A hearty welcome to “Grandma’s Wealth Wisdom” with your neighborly hosts, Brandon and Amanda Neely. This is the only podcast that helps you take charge of your cash flow and leverage your assets, simply and sustainably, the way Grandma used to.
Brandon: Hey, I'm Brandon, and welcome to Grandma's Wealth Wisdom, where we help you break through to a smart, stable financial future with the tried and true wisdom Grandma used.
Amanda: And, hey, I'm Amanda. This is Episode 54 that we've titled “Entrepreneurial Mindset: Good and Bad Thinking about Money.” Today, we're going to share three different ways that employees and entrepreneurs think about money. Right? The three ways employees think about it, three ways entrepreneurs think about it, and compare and contrast. We're going to talk about the good and bad of both ways, and what the employee can learn from the entrepreneur and what the entrepreneur can learn from the employee in terms of how we think about our money. [01:10.2]
Brandon: What we want you to hear from this episode is not that an employee mindset is better than an entrepreneur mindset or the other way around, that the entrepreneur's mindset is better than the employee mindset. Our hope here is to cross the aisle, that whole political thing, cross the aisle and look at what we can learn from the other side.
Amanda: A quick disclaimer: in case you're not aware of, Brandon and I have not been employees for years, but we do talk with them a lot. I originally left my cubicle in 2009, and then Brandon left his in 2011.
I had a brief stint where I got a W2 from a nonprofit, but even in that role I got to be very entrepreneurial. In fact, I had told them that I wouldn't take the job unless I had flexibility and was able to exercise the entrepreneurial side of me. So, we're coming at this conversation from more of an entrepreneur perspective, but we still talk a lot with employees. [02:16.3]
Brandon: And we have been employees for a long period of time in our lives, and so I think we can still relate very much to that side as well. An added benefit of this episode is what you can learn if, like us, you move from being an employee to being an entrepreneur. This is happening to a lot of people right now.
If you're an independent contractor or freelancer, what we discussed with the entrepreneur mindset will apply to you in more ways than the employee mindset, with stats showing more and more people are being independent contractors and freelancing. And that was before COVID happened, so I bet you that number is just increasing just to as well as the COVID outbreak, I guess. [03:05.7]
Learning about the entrepreneurial mindset related to your money, that is even more important now because of what's happening in the world and that increase.
Amanda: Yeah, it was already increasing that more and more people were being independent contractors and having to freelance. If we were to guess, we would guess that this COVID-19 crisis is going to accelerate how many people are becoming independent contractors and freelancers, so this employee or entrepreneur mindset might become more and more important.
So, here we go with three of the different mindsets employees and entrepreneurs have about their money.
Brandon: The first has to do with income. An employee expects to get a steady paycheck. The standard thought is, It's okay if I spend this money on something I don't really need because more money is coming in two weeks. This way of thinking goes bad when it leads to overspending and getting a bunch of stuff that clutters out the most important things in life. This way of thinking is good in that predictable income relieves a lot of fear and anxiety about things like how you'll pay rent or the mortgage next month. [04:17.2]
The entrepreneur can learn a lot about reducing anxiety by setting up a regular pay schedule. So, what if you, as an entrepreneur, could set up your pay in such a way that you get a steady salary, no matter if business is booming or hard to come by? Wouldn't that give you a nice foundation of predictability in your life? Might less stress and anxiety even make you a better business person or a boss because you have that predictability in place?
Amanda: Now, you might be thinking, There's no way I can have a regular salary. My revenue is just too variable. And we expect you to say that because of the entrepreneur's mindset related to income. [05:02.1]
An entrepreneur expects to have variable income. The main mode of thinking is “future income is not guaranteed, so I've got to be very careful about everything” or “future income is not guaranteed, but I've got a lifestyle to maintain, so I'll just go into debt whenever revenue is low.’
And, as you might expect, the bad of the entrepreneur mindset is often fear and anxiety from not knowing if we can pay the rent or pay the mortgage, or from so much income going to servicing debt, and this can often lead to a self-defeating attitude of “Why bother getting under debt? Why bother trying to budget? It's never going to happen and my income is just too variable,” and that self-defeating attitude there.
