Mike Michalowicz: Stop Living Paycheck-to-Paycheck and Build Lasting Wealth in 2026 | Finance | E386

Entrepreneurs often believe their financial stress will disappear with the next big contract, launch, or raise. But Mike Michalowicz has seen hundreds of high-earning founders and employees still living paycheck-to-paycheck. The problem isn’t income; it’s behavior. Now on Spotify video! In this episode, Mike returns to break down the core principles behind his latest book, The Money Habit, revealing the psychology behind why we overspend and how small changes can create massive long-term wealth. He also shares his practical personal finance system to increase savings, eliminate debt, and achieve true financial freedom. In this episode, Hala and Mike will discuss: (00:00) Introduction (03:48) Mike’s Latest Book, The Money Habit (11:14) Cash Confidence and Financial Independence (17:14) Saving for Big Life Expenses (21:24) Why Traditional Budgeting Fails (24:10) Behavioral Psychology Behind Money Decisions (30:48) The Paycheck-to-Paycheck Money Cycle (37:36) The 6 Essential Money Account System (45:21) The Four Financial Seasons (54:02) Smart Debt Elimination Strategies (57:42) Money Habit Advice for Entrepreneurs Mike Michalowicz is an entrepreneur, bestselling author, and speaker specializing in small business growth strategies. He has built and sold multiple multi-million dollar companies and is the host of the podcast Becoming Self-Made. His latest book, The Money Habit, translates his business finance principles into a practical personal finance system designed to help individuals build stronger money habits and work toward financial freedom. Sponsored By: Indeed - Get a $75 sponsored job credit to boost your job's visibility at Indeed.com/profiting Shopify - Start your $1/month trial at Shopify.com/profiting Spectrum Business - Keep your business connected seamlessly with fast, reliable Internet, Advanced WiFi, Phone, TV, and Mobile services. Visit https://spectrum.com/Business to learn more. Northwest Registered Agent - Build your brand and get your complete business identity in just 10 clicks and 10 minutes at northwestregisteredagent.com/paidyap Framer - Publish beautiful and production-ready websites. Go to Framer.com/profiting and get 30% off their Framer Pro annual plan Quo - Run your business communications the smart way. Try Quo for free, plus get 20% off your first 6 months when you go to quo.com/profiting Working Genius - Take the assessment and discover your natural gifts and thrive at work. Go to workinggenius.com and get 20% off with code PROFITING Experian - Manage and cancel your unwanted subscriptions and reduce your bills. Get started now with the Experian App and let your Big Financial Friend do the work for you. See experian.com for details Huel -  Get all the daily nutrients you need. Grab Huel today and get 15% OFF with my code PROFITING at huel.com/PROFITING Resources Mentioned: Mike’s Website: mikemotorbike.com Mike’s Book, Profit First: bit.ly/-ProfitF1st Mike’s Book, The Money Habit: bit.ly/MonyHabit Mike’s Podcast, Becoming Self-Made: bit.ly/BSM-apple YAP E219 with Mike Michalowicz: youngandprofiting.co/E219  Hala’s Speech at MIT: bit.ly/HTMITKN Active Deals - youngandprofiting.com/deals Key YAP Links Reviews - ratethispodcast.com/yap YouTube - youtube.com/c/YoungandProfiting Newsletter - youngandprofiting.co/newsletter LinkedIn - linkedin.com/in/htaha/ Instagram - instagram.com/yapwithhala/ Social + Podcast Services: yapmedia.com Transcripts - youngandprofiting.com/episodes-new Entrepreneurship, Entrepreneurship Podcast, Business, Business Podcast, Self Improvement, Self-Improvement, Personal Development, Starting a Business, Strategy, Investing, Sales, Selling, Psychology, Productivity, Entrepreneurs, AI, Artificial Intelligence, Marketing, Negotiation, Money, Finance, Side Hustle, Startup, Career, Leadership, Mindset, Growth Mindset, Wealth, Stock Market, Scalability, Investment, Risk Management, Financial Planning, Business Coaching, Finance Podcast

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Hala Taha?

  Today's episode is sponsored in part by Northwest Registered Agent, Whatnot, Mod, and AG1. Northwest Registered Agent gives you the tools and guidance to build a complete business identity. Start using free resources at northwestregisteredagent.com/ yapfree. Whatnot helps sellers grow through live shopping, community, and real-time connections with buyers. Search Whatnot, W-H-A-T-N-O-T, in the App Store, download, and you can start selling right away. Mod connects qualifying patients with licensed medical providers for modafinil to support sustained energy, focus, and alertness throughout the day. Visit mod.com for a free consultation and get 10% off your first order plus free shipping with promo code PROFITING.

• 0:45Hala Taha?

  See their website for important safety information. AG1 Next Gen supports your nutritional foundation with vitamins, minerals, pre- and probiotics, and superfoods. Go to drinkag1.com/profitting and get a free immune support bundle with your first subscription order. As always, you can find all of our incredible deals in the show notes or at youngandprofiting.com/deals.

• 1:08Speaker 01

  The number one desire people have is if I could just win the lottery, I could just get a big chunk of money. But then people come upon this money and they don't have experience controlling that money, and they blow it.

• 1:19Hala Taha?

  Yap fam, today we're welcoming back Mike Michalowicz. He teaches everyday people how to finally stop worrying about money and build a system around their natural behaviors so they can break the paycheck-to-paycheck cycle and build "real cash confidence," as he calls it.

• 1:33Speaker 01

  I did research around lotteries and the average payout is $2 million. Do you know if you make an average salary of $50,000 a year for 40 years, that's exactly $2 million? And the average worker, at least in today's society, works about 40 years. Everyone is already a millionaire. Like, you've already won the lottery.

• 1:48Hala Taha?

  Debt is a big problem for people. How to pay down your debt, what not to do, what to do? What's your thoughts about that?

• 1:55Speaker 01

  If you have a lot of debt, sort your debt out by the amounts due. And if you can wipe out some early debts, that's a beautiful thing because you'll believe, truly, that you can wipe out debt. But if you continue that pattern...

• 2:07Speaker 01

  When we have a certain life standard, it is very hard to reverse that. And so we will go to extreme measures to keep it, and sometimes illogical. The better move is not to gain the things you can't really afford yet. It's to slowly build toward it. The most predictable expense for everyone is an unpredictable event. We all need an emergency account because I can guarantee something unexpected is going to happen.

• 2:29Hala Taha?

  What's the number one thing that people can do in the new year to optimize their money habits?

• 2:34Speaker 01

  I think the first thing is to realize that.

• 2:38Hala Taha?

  Yap fam, today we're welcoming back somebody who needs no introduction, Mike Michalowicz. You know him from Profit First, Clockwork, and all the frameworks that have truly transformed how entrepreneurs run their businesses. And if you want Mike's full origin story, the rise, the fall, the rebuilding, and everything you need to know about the Profit First framework for businesses, which we follow here at Yap Media, we're replaying his very first Yap interview this Friday. And by the way, guys, that conversation changed my life and the way that I run my business. So I highly recommend it. If you don't know about the Profit First framework, it will change your business. But today is all about his newest book, The Money Habit, which is about personal finances. And it might be his most important book yet because he teaches everyday people how to

• 3:19Hala Taha?

  finally stop worrying about money and build a system around their natural behaviors so they can break the paycheck to paycheck cycle and build real cash confidence, as he calls it. So let's jump right into this conversation. Mike, welcome to Young and Profiting Podcast.

• 3:34Speaker 01

  It is awesome to be here with you. Do you know the last time I saw you was in Massachusetts at Gathering of Titans?

• 3:41Hala Taha?

  Oh, my God, I can't believe that. I forgot that we met in person over there. I totally forgot that. I just felt like I was so familiar with you because of all the times I've interviewed you, but I totally forgot that we met in person.

• 3:54Speaker 01

  You rock the show. So that group, just to give you a little bit of sense, that is an entrepreneurial group that I joined in 2000, 2001. And the idea was it was 80 entrepreneurs came together to learn from each other, but to really be the next level entrepreneurs. And out of that group came, 1-800-GOT-JUNK was there, that's Brian Scudamore, the co-founder of Burt's Bees, all these massive companies. And we bring in expert speakers to share on topics. And there we are. And I'm like, here she comes. Halasaha, and you freaking rocked it.

• 4:24Hala Taha?

  Oh, my God, I can't believe you reminded me of that. That was such a big event for me at the time. It was at MIT and it was like such a big deal.

• 4:31Speaker 01

  Yeah.

• 4:32Hala Taha?

  We'll replay that on the podcast just because you mentioned that. I'm going to replay my speech.

