critical to take a break. I mean, you were just joking. I don't know if you'll put in the clips, but, like, you feel brand new, right? You're having to remember how to do things. And I went to Florence, Italy to take a nine month break with my family. I wanted to move my kids abroad to experience living in Europe before they went to college. And so I convinced my wife to like, let's go live in Florence, Italy for nine months. Let's put Put the two kids in an international school and let's just experience living in Europe. And nine months turned into, I'm now here seven years. So I'm actually talking today from Florence, Italy. We're still here. So it totally changed our whole family's life. It wasn't the plan, but the sabbatical turn into a whole new life. I'm somebody that just strongly believes that from entrepreneur standpoint, because I have so many entrepreneurs and especially entrepreneurial women that are listening, that we have to intentionally recharge our batteries. And when you take a break, in many cases what you do is you actually replace your batteries. Now I know you've been on mommy duty, so it's not exactly a sabbatical. So how has it been for you? You're coming in, what is it, six months now since you had the baby?

[A]

Yeah, my batteries are probably at an all time low, I will say so. I initially took three months completely off of work, like not checking slack, not doing absolutely anything in the business. And then on the three month mark, I came back. I'm launching a book this summer, so I felt, okay, I've got to get back to work in some sense. But what I was doing, I caught myself. I was just following this expected programming. Okay, so if I'm back to work, that means I need a nanny. And I just started to challenge myself in that's not what you want, so why do it just because you think you should? And so, yeah, my baby's six months, I don't have a nanny for her. I'm kind of just juggling and it is harder doing it that way, but it feels more like my path and I don't think there's a right way to do any of this. My oldest, I did have to come back pretty soon. The business wasn't doing so well without me and I did have to get childcare early on with my second. It's different. And so I've really just been kind of like what you said. I don't have a plan per se. I don't know when I'm going to get childcare. It's a balance. I don't feel like it's been recharging. I'm not sleeping and there's so much on my plate. But it's very fulfilling and I feel so much happier doing it this way, trying to fit it in versus I know if I was spending less time with her and I had more time for work, I would feel less fulfilled. So it's just one of those things I Feel like I'm figuring out, even though I've done this before, I don't feel like I'm an expert in any sense. But I think that's the beautiful thing about being a business owner is when you do put the work in to build that foundation of your business or even finances, which we're going to talk about, the most beautiful thing that comes from that, in my opinion, is choice. There's no one right way to do anything, but if you have the choice, I think it's the biggest luxury you can ever have. So that to me has been just the most incredible thing. But I want to hear about your moving to Italy. So you planned to Florence. You had nine months. How old were your kids then? And what was the decision to stay like? I want to hear about all of it. I'm sure for me and so many of the women listening, we all have this dream of like, oh, should we just pick up and move to Tuscany and live this life, our life? And I want to hear all about it.

[B]

Well, you know, I'll go back to one thing you said though, before we jump into what? Me answering the question. Because you told me that you were going to take three months and then you made a decision to go longer. Right. And it's the ability to have optionality, the fact that you could be like, I don't have to go back at the end of 90 days. And I said you before we started, like, you will never regret this. You will never look back and go, oh, I can't believe I took those extra 90 days. And I think when we get to the end of our lives, that's the question, what do we look back and regret? I've been an entrepreneur for basically almost my entire life. I've been doing the work that I do now for 33 years. And the last company that I started is a financial service company. It's called a wealth management. And I committed three years with my partners to get the business off the ground. And I said to my wife, at the end of three years, my equity is fully vested. I will have done the heavy lifting to get the business up and running. And we really should move abroad for a year because the age of our kids, this was my son at the time was in eighth grade. So there was planning that went involved, there was planning involved in this. I said, right, the one year to move the family abroad is when my older son is in 10th grade, because it's the easiest year to move a kid in high school and then come back and he'll finish high school in New York City.

[A]

Can I just ask on that? Because I'm British, I don't understand grades. How old are they in those grades?

[B]

So in high school, you have four grades. It's ninth, it's freshman year, 10th, sophomore year. Junior year is 11th grade and 12th grade. And so high schools don't want you moving in 11th and 12th grade. And usually kids don't move in freshman year. So, like. So sophomore year is kind of one year that you can strategically least. We did pick up the kid and move him to another school, and we moved both of our kids to the International School of Florence. And ironically, I'm actually. I'm filming this in my older son's room. My older son is now out of the house. He's in college. He's just about to graduate. He's actually back in the States in Chicago, about to graduate from Northwestern. But in this room, like, 30 days into us living here, he pulled me into this room and said, dad, I know we're supposed to go back to New York City, but is there any way you could run your businesses from here? Because I really want to finish high school here. And my wife, ironically, like the day before, had said to me, I don't want to go back to New York. I love our life here. I like the pace. I like our friends. Is there any way we could stay? So my son asked me, could we stay? And I go running back into our bedroom. I'm like, do you. Do you think he hurt us? And he hadn't heard us. It was. But, like, the world, the universe hurt us, right? Like, it's just how energy works. So we stayed. And really, my goal was to have a transformational experience for our family. I felt like if I picked the family up, we moved abroad, we got out of the bubble of our life, we'd have more time together. We'd have more time to just truly connect and experience new things and see a new culture. And it did all those things. And. And I think, like, right now, as a dad, very special dad moment for me is that I have my younger son who's in 11th grade. He's 16. And again, my oldest son's about to graduate, that my two boys are going to go hike to Camino de Santiago this summer together.

[A]

Wow.

[B]

And not with me, and not with dad saying, you guys should go do this. They got so close living in Florence together, that they together said, hey, we want to go do this. And that was also a result of us being on a family trip, because on A family trip. I read a book about hiking the Camino de Santiago that Andrew McCarthy had written. And then the boys read the book, and the boys were like, we want to do this one day. So I don't know, it's just been cool.

