How Money (Actually) Works

Money is simpler than the financial gurus want you to believe. A pragmatic framework that teaches you how to end up with a lot more of it and the freedom you desire.

People like money. They spend a lot of time thinking about it. They worry about it. They dream about it. They wonder how to get their grubby little fingers on more of it.

Given that everyone wants money so much, you would think they completely understand what money actually is, right? But, how often do you interact with physical paper money these days? You don't even see money 99% of the time. At this point, it's basically a digital number on a digital screen reflecting a digital bank vault.

First, grab a mirror

Most of my audience is made up of people who either run their own business or who want to run their own business. That's probably why you're here.

Before moving on, ask yourself the following question. Really think about it for a minute:

What makes you want to run your own business?

With all the myriad ways to make a buck, why your own business? What about this idea is different?

Got your answer?

I bet it boils down to one word: freedom. This includes freedom over your time, your location, what you choose to create, and how much you can earn. It's a wonderful feeling when you visualize all the great things life can bring you when you're in charge. 

And it’s true. Nothing tastes sweeter than freedom.

Now, think about what scares you when it comes to running your own business. Go to the darkest place for a moment and really feel that fear. 

Ready to look into my crystal ball again?

I bet you're scared that you won't be able to make enough money to live as you wish. You might be scared of other things—where to start, what to focus on, how it all works, what if you fail?—but, at the core, you're worried about making money.

And, you know what? You have good reason to be!

If you run out of money, you're screwed. 

Most people with jobs worry about this, too, by the way. There are no guarantees. The difference between you and them is that you recognize money buys you freedom, while they use money to buy stuff. If they run low on cash, they just buy less stuff. If you run low on cash, your very freedom is at stake.

The Solopreneur trade-off

The Solopreneur life affords you incredible realities: 

1. Work on what you want

2. Choose who you work with

3. Make great money

4. Travel when you want

5. Spend time with your family

6. Never ask for permission to take time off

7. The potential to make a lot of money

You directly affect your ability to have all of these things.

But, here's one thing that Solopreneurs can't afford: Financial Anxiety. Over 3 out of 4 people feel anxiety around money, making it the primary source of stress in America.

Anxiety is a mind-killer. As a Solopreneur, your mind is your greatest asset. You must protect your mind at all costs, removing anxiety, stress, fear, doubt, discouragement, and any other destructive feelings that will try to destroy you. Employees may have co-workers who can pick up their slack during rough times, but there is no safety net when you’re solo.

So, let's cut this anxiety off at the pass. I want you to feel confident and powerful on your journey. Time to get back to money.

Money, finances, and economics are really complicated, right?

There are thousands of websites and books about finances. They'll teach you various budgeting techniques, investment strategies, asset allocations, debt remediation, and on and on. What they don't tell you is how money actually works. The reader walks away with lots of tactics, but missing the fundamental piece that makes everything click. 

Let's fix that.

What is money?

1. Money is a storage mechanism for the value you create.

Seriously. That's it. No more, no less. Read it a few times and let it sink in.

So, that was easy. Now that you know what money is, how does it work? Despite what the $53 billion Financial Planning and Advice industry wants you to believe, the truth is, money only works in two ways. You can: 

1. Make More.

2. Spend Less.

There are no other ways. Both of these methods are powerful, but they play by different rules. Below, you'll learn how to leverage both to their maximum. Let's start with the method most familiar to people.

The Spend Less Method

The Spend Less Method is the basis for advice that tells you to "save up." It's an entirely defensive move aimed at keeping what you have. Most financial advice is aimed squarely at people who earn W-2 incomes. You know, jobs. After all, only 7% of Americans are self-employed. 

If you're peddling financial advice to the masses, you're going to focus on people who receive a paycheck from an employer. This means the bulk of financial advice is predicated upon advising people who have a fixed income from an employer.

It's no surprise, then, that the authors gravitate so often to the Spend Less Method. Their readers are perpetually stuck in the employee mindset, which caps their ability to rapidly expand their incomes. The option to make more simply isn't on the table, so saving as much as possible is the only tool available to them. 

Nevertheless, anyone who makes money can utilize the Spend Less Method. After all, there is no amount of money you can't outspend.

• Strengths: It protects what you have. Spending less means keeping more money so you can buy important things like, you know, freedom. More on that in a bit.

• Weaknesses: It's capped by how much money you make, and it can't generate a penny more. It lends itself to limitation thinking. On its own, it's virtually impossible to get rich by just stuffing money under the mattress.

The Make More Method

While the Spend Less Method is limited to the amount of money you already have, The Make More Method is limitless, with one exception. Its only limitation is based on your answer to this question: How hard am I willing to work to provide as much value as possible? 

If you're willing to fight like hell to get what you want out of life, to constantly learn and apply new skills, to do what you say you're going to do, and to show up every day and blow people's minds with the value you provide them... You're probably going to generate a lot of money. 

How you choose to do this is entirely up to you. But, the rules of money are universal and will apply to whatever method you use to earn it.

• Strengths: Limitless income potential. Can be split between multiple income sources. No one else can cap you or tell you no (providing the income is legal - please make sure it's legal).

• Weaknesses: It takes hard work to generate the value that, in exchange, generates money for you. If you spend all you make, you'll never achieve financial freedom.