• 4:36Speaker 01

  Yeah.

• 4:37Hala Taha?

  And we're also going to replay my first interview with you because I first interviewed you like.

• 4:41Speaker 01

  Pre Beard, I think.

• 4:42Hala Taha?

  I think so. It was like three, four years ago.

• 4:45Speaker 01

  Yeah, maybe.

• 4:45Hala Taha?

  And we talked all about your come up story. We talked about Profit First, which is a classic. So we're going to replay that on the podcast this Friday.

• 4:52Speaker 01

  Wow.

• 4:52Hala Taha?

  After this gets released, so everybody can get your background.

• 4:55Speaker 01

  Thank you, Hal.

• 4:56Hala Taha?

  But you're back with another book called The Money Habit.

• 4:59Speaker 01

  Yeah.

• 5:00Hala Taha?

  So curious to understand what was the genesis of this book? You've written several finance books. What's different about this one and why'd you decide to write it?

• 5:07Speaker 01

  So I got this call from this guy, Tommy Mello, and he owns a garage door repair service.

• 5:12Hala Taha?

  Mm hmm.

• 5:13Speaker 01

  He used Profit First, made his business permanently profitable. And he calls and says, I have another problem that presented itself. He goes, my book is very profitable, but he goes, my employees are struggling financially. And so what they do is they, they say, hey, can I borrow some money? Or can I get a raise when it's a little bit early to get a raise yet again?

• 5:31Hala Taha?

  Mm hmm.

• 5:31Speaker 01

  He goes, I want to accommodate them. They're great workers because I can't afford to do this. My business will go under. He's like, I need to teach them Profit First for their personal finances. I'm like, oh, okay. I said, how many employees do you have? Like, you know, five or six? He goes, no, no, I have nine hundred.

• 5:46Hala Taha?

  And I go, pardon me, what?

• 5:48Speaker 01

  He goes, nine hundred. So it's a national brand and this is a systemic problem. There, I think it's Henry David Thoreau, who said, the mass of humanity lives their lives in quiet desperation. Now, that's not the exact phrase, but that's basically it. Well, the quiet desperation is most people are not making enough money or don't have enough control of their money to feel comfortable. And so there's constant ringing in the back of our heads worrying about money. And that's what Tommy was sharing with me and I've lived through it myself. So I said, this is the time I finally write this book. And so that was about three, maybe four years ago. Started doing my analysis and research, deployed it for his company and others and said, my gosh, we have it. So it's basically, it's Profit First, but. Just translated personal finance.

• 6:31Hala Taha?

  Yeah, and Profit First is amazing. I mean, we use that strategy at my company, Yep Media. We do. Yeah, I can't wait to kind of, you know, unpack all of this and see how I can use it for myself. Because Profit First really is like a business focused framework, and this is more for personal. So talk to us about this company with 900 employees. You saw a couple of patterns coming out of this company, like even when they got more money, they still didn't feel like they were, like their lifestyle basically just caught up with them. Talk to us about that.

• 7:01Speaker 01

  Yeah, so I interviewed people who were making very modest salaries to people who grow these organizations, and were making what most people consider a significant salary. So to give context, the average American worker makes $50,000 a year. That's the average income for the entirety of the United States. So if anyone listening right now makes more than $50,000, you are greater than average. That's the middle point. And there's employees that were making well more than that. And they were struggling just as deeply as people that were at perhaps just a starting salary. And so how can this be? Because the number one desire people have is if I could just win the lottery, you know, if I could just get a big chunk of money, or we observe someone else. You're like, oh, she's got a nice car and she has all those successful things.

• 7:45Speaker 01

  If I had that money, I would have the life that I've always dreamed of. But then people come upon this money and they don't have experience controlling that money and they blow it. So there's this belief that if I just get more, I will finally arrive. But you don't have the context of managing that money, and so it just collapses. There's a behavioral theory called Parkinson's Law. It basically states as a resource expands its availability, we consume more. The more time we're given to do something, the longer it takes. The bigger the closet in our home, the more stuff we have that fills up the closet. And the more money we have, the more we spend. So what the understanding I came across was I need to give people control and authority over the money they have, regardless of how much it is.

• 8:27Speaker 01

  And once you have control and understanding of it, then you can direct it to what you want. Then adding more money helps. But if you try to make more before you can control more, you're in trouble.

• 8:37Hala Taha?

  Yeah, I learned that collectively out of these 900 employees, they saved like $280,000.

• 8:45Speaker 01

  Yeah, it wasn't of 900, that was of 25 people.

• 8:48Hala Taha?

  Oh, okay.

• 8:49Speaker 01

  So we started with a batch group. So there was 900 that we served, but they said, let's just try this out. So we had 25 employees go over this process for six months and collectively they saved a quarter million dollars. Now, these were people, so you think about that, that's $10,000 per person in additional savings. These were people that were living check by check by check. And so, and they didn't get a single dime in an increase in salary to do this. They simply asserted control over it. The interesting thing is Parkinson's Law, as I shared, teaches us that the more money we have, the more we spend. The reason we spend more is most people have a primary checking account. So for me personally, in the past, my money would come into one account, all my money. And then I'd say, oh, I need to spend it on the next thing.

• 9:34Speaker 01

  I need to buy a piece of furniture for the home or something like that. But I was falling victim to this thing called the primacy effect. And the primacy effect is whatever is our immediate need is our primary need and we disregard the future. So I have a mortgage payment coming up or rent, or I said, buy groceries, but I don't think about that when I need a new piece of furniture because that furniture cracked or broke. And I look at my account, I say, I have enough money to buy the furniture, but there wouldn't be enough to then pay the rent.

• 10:00Hala Taha?

  Yeah.

• 10:00Speaker 01

  And then panic ensues. So what we did is we put people's money into buckets. And we also did it at their bank. This is the other little trick. It's called behavioral intercept. And when you want to do something with consistency, don't try to change who you are using willpower. Instead, look what you're already doing and set the system where you already go. Most people log into their bank account, see how much money they have. And if they see they have enough money to cover that furniture, they buy it. So we said, keep going to your bank account, but we're going to set up an account that says furniture. We're going to set up an account that says groceries and we're going to carve out that money when it comes in to each account accordingly. And now when I'm looking to buy furniture, I look at the furniture account and if there's not enough money there, can't spend it.

• 10:39Hala Taha?

  Yeah, so that's the concept of channeling your habits instead of changing them, right?

• 10:44Speaker 01

  Exactly. So most of us are told to try to change who we are. So traditional personal finance is one of two methods. Deprive yourself of a lifestyle of comfort today so you can live one tomorrow. So live in deprivation. Humans can't do that for a sustained period. Uh, we become resentful. Like if you love, I love chocolate chip cookies. If I don't eat chocolate chip cookies and I see one laying out, I will try to use willpower, but there'll be a moment I fatigue. And the longer I go without a chocolate chip cookie, the more I'll desire it. So the longer it sits there, the more I'll desire. And tests prove this out. They did a test with children where they said, uh, they put a little treat down and said, if you don't eat this, um, you'll get two of these treats. When I come back, the researcher said that and left the room.

• 11:29Speaker 01

  And you watch these children like shaking and sitting on their hands and doing all these things not to do it. And they couldn't stop and they ate the treat, even though a bigger treat was coming, they simply resisted. That's true, not just for children, it's true for adults. Yet most personal finance principles tell us deprive yourself. So that works for very few people. The other one is to use budgeting systems or technology or something that is outside your normal pathway. So don't look at your bank account, instead set this other system to do things. And those can work, but it requires you to change your habits. It's very difficult for humans to change. So what I argue is don't change who you are, channel who you are. If you log into your bank account, the budget needs to be at the bank level and we need to set these accounts there because now you don't have to change a thing about yourself.

• 12:12Speaker 01

  You continue your behavior, but the system is showing you what's available for what purpose.

• 12:17Hala Taha?

  And I feel like the dream outcome of all this is to have something you call cash confidence. What is cash confidence to you?

• 12:24Speaker 01

  Yeah, so I think most people are pursuing financial freedom and I think that's a great aspiration, but I think there's a step before it. So financial freedom is where I don't worry about money. I, I decide, you know, I want to go to Caribbean, it's getting a little cold here in the winter. Let me hop on a jet, uh, maybe my own jet and go to the Caribbean and not have to worry about a single dime. That's what financial freedom is. I can do what I want at the whim of a thought and I don't have to worry about the cost. That's a great aspiration. I think there's a step before that. I call it financial independence. Financial independence is where I'm not beholden to my money, that I have control over it. It doesn't have control over me and I know we can achieve financial independence at any level of income. What you need to do is have cash control. What cash control is, is an awareness of what money's available for what purpose.