[A]

I think that's incredible to just actually do it, because so many people probably listening, have that dream that's just sitting there, that hearing this, it might just inspire them to think about, okay, well, what is my timeline? Can I set a timeline and just do it and just go try the thing? 90 days, whatever it is, go try it. I absolutely love it. I think it's so great, and I think what an amazing experience for your kids, too. With our daughter, we live in the US but we are from the UK and we always make sure we do an extended summer in Europe every single year. And even though she's four, about to be four, I see that she understands that she says certain things about, we eat that there and we do that there. Like, she's understanding already the difference in cultures. And again, it's that freedom, that optionality, that choice, I think is such a beautiful thing. Do you feel like putting the financial groundwork in when you were younger, then helped you to make those decisions, or do you feel like that's not necessarily something you have to have to do it now?

[B]

That's such a good question. If I were to answer it for myself, absolutely. Having the right financial foundation, which is what I spent 33 years teaching people, I did for myself what I taught other people to do. Right? So I've written 10 New York Times bestselling books. I'm out right now with the update of the Automatic Millionaire. I've spent my life teaching people financial literacy, and I wanted to be the person that walked my talk. So I made sure that I paid myself first, that I was on top of the finances, and that gave me the financial freedom to do these kind of things. At the same standpoint, I will tell you, because I live here in Florence and I've met so many people that you don't need to have financial freedom to pick up and move abroad. This idea that you have to have all this money, it's just not true. People do it all the time with much less money than I have. Lots of people are retiring now to Europe, a lot of Americans. The great arbitrage is you make your money in the US and you. You retire abroad because money goes further and the lifestyle's different abroad. I lived in New York City before I moved abroad. I've been A hard charging entrepreneur my whole life. And when I came to Italy, I had to learn how to slow down because it's a different culture. And you learn how to slow down to the speed of life. You learn how to walk slower and talk slower, and you learn how to connect in a way that's way deeper than you would connect in Manhattan because people take the time to actually connect. People go out and when they have an espresso, they don't go to Starbucks, but they go have an espresso. They sit there and they're not on their phones and they're drinking their espresso and they're talking to the person next to them. And it's just a different culture. It was one of the first things I talked to my kids about. They said, you know, what's different about Italy than the U.S. and I said, you know, in the United States, people basically live to work. And in Italy, what you're going to find is that people work to live. And they go, what does that mean? Right? Because they were young. Tommy was 15, 16, and my younger one was, was in fourth grade. And the ironic thing is we got in a taxi to go to the fitness gym, to go to the health club. We have a, we didn't have a car yet. And the taxi driver, literally verbatim explained that to the kids in like broken Italian, like he was dropping us off, it was like one o'. Clock. And I, we go, what are you doing for the rest of your day? And he's like, oh, I'm done. I'm going over my mom's house and my mom's going to cook me, make me a big lunch. She doesn't want to make me a big lunch, but she's going to make me a big lunch. She makes it for me every day. And I'm going to take a nap and my day is over. And my boys were like, seriously, you're already finished working? And they're like, oh, yeah. And he goes. And he literally repeats back to me exactly what I had already told the kids. In Italy, we work to live, we don't live to work. Now that's not maybe the case for everybody, but there is a quality of life in Europe that you just experience. It's different. You don't know about it until you come here. I know so many Americans that will not take two to three weeks of vacation a year, especially entrepreneurs. And in Europe, everybody takes the month of August off. My big joke is like, everybody needs a sabbatical in Europe. They just call It a summer.

[A]

Yeah, it's so true. I lived in France for a while and one of my friends dad was CEO of a really, really big company. And what really surprised me was how he'd be home for dinner at five every single day without fail. And it wasn't bringing the business home, it was very much presence at dinner, long extended dinners. And I feel like I've always taken that with me. It is very different and I just, yeah, I think it's incredible to be able to just step outside of your normal day to day. Especially coming from New York. It's so fast paced to just experience something a little bit different and take it with you. Even if you know someone's listening and they're going on a two week vacation, it's okay. What can you take from that? We all go on vacation and, and slowly become a slightly different person when we relax. How can we bring more of that in? I love it. I love that so much and it's so inspiring to hear. I think I'll definitely end up retiring in Europe. I love the US for right now in the, in the place I'm at in my life in Korea. But it's somewhere that I love to spend time. So with that, let's talk about financial freedom. Let's talk about being able to manage finances. So I'm a huge, huge fan of your work. Me and Steve and my husband read Smart Couples, Finish Rich and we had the filing cabinet. We, we still have all of that. We have not aided the system up. It has been so helpful for us. We from day one have always managed our finances together. And I will say, I know finances are such a big argument for a lot of couples. Just that awareness of managing it together and what's going on with finances has been really helpful for us. Where I do feel like I would love to talk about and I think a lot of the women listening would love to talk about is how we can really plan as entrepreneurs for that eventual choice point. So one thing I feel like, because Steven and I read, we write your books early and we got someone to help us manage our money early. I feel like we have started to afford ourselves the choice. You know, if we want to work, great. If we don't, we don't have to. And learning how all of that has worked and seeing the compound effects of it have been really powerful. I remember getting told about this when I was in my early 20s and kind of not believing it and I found it really hard putting so much of my paycheck away. Steven And I got married at 25. And he's always, he was like, we're putting most of this away. And I was like, no, I wanted this. And I'm like. He was like, absolutely not. I remember I didn't even buy a fancy card, so I had over a million in the bank. We were very, very religious about that. So let's start there and talk about, for some entrepreneur who's listening, let's say they are in a place where their business is cash flowing. They have been setting aside some money. They are reinvesting in the business, but they don't really know, okay, I have the ability to really make my money start to go further. What do I do with it?