Stacking firewood for winter

The Spend Less Method and the Make More Method both have strengths and weaknesses. But, imagine being able to maximize the strengths of each while eliminating the weaknesses. This is why sports teams have an offense and a defense. The team sucks if they lack one or the other.

For athletes, this is the difference between a loss and a win.

For Solopreneurs, the stake is MUCH higher. It's the difference between true freedom and struggle.

When it comes to financial freedom, there is only one thing that matters:

1. How much money you keep.

Once you start leveraging the Make More method, you'll earn more money. This is excellent. If you're like most people, you'll just spend it all on more useless crap. This is not excellent. 

Other than the startup phase, the critical moment in any Solo Entrepreneur's adventure is when they begin making more money. The urge to increase your spending rises alongside your increased income. This is where the Spend Less method can finally be the hero that it is. 

Your offense (Make More) is generating great income. If your defense (Spend Less) sucks, it doesn't matter. You'll be in the same overall financial situation. But, hey, "Look at my awesome new boat, Neighbor Jones!" 

Herein lies the trap that destroys most middle-class lives. If there's one thing I want you to remember above all else, it's this: 

The desire to look rich, but not actually be rich is your number one enemy.

They're all sheep, but you are a lion

Do you know what a HENRY is? HENRY stands for "High Earner, Not Rich Yet." This term applies to a significant number of households in the $250,000 to $500,000 income range. They make a good income, and they spend all of it.

Many times, they not only spend all of it—they spend more than that and go into debt! You know people in this group. You may be in this group right now.

Advertisers absolutely know this group. See, advertisers don't waste their time targeting actually rich people. No, advertisers fix their sights squarely on those who can afford payments, even though they cannot afford many of the goods outright.

They know that HENRYs will fill their monthly budgets to the absolute brim, and will even happily overflow it by going into debt and paying much more in interest. They're so desperate to look rich right now, they'll spend all their money.

They suck the milk of never-ending status purchases, simultaneously destroying their opportunities to become actually rich.

A prison where you hold the key

Listen, if you want a life like everyone else - the McMansion, the BMW in the driveway, the boat, the golf club membership, the clothes with the right logo, the fancy dinners - spend all the money you make. Go ahead, do it.

But, in exchange, you have to take all that comes with this lifestyle:

• Perpetual debt. 80% of Americans are in debt, with a median amount of $67,900.

• Too many things to manage. 54% of Americans say they feel overwhelmed by clutter, and 78% don’t know what to do with it.

• Both parents working non-stop. Almost half of American households feature both parents working full-time.

• Extra expenses for the McMansion. Home ownership in America averages $13,153 per year NOT INCLUDING the mortgage payment.

• High depression and anxiety rates. Corporate CEOs may exhibit as much as double the depression rates of the general public.

• Living paycheck to paycheck. Almost 1 in 5 households making over $100,000 said they would struggle to come up with $400 to cover an unexpected expense.

Should I keep going? Don't believe me? Click any of those links and go down a depressing rabbit hole.

So, about that "how much money you keep" thing

I have spent 20 years in the arena with massive corporate marketing teams. At some point, their game sank in for me, and the impact was profound.

Here's their playbook, in a nutshell:

• Get all the middle-class people to aspire to looking wealthy by convincing them that status purchases gain them actual status

• Dump all your efforts into marketing to them

• Partner with big banks to subsidize the effort via borderline criminal debt mechanisms

• Completely disregard the people who are actually wealthy enough to buy your product outright.

I've met and worked with hundreds of rich people in my career and travels. The truly rich are remarkably similar in their attitude toward money.

One thing is for certain: They didn't get rich by throwing all their money away on depreciating objects.

They remained disciplined and focused, putting all their money back into themselves and into assets that generated more money. After all the hard work behind the scenes and smart financial decisions, they emerge wealthy. Then, and only then, do they go out and purchase nice stuff. They do it in cash, and they do it without any advertiser telling them to.

This may feel foreign to some of you.

The social programming from corporations and government that want you to spend, spend, spend is woven into the fabric of our entire society. It’s much easier to convince people they’ll never be rich like those “lucky” rich people, so you may as well have some nice stuff before you die. Nevermind that only 8.5% of rich people completely inherited their wealth. I know you won’t be fooled.

The formula is clear:

If you want to emerge wealthy and financially free, you must stay disciplined and resist the outside forces who want to keep you down so they can get rich instead. 

With every dollar that flows your way, you now know you have two choices - and you MUST choose one:

1. Buy freedom.

2. Buy crap you don't need.

It's as simple as that. Every dollar you keep is an opportunity to turn it into many more dollars, with minimal or no effort on your part. Every dollar you spend on useless crap chips away at your freedom. I know that the new car is tempting. I know that you want to "look professional." I know that buying nice stuff makes you feel good. But, you have to set your sights on a much larger, and much more important lifestyle. I know you will.

After all, when you decided to commit to being a Solo Entrepreneur, didn't you say something about wanting freedom? 

Take some time to reflect on this choice. This is really the core action-item from this article. Once you learn to obsess more over your freedom than your desire for shiny objects, you're on an unstoppable course to wealth.

I'll cover many more topics in the coming months that can help you figure out just HOW to make more money. In the meantime, build on this foundation. Use it where you can now and begin to practice.

The stakes will only get higher from here.