• 13:10Speaker 01

  I believe even at $50,000 a year, you can go to the Caribbean on a private jet if you're willing to wait about 200,000 years. But we can start allocating a dollar a week or whatever it is to ultimately get there. And at least you'll have an understanding that you can't do it now. But if you keep saving, keep saving, maybe you can do it in a long period of time. And maybe you say, that's such a long wait, 200,000 years, it's not worth it. But that is cash control because now you see what money is available for what purpose? And you can make controlling decisions around that. So you may not be able to live financial freedom yet, but you start with cash control. Once you've cash control, you have the ability to decide, you know what? I'm going to live a little more, I'm going to go out to dinner less, for example. And that $100 I'm spending going out to dinner every week?

• 13:54Speaker 01

  I'm going to allocate that toward these trips I want to go on or whatever. That's cash control.

• 14:02Hala Taha?

  What's up, Yap gang? I recently had Gary Vee on the podcast and he told me something that really stuck with me. If you've got sales DNA, you've got to be paying attention to live selling because it's one of the biggest opportunities right now online. And that really got me curious. So I checked out an app that he told me about called Whatnot. I jumped into a live show and I instantly got it. The seller was showing products in real time, answering questions in the chat and building a real relationship with the buyers. It didn't feel like boring shopping. It felt like a community. Whatnot is the largest live shopping marketplace in the country. And for entrepreneurs, the results are really hard to ignore. Sellers on Whatnot can sell up to 10 times more than traditional marketplaces. And the number of sellers making over a million dollars a year on the platform has doubled.

• 14:46Hala Taha?

  So if you've got products to sell and you're looking for a new way to reach customers, search Whatnot, W-H-A-T-N-O-T in the App Store. Download it and you can start selling right away. That's Whatnot in the App Store.

• 15:00Hala Taha?

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• 15:44Hala Taha?

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• 16:09Hala Taha?

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• 16:53Hala Taha?

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• 17:15Speaker 01

  Old, and coincidentally, my son, my oldest son who got married, got married at 29, so it was pretty close. And we started saving. And we didn't save at the same rate. It wasn't like... We're gonna save, you know, a thousand dollars a month, every month. We started saving this ten bucks. What's called, it's called behavioral momentum. Once you start doing something, even in small pieces, you start becoming wired to repeat that. That's how our brain works. Kind of like exercise. I think the biggest, excuse me, the biggest mistake that people make with exercise is saying, I gotta start working out. I'm gonna work out an hour at the gym every day. I'm gonna go for a run. No, just day one, buy a set of sneakers or something and put them on. Day two, put on your gym clothes and walk down the gym and walk back. Like start off very small and then day three is go for a little walk and stretch.

• 17:58Speaker 01

  And you slowly build your way up and you start wiring, this is who I am. So the first thing is an identity shift, then a behavioral shift. So we just wanted to have an identity shift for ourselves that we're gonna save for our children's weddings. As our income increased, because we do this on a percentage basis, automatically the percentage stayed the same, but the dollar amount increased because it was a same piece of a bigger pie. By the time my son was 25, we had $50,000 saved up. And we said, okay, that's the number. And for every one of our kids, we have $50,000. And if one of my kids is watching right now that's not married, I'm not, this is supposed to be a secret. So it's no longer a secret.

• 18:35Speaker 01

  When my son got married, we told him, well, when he was about to get married, we said, we have a check for $50,000. We'd like to give to you. Now, here's what it is. It's for your wedding, or if you decide to have a lower budget wedding, the remaining check is for you. They found a way to have a wedding for a hundred people for $14,000. They rented a whole restaurant. It was on a lakefront. It was amazing, but they were searching and navigating a deal. At the end of the wedding, my wife went up, my wife and I went up to our son Tyler and said, here's a check for 36,000, the difference. And he was sitting there, he's hand shaking. He's like, I've never had this much money in my life. So much so that his wife, Cora, they didn't deposit. Like, like a month later, I'm like, this check hasn't cleared. What happened? Like, we don't think we can deposit a check this big.

• 19:17Speaker 01

  Trust me, you can, you can. And they finally did.

• 19:19Hala Taha?

  Aww.

• 19:20Speaker 01

  It was. It was such a great gift of ours, but there was also no cost to me, my wife. The money's already been allocated. So my wife and I are still living our life standard. We're still living the way we want to live. It didn't feel like we had to take a chunk out of our life to give to them. It was something we had built for.

• 19:36Hala Taha?

  Yeah, that's so beautiful and so smart. And I'm sure, you know, putting aside 10 bucks a month, a hundred bucks a month. It probably didn't feel like anything and you would have just wasted that on some other junk. You know, so it's good to just kind of put it aside and maybe even pretend like it's not even there.

• 19:52Speaker 01

  I remember looking, this is back 20 years ago. So this is like around 2000. I said, what's the average cost per plate for a wedding? I remember it was $70 at the time, a standard wedding. Every guest you had to pay $70 to feed them, plus additional costs. Every time I start putting $70 away and it was $70 a week. I'm like, one more guest at the table, one more guest at the table. Yeah, it felt so good.

• 20:15Hala Taha?

  Yeah.

• 20:15Speaker 01

  And then I asked myself, once we had 200 guests covered, that was 14,000. I then said, okay, what's a band cost? And a band would cost $10,000 or whatever it was. I said, okay, we got the drummer. Once I hit $2,000, we got the drummer. Now we got the bassist. Now we got the lead singer, you know? And so it's important to put these little milestones. So we feel that we, so we experience the progress.

• 20:35Hala Taha?

  Yeah, yeah. That's a really beautiful story and like awesome that you did that for your kids. Okay, so let's talk about why traditional budgeting doesn't fail. So like you budgeted for this wedding and you set it aside. What was different about what you did there versus traditional budgets?

• 20:53Speaker 01

  Right, traditional budgets usually have a common pot at the bank. So it's a separate documentation, usually a spreadsheet that says, I'm going to save X number of dollars for this wedding, say $50,000 and so forth. And then we have a singular pot where the money's stored. Maybe it's in a money market or some form of investment, which is fantastic. Here's the problem. We have to enforce willpower not to take from it. And we will justify taking from it. Will resolve, I should say, the cognitive dissidence that we have when we take the money by giving some form of justification. So let's say in my pot, I have $200,000, $50,000 for one kid's wedding, $10,000 for auto repairs and home maintenance, different things.

• 21:36Speaker 01

  And now something comes up and my roof is leaking. And so I gotta replace the roof. And I'm like, well, I got a pot here of $200,000. Yeah, it's for the wedding, but the wedding's like, you're not gonna happen. And I'll start justifying it and I'll replace that roof. And now I'm back to square one. Conversely, and we actually have an account called the roof, because roofs need to be repaired or replaced in its entirety, usually every 25 years. So we have a 25 year vision for it. And to replace our roof, we're thinking it's gonna be a big budget. So we have that dollar amount set aside. If I, my roof is leaking and I want to replace it and there's not enough money in the roof account, I can still take it from my son's wedding account, but I can no longer

• 22:20Speaker 01

  subconsciously ignore that. I have to say to myself, I just stole from my son's wedding. So now a subconscious behavior becomes a conscious awareness. It's a much more disciplined, when I'm consciously aware that I'm stealing for something as opposed to a common pot.

• 22:32Hala Taha?

  Yeah, you realize that like some other goal is not happening.

• 22:35Speaker 01

  Yeah, you can't deny it anymore.

• 22:36Hala Taha?

  Yeah.

• 22:36Speaker 01

  Yeah. And it's okay. Sometimes you may choose to do that, but I can no longer deny it.

• 22:41Hala Taha?

  Yeah.

• 22:41Speaker 01

  There's another thing is if you have multiple people involved in the finances. So we have, my wife and I both manage our finances. It used to be I was the primary lead and my wife was secondary. So she would ask, almost like permission, saying, hey, I'm thinking about going out with friends. Do you mind if I go out? Do we have enough money? With the accounts divided up as we have them, she's lying in the bank and says, yeah, there's enough money. We have a, her name's Krista, the Krista Fund account, I have a Mike Fund account. She doesn't have to ask me. So there used to be like this weird parent-child relationship. I'd say, no, you can't go out. Or here's your lollipop, you can go out. It's like bizarre. It's kind of creepy. And now we're a team looking at the account. And there's not enough money in the account. There's a conversation about it.

• 23:22Speaker 01

  We, we, we see we can't do this now. Do we decide to override the system or not? That's how it works.

• 23:28Hala Taha?

  Yeah. I know that you mentioned there's a bunch of behavioral things that, that humans just are, you know, likely to do if you have one big. Bucket of money and you don't split it out.