[B]

So let's start there. And I want to go back to you for a second because you did so many things that I'm going to tell anyone listening they should do. Like, you already talked about what you did. You started by reading Smart Couples Finish Rich. Now, I'm not saying everybody has to go to read Smart Couples Finish Rich, but the point is that you went out and got educated on money, right? So you went out and you learned about money. And then you and your partner, your husband, you said, we're going to work on this as a team. And you actually, like most couples, didn't agree in the beginning, right? Your husband wanted to save more money than you did. You had doubts about whether or not it needed to be done in your 20s. But, you know, hopefully the book helped you come together and look at your values and look at your goals and look at your dreams, and you started working together as a team. Then you also got professional help, right? So you started doing everything right early. And you didn't buy a nice car until you had a million dollars in savings. Like, you set up all the basics. So the first thing I would say to anyone who's listening, who's an entrepreneur? First of all, when you're an entrepreneur, you have to realize you're a rare breed. Lots of people want to be entrepreneurs. Most people are not cut out to be entrepreneurs. They're just not. It's much easier to have a job, get a paycheck, do your work, and then figure out how to keep the money that you're somebody else is paying you. But when you're an entrepreneur, you're betting it on the line all the time, over and over again. You got to constantly prove yourself, and it's hard. But man, the joy of being an entrepreneur, the rewards are just extraordinary. Let me start by saying what I see entrepreneurs do wrong.

[A]

Okay.

[B]

And then I'll talk about what they should do. Right. Because many entrepreneurs believe that how they're going to make money is they're going to sell their business one day. It's, it's the, when I sell it, then I'll have the money. And whether that's a startup, they've raised money, they've raised capital, they're going to have an exit. Whether it's just like the reinvesting every dollar in the business and. But we're going to sell this business, it's going to grow, and then we're going to sell it. There's always this, someday I'm going to have some money. And what I see go wrong for so many entrepreneurs is someday never comes. They've raised capital, next thing you know, they've been completely diluted down to nothing. Businesses sold for less than they've raised. They work on a business for 10, 15 years and they have nothing to show for. See, that all happens all the time. You don't see a lot of people talking about it on social media or podcasts. Recently, people are starting to. But that's a big problem with people who raise money. I also see lots of people who have businesses and they have accountants, they don't have financial advisors, but they have accountants that push them to run all their expenses through the business so they don't have to pay taxes. And what happens when you do that is every year you get to the end of the year and you have nothing to show for it because you've had a good year, you've run your expenses through the business, and maybe you've increased your lifestyle, but you actually haven't increased your net worth. And so you're still stuck in the trap of like, well, somebody else sell the business. Then the economy changes, then you go into a recession, then all of a sudden the business that was salable is not saleable. Next thing you know, the business is having trouble. So then this person hasn't built any financial foundation like you talked about earlier, like, how can we do this? So the number one thing I would tell anyone who is an entrepreneur, you have to put yourself first when it comes to your money, you have to put yourself first. You have to have a pay yourself first plan. And that means when money comes into the business, because you're not an employee, you have to treat yourself like you're an employee and you have to take money right off the top. Every time you earn money, you gotta obviously set, set some side, set some aside for taxes, but before taxes, you should be paying yourself first. Like anybody who's listening in America should have a retirement account set up. The amount of entrepreneurs that I meet who have businesses doing hundreds of thousands of dollars a year and they don't have even a SEP IRA set up, or they don't have a solo 401k plan in place, or they've gotten a company with 10, 15, 20, 30 employees and they haven't put a 401k plan in place. You can't do that. You have to have a retirement plan in place. Once you're making real money, you should have what's called a defined benefit plan in place. The beauty of being an entrepreneur is that you can funnel a lot of money away. Tax deductible to grow tax free, tax deferred until you take it out. You need to take income coming in and convert it to assets. The really important thing for entrepreneurs is to buy real estate. And the number one thing I push entrepreneurs to do is to buy the building that their business is in. So many entrepreneurs, as their business grows, they rent space, they rent office space, or they rent whatever kind of business they're in, and they don't buy the real estate. And the amount of wealthy clients that I have when I was in Morgan Stanley that became rich by accident, the accident they made is they bought their building early on, 10, 15 years later, they paid that building off. They didn't even need to sell the business because the building was worth more than the business was gonna ever be worth. And then in the dream world, you sell the business and you own the real estate in a separate company, an llc. And whoever you sell the business to then has to rent back the space from the company that you own, which is the real estate. So I just covered a lot in a short period of time, and I'll stop and you can ask me questions. But there's so many things that entrepreneurs can do to really build wealth, and they can do it in a shorter period of time too, than employees can. You have a lot. The power of an entrepreneur to build wealth in a decade or less is extraordinary. Employees, it can take you 20, 30 years to build real wealth. But entrepreneurs, you can do it in five to 10 years if you do it correctly.

[A]

I agree. I love talking about this because I do think as an entrepreneur, especially right now, there is so much opportunity. And so one thing that I've always really tried to do is when we do a big launch, when we do something where we get a lot of money, cash flowing into the business, I take it out, I make sure I take a good chunk out for me and I invest it. I make sure that I set aside enough that we have to cover for. I normally keep in about six months, but then I'm reinvesting the rest, whether it's in the business, in myself because I really, really want to make sure I'm putting that money to work. I run a lifestyle business, you know, I'm not planning on selling it. And so the way that I've generally thought about that is my exit doesn't come at the end every year I'm exiting in a sense where I'm taking cash off the table and then continuing to grow it. And I would also say too the lifestyle inflation piece. I think that can be very tempting, especially as entrepreneurs, especially on social media. It can be really tempting to inflate your lifestyle costs to present a certain way online. I'm very curious your thoughts on this, but I would really caution people to be really conscious about. Just because their business is bringing in more money doesn't necessarily mean you need to go and stretch how much you're spending or what it looks like you're spending every month.

