“Making more money” is only a small part of it. Full transcript below.
Welcome to the Business Numbers Podcast. I’m your host, Ben McAdam. I’m a profits coach, virtual CFO, and entrepreneur, and I’ve created this podcast to help you grow your business profits and understand your business numbers without judgment and without burying you in a whole bunch of jargon that you don’t need. Just actionable tips and case studies to help you grow your business. For show notes, go to the website, businessnumberspodcast.com.
Something a bit different today. This podcast is called “Business Numbers Podcast”… or maybe you’re listening to this way in the future and I’ve changed it, who knows. But anyway, sometimes I’m going to talk about non-business numbers or non-business money topics, because there are often the motivation behind the business numbers issues that you want to talk about.
Perhaps those non-business number topics are the root cause of the question you have about business numbers, and I’d rather help you with the root cause. Someone who comes to me and says, “I want to get my revenue to $10 million”, I’ll ask why because maybe there’s a better solution and a shorter path.
So in this episode, I’m going to talk about financial abundance, which is a fairly common goal for a lot of my clients and I thought it might be helpful for you as well.
The way I think about it, financial abundance means having more money than you need, and that’s the definition I’m going to use for this episode. And that seems pretty common for other people, they might word it slightly differently, but the wording I’ve used is important: “having more money than you need”. The greater the gap between your income, the “more money” part, and your expenses (what you need), the more financially abundant you’ll feel. And there needs to be a positive gap between them, of course, otherwise you won’t feel financially abundant, you’ll probably feel really stressed.
Most people (including me, sometimes, I’ll admit) focus on the “more money” part of trying to get to financial abundance. But the greatest progress can sometimes come from the “what you need” end of the definition.
Let me talk about why for a moment: the difficulty with focusing on the “more money” part is that often when we earn more our needs (or expenses) go up, so we don’t end up feeling more abundant. It’s about that gap between how much money you have coming in, or how much money you have, and how much money you need. And sometimes we increase the money side of the gap and the needs chase after it. So the gap stays just as close together, unfortunately, and we don’t end up feeling abundant.
For example, think for a moment about a time when your income increased. It could be from your business or from previous days as an employee or contractor. And I’ve got a couple of questions for you.
How long did that income increase make you feel good for?
How long did you feel amazing about it?
How quickly did you start thinking about what you could spend it on? It might have been the first thought that popped into your head when your income increased. It may have even got in before the “Oh, wow, my income increased!” the thought could have been “My income increased, I could buy this thing!” Sometimes that’s how our brains work.
How quickly did you commit to an “ongoing” extra expense, so any ongoing income increase was swallowed up forever? It could have been something in your business, like hiring another team member, signing up for a program, hiring a marketing agency or consultant on retainer. Or maybe it was a personal cost, like moving to a better home, taking on a bigger phone plan or car loan, or hiring personal staff around the house on an ongoing basis.
Again, to be clear, no judgment here. These are all examples from my past and I’ve noticed a lot of clients have had a similar thing as well. So no judgment if you’ve done any of these.
Again, back to the questions: how long did the feeling of financial abundance last from that income increase? I mean, you might have felt like “Yay, my life has improved”, or “Yay, my business has improved or gotten easier, or it’s more of a chance to be more successful”. But what we’re focusing on here is the feeling of financial abundance. How long did that last from the last time that your income increased? Probably not long. And it’s mostly because, like I suggested, that we tend to increase our needs.
When more income comes in, we tend to increase the things we spend it on, on a regular basis.
The other part of the reason why you might not necessarily have felt financial abundance for a while, is that there’s this idea called “hedonic adaptation”. It’s the idea that we stabilize after a big, good or bad event, we get used to it and we become accustomed to it, we adjust to it, and we feel just the way that we felt before. And then we chase the next thing. It’s something in our biology and it’s probably why the human race has grown to become what it has. And why we achieve success is that when we’re not satisfied with the success we have, we chase the next one. It’s a topic for another day.
Another side idea I want to share is that it’s not always about focusing on more money and after that we increase our needs. Sometimes we might get a little excited by the phrase “It takes money to make money” and maybe “our needs” increase *before* the more money starts happening. I don’t know if you’ve ever done that, something like “Oh, okay, well, in order to make more money, I’ve got to start spending on Facebook ads, or spending more on Facebook ads”. I wonder if everybody in the online business space has had that thought before (and a bunch of people in the offline space too), including me while I’m being honest.
Anyway, the idea here is that focusing on the “more money” part of the financial abundance equation often doesn’t work, as an approach to achieving financial abundance beyond having a base comfortable level of income (everyone needs at least that).
Let’s talk about the more powerful part of the definition. Financial abundance means having more money than you need. And it’s those last few words, “than you need”, that’s important. Because financial abundance is a gap between two points, how much money you have and how much you need, it’s that gap between them that’s the key.
And the gap has two sides you can work on. Just like gross margins that I love talking about all the time. If you can lower your needs, you can increase your financial abundance. Now I’m not necessarily saying “Stop working on the more money part”, but maybe this takes the crazy pressure off for some of you and maybe you actually start getting closer towards financial abundance by focusing on lowering your needs.
So how do you do that? It’s all well and good for me to give you this theory. How do you lower your needs? It’s a really, really big topic and I won’t be able to cover it in depth in this episode. I mainly wanted to share the idea that focusing exclusively on the more money part might not be working for you, but there are a few suggestions I have for reducing your needs.
The main one is: lowering your needs can be achieved by focusing on how much extra benefit you actually got from a recent upgrade or a recent addition to your needs. So let’s say for example, you upgraded your home. You moved to a bigger home, or a better home, or a better location, or a better country or whatever, when you recently upgraded it, just focus on exactly how much better did that make your life. And compare that to how you thought it would impact you.