• 23:40Speaker 01

  Yeah.

• 23:41Hala Taha?

  So let's talk about those. You've got, uh, one of them you mentioned, but I'd love for you to go deeper on it. You call it Parkinson's Law.

• 23:46Speaker 01

  Yeah. So Parkinson's Law, uh, is based upon a theory by this guy, North Cop Parkinson from the 1950s. And he observed something really interesting, uh, and we already alluded to it, is that when a resource expands availability, we consume more. The classic economics curve says that demand dictates supply. So the more people want your podcast, the more you're going to produce podcasts. The more people want to sponsor your show, the more, more you're going to charge for it. And he argued that is true in a certain number of economic cases financially, but in most cases, humans behave in the reverse. It's not demand dictating supply, it's supply dictating demand. And the classic example is with, well, you can do with soda cans. Uh, a hundred years ago or 200 years ago, when soda came out, soda cans were what we consider almost a shot glass.

• 24:29Speaker 01

  Like it was a small little can. Um, then they got to these, I think they're 16 ounces or something. But I don't know if you've seen cans recently. It's like a

• 24:35Hala Taha?

  They're huge.

• 24:36Speaker 01

  It's a freaking bazooka. You could, you could kill someone with this thing. It's crazy. And the thing is, human behavior hasn't changed. The container dictates consumption. We used to drink that small shot. We used to drink a full can. We are now drinking this full container and societally, the, the caloric intake is massive and our waistlines are expanding massively as a society. The interesting thing about Parkinson's, he said, if we simply went back to the shot glasses, you won't drink the whole can. You won't get multiple shot glasses. You'll finish off the shot glass and you're done. So the container dictates the supply. When it comes to our finances, if you have one bank account, that is your shotgun bazooka of a container. We need multiple small shot glasses and you'll just take that little shot. That's what Parkinson teaches us.

• 25:16Hala Taha?

  That makes sense. And then there's loss aversion.

• 25:19Speaker 01

  Yeah. Loss aversion is so interesting. Um, loss aversion is once we possess something, we'll go to extremes to retain it, even though it's illogical. But we won't go to the same extremes to gain it. So we'll do more to retain than we will to gain. Classic example, you drove up in a nice car. I was admiring your car.

• 25:36Hala Taha?

  Well, thank you.

• 25:36Speaker 01

  Yeah, I love it.

• 25:37Hala Taha?

  Hot pink Porsche or purply pink.

• 25:39Speaker 01

  Purply pink Porsche. It's gorgeous. And so this Porsche pulls up, um, and a Porsche will be a dream car for me. Um, I do have another dream car I love, but, um, if I bought that Porsche. Uh, I would put it into my garage and save it, but say I, uh, and, and drive around and show it off and polish it. If I didn't have enough money saved and couldn't pay for it, and the dealer calls me and says, we're gonna call the, claim the car back and take the slips back. I will maybe take a second job. Uh, maybe I'll drop insurance. Maybe I'll stop driving. I'll just keep it in my garage because it's my baby now. But here's the thing, I'll do extraordinary things to retain it. Second job, drop insurance, but I won't do those things to get it in the first place. That's loss aversion. When we have a certain life standard, it is very hard to reverse that. So now I live in my new beautiful home, I'm

• 26:24Speaker 01

  not gonna lose that. And so, we will go to extreme measures to keep it, and sometimes illogical. I'll take on debt. I'll borrow money. I'll ask my parents if they're gonna just lend me a little bit of cash. I'll ring up the credit card, and it will crush us. But we wouldn't do those things to gain it in the first place. We have to realize, this is wired into us. And with an awareness, you have some control and authority over it. The better move is not to gain the things you can't really afford yet, it's to slowly build toward it, and have a cushion that when perhaps your income drops, that you can sustain because you have some kind of savings. Because you will logically try to retain something you have that you can't afford. So, so don't try to grow your lifestyle very quickly, which most people try to do, to pace their income. As your income increases, build a cushion for yourself as you're moving along. Let your life increase. That's our

• 27:09Speaker 01

  natural tendency. We want better and better. But save a cushion, so that if you ever have a dip, you can sustain that for an extended period.

• 27:15Hala Taha?

  Is there some sort of rule, like, I should be able to pay for this 10 times? Or like, is there some rule that we could follow?

• 27:22Speaker 01

  Generally, the optimal rule is minimally three months of, of full life expenses covered. So whatever your life expenses are, that you have is sitting in savings, ready to spend, minimally. Six months is ideal. Here's what the research indicates. If I save for three months, I'll live in the loss aversion state usually for about one to one and a half months, about half that time span, and start saying, oh my gosh, I'm eating into savings. Then we'll start adjusting our lifestyle. So that remaining one and a half months of cash I have, will stretch for another three or four months. So, three months of savings can usually last six months. Six months of savings can usually last a year to year and a half. Today's a much more volatile economy. I'm encouraging people to have six months of full expense savings, minimally, so that you can sustain if you go into a dip.

• 28:06Hala Taha?

  That's good advice. Okay, the transgressive motive, what is that about?

• 28:12Speaker 01

  Yeah, so we have a natural tendency to rebel. So if, if, listen, if you came in here and tell me, this is how absurd this would be.

• 28:20Hala Taha?

  Yeah.

• 28:20Speaker 01

  I'm like, oh, huh, it's so good to see you. By the way, the way you dress, you could be a little more professional wearing a suit. In your mind, you'd be like, who the F are you? Now, you will say to my head, oh, thanks for the advice, that was very kind of you. But inside, we rebel. If you said to me like, Mike, what are you doing? Like, this is the worst outfit ever, like, Mr. Paley White is wearing this? Like, you're reflecting, why don't you wear a better color for yourself? I was like, oh, that's so great. In my head, I'm like, what a total pain in the butt you are.

• 28:46Hala Taha?

  Mm-hmm.

• 28:46Speaker 01

  We rebel against advice and we rebel against any authority asserted to us. I have a saying with businesses, if you, as an owner, tell your business employees to comply, they will seek to defy. So when we're given instructions, we resist. So when we are put in constraints and budgets do this inherently, we often resist.

• 29:07Hala Taha?

  Hmm.

• 29:07Speaker 01

  Many budgets I've seen, systems will have categories like, things like maybe tithing are in there. So basically, what those budgets are saying is, we don't know if you tithe, but that's a common thing to do, you should be tithing. Well, actually, I don't tithe. And I see that and I'm like, what are you doing telling me to tithe? And a subconscious rebellion kicks in saying, I don't know if the system's for me. Or I start to push it away.

• 29:28Hala Taha?

  Hmm.

• 29:28Speaker 01

  So budgets have implicit, or non-implicit, but suggested, um, compliance. And then therefore I'll defy. So just be aware of that rebellion that's inside. The best system to build is a system that you create for yourself. So if I tell myself, you know, I shouldn't dress like this, I should have colors a little more complimentary and make me a little less pale. If I said to myself, I'm like, that's a good idea, because I said it myself. So build a system around your own desires and interests. So when I made the money habit, I don't have any suggested accounts. I have ways to observe your own behavior so you can create your own accounts and your own budget effectively.

• 30:04Hala Taha?

  Hmm, that makes sense. So I know, uh, one of the things that happens, especially for people who are living paycheck to paycheck, is this panic at the end of the month. Like, you get your paycheck and it's a high. And then 10 days before the month ends, you're in a panic because you can't afford all your things. What is happening in that payday high to panic cycle?

• 30:24Speaker 01

  Totally. This is rooted on, I think, the most important principle that the entire book's based on. By the way, in the book, I don't talk about the behavioral principles. Like, that's not important. I just talk about the applications. I touched on it a little bit, but this is based upon what's called optimal foraging theory. So before humankind was the Neander- the modern humankind was the Neanderthal. And we were hunters and gatherers. Now, here's what the Neanderthals didn't do. I wouldn't say, hey, I'm hungry. Let's go get steak. Ugh. No, I'd say, we hungry, we go hunt woolly mammoth and you and I are out there. Or, you know, we hungry, let's go gather berries and stuff. You didn't go for a small portion just to satiate. You went for the big hunt. And the reason we went for the big hunt is there's a massive caloric burn.

• 31:07Speaker 01

  If we're out gathering, we're putting ourselves at risk. There could be saber-toothed tigers or whatever is out there coming after us. So we have to protect, gather. We're putting the rest of the community at risk. We have to come back. If we're going out for the hunt, we're racing and chasing, a big caloric burn. So you go on a massive hunt. When you capture the food, say we go for a woolly mammoth and we capture this beast and kill it. Now we're at risk because the food will perish. We have this massive beast. But we know if we don't eat it now, it's going to rot away. So what you do is you start burying some of the food, you smoke the food. But we also know there's a very short period before it rots. So you go into a gluttonous state. You start consuming an over-caloric intake. Eat, eat, eat.