[B]

I've seen the tragic ending that happens when people do that, right? You'll see somebody who's making business is doing a couple hundred thousand dollars a year and now it's doing half a million and now son's doing a million and that's doing 2 million. And the next thing you know they bought a much bigger home and they've got maybe they bought a second house, they got a boat, now they got two new cars. And the next thing you know they need that business to do a million dollars to cover their overhead. And then something happens like a recession, like a war. And the next thing you know, things just stop. And the hardest thing to do is ramp up your lifestyle and then have to cut your lifestyle back. Truly the most important thing you can do is live below your means. I know this is like such a boring basic thing to say, but you teach people about how to have a freedom based business, right? Like money is about freedom. Stuff is not about freedom. So when I look at people's level of overhead, it's always been fascinating to me because I've watched some of our friends do very, very well and, and grow their lifestyle extraordinarily. And I also know how stressed out they are. I'm the money guy, right? So people tell me what's really going on. They seem like they're doing amazing and then you peel the Curtain back. And they're not actually, because the business is eating up tons of money. And one minute they're doing $5 million launches and $10 million launches, and the next minute they're not doing those launches. And I think I give you tremendous credit for, like you say, I have a lifestyle business. That is like, a phenomenal thing to say. I have a lifestyle business, and I'm using my business to help me build financial security, Right? And there's two buckets when it comes to that. Especially for entrepreneurs, you must put away money for a rainy day. And when I tell entrepreneurs, like, show me what your expenses are, you should have, ideally, a year's worth of expenses set aside in cash at least. Ideally, too many entrepreneurs have, like, three months of expenses set aside. Or they tell me they have a credit line, and they're like, well, we have a credit line. That's our emergency money. A credit line is not emergency money. Credit line, in fact, is not even really there. It's there, and then the bank can decide it's not there. You can use a credit line, and then the bank can turn around and go, sorry, Natalie, you know what we're calling the credit line. And then people are like, what do you mean? What do you mean you're calling that credit line? They don't have the ability to pay the credit line back. So run the business where you live below your means, fund a retirement account and fund an emergency account. And I think if you live below your means for the 10 years that you're first getting a business off the ground, you'll be able to live beyond your means for the rest of your life. It's that first 10 years. And then what happens if you live below your means? You learn how to live below your means in the first 10 years is you won't have this need all of a sudden on year 11, to show people, like, there's a lot of beauty in quiet wealth.

[A]

I love that we're talking about this. You said that. It's kind of the boring advice. I actually think this is the best advice. I just think people often don't want to hear it. I don't feel like I talk about this kind of thing all that much. So I really love that we're having this conversation for us, me and Steven, we met in San Francisco, very expensive city to live. We moved to LA because of our careers, and things started really taking off for us, and we were making good money, and our lifestyle started creeping and creeping, and we actually, when we knew we wanted to start A family. We made an intentional decision to move to Austin. We got a house that was so far below our means, we kept our monthly spending really low, started saving. And it meant when we are in a season of having kids, we can afford the support without any stress whatsoever. And a lot of people said we were making a big mistake. And I want to call that out. Like, there was a lot of friends I had in the industry that were saying, you know, if you're not in la, you won't get invited on the podcast, you won't do X, Y, Z, or you're going to lose a lot of your friendships. There was a lot of people saying, you're making a really big mistake. You'll regret being in Texas. We don't regret being in Texas. We have loved it for this season of life because we have been able to really build our financial future. That's the way that I see it. The money that I would have spent on my lifestyle there, I've actually put into investing. However, and where I would love your perspective is we're now in a place where, you know, we've had our two kids, we've really loved this season. Now we're starting to crave the California life again. We're starting to crave a lot of that. The beach and just things that we haven't had in a while. And we're starting to weigh that up and think about, okay, well, if we were to make the move back, probably keep our house here, it's a great house. I think it's a great investment. I don't know, thinking about moving back to a more expensive state. We're starting to think about, do we rent, do we buy? How do we think about that if we've already set a bit of a foundation, which I know a lot of the women listening to this too have it. Now I'm starting to play with that age old question of, okay, I know my lifestyle is going to increase. I know it's going to be more expensive to live there. I know kids, schooling gets expensive. Do we rent? Do we buy? Do you have frameworks for thinking through that, those kinds of big life changes?

[B]

Absolutely. Before I go through the frameworks, I just want to talk a little bit more about you for a second because. Because what you went through, other people go through.

[A]

Yeah.

[B]

Like your decision to leave California, move to Austin for a dream. Part of going for a dream is that not everybody shows up for your dream a lot of times. What's disappointing is a lot of people that you love, they do the opposite. They're what I call dream stealers. You know, I talk about this in smart women finish rich. Like, be careful who you tell your dreams to, because a lot of people will just rain on your parade. And you move to Austin, which happens to be where all the podcasts, lots of podcasts have moved to Austin now.

[A]

Yeah, we got really lucky.

[B]