And this can be the same thing for if you got a new car, or you got a better phone. Or on the business side when you signed up for a program, or you hired a new team member. You probably thought it was going to have a really big impact, and then it didn’t. It’s often less than we thought. More than “nothing”, it would’ve had an impact, and the fact that it had an impact doesn’t disprove my point or derail this exercise, but usually it’s less than we thought. And that’s the key. Because partly the reason why we feel the desire to increase our needs when more money comes in is because we believe (usually incorrectly) that the extra that we are doing or the extra we’re gonna increase or upgrade is going to have a BIG difference.
If you think that a new home is going to make you feel super happy, then you’re going to upgrade. “The last time I upgraded my home was good, but it wasn’t super amazing. Maybe this next house is going to make me feel amazing.” Nope. Unless you upgraded from a house that was riddled with mold to a house that wasn’t, that’s going to have an impact and a big one (and please do go get out of the moldy house).
Most of the time, all these upgrades we think they’re going to be *amazing*, but they’re not really. And if we have that attitude of “yeah, that would be nice, I guess”, then we’ll be less likely to upgrade.
So do this thought experiment, do this little mental review of “how much did that upgrade actually make me feel better, how much did that upgrade actually impact me”, and compare from the amazing, super awesome impact we thought the upgrade would achieve to the more realistic small improvement it actually had.
What we are doing with this thought experiment is vaccinating ourselves against the idea that upgrades are super amazing and wonderful and we should always do them. We’ll be less likely to take on more expenses or increase our needs when more money comes in.
And you might actually find that after doing this review exercise, you might unwind the upgrades you’ve made. Maybe you’ll look back and you say “Well, actually, this didn’t make me any happier. Why am I paying so much for this? I’m going to stop this thing.” Maybe you hired a whole bunch of personal staff to help you around the house and you think “Oh, this isn’t making my life as amazing as I thought, it’s got some inconveniences attached to it as well and I don’t think there’s a net benefit. It’s not worth paying all this amount for it. I’m going to stop them. I’m going to dismiss the personal staff around the house, or I’m going to lower their hours to something that’s gonna be a bit more meaningful.” And by downgrading your needs you’ll increase that gap, that financial abundance gap between what you have and what you feel you need.
So that’s two ways this little mental review exercise can help you. It’ll help inoculate you from the desire to upgrade your needs in future when more money comes in. And it will possibly help you see that you could downgrade what you feel are your “must have” needs right now.
The reason why lowering your needs is a big topic and why I’m only going to give you one suggestion here is because sometimes, behind this constant desire to increase your needs, there are mindset issues (or even traumas from your past) that you might require some expert help to untangle. But hopefully I’ve given you somewhere to start with this review exercise.
Before we wrap up, one other thing I want to add. I mentioned in the beginning of this episode that I like dealing with the root cause, if you remember. So I could also talk about why you want financial abundance and whether the shortest path to the result you actually want is something else other than financial abundance. For example, dealing with fears and scarcity. Maybe you think that “Oh, if I had more money than I need, then I wouldn’t be afraid of losing it, I wouldn’t be afraid of going broke, or I wouldn’t feel like there’s never any money.” The solution isn’t necessarily financial abundance; more money doesn’t necessarily solve a fear problem around scarcity. I’ve seen this with clients, as well as myself.
Or maybe the shortest path to the result you actually want isn’t financial abundance, it’s designing a life that suits you better than the traditional scripts and social expectations. You don’t necessarily need to have an abundance of money that requires you not to work. Passive income for example, is a dream for a lot of people, because then they wouldn’t have to work.
Maybe the shortest path to what you want is better work. Maybe there are some things about your business you don’t like and you could delegate them, or just stop that from being a part of your business, or maybe there’s a different business you need to move into. Or if you still have a day job or maybe some things in your personal life, you feel like financial abundance is the solution to those, when in fact there may be other solutions.
It’s a fairly common goal for a lot of new clients, when I’m doing the initial session with them, to get clear on their goals so I make sure I head them in that direction with my advise. It’s a fairly common goal to have financial independence, which in their case might mean that there is passive income, income without having to work for it, that more than covers a comfortable lifestyle for them, so they don’t have to work. And again, sometimes the issue is actually the work. The work needs to be changed, not necessarily that you don’t want to work. So for me, for example, I love being a coach. If I had enough passive income coming in that I didn’t need to do this, I would still do it anyway, because it brings me a lot of meaning and joy, and I love having an impact on people’s lives.
Maybe that might be the answer for you. Not becoming a coach necessarily, but finding the type of work that works for you. Rather than financial abundance or financial independence, which might feel like a goal that’s really far away, maybe you’re just a couple of tweaks or one key hire away from getting the result that is actually meaningful to you.
But this podcast is already getting a bit long, so maybe I should stop there. Reach out if any of this is a helpful topic, or any particular points that you want me to expand on in future episodes and I’ll do an episode on that sooner rather than later. If there’s interest, I’m more than happy to help.
For now, a quick recap:
- Financial abundance means having more money than you need, or more money coming in than you need.
- Aiming for more and more money is not necessarily the right approach for you.
- There could be a lot of benefit from focusing on the “than you need” part of the financial abundance definition or getting clearer on the root cause about why you’re interested in financial abundance.
This episode was a bit of a longer one, but something that’s been important to a lot of clients, so I wanted to share it with you.
I hope it helps. And thanks for listening.
Before you go, two quick things:
- If this was useful, please give it a review and share it with a friend who it might help.
- If you want help from me to unlock growth and profits, and greater clarity around your numbers, book a call through ProfitsCollective.com and if we’re not a fit I’ll point you in the right direction.