• 31:48Speaker 01

  Then the very last phase was now there's no food left. You start eating what's been stored. And when that's gone, we better go and hunt again sooner. We're going to starve to death. That's called optimal foraging theory. Capture en masse, preserve what you can. And if you can't preserve it, consume it fast because you need those calories. And when the food's gone, go to hunt again. Fast forward to modern humankind. We still live by that law exactly. Now, the massive hunt is a paycheck. The paycheck comes in once every two weeks. For some people, weekly. Some people even once a month, but once every two weeks is the most frequent. Do you know the optimal payroll that people should receive is three times a day? If I paid you in the morning, again in the afternoon, and one more time in the evening, you would actually manage your money better. But that's absurd and no employer can afford to do that because there's costs associated with that.

• 32:32Speaker 01

  So you get it once every two weeks. We just captured the woolly mammoth. Our wiring is now, there's two things you can do. Preserve it, but- There's not many ways to preserve it. You can put it in a bank account, but it's rotting away. It's sitting there or consume it. And since the money is just sitting there, the essence, the, the feeling is consume, consume, consume. This is rotting away. Uh, some people preserve it by putting it in a 401k. When something's inaccessible, then we actually don't worry about it.

• 32:58Hala Taha?

  Yeah.

• 32:59Speaker 01

  The money goes in 401k, it's preserved. So our mind is wired. Once it's smoked or buried, it's okay. But when the money's sitting in the checking account, it's like, this is going to go away. I better consume it while I have it because it's gone.

• 33:09Hala Taha?

  Mm hmm.

• 33:09Speaker 01

  We proved that to be true because by a week or two, it is gone and we're proved it's rotting away. So then we go into, oh my gosh, I don't have enough calories. I need to go on a hunt again. And we go into this panic state toward the very end and we go on the hunt again. So what do we do? We have to improve the preservation mechanisms. We need little 401ks. What happens is when we get the hunt, the kill, paycheck comes in, we carve it up very quickly into different accounts. Those accounts are effectively smoking or burying that woolly mammoth.

• 33:38Hala Taha?

  Hmm.

• 33:39Speaker 01

  Pieces of it and we put into different accounts. It actually satiates us and gives us comfort. We say, oh, okay. I put some money in the mortgage. The mortgage is covered. I don't have to worry about that. And it actually takes away that stress of I need to consume it now or it's going to go away.

• 33:51Hala Taha?

  Mm hmm.

• 33:52Speaker 01

  Then you start consuming in a more optimal way because the money starts dripping to you from these different accounts. You use it more prudently and we repeat this process over and over.

• 34:00Hala Taha?

  Yeah, that's, that's really interesting. Um, as you were talking, one of the things that I think about for myself as I've become more successful and make more money, I'm an entrepreneur, a lot of entrepreneurs are tuning in. When I get a lot of money, the first thing I think about is I gotta spend this or else they're going to tax me on it.

• 34:16Speaker 01

  Totally. That's part of, that's part of optimal forging theory.

• 34:19Hala Taha?

  Yeah.

• 34:19Speaker 01

  Yeah, I'm afraid like, and so by the way, taxes will come. We're told in our business, if you spend the money on different expenses, you can reduce your taxes.

• 34:27Hala Taha?

  Yeah.

• 34:27Speaker 01

  Some of that's prudent for sure. Like, I hope your vehicle or some of your vehicles are actually going through the business to reduce your tax consequence. Some of it just can't legally be done. And yet entrepreneurs still say, if I just simply spend or find a way to spend, and it actually compromises other elements of our life.

• 34:43Hala Taha?

  Yeah.

• 34:43Speaker 01

  Here's the most crazy thing, and this isn't a profit first. We encourage people to set up a tax account. So money comes in and money goes into this tax account. And then when tax time comes, we pay from that account. What's so interesting is it reduces that sense of loss aversion because the money's already been allocated to it.

• 35:01Hala Taha?

  Mm hmm.

• 35:01Speaker 01

  One of the most crazy things, Hala, is every quarter, when I wrote Profit First, I was expecting people to say, hey, I have more profit than ever before. Thanks for writing this book.

• 35:08Hala Taha?

  Mm hmm.

• 35:09Speaker 01

  I actually get people writing, calling me, and sometimes showing me my office, which don't need to do that. But some people don't, uh, saying, I just paid my taxes, the company paid it, I feel so good. I was like, why is this? I'm like, oh, because of loss aversion. So that car that's in the garage we're talking about, that if I can't pay it, uh, I will drop the insurance or can't afford it. I'll, I'll take a second job. When it comes to taxes, if I put taxes in a tax account and never came into my own pocket, I don't feel like it's being taken from me. A quick analogy is if, if I sit here and I said, hey, Hala, this was awesome. Here's a hundred dollars, just thanks for doing this. It may feel awkward to give you a hundred bucks, but you're like, oh, well, a hundred bucks, thanks, Mike. If I gave you $200 and say, hey, thanks for this, but oh, oh, by the way, I need a hundred back. You'd be like, hold on, you just gave me a hundred and you're taking some back? Like now it's like super weird.

• 35:53Hala Taha?

  Yeah.

• 35:53Speaker 01

  And that's what taxes feel like. I just earned money and the government takes it back from me.

• 35:56Hala Taha?

  Yeah.

• 35:57Speaker 01

  But if I never give you that second hundred in the first place and just give it to the government, it doesn't feel as painful.

• 36:01Hala Taha?

  Yeah, and that's exactly what we did. I remember when we implemented Profit First, one of the things that we changed is whenever I get my sponsorship money.

• 36:08Speaker 01

  Yeah.

• 36:08Hala Taha?

  Now it gets sent in like two buckets. One is like my money and one is tax. And then we just split it 50 50. And, you know, if there's stuff I don't owe, it's just like, kind of like a bonus at the end of the year.

• 36:19Speaker 01

  And I, I suspect it reduces the pain.

• 36:21Hala Taha?

  It does, it does.

• 36:22Speaker 01

  Yeah.

• 36:23Hala Taha?

  It does to a degree. I know it's there though, you know?

• 36:25Speaker 01

  I've had people, yeah, you know, it's there, but it does reduce some of the pain. And I've noticed some people, like say their tax bill is $100,000 and they saved 110,000. There's 10,000 extra, they feel like they're getting a bonus.

• 36:35Hala Taha?

  Exactly, it feels like a bonus.

• 36:36Speaker 01

  So obviously, this sounds like it's a shell game and logically, it's a shell game. But it's actually a behavioral management system.

• 36:43Hala Taha?

  Mm hmm.

• 36:43Speaker 01

  And that's what people don't understand.

• 36:44Hala Taha?

  Yeah, and it prevents you from like realizing like at some point, oh my God, I didn't save money or I didn't put money aside or spending what you actually don't have. Cause that money eventually won't be yours, right? So you break down six accounts. Income, needs, wants, dreams, fix, future, and emergency.

• 37:02Speaker 01

  Yeah.

• 37:02Hala Taha?

  Do you want to explain each one?

• 37:04Speaker 01

  Sure. It's based upon Maslow's hierarchy of needs. So Maslow identified that you and I have basic physiological needs to survive. We need to be breathing air right now, drinking water, eating food. So like if someone came running in and threw a bag over my head, it's plastic and starts choking me out. Interview's over. I'm struggling to get out of this thing because my life's in jeopardy. And what Maslow appointed is no matter what state we're in, if the foundational needs aren't being met, we have to revert to it. But once they're adequately met, we move to the next level, which is safety needs, shelter and so forth, and then belonging to be part of a community, just like you have here, and then ultimately self-esteem or self-actualization, I should say, is the highest. Well, when it comes to survivability, we need those physiological needs. We need to eat, we need food, we need water, we need shelter.

• 37:49Speaker 01

  So that's what the needs account is. The income account, which is the first account, is simply a depository account. Money flows in there. It's deposits of your household income. If you're the sole breadwinner, it's the money you're earning. If you have collective earners, it's the collective money that's contributing to the household. That's our starting pot. But historically, that's just the one big pot and we know the danger of that. That's a woolly mammoth and it's rotting away. So we need to carve it up. The first account we carve to support our basic needs. And in my book, I identify based upon your income level. If you're a young but profitable person making a hundred or more thousand dollars a year, the percentage you put toward needs may be less than if you're making fifty thousand dollars a year. If you're making fifty thousand dollars a year, eighty percent of your money may be going to support your core needs to live in the United States.