Austin's like the entrepreneur capital of the world now. I mean, everybody wants to be in Austin. The prices of real estate skyrocketed in Austin. You moved yourself to a new location for a different quality of life. And it happens to be. Then you moved yourself into an amazing location for entrepreneurism. So I moved myself from San Francisco. I'm a California kid. And I moved myself from San Francisco to New York City for work. I actually went from what I thought was the most expensive city, which was San Francisco, to New York, which was a more expensive city. And back in the day, when I did that, I did that because I wanted to be on all national television shows. It was before podcasts, and I wanted to be on the Today show, and I wanted to be on CNBC and Fox and CBS and all those shows. And the best way to be on those shows was to live in New York City. And so I left Morgan Stanley on a wing and a prayer to move to New York to. I'd written two books, Smart Women Finish Rich and Smart Couples Finish Rich. And I wanted to write more books and help more people. And people said to me, you're crazy. You've been a Morgan Stanley for nine years. You basically made it, and you're going to move to New York and write books and try to help people. Like, that's crazy. Like, don't do that. And we did, and I'm so glad we did because it changed our whole life. But how do you think of the frameworks? I think you run a financial plan, right? Like, you have a financial advisor, right? You've hired somebody, and you can actually do a deep dive and run all these numbers. And just like you with a business, you can sit down and be like, okay, well, if we move to California, like, now, if I were your advisor, you sat down with me, we'd go through your finance, we'd look at all your finances, and we'd really try to run through, what is it going to really cost you to live in California? Like, what's it going to cost to go to private school? Let's take these two kids and let's look at the next. What do we talk about here? 18, 16 years of expenses before we get to college. What does that look like? What do the taxes look like? Is your tax base going to be in California? And what are the expenses of moving? You just run the numbers now. You run those numbers. Those numbers will tell you a story. And then the question is, does it tell you a story that excites you? Does it tell you a story that scares the living out of you? And you know, does it tell you a story that's like, okay, this is frightening, but I think we can do it. It's. Maybe it's worth it. Do we really want this? What is it that you really want? Right, like, because it's very possible to recreate the California experience, maybe somewhere else that isn't as expensive. So it's important to kind of like peel back the value, go back to the values conversation. Like, what are the two of you value most? Was it. What is it the two of you really want? What do you want for your family? Does a relocation to this specific spot give you that? And then you kind of go from there and look a lot of this stuff too. I think it's very important to make decisions based on, on intel information. Right? Like, like when you run a business, I know you teach everybody this stuff with the businesses. Like, you got to know your numbers, you got to have a dashboard. You gotta, you have to know all the metrics. You can do that with finance, too. My son is about to move to New York. He's about to graduate. And, you know, I'm online, I'm like, what would it cost me to get a new apartment in New York? Right? And then my wife, we're not moving back to New York. I'm like, I know, but what if we just had a place part time in New York and looking at the numbers and like, the one thing I don't ever want to be is back in New York. Taxes, like, right. You couldn't pay me to be back in California. Taxes. Everyone's leaving California, moving to Texas. Right. In Florida. I don't know if anybody's leaving Texas and moving back to California. I love you, California. I'm a California kid and I love the beach too. And if I ever go, we spend a lot of time in Del Mar. We love Del Mar and Solana Beach. But I always say, my wife, if we decided by, if we decided to get a place in California, we're just not spending more than six months a year there. Yeah, that's another thing is you can also have, maybe you have a California experience where you rent a place. And you rent a place in the summer for three months and you keep your place in Austin and you test do you like California? For three months? And the other option is, and then you test renting for a year in California and see do you like it? It's interesting because being from California, my clients would retire. A lot of my clients would retire and had made a lot of wealth in their houses right in the Bay Area, San Francisco. So they had all, they had millions of dollars in their home. So they'd say, well, I'm going to sell my house and move to Arizona or Florida or Texas. And we would usually get our clients to go rent for six months, go rent for six months, or go rent for a year in the community you think you want to move to to see if you really like it. And some people would, do you know what, that makes sense. And they would go do that and they'd come back and they'd say, you know what, we love it. But I'm glad we didn't buy yet because we realized that that's not the retirement community we want to be in. We want to be over here. But let's do that. The opposite is we've seen people go and buy, you know, immediately say, I'm moving communities and I'm buying a home. I'm retiring and I'm retiring here. And then they get to the community, they don't like it, they miss their friends. So sometimes like in your situation, maybe testing it makes it easier to make the ultimate leap.

[A]

Yeah, I like that. Reframe. Not every big decision needs to be that permanent decision. And you mentioned a few times in there, you know, what would it look like buying a place here? Buying a place here. And I heard you talk on the Diverse CEO podcast with the buying versus renting argument, which I was so interested in. Cause I feel like it's the age old argument that people have such strong opinions on. And so can you share your perspective on the buying versus renting?

[B]

Absolutely. And you know, I went on the Diary, I really, really love the Diary of the CEO. I happen to be somebody who's listened to Stephen's podcast for like three years. So I'm like a fan of his show. And I also had kind of a bone to pick because he's had so many financial influencers on and all of them are on these shows saying it's better to rent than buy. And it's so interesting what you just said because she's like you said, it's an age old debate. And the Interesting thing, Natalie, is it's not an age old debate. This whole debate has started in the last 10 to 15 years.

[A]

Oh, interesting.

[B]

This is a new debate. So, you know, the American dream for 200 years included, get a job, make money, buy a home. In fact, saving in 401 plans wasn't even a thing thing until 40 years ago. So the first thing that people did in America to build any sense of financial security was buy a house. You know, and by the way, that all came from Europe. In Europe, most people have been raised to buy homes and then homes are passed on to the next generation. They're not sold. Generational wealth in Italy passes from generation to generation through home ownership. Well, in the US and that's partially because of the way things are taxed in the U.S. generational wealth also passes through homeownership. It's that the parents who owned a home actually have wealth and when they die, the home is sold and that wealth passes on to the next generation. And in fact, when you look at what's the leading indicator whether or not people buy homes or they don't buy homes, it's whether or not their parents bought a home. So what has happened in the last 10 years is, is that people who bought homes have made so much money, home, home values have just skyrocketed. Like when I wrote The Automatic Millionaire 20 years ago, I think the home value, I'm doing this off top of my head. I think the value of the average home, American home was like $160,000. And today the average home in America is $435,000. Now, probably in Austin, Texas, you can't touch anything right now for 435,000. But I remember when my friends were moving to Austin, Texas 20 years ago and you could. And, and so it's all about where can you get into the homeownership game. And what's happened is a generation of the last 10, 15 years because homeownership has become more expensive. You have people who have basically come out and said it's better to rent than home, that the interest that you pay when you buy a home is just wasted money, that you're going to have taxes and you're going to have expenses and a house is a money pit. And the truth is a house builds wealth. You have to live somewhere. And as long as you're alive, you're either going to rent it or you're going to own it. Now, there are times in your life, there are seasons in your life where renting makes sense. But typically, as you're starting to build wealth, what a home does is it's forced savings. And over 10, 15, 20 years, often you get the house if you do it right, which I teach you in the automatic millionaire, how to pay the home off early, you can turn around in your 40s or your mid-40s and certainly your early 50s and be debt free. And you know, yes, you'll have taxes and yes, you'll have insurance and yes, you'll have expenses, but that will be less than rent. And the thing about rent is the only thing you can promise yourself is rent. So the cost of rent's going higher. Rents just always go higher. And the reason they always go higher is that the landlord who owns your property has to pay taxes, insurance, maintenance fees, and they don't eat those expenses, they pass them on to you, the renter. Now, certain markets have better protection than others. Like in Italy, you rent an apartment, you can get an eight year lease and the landlord can't raise your rent for eight years. Well, that's an interesting play. You know, it can be cheaper to rent in Florence than it is to buy. And real estate in Florence is not liquid. It's not like a US Market where you can buy a house and sell it in 90 days. So you have to know your markets too. But I would tell anyone who's listening, who's young, I know you've been told that you're better off to rent than you are to buy, but honestly, it's just not what you see. The data, it's not me. The data is what says it. All of wealth in America is in two locations, home equity and the stock market. And the way they got there is they bought a home and they invested in their 401k plan or their IRA account. There's 24 million millionaires in America. The bulk of them did it by buying homes and paying themselves first. Automatically. Boring stuff, but that's what they did.