On the flip side, the good of expecting your income to be variable is that it can happen when we use variable income to prepare for when revenue is low. Variable income can push someone to get serious about setting up an emergency fund and breaking down big, less frequent expenses into bite-size pieces. [06:09.7]
Brandon: I have an example for you. I've talked with several entrepreneurs who have learned their lesson with a tax bill much higher than the money they have available. So, they start setting aside a portion of every dollar that comes into the business to be sure that they never get on the wrong side of the Internal Revenue Service again, and you don't want to be on the wrong side of the Internal Revenue Service.
Amanda: Absolutely. And I think that scared you so much. That's why you flubbed there.
Brandon: Yeah, I was.
Amanda: But there's actually a really important lesson that the employee can learn from the entrepreneur about income. Future income is not really guaranteed. Be prepared just in case. And if you need an example, just go back -
Brandon: Look right now.
Amanda: - right, to what's been happening during this COVID-19 crisis. Because when you're an employee, really, you only have one customer, right? Your employer. Whereas the entrepreneur usually it has several, if not hundreds or thousands of customers. So, if they lose one, they likely have a system in place to go find three new ones. [07:16.4]
As an employee, if you get laid off, it can take months, if not years, to find a good job that can pay you what you were getting paid before. And when you get in the mindset that your income isn't guaranteed and could be variable or maybe even completely disappear, most people approach their finances from a different perspective.
That's the first mindset difference between an entrepreneur and an employee—how we view our income and what our income is going to be like.
Now for the second.
Brandon: The second has to do with major decisions like how you'll pay for health care expenses and have money to spend in retirement. An employee expects their employer to take care of the big stuff. The thought in their mind is, I'm all set for healthcare and retirement because my employer has taken care of it for me. [08:04.7]
The mindset can go bad in a lot of ways. The employer-provided health insurance goes away if you lose your job and you haven't spent any time figuring out an affordable Plan B. With retirement, there are often vesting schedules, so you might not get to keep everything in your 401(k) that you thought you could. Also, what most Americans are putting into their 401(k) in 403(b) through work is not nearly enough to sustain them for 25 years of retirement, especially when you factor in that dreaded word, “taxes.”
Amanda: And typically with healthcare and retirement, employers are only covering the minimum to keep you there employee, right? They don't want to spend too much, right? They're trying to make sure they have a healthy bottom line, stuff like that. So, it's important, as the employee, to ask questions like, Is this enough? What else should I be doing to protect my own future? [09:05.3]
Brandon: And there's a lot of good as well, though. Good health insurance typically costs less than other alternatives. I mean, I want to go back. Not good.
Amanda: Wait, wait. Say that again. Yeah.
Brandon: Group health insurance typically costs less than other alternatives. Group maybe good, right? So, that's why I said that.
Amanda: Or it might be bad.
Brandon: Yeah.
Amanda: But definitely group typically costs less.
Brandon: It’s probably cheaper. The match to your 401(k) contributions when vested can also be super helpful. Again, once it's vested, that can be helpful, you know?
Amanda: Yeah. So, what can the entrepreneur learn from the employee and what they've got set up for healthcare, retirement, those big things? Here it is. These are important things not to be ignored or decided haphazardly. That's why employers take this on for their employees, right? How many Americans would have $0 set aside for retirement if there wasn't a 401(k) match offered by their employer? That's why these things work. [10:07.7]
It’s because it gives us the motivation to do that. So, if you're an entrepreneur, you've got to find the motivation in not just ignore or defer, which I'm getting ahead of myself. Let's talk about the flip side, the entrepreneur mindset on these major things.
Brandon: So, on the flip side, an entrepreneur expects to figure this out for themselves and for others, all of their staff. I need to learn about my options for covering healthcare expenses now and in the future—that's what they say to themselves—plus, I'm on my own to make sure I can support myself when I'm older.
The bad of the entrepreneurial mindset is ignore and defer. That happens a lot. It's an overwhelming task. Where do you start? Who can you trust? So, you just don't do anything when it is with this topic, the good empowerment and control. If you take on the challenge, you'll learn a lot about your options and you'll literally be in control of the choice you make and what it means for your future. [11:13.8]
Amanda: Yeah, to have that control is something that an employee doesn't, right? They don't really get to say what group health insurance their employer chooses, that kind of thing.