• 38:34Speaker 01

  But if you're making a hundred thousand dollars a year, maybe it's only sixty percent or fifty percent. Core needs are like groceries, you know, shelter, rent, exactly. Wants is I want to eat out. And some people will conflate the two. They'll say, well, I need to eat out. So yeah, so always, if you don't know which level it's in, it's always the higher level. I know someone that has multiple homes. I say, well, I have these homes, so I have to pay the mortgage. I need a mortgage. I'm like, is a basic level need for all humans to have three homes? And they're like, no. I'm like, okay, that's beyond it. We all need a home of some sort. So you have to differentiate those two. And if you don't know, it's with a higher level. So wants are the mini luxuries. Dreams are the bigger luxuries. So dream may be, you know, I, I need to eat food. I want to eat out.

• 39:19Speaker 01

  I would love, I dream about having a personal chef. Like, that's kind of how you differentiate this stuff. Um, usually dreams are a longer term savings. Wants are usually something you spend on a weekly or monthly basis. And needs are usually more of a daily basis, basically.

• 39:33Hala Taha?

  Yeah.

• 39:34Speaker 01

  Fix or future is this. Most people that start this system and most people in the United States are in debt. So a fixed account is that we're allocating money intentionally to get down unsecured debt. So credit cards, anything that's not asset based. But a, a loan for a house, generally houses, not all, but generally a house will appreciate over time. There's value in that. I believe taking a mortgage or some kind of loan is appropriate for it. Um, when it comes to a car, yes, most cars depreciate, but it sustains its value over a period of time. And we do need that for transportation. I think that's appropriate. Um, but other things like credit card loans and so forth, they're unsecured. We need to get rid of that. It's a big burden and there's no value. You can't say, well, you know, can I sell my credit card debt to someone else? Maybe they'll give me some money for it?

• 40:18Speaker 01

  No, but you can sell your car to someone else or your house. So, well, if you have credit card debt, we're going to have a fixed account to pay for that. Once your unsecured debt is addressed, we're going to move to a future account. This is reserving, not for retirement necessarily, but some future event of significance. Uh, do you have children?

• 40:36Hala Taha?

  Not yet.

• 40:36Speaker 01

  Not yet. Okay. So I got three kids. I remember my wife and I, when they were approaching their 18th birthday, saying, we want to take them to Disney. And we want to go large because it's the last time they're going to be home before they're out of the house. And so we started allocating money for that. That was a future saving. So that's something big for the future event. Some people are saving for some form of retirement, which I'm not a fan necessarily of fully retiring. I don't.

• 40:58Hala Taha?

  Really?

• 40:59Speaker 01

  Yeah. I've been talking to a lot of people that have been there. So I'm in my 50s now, my early 50s. I've been talking to people in their 60s and 70s who've retired and it ain't easy necessarily. And the general feedback is perhaps slow down the pace. But if it's your passion, stick with it to the very end is what I'm hearing. The last account is emergency. The most predictable expense for everyone is an unpredictable event. I can guarantee it's going to happen. A health crisis, an accident.

• 41:28Speaker 01

  The boiler is going to blow in the house, which recently did our house. And so you, we all need an emergency account because I can guarantee something unexpected is going to happen.

• 41:37Hala Taha?

  Yeah. And the emergency account, is that different than the six months of savings?

• 41:45Speaker 01

  Yeah, six months of savings is for an extended period without income. An emergency is where there's a surge demand while you're still earning an income. And I just can't tell what it is. And in the book, based upon your income level, 50,000, 100,000, I have all the way up to millions in earnings, and your season, like some people are recovering from debt. Some people are looking to secure their future more and more. Some people are saying, listen, I want to live large now because of whatever. And I am kind of living in that moment right now. I just want to kind of live big and we're doing it. We're doing some amazing things. You have to identify the season you're in, match it to your income. And there's different percentages I suggest.

• 42:27Hala Taha?

  Yeah, I love this concept of the four financial seasons. So there's recover, fund, activate, balance. Talk to us about each one and how you can tell if you're in each bucket.

• 42:39Speaker 01

  Yeah, and they're rooted in behavioral psychology.

• 42:42Hala Taha?

  Okay.

• 42:42Speaker 01

  So when I was interviewing people for this, I worked with collectively either directly or through group coaching about 1,000 employees of different companies and hundreds and hundreds of entrepreneurs. And I'd ask them about their situation. The majority, I would say it's upwards of 70% have debt of some sort. That's not secured debt, like it's credit cards or whatever, loans from family and friends.

• 43:04Hala Taha?

  Student loan debt is.

• 43:05Speaker 01

  Oh, my gosh.

• 43:06Hala Taha?

  Yeah.

• 43:07Speaker 01

  That was the most common. It's maddening. And they would say, I have debt. There's a behavioral phenomenon that if you say I have something, it's a possessive state. It actually becomes you. So if you say, I have a purple Porsche, it's your possession. It's actually part of your identity. If I say I have debt, that's part of my identity, it's part of who I am. And when it's part of your identity, it becomes a permanence. And that's the dangerous part. So when people say I have debt, that they are also saying I'm always in debt. It's very hard to eradicate. So I said, okay, that's not a good word. We need to put the word recover. So if I'm in a recovery state, that means an active move toward improvement. The other thing is seasons are not permanent. So I said, oh, recovery season is a positive temporal state.

• 43:52Hala Taha?

  That's so smart.

• 43:53Speaker 01

  Yeah. So when I say, oh, you don't have debt, you're in a recovery season. How long is this season going to last? It's like, oh, that's right. There's a timeframe to it. So that's why those terms exist. Seasons are recovery, coming out of debt. The next one is funding. Funding is where we're intentionally saving more than we're spending of our income to prepare for some kind of future experience. Activate is where we're spending more than we're actively earning. So we're actually downing our money savings with intentionality because perhaps we want to live larger in the moment. And I was like, listen, that's appropriate at all stages.

• 44:26Hala Taha?

  Or maybe you're starting a business. Does that count?

• 44:28Speaker 01

  Yeah, that totally counts.

• 44:29Hala Taha?

  Okay.

• 44:29Speaker 01

  Yeah, like, that's a life dream. I want to do this. Or I want to, um, I just want to take a year off and rediscover who I am. Or anything. So that, that's a form of activation. Then the final stage is, or season is balance. Balance is where I'm actively trying to live in the now, but also preparing for some future events. The interesting thing about seasons, though, is you can choose the season you're in and move through them quickly. So in nature, seasons usually are three months, in the Northeast at least. You know, you have winter, spring, summer, fall.

• 45:04Hala Taha?

  What's up, Yap gang? I recently had Gary Vee on the podcast and he told me something that really stuck with me. If you've got sales DNA, you've got to be paying attention to live selling because it's one of the biggest opportunities right now online. And that really got me curious, so I checked out an app that he told me about called Whatnot. I jumped into a live show and I instantly got it. The seller was showing products in real time, answering questions in the chat, and building a real relationship with the buyers. It didn't feel like boring shopping. It felt like a community. Whatnot is the largest live shopping marketplace in the country. And for entrepreneurs, the results are really hard to ignore. Sellers on Whatnot can sell up to 10 times more than traditional marketplaces. And the number of sellers making over a million dollars a year on the platform has doubled.

• 45:48Hala Taha?

  So if you've got products to sell and you're looking for a new way to reach customers, search Whatnot, W-H-A-T-N-O-T, in the App Store. Download it and you can start selling right away. That's Whatnot in the App Store.

• 46:03Hala Taha?

  Hey, young improffters. As an entrepreneur, my days are absolutely jam-packed. And I usually start my day off with a coffee or an energy drink. And then by 3:00 PM, I'm crashing. And that's why I wanted to tell you about MOD. MOD connects qualifying patients with licensed medical providers who could prescribe a once-or-twice-daily modifinol drink designed to help keep you energized, focused, and alert throughout the day. Here's the thing, yap fam. Energy drinks with caffeine temporarily block adenosine, which is a chemical that makes you feel tired. Once the caffeine wears off, it all comes crashing down at you at once. Modifinol works differently. It engages multiple pathways in your brain, and it helps you achieve a steady energy and alertness for 10 to 12 hours. Modifinol was invented in the 1970s

• 46:47Hala Taha?

  and has been used in high-stakes situations where concentration and alertness are critical, including by soldiers, pilots, and astronauts. Visit mod.com, that's M-O-D dot com, for a free consultation and get 10% off your first order plus free shipping with promo code PROFITING. That's promo code PROFITING at mod.com. See their website for important safety information, and we thank MOD for sponsoring the pod. What's up, yap fam? If you're building a personal brand, you already know how hard it is to stay consistent with content when you're also trying to actually run your business. I love creating content, but realistically, I'm not trying to sit in front of the camera every single day. I need time to work on my business. But the problem is, consistency matters. The more people see your face and hear your voice,

• 47:31Hala Taha?

  the more familiar you become. That's why HeyGen has been such a great tool for me. You can record just 15 seconds of footage, create an AI avatar of yourself, and use it to make videos on demand. So instead of constantly filming from scratch, you can create more content, stay visible, and keep showing up without making your entire life be about generating content. And you guys know I'm always looking for tools that give entrepreneurs more leverage. HeyGen is definitely one of those tools. 30 million people already use it, from solo founders to 85% of the Fortune 100. Your first three videos are free at heygen.com/profitting. That's H-E-Y-G-E-N dot com slash P-R-O-F-I-T-I-N-G.