[A]

Yeah, that's what I was going to ask you about the stock market and then home equity. So if someone is sitting thinking, okay, I could keep putting X amount in the stock market, in index funds, whatever it is, or I could half that amount and put half into a mortgage. How do you make that decision of how to split that investment?

[B]

So first of all, here's what people are saying. And you brought up diary CEO. What people are saying on these shows is like, stock markets average over 10% a year annually. So the real estate markets average 5. Why would I put money in real estate that goes up 5%. When I can put in the stock market, that goes up 10%. First of all, neither of those returns are guaranteed. You don't just buy a house and have a kickoff 5% a year. That's not how it works. These are annualized returns. All over the US there are markets, and you're living in one of them where home prices have doubled, tripled and quadrupled in less than 20 years. So a person goes out and buys a $500,000 home. All over Austin, there are people who bought homes for $500,000 that today are worth over 2 million. Yeah, there are people who bought $2 million homes that today in Austin are worth 6 million. And they didn't get 5% returns. And by the way, they didn't pay cash for the house. They put down down payments and they financed it. So they actually got a much greater return because they're getting a return on the loan. Right? Like if you buy a million dollar home and you put down $250,000 and you finance 750,000, you're getting a rate of return on the million dollar house. When you go to sell that house, you pay the mortgage back and you keep all the equity. And in the case of buying a home, you keep, if you're single, a quarter of a million dollars in equity tax free profits. If you're married, you get a half a million dollars tax free. Like you and Steven could go sell your house in Austin, move to California, keep over half a million dollars tax free profits, buy another house in California, live in it for over two years and do it all over again. I've lived in multiple homes and made a half a million dollars tax free, and then again a half a million dollars tax free and then again a half a million dollars tax free. So now to answer your question, what people say in these other shows is like, you should rent and put all your money in the stock market. Stock market's been on fire for the last 10 years, right? Annual returns have been more than 10%. Many cases they've been 12, 13, 14, 15% annually. However, before that, there was a decade where the market was flat. There are years when the market goes down. Sometimes there are multiple years where the market goes down. Sometimes like there are points in time in the market where the market goes down 10 or 20 or 30%. And the challenge is that people don't always keep investing when the market drops. And the other challenge is that people sell. So you can't just look at these numbers and be like, oh, you know What? Just rent? Put in a mutual fund, you'll earn 10%, and then, look, this is what it would be worth in 30 years. I mean, you can. But I think you're better off to do both. I think you're better off to hedge your bets to something to get into a piece of real estate that you can either start with and then ultimately rent out. Yep. And pay yourself first. I don't think it's either or. I think it should be. And

[A]

I love this conversation. I even had a situation where this was a few years ago. We go back to the UK every single summer, and we do Europe and we're renting Airbnbs. And it's really expensive. Like, we're talking some of them, like 10,000 a week. Really, really expensive. And we loved being in the cottage on the countryside. And one day, I'm very spontaneous, which is probably not the best thing. I was like, I found a house. We should buy it. And we ended up buying this house in cash, which we looked back and we were like, oh, God, we've just made a terrible decision. Was this a really bad idea? It was like a very emotional decision. I'm not recommending it. But interestingly, when we sold that house, think we had a three or four years when we sold the house, we made a little bit of money on it. Not like huge, huge, huge returns, but we'd saved all of that money. We would have been renting for all of those years. And when we did that, that was our first kind of realization that we could make money doing real estate. Like, we just. It just hadn't been part of our vocabulary. We hadn't done a lot of research on it. And we had this big idea that we'd made a huge mistake, this emotional decision, and it actually turned out to not be a bad decision and taught us the process of what that looked like. And now we're in a place where we're thinking about moving and whether we'd keep this house or, you know, invest in another house. And I think just that process of going through, selling a house or getting a mortgage, deciding, doing the math of do we get this kind of mortgage, this kind of mortgage, how do we pay it off? It's all been such a great learning curve that I don't think we would have learned had we not tried it as well. And I think by living so below our means for such a long time, it gave us that money to play a little bit and to take a couple of risks that we would never. I would never have Been able to buy a house like that. Had I been living in California, it was completely different. So I think there is something to that as well, of being willing to kind of trust yourself. And I'm not encouraging people to take risks here, but trust yourself a little bit and learn by doing. Do you think that's a crazy thing to do?

[B]

No. I mean, you actually just said all the keywords, learn by doing, right? Like the first time you buy a home, it's super scary. Like the whole process going to get a mortgage, it's always the scariest because you don't know how to do it yet. Right? Like I talk about in the automatic millionaire books, all my books. Like, here's how you get a mortgage. Like, you know the whole process. Here's how you get pre approved, here's how you get your credit score. The first time you do it, the first time you make an offer on a house, the first time you close escrow, the first time for anything is scary. Then the second time it's like, okay, well I've done this once, we survived. The second time's a little easier. Third time's even easier than that. The fourth time you're kind of like, I know what mortgage I want right now. Rates are like this. I want this kind of mortgage now. And if rates drop, I'll switch to this kind of mortgage. And it becomes like a game. It's not actually any different than being in business. Business, right? Everything in business is scary in the beginning and then you just get better at it and you start to see patterns, right? There's patterns behind everything. I've now been doing this long enough. Like, even with what's going on right now with the war, I mean, I can look back and remember when we went to war in Iraq. I can remember the newsletter, the original war, like the one with the senior Bush. And I can remember the newsletters that I sent to my clients and saying, like, you know what, here's what typically happens after war work. The market does this, but then it recovers. And you cannot time these markets. I'll say that right now. You can't time the stock market. It's time in the market. Just like today. You can do all this with AI, but like, if you go into AI and you're like, tell me what happens if you miss the best 10 days in the market over the last 20 years. What you'll find out is if you miss the best days of the market over a 10 year or 20 year period, your returns will be half what the Stock market's returns are by simply missing a handful of the best days.