But there are things that the employee can learn from this entrepreneurial mindset and a big part of this is the thought, Only I have my best interest in mind now and in the future. Yes, my employer is trying to help, but I have to be the one looking out for myself the most. No one else is going to do that for me.
This is an opportunity to take control of your future and decide what's best for you and then make it happen. What your employer does only becomes part of your overall financial journey. Your 401(k) becomes one of your tools for retirement, not “the” tool. You set up other tools outside of work as well. [12:04.8]
So, that's the second mindset difference, how we think about major decisions like healthcare and setting aside money for the long-term, like, quote-unquote, “retirement,” whatever that word means for you.
The third is all about what we expect for our futures.
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Brandon: An employee expects small increases in their hourly pay or salary and maybe a bigger bump if they get promoted, right? So, if you get a promotion, all of a sudden, you're like, Hey, I’ve got more money. [13:09.1]
Some employees might get bonuses on occasion, too. The mindset is “if I do a good enough job, I'll be rewarded.” The bad is a fixed mindset stops your growth at work and outside of work. The good is it helps you keep up with inflation, hopefully. If inflation is 3% and you get a 3% raise, you'll just be keeping up, but at least you're keeping up, right?
Of course, none of this is guaranteed to happen. Maybe like some people right now, you've got laid off during the COVID thing, but then are rehired at 60% of what you're making before that. I mean, that has actually happened to some of my clients. The employer controls what happens really, especially when options for other employments are super low, and that can be scary. [14:05.7]
Amanda: Yeah. So, what can the entrepreneur learn from how the employee thinks about their future? I think, when you do a good job, you deserve a pay raise, too, right? Give yourself a performance review. Increase their pay accordingly. Don’t stay where you're at, right? But be thoughtful about it, right? Make sure that you're giving yourself a pay raise that you actually deserve to.
Brandon: Now for the entrepreneur mindset on the future. An entrepreneur expects no ceiling on their income potential, at least the healthy ones. If I figure out a way to create more value for more people, my income will continue to increase. That's what they say to themselves. The bad of the entrepreneurial mindset is hustle, hustle, hustle. We work always. We hustle always. And I know that's what I do. [15:01.0]
Amanda: Yeah, I’ve got to jump in here and say it's kind of this vicious cycle to believe that if you can create more value for more people, your income will increase. Brandon is especially prone to not being able to stop working, and I don't think it's because he's trying to make a ton of money. It's literally because he loves creating value so much.
Employees can get stuck here, too, especially if you're salaried, right? You see the positive impact of your work and you want to see more and more of it, and all of a sudden like what happened to Brandon a few years ago, you find yourself in the emergency room with heart problems. The hustle is real, right? But the hustle also needs to be balanced with something else, which I think is the good side of the entrepreneur mindset on the future.
Brandon, you want to take that one?
Brandon: Yeah, and I will say, if you don't want me to hustle so much and get into the emergency room, right now I'm going and doing all this YouTube stuff, so go subscribe and help us out. That'll lower my stress, I guess. No, not really. But you can subscribe, whatever. Anyway, that's just for fun. [16:07.4]
The good of the entrepreneurial mindset is this growth idea. The definition of a growth mindset is your basic qualities are things you can cultivate through your efforts, your strategies, and you get help from others. And if you're growing through application and experience, your revenue and thereby your income should reflect that personal growth. Could you say that in a different way, Amanda?
Amanda: Yeah, let me break this down. A growth mindset has where you're taking this personally, right? You're saying, I've got these basic qualities. I've got things that are good about myself, but I can cultivate them. I can make them better and that'll happen through my own efforts as I accept help from others, that kind of thing. [17:03.7]
And when I'm seeking that growth mindset, it comes to my business, right? How can I grow, do personal career development, growth as an entrepreneur, that kind of thing. But, also, when you think about that growth mindset, it applies to things outside of work, like becoming a better parent, learning to cook, all kinds of things like that.