• 48:17Hala Taha?

  Heygen.com/profitting.

• 48:19Speaker 01

  Slice that cookie, not in half, slice off a small piece for you very quickly, give it to the other people. But give yourself some of that treat too.

• 48:26Hala Taha?

  That makes sense.

• 48:26Speaker 01

  Yeah. If you're in the fund season, similar method, a big chunk of it goes toward whatever that future savings event is, but a little bit should go toward the now, also to have that reward. If you are in the activate season, you may choose to activate all of it. Activate is a unique season in that we're intentionally downplaying our savings and we're going into its intentionality, knowing that we don't need to save more for a period of time. So saving any of that may actually not serve you well. So if you're in the activate season, you get $5,000. This may be your moment to live large or to extend that activate period and use that capacity. If you're in the balance period, some of it goes toward the future, some of it goes toward the current and you've kind of split it in half.

• 49:06Hala Taha?

  Yeah. I'd love to hear your perspective more on retirement because a lot of entrepreneurs tuning in, we're like responsible for our own retirement. When you work in corporate, you just have a 401k, you kind of just put money in it and that's sort of taken care of.

• 49:19Speaker 01

  Yeah.

• 49:20Hala Taha?

  And as entrepreneurs, it's really all on us and some of us are making a lot of money and kind of are, even me, like I think about my retirement and it feels really abstract because I'm making a lot of money. And I'm like, well, I don't need to worry about that because I'm making so much money, but I do need to worry about it, right?

• 49:37Speaker 01

  Yeah, yeah, yeah.

• 49:38Hala Taha?

  So how do you think about it?

• 49:41Speaker 01

  I'll give you some more modern teachings that people are sharing and I'll give you a perspective that I haven't heard anyone share.

• 49:45Hala Taha?

  Okay.

• 49:46Speaker 01

  So one is

• 49:51Speaker 01

  when you hit retirement age, your health span will perhaps be on a decline compared to where you are now. So if you're in your twenties or thirties, you're at the optimal in health. When you get to your fifties, I don't care what you do for exercise and stuff, things start aching and hurting. It just does. Trust me, it's coming, it's coming. And once you're in sixties and seventies and perhaps eighties, you may start a decline and you can't be as active. And it's a shame that people are saving for their seventies and eighties to do all these amazing things, but they're not physically capable. Now, listen, technology is coming about and all these things with AI and medicine research, that may change. So this is just what I see in the current state, but it may change. So actually leveraging more of that money for the now may be better.

• 50:30Hala Taha?

  Yeah.

• 50:31Speaker 01

  The second component, which we already talked about is

• 50:35Speaker 01

  People that go into this kind of full stop generally seem to resent the fact they went to a full stop. They've lost meaning and purpose and that becomes a big emotional cost. So even if they have their health, even if they have the funds to live a new way without purpose, it becomes fleeting and it's like, is this all there is? And that's actually anguish you're living under. Here's the thing I haven't heard anyone talk about in this context. It was fascinating. I was talking, I was listening to this one guy. He says, photograph every single day of what you're doing and maybe even record a quick note about it. So 365 photographs for the entire year. And he goes, what will be so interesting is it's the ultimate form of memory. When you look back at those photos, you'll remember what you did and you'll start seeing what a rich life you lived. So if you preserve what you've done, it expands your

• 51:20Speaker 01

  memories. I believe, and I'm starting to feel this, at the end of life, what's going to be most important is all the things remembered. And right now, when you're in your twenties and thirties, it would be a shame if you forgot all the great things you did. You know, I look back to like my college days. I'm like, ah, I remember like the two epic parties that were the best parties ever. I remember a couple of friends I had that were extraordinary friends, but I don't remember like the day to day stuff. But I do remember it was fun back then. I wish I preserved it. So I actively take pictures on my phone every single day now. And we'll get a picture when we wrap up here. And I'll look back and say, oh, I remember this was Hala. It was so fun. We were talking about her purple Porsche and we went for a ride in it. And it was, I just remember.

• 51:58Hala Taha?

  I love this.

• 51:58Speaker 01

  Yeah, I remember the things that happened and it makes the current moment richer because you remember the past.

• 52:04Hala Taha?

  And it prevents like recency bias, even like with friends and memories and because you just really remember everything that happened all year.

• 52:12Speaker 01

  Hundred percent. It's not ever forgotten.

• 52:15Hala Taha?

  Yeah. So debt is a big problem for people. And I know you give some advice in terms of how to, you know, pay down your debt, what not to do, what to do. What's your thoughts about that?

• 52:27Speaker 01

  Yeah. So a common technique we talked about was is based upon B.F. Skinner's work is this concept of paying off your lowest debts first to form the neural wiring to continue behavior. And that's absolutely a smart idea in the beginning. So if you have a lot of debt, sort your debt out by the amounts due. And if you can wipe out some early debts, that's a beautiful thing because you'll believe truly that you can wipe out debt. But if you continue that pattern, you may not be optimizing. And if you have very expensive debt, high interest rate debt, that can crush you. There's another form of debt I've never heard anyone talk about. It's called consequence.

• 53:02Hala Taha?

  Okay.

• 53:03Speaker 01

  I had a loan from a friend of mine for $30,000 at zero interest rate. But he was a friend of mine. And so I put zero interest. This is a very inexpensive debt. I can take my time paying this back. And he called up, he's like, dude, where's the money I gave you? High consequence. His name is Chris. And over time, it almost cost us our relationship because I wasn't paying it back. I said, oh, my gosh, there's another form of interest. There's the consequence of the relationship. And that could have been the most costly loan that I wasn't paying back. And it could have burned me long term. So rate by the percentage due. But also, what's the consequence to your life? Will a lawsuit come about? Will you lose a friend over this? So consider that. Start off with a couple of early wins. But then very quickly, sort out your debt by the highest interest rate and the highest consequence.

• 53:46Speaker 01

  When you have high consequence, high interest, tackle that. When you have high consequence but lower interest, that still is extremely important and often is disregarded. Actually do that next and then target the rest of the stuff.

• 53:58Hala Taha?

  If you have debt, should you also be saving? Or should you just be focusing on your debt?

• 54:02Speaker 01

  Great question. I still save. But I save at a lower rate for sure because I'm targeting my debt. But I'm still saving because I want that behavioral mechanism in place. There was a saying from, I think it was Ramit Sethi, who's a very popular personal finance expert, great friend. And he said, I think it was him. He says, the new form of discipline is automation. Automate the process. So when money comes in, automatically save and you will maintain that discipline. Also, according to Parkinson's law, if you save before you receive the money, so like a 401k, you will adjust your lifestyle because there's a smaller closet to store your stuff in. You'll adjust your lifestyle to live within that container. So if you can, save before you see it.

• 54:44Speaker 01

  And if you have an employer, you tell them, I want my paycheck in two forms. One is to my primary checking. I also have this other checking account. Can you carve out 20% of my paycheck to go there? You will adjust off your primary. That second one have hidden away. It's your magical kind of hidden 401k without being a 401k.

• 55:00Hala Taha?

  And I remember when I was in corporate, the system like allows you to just do that really easily.

• 55:04Speaker 01

  Yeah, and I'm a small business owner. I got six employees at one of my businesses. We can do it.

• 55:08Hala Taha?

  Yeah.

• 55:08Speaker 01

  You just got to ask.

• 55:09Hala Taha?

  Yeah.

• 55:10Speaker 01

  Yeah.

• 55:10Hala Taha?

  And also like certain bank accounts let you do it. I know Relay is a bank account that lets you like set up different accounts. I use Monarch Money and I can set up different like little accounts.