[A]

Wow.

[B]

And your mouth just went. It's like, because the market doesn't go 10% like this over a year, the market moves in these dramatic swings and it moves down in dramatic swings, it moves up in dramatic swings. And you can just be wrong for a couple days and miss the bulk of the returns in the stock market market. And so people were like, oh, I know, I watched this show and now I'm going to sell. And then, and then when this happens, I'm going to buy. Those people fail. They fail for three reasons. You have to be right. Selling, you get hit with taxes and you have to be right when you buy again. And people don't get those three things right consistently. It's just not possible. So the reason I'll go back to homeownership again, that homeownership works for more people than actually the stock market is that homeownership, you're living there and you're not seeing your house trade on a daily basis, right? You watch the president get online and you can't click a button and sell your house. And so you just, you just, you live in your home, you hopefully enjoy your home. Time goes on. The next thing you know, a decade's gone by and your house has gone up in value and you've paid your mortgage down and you've had four savings. And that's why homeownership works for most Americans. Other people who get it wrong, sure happens. All the things go wrong for people. But bulk of average Americans, homeownership has worked out pretty darn well for them.

[A]

That 10 day start, that just completely shocked me. That is wild. I think the best. My advice, do what I do. Forget how to log in. I wouldn't know how to sell if I was asked to sell. You know what, my husband goes freaked out by that. But I'm like, I, I wouldn't know how to do any of that.

[B]

Well, you should know how you have to run the fire drill. Like if, God forbid, if Stephen's the one taking care of the investments. God forbid, Stephen, something happened to Stephen tomorrow you would need to know everything. And I have these conversations with my wife because she too doesn't really log in. And I'm like, you gotta know where everything is, sweetheart. I involve her in every call. With a financial like, you got to know how to get online, you got to know where everything is. It's just, you can't put your head to stay on that. And a Lot. And I see a lot of women entrepreneurs that are really dialed in on the business, and then they delegate the finances and the investments to their spouse. You got to be involved in both.

[A]

I do like being on the calls, and we have, like, a handover document where everything is. And this happened to my husband. His father passed when he was 19, and his mom had no idea how to access anything, do anything. And that really was such a moment for him where he was like, I just want to make sure you know what everything is. But I do feel like, and I don't know if this is a female thing, I wonder if I look at things like that. I get freaked out when I see. I remember when Covid hit and I was seeing how much we were losing, I was so freaked out and would be very tempted to pull it out. And so for me, I feel like ignorance is bliss in a sense of, like, I'll check in once a year, but I don't really want to know when I'm doing really badly. And I also don't really want to know when I'm doing really well because I feel like I would be inclined to pull money out or freak out a little bit. So how would you manage that while still having the insight into everything?

[B]

So here's what's interesting. When things go wrong, and they go wrong really quickly. Like when Covid happened, the market at one point was down 33%. It happened in a matter of two. I think it happened a matter of two weeks. Yep. If you had a balanced account, you're 40% bonds and 60% stock, you were still down over 30%. It was the worst returns on a balanced portfolio, which is what most Americans actually have in like a hundred years. Nothing was up. I'm in the business, right? I'm getting on. I'm doing zoom calls like this for all of our financial advisors to keep our advisors calm, because they need to be calm with their clients. This is not a once in a lifetime occurrence. Like, every 10 to 20 years, something major goes wrong, and this happens. And you know what's interesting? If you don't look anything for 90 days, almost inevitably it all recovers. And when you really look at a downturn in a market, on average, what it's taken for downturns in major markets to recover is 27 months. So somewhere between 90 days to 27 months, things get back. Now, after Covid, it got back, I think, in less than 90 days because there was all the money pumped in. But I knew a lot of smart people that panicked and sold everything and they never got back in.

[A]

Yeah.

[B]

And it's really hard to buy back in the market when the market dips 33% and then it rips right back up and you just sold. So there's a phrase called benign neglect.

[A]

Okay.

[B]

And benign neglect ultimately means kind of like buy really good quality things and you leave it alone. So your approach of like, I'm not going to look when the market's bad and I'm not going to look when the market's really good. I'm going to just kind of peek in there every quarter or twice a year. It's not actually a bad approach.

[A]

So as long as I know all my logins and I know how I would sell, which I then that's not

[B]

a broad approach because these are investable dollars for long term.

[A]

Right.

[B]

I'm sure you're looking at your bank account all the time. Right. Like your business bank account.

[A]

You're looking at my bank account. I make sure. Because I used to also be very, very avoidant of looking at my. My finances when I didn't have a lot of money. And I was always kind of living month to month, I would avoid, avoid, avoid, avoid. And it was when we started taking our finances seriously. Your book was the first one we read. Smart couples finish rich. Because me and my husband, we had nothing when we met and we built stuff together. And that was one of the things that I started doing was, okay, well look at your account. Like it was like exposure therapy. It might say minus, but look at your account and be willing to sit with that uncomfortability and know your numbers. And I will say that has been huge, is just having that awareness of what is there. And it's become a really good financial muscle. But I grew up with parents that were always in debt. We had bailiffs knocking at the door, taking off furniture like there was weeks my mum could barely afford food. And that created quite a scarcity financial mindset. And I began to avoid and it was something that I did have to repair to be able to then manage your money. And I think that mindset piece is really important.

[B]

It is really important. And what you just said, like not wanting to look at him is so common, especially when you're in debt and you have bills. I know what that feels like. I remember being in college and having all these credit card bills and like literally being afraid to open up my bills. I remember once covering my eyes to open my own bills.

[A]

Yes.

[B]

And be like, how stupid is this? I'm the one who's created these charges? And I'm covering my eyes to open my own bill because I was sick over how bad I knew the credit card bill was. And you know, fast forward, I'm on Oprah with the book the Automatic Millionaire. We actually did a whole year long campaign to get America out of debt called the Debt Diet series. And Oprah turned me one day and she's like, I don't understand how people get in all this debt and they don't confront it. I said, what happens is people basically play this game called if I don't know, I don't owe.