And so, to avoid hustle mentality, like we discussed on the bad side of the entrepreneur mindset, you can use this growth mindset, this “I expect my future to have no limits,” right, to also help you find that, that your unique balance between work and play, and what that looks like for you.
And, of course, the employee can learn from this. There are totally plenty of ways that you can look for to continue growing and for creative strategies that turn personal development outside of your career potentially into making money, safely and predictably outside of your day job. [18:05.3]
You might start a side hustle, but it might start from something that's more of a way that you want to grow and cultivate what's already in you to become something that's really cool and beneficial to others that you can charge them money for.
Brandon: There you have it. Three differences in mindset in how entrepreneurs and employees can learn from those mindset differences related to income, major decisions and our future potential.
To underscore this mindset episode, let's go into your mind for a second. This is going to go all Matrix.
Amanda: No.
Brandon: But if you believe about... What? You don’t think?
Amanda: No.
Brandon: Yeah, I think. What you believe about money shapes what you do with your money, if you take that red pill or blue pill, I guess.
Amanda: No, no.
Brandon: No?
Amanda: No Matrix analogies.
Brandon: No Matrix, okay.
Amanda: Keep going. [19:01.4]
Brandon: The thoughts you have directly lead to your behavior. Your behavior with your money directly impacts the rest of your life and the people closest to you. Our suggestion is to take some time to first notice what thoughts you have about money.
Amanda: So, because that Matrix analogy kind of threw me off, we're basically saying the thoughts you have influence your behavior. Your behavior impacts people around you. So, let's start with your thoughts. And here are some questions that we suggest asking.
First of all, what do you hear yourself thinking over and over again? Maybe something we shared today sounded familiar. Perhaps there's something else. First, just notice when you think about money, what comes to mind, or when you're going to spend money or you're going to save money, what kind of thoughts do you have?
Brandon: I think that's really important to take notice of that. Then ask yourself this important question: how is this thought helpful and how is it harmful? Or maybe how can I use this thought to act in a helpful way or how might this thought lead to harm for myself and others that I care about? Those are important questions to be asking about almost every dollar. [20:21.8]
Amanda: Yeah, so it's kind of noticing the thoughts and then deciding or then just not even deciding. First noticing the thoughts, playing with them a little bit—how is it helpful? How could it be harmful? How does this impact my behavior in helpful and harmful ways?—right?
And our guess is that even thinking about this might begin to change your behavior pattern. Just keep going with asking these questions and see what happens. Anytime you have a thought about money, notice it. Ask how it could be helpful and how it could be harmful.
Mindset change is difficult, so if simply noticing and asking these types of questions is not working, maybe what would work for you is instead to change your behavior and allow that to change your thinking. Test and action, right? [21:10.6]
Something that you thought, This could be helpful for me, but I don't know for sure, test it. Find some small way to test it and see if it is helpful, and that might just change your thinking and reinforce that action to continue to be more and more helpful.
Brandon: We think this exercise is so valuable that we created a wealth journal to go along with this episode. It's structured a little differently than our previous wealth journals, so that you can learn to turn your thoughts about money into helpful actions that help you move to a better place along your financial journey. All you have to do is download your copy at Grandma'sWealthWisdom.com/54.
Amanda: And we'll put that link in the show notes, too. But, again, it's Grandma’sWealthWisdom.com, slash, and then the number five and then number four, for the number of this episode. And I think that wealth journal will really help you think about mindset change, and if you can change your mind and then change your behavior or change your behavior to change your mind. [22:13.2]
But in the next episode, we're going to continue this series of episodes that are talking about entrepreneurs, business owners, self-employed, independent contractors, but with lessons employees and people who don't work can learn from, too.
The topic for next time is “Value Yourself.” We want to show you the importance of not being the last to get paid, maybe even being the first to get paid.
Brandon: It’s a novel concept.
Amanda: Right. So, subscribe and value yourself more now and in the future.
Brandon: Until next time, keep building your wealth, simply and sustainably, so you can break through to a smart, stable financial future.
The topics presented in this podcast are for general information only and not for the purposes of providing legal, accounting or investment advice. On such matters, please consult a professional who knows your specific situation.
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