• 55:21Speaker 01

  So yeah, so Relay is for business owners. So if you're an entrepreneur, use Relay. I'll give you a little plug here. BanklikeMike.com. It's the bank I use for my, my business finances. And if you have a personal checking account, Relay doesn't do personal, you can go to Dream First Bank. I set up a link called ProfitFirst.Bank. So you can go to ProfitFirst.Bank if you want to do the personal accounting.

• 55:44Hala Taha?

  Amazing. Oh, I know that you've got a flight to catch. So I want to be respectful of your time.

• 55:49Speaker 01

  I'm kidding, I'm kidding. I'll take an Uber, in a Porsche.

• 55:53Hala Taha?

  But leave us with some advice in terms of like, what's the number one thing that people can do in the new year to optimize their money habits?

• 56:01Speaker 01

  Yeah, I, I think the first thing is to realize that people do want you to be wealthy. Like you, everyone watching this, the people around you want to be wealthy. Now, no one says like, I wish you were rich. But when it comes to participating in life itself, if you are worried about money, you're not fully there. The analogy I use is a doctor. Imagine, you know, I'm, I'm having a heart attack or something. You rush me to the hospital. I guess at that hospital, two doctors come out. Doctor one comes out and says, "I'm really poor. I have no money. I'm actually desperate. I, I need, I need patience. In fact, I'll, I'll do 50% off. You're ready to proceed." Doctor two, she comes out and says, "I, I'm very rich. I'm very wealthy. I, I charge a premium for what I do because I'm the best at this. I have all the time in the world to take care of you, and this is the exact procedure I do. Do you want to work with me?

• 56:46Speaker 01

  And by the way, I charge 10 times more than Doctor One. I'll choose Doctor Two."

• 56:50Hala Taha?

  Yeah.

• 56:51Speaker 01

  Right? I want someone who's wildly confident because they're taking care of me. When it comes to relationships, I, I want someone that's fully present in my life. I want friends who are really there. And if they are worried about their finances and struggling, there's this ringing in their head that's constantly playing out and they can't be present. So no one's gonna say, "Yeah, I wish you were rich. I wish you had more money." People are saying, "No, if we're friends, I want you to be fully my friend and fully present." So it's ironic. The world wants you to be wealthy. They just don't use those words. So that's the takeaway I want. The method I want you to use to start achieving financial independence is real simple. Right now, think about the thing you worry or wonder about most financially every single day. Do you worry if you can pay groceries? Some of us do. Do you worry if you can pay the rent or the mortgage on your apartment?

• 57:35Speaker 01

  Or do you do you wonder if you can go on a big vacation this year? I don't know what it is, but what's the one thing that you think about most? Whatever that thing is, set up one additional account at your bank, or one of the banks we suggested, but at your bank, set up one account and give it that name. So if I worry about if I can afford my mortgage, I'll say, I will set up an account, a new account that says mortgage. And say my mortgage is, just for easy numbers, $4,000 a month. What I'll do is every paycheck, say, comes weekly, I'll take $1,000 and transfer it to the mortgage account to assure that my mortgage is cared for. Now, here's the magic of the system. You've guaranteed that your biggest financial worry or wonder is taken care of. It will reduce it, but the real magic is not that. It's in what's left over. You'll see, oh, I don't have as much money as I thought. I have to adjust the rest of my lifestyle.

• 58:20Speaker 01

  It will force you to start taking balance and accounting for your priorities without compromising the rest of your life. That's a real simple way to get started. You don't have to do all six accounts, not yet. Start with one account that you worry or wonder about most.

• 58:31Hala Taha?

  Yeah, I'm somebody who like hates finances. I'm the type of person that's like, let me just make as much money as possible. So I never have to worry about this. But your stuff is always so easy to understand. And I always leave these conversations being like, I gotta do this. Like immediately, it's gonna make me feel better.

• 58:47Speaker 01

  Guaranteed.

• 58:47Hala Taha?

  And it's not scary. Like, all you, all your suggestions are so easy to implement. And what you do for entrepreneurs, what you've done with Profit First and what you're doing now with The Money Habit for just everybody in the world is just awesome. I'm so excited to put this to work.

• 59:01Speaker 01

  That means the world to me. And one last thought is you said, you know, you're not really excited about numbers or the finances.

• 59:07Hala Taha?

  Yeah, not really, yeah.

• 59:08Speaker 01

  I found there's a word for it. It's called human being. You are so human. That's so normal. I'm not into numbers. People come to me and say, oh, were you an accounting major? No. Do you love numbers? No, I suck at them, actually. That's why I built the system, something that's really simple, that works for people who care about living life, that want to maybe earn as much money as possible, but don't want to do all the management. The system manages it for you.

• 59:33Hala Taha?

  Yeah, I can't wait to put it into practice. Where can everybody learn more about you and everything you do? Where can people grab the money out of it?

• 59:39Speaker 01

  The best site to go to is MikeMotorbike.com. It's MikeMcCallum, it's spelled, nicknamed from grade school because it rhymed. MikeMotorbike.com. And then I'm really proud of a podcast I started. It's called Becoming Self-Made. And I'm studying the journey of these wildly successful entrepreneurs. I want to get you on the show.

• 59:57Hala Taha?

  Oh, I love that.

• 59:58Speaker 01

  I met with the Savannah Bananas owners. I met with Don Miller, a mutual friend of ours, Amy Porterfield, 1-800-GOT-JUNK, the founder of 1-800. And I found what is their story to success. But the most interesting thing is not success porn. Like, here's all the things they achieved. We talk about what's the struggle they still feel today that they started off with. And it's unbelievable how much these entrepreneurs still struggle with what we would consider the basics that they should be over. I think it's a very empowering show.

• 1:00:24Hala Taha?

  What a cool concept.

• 1:00:25Speaker 01

  Yeah, it's really interesting. And people get super real. It's a little bit of an Oprah moment at times. So that's called Becoming Self-Made.

• 1:00:33Hala Taha?

  Amazing. I'll stick all those links in the show notes.

• 1:00:35Speaker 01

  Thank you.

• 1:00:36Hala Taha?

  Thank you so much for your time. It was such an awesome conversation as always.

• 1:00:38Speaker 01

  It's amazing. Thanks for letting me come to your studio.

• 1:00:40Hala Taha?

  Of course. It was so great having Mike back on the show. He keeps raising the bar on how we understand money. And this conversation hit especially deep because it revealed how much of our financial life comes down to behavior and not income. Mike reminded us that most people don't struggle because they're not earning enough, but because their system is working against human nature and human psychology. And the moment that you flip the system, everything else will follow. One of the biggest takeaways is the power of separating your money into purpose-based accounts. Now with his Profit First system, you do this for your business. But now with The Money Habit, he's suggesting you do this for your personal life as well, and I love it. Instead of one giant pot that fuels

• 1:01:22Hala Taha?

  impulse decisions and panics, you create smaller shot glass accounts to give you instant clarity. They turn vague intentions into visible choices and goals, and they help you stay in control without relying on your willpower. I am so inspired to go into my bank account and create little buckets for all of the different goals that I have and all the intentions that I have with my money. Mike also showed us the importance of momentum. You don't transform your financial life through massive rigid sacrifices. You do it through small wins that rewire your identity, like saving $10 a month or wiping out your smallest debt first. That steady psychological lift is what makes your habit stick. And lastly, I loved his idea of financial seasons:

• 1:02:05Hala Taha?

  recovery, fund, activate, and balance. Each season demands a different strategy. When you label your season, you finally understand which actions support your goals and which habits pull you backwards. It takes shame out of money and replaces it with intention. So if you're in activate mode, you can feel free to spend without any of that guilt. And if you're in recovery, you know that your intention is to pay down your debt. This episode is a reminder that you already have the potential to build cash confidence. The moment you match your system to the way that your brain naturally operates, you stop surviving on payday highs and start building a life where money supports your goals instead of stealing your peace. All right, Yap fam, if this conversation with Mike Michalowicz sparked a new way of thinking about your money, send it to somebody who needs this conversation. We all know at

• 1:02:50Hala Taha?

  least one person who could use more clarity around their cash. And if you're feeling this live energy, show us some love. Drop us a five-star review on Apple Podcasts and leave a comment telling me what resonated with you the most. And remember, you can watch all of these in-person interviews on Spotify Video and YouTube. And make sure you follow and subscribe so you stay tapped into every conversation as it happens. You can also find me on Instagram at Yap with Hala or LinkedIn, just search Hala Taha. And huge shout out to my amazing Yap team for pulling off yet another powerful live recording. Appreciate you guys so much. Shout out to Sham for con Joshua on the guest outreach team. And also shout out to Bryce at Record ATX for helping us with this live recording. This is your host, Hala Taha, AKA The Podcast Princess, signing off.