[A]

That was me. That was my game.

[B]

If I don't know, I don't owe. Like that. But that game doesn't work. People do that with taxes too. Like, they, they sort of, they're entrepreneurs, you know, they're not putting aside money for taxes and then they get behind because they're living on all their income. And then next thing you know, they're two, three years into it, they haven't paid their taxes. The IRS always finds you. So don't know. Doesn't mean you don't. Oh, you need to know.

[A]

Yeah.

[B]

And obviously, like, you need to know so that you can go, you go fix it.

[A]

That's a good, a really, really good call. Okay, so coming back to the House Conversation, 1, 1 last question I have on that is I remember going through the mortgage process and kind of deciding, this is the house we want. And we start going through the mortgage process and they start floating out other numbers. Ooh, we could do this kind alone and this kind alone. And I remember at one point we ended up thinking, oh, should we then just go bigger? Should we go as big as we can get? And I think that is a really tough thing to figure out is how do you make the decision of how much you do put into your house in terms of do we stretch ourselves to get the biggest loan we can do we get a loan that we know we can pay back very easily. Is there a, an easy framework for that?

[B]

Well, I'm going to give you a generic framework again. Like this is the update of the Automatic Millionaire after 20 years. We're putting this back out after 20 years. And I talk about all this in this book and one of the things I say that's super important is always borrow less than the bank will loan you.

[A]

Okay?

[B]

So if the bank's like, look, you qualify for a $500,000 mortgage, and then some mortgage broker, like, I can probably get you 600,000. Right? And so Then you're like, oh, maybe we should do 600,000. I go, no, wait, if they told you 500,000, you should probably borrow 450, 400, you should borrow less, okay? Because even though the bank is supposed to really care about whether or not you're safe to get that mortgage, the moment that mortgage is done, that mortgage is packaged up and sold to an investor and serviced by somebody else. And if you can't pay the bills, they'll just come around right back to you and want the house back. And you gotta leave yourself a cushion, right? And look, I bought my first house. I had no cushion. I had three months cushion, you know, And I was in commercial real estate, which is a commission based job. I bought a house with my best friend, we split the mortgage payment, we bought a $220,000 home, ran out of college, you put 10% down. So it was like $12,500 each. Total fixer upper. We couldn't afford the mortgage payments. We rented bedrooms and this is how I got my first house. Rented bedrooms, did all the work ourselves. And I remember getting to the third month and being like, I am not going to be able to make this mortgage payment in the fourth month if I don't close a deal like in the next 30 days to get a commission check. And I remember calling my dad and like, dad, I'm almost out of money. And my father goes, well, son, nothing motivates a salesperson like debt. And I was like, that was not the answer I was really hoping for. But I went and knocked on a lot more doors because I was in commercial real estate. We would literally, we were you cold call. You knock on doors in office buildings. Office buildings have those signs that say no solicitors. We would knock on those doors, hey, it's a solicitor here. Can we talk to you about your lease? You know, I had to find a deal, so it is true. But it's always stressful when you buy your first house. You will stretch to buy your first house. But don't overstretch.

[A]

I love that. Tell me a bit about the updated Automatic millionaire. I see all of those sticky notes there. I'm so intrigued. What made you decide to update it and tell me all about it? Is it out now?

[B]

It's out now. So the book came out January 1st. That's what you saw me actually talking about on Diary, CEO and Mel Robbins and everywhere else I've been. And you're actually, believe it or not, you're my final podcast.

[A]

Love that.

[B]

Wrapping this up, we're Doing. I'm doing the Today show on June 9th and wrapping this tour up. But the Automatic Miller came out 20 years ago. It's my most popular book. It's sold millions of copies and it's been updated four times. I wanted to update it again one last time to reach the next generation. So like for all the moms who are here and they've got younger kids, I mean, it's good for anybody. But I really wanted to reach next generation. I wanted to help people in their 20s and their 30s get started correctly. And the Automatic Millionaire book is about how to take an ordinary income and build financial security for life without a budget, without discipline, by making your whole financial life automatic. And the book walks you through in less than a few hours. How to put your financial life on autopilot. It was actually the follow up book to Smart Couples Finish Rich. Because after Smart Women Finished rich and then I wrote what happened is I wrote Smart Women Finish Rich to teach women all over America how to be in charge of their finances so they could protect themselves and teach their kids and help their family. That was my mission. Then all these women came back to me and they're like, this is a great book, but how do I get my husband to do this with me? And that led to smart Couples. Then people came back to me. They're like, I love this whole book. I got the file folder set up. I've learned about insurance, I've loved the values based financial planning. But I just need a book that tells me this. What's the one thing I need to do to build to be rich? What's the one thing? What's the secret? And so I found myself over and over again telling people, well, you gotta pay yourself first automatically, one hour day of your income. You gotta buy a home and you gotta get your debt paid down and you should give back. And so I covered all these things in a really tight little book. And this book has just now gone on for 20 years, continues to be on the bestseller list and help millions of people. And I wanted to help people one more time. So that's what we did one last time.

[A]

I love that. Congratulations. That's incredible. I'm gonna put the link below for anyone listening to grab a copy. I would really, really, really recommend your work. It has changed my life. Like I said, it was the first financial book that we'd read and we did all the things. We followed it really to the letter. We got the folder set up and everything. So I'll put the link below. I think It's a kind of book, too. It's really helpful to buy these kind of books for people that, you know. Like, I already have in my head a few people that I think would really benefit from this. Like, we always get those questions, where do I put my money? And things like that. So I'm gonna put all that link. Thank you so much. This conversation has taught me so, so much. I feel like I'm gonna run to Stephen and be like, okay, I've got some new plans for us. So just thank you so much.

[B]

Oh, I love it. You know what? It's such a pleasure to see you. The time we spent together in Puerto Rico is really special, and this was really nice because it brought it back. So I really appreciate you doing the show and give your husband my best congratulations on child number two. And, yeah, anything you need, just let me know.

[A]

Thank you.

[B]

Thanks.