#119: The Illusion of Savings: How Cutting Corners Can Costs You More
In this episode, Abu explores a counterintuitive idea: while saving money is important, overdoing it can cost you dearly in the long run. By sharing personal experiences and insights, the discussion centers on balancing saving with investing in quality services—both for business growth and personal well-being.
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Key Takeaways
Mindset on ROI:
- While saving is important, don’t cut corners on investments that help your business grow.
Growing Your Business:
- Early on, you might stick to a tight budget. But as your revenue increases, it’s time to level up your support—whether that’s your accountant, lawyer, or other professionals. Don’t be the “big fish” in a small pond.
Personal Money Matters:
- It’s smart to save a bit of each paycheck, but also invest in yourself. As your income grows, consider spending a little more on quality services or even better personal health choices like improved meal options or a gym that offers more than the basics.
The Hidden Costs of Being Too Cheap:
- Always choosing the lowest price might seem smart now, but it can lead to costly mistakes down the line. Sometimes, paying a little more up front saves you from expensive problems later.
When to Make a Change:
- If you’re constantly managing or fixing your service providers, that’s a sign it might be time to upgrade. The same goes for your health—if you’re feeling run down or low on energy, it might be time to invest in higher-quality options.
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Transcript
Okay, I want to talk about something that is really important that I've learned as I grew my business.
Speaker A:And it's about savings.
Speaker A:Yes, savings is expensive.
Speaker A:So let me tell you what I mean by that.
Speaker B:It's been a long time and I miss this feeling.
Speaker B:It feels like freedom.
Speaker B:It feels like healing.
Speaker B:Floating up the floor, past the ceiling, the wind in my head.
Speaker A:When you're growing your business, your goal is to spend money that's going to make you more money.
Speaker A:We all understand that.
Speaker A:We spend money that's going to make us more money.
Speaker A:This is a return on investment, right?
Speaker A:As long as the money we spent is making us more money, we're willing to spend.
Speaker A:The second aspect of business is you also want to be able to save money.
Speaker A:So when you are generating cash flow, you also want to save money.
Speaker A:So that way you, you could invest in bigger projects, you could make bigger investments to grow the business, to hire people, et cetera.
Speaker A:Now, keep this in mind before you start a business.
Speaker A:You are an individual.
Speaker A:And as an individual going through life, our goal personally is to save money.
Speaker A:When you had a job or when I had a job, I would work that job.
Speaker A:I would get a paycheck.
Speaker A:From that paycheck, let's say I was getting paid $1,000 a week, I would have savings.
Speaker A:So maybe I get taxed, and from that thousand, I get taxed $300.
Speaker A:So now I have $700, okay?
Speaker A:From that $700, let's say I live at home.
Speaker A:So from that $700, maybe we're saving $200, okay?
Speaker A:Now we have $500 to spend on our day to day to make sure that we are eating, we have transportation to work, right?
Speaker A:But that $200, we're saving.
Speaker A:So every paycheck we're saving $200 that we have now for you, this number looks different.
Speaker A:This number could be a hundred dollars, it could be $1,000.
Speaker A:For you, it looks different based on the income that you're bringing in from your business.
Speaker A:So the context of saving is to hold something for a later date or to hold something for something else, something maybe a bigger investment that you're going to make in the future.
Speaker A:Saving is to save money for a later date or to save money because you want it to grow in a different way.
Speaker A:Now let me tell you, when saving becomes expensive, when you decide to always go for the cheapest option, what you do is you open yourself up to pay later down the road.
Speaker A:Let me repeat that.
Speaker A:When you decide to save in every aspect of your life, and you decide to always save because you want to pay the cheapest amount for a service.
Speaker A:You want to really live below your means so you could save more.
Speaker A:What I'm saying is that at a later date, you're going to be paying more because savings becomes expensive.
Speaker A:Okay, let me give you an example of that.
Speaker A:When you decide to grow your business, you are making money in your business.
Speaker A:And in the beginning, when you don't have a lot of money, what you're essentially doing is you are living below whatever that budget is.
Speaker A:Okay, I gotta make sure I have an accountant.
Speaker A:I gotta make sure I am paying a bookkeeper.
Speaker A:I have to make sure I am paying a lawyer for these things.
Speaker A:You are operating within that budget.
Speaker A:Everything is fine.
Speaker A:At this stage, when you don't have a lot, you are going to what you could afford.
Speaker A:Now here's where savings becomes expensive as you begin to grow your business.
Speaker A:Let's say year one, you made $50,000.
Speaker A:Year two, you now made $300,000.
Speaker A:The people that you were working with when you were spending 50k should be different people.
Speaker A:When you're making 300k, when you're making a million dollars.
Speaker A:And let me tell you why.
Speaker A:This is something my mentor told me a long time ago.
Speaker A:You never want to be the big fish for your clients.
Speaker A:You never want to be the biggest fish in the pond.
Speaker A:You want to make sure that you're the smallest fish because you want the people that you're working with, especially service providers, to have worked with people that are making way more than you, because then they could direct you a lot better.
Speaker A:But when you are their big fish, they're figuring everything out for the first time.
Speaker A:And so therefore, they could make a lot more mistakes with you because they haven't done this before.
Speaker A:So later on, at a later date, what happens is that that money you thought you were saving by Paying that clientele $100 a month when you were making 50k is now costing you 10,000, 20,000, $30,000.
Speaker A:Because they're making a lot of mistakes along the way.
Speaker A:This is something that happened to me not once, not twice, not even three times.
Speaker A:Because I didn't learn my lesson.
Speaker A:I thought that I should continue to save as much as possible.
Speaker A:So let me go ahead and pay the least amount that I can for the things around me.
Speaker A:Here's another example.
Speaker A:If you are trying to live a very healthy lifestyle, if you are training for something, if you want longevity, you should not be putting trash in your body.
Speaker A:Your input becomes your output.
Speaker A:The way you feel is because of the input, the things that you may be eating, you need to make sure you're eating better quality meals and maybe you don't have time to make those meals.
Speaker A:So therefore you're paying someone to make you meals that are higher quality so you could operate at a higher efficiency and have longevity.
Speaker A:Because over time, when you put good things in your body, you have good outcomes.
Speaker A:When you put bad things in your body, it may not affect you that day, but.
Speaker A:But over time you start noticing different health problems that you may have.
Speaker A:Does that make sense what I'm saying?
Speaker A:Savings could be expensive, so you shouldn't always default to savings all the time.
Speaker A:There should be critical things that you write down.
Speaker A:Okay, these are the things that I am going to make sure that I'm not saving on because I don't want it to become a problem later on down the line.
Speaker A:And in your business, that could look like your lawyer, that could look like your accountant, and your personal life, that could look like having meals prepared or using a meal preparing service.
Speaker A:If you don't have the time.
Speaker A:That aspect in your life that may look like getting a gym membership, maybe you upgrade it from planet Fitness at $10 a month now to a higher quality gym where you have a personal trainer that does the thinking for you based on your body goals and the areas that you want to improve in your fitness.
Speaker A:What I'm telling you is that as you grow your business, you don't want to continue saving in every area.
Speaker A:It doesn't mean you can't save.
Speaker A:But you have to understand that in your business there should be a list of things that are very critical that you should not skimp out on.
Speaker A:Because saving for that right now, by paying the least amount you can for the people for the services, is going to cost you in the long run.
Speaker A:And I know you're probably thinking, well, I'm fine right now, but I promise you, it may not be in one year, it may not be in two years.
Speaker A:But later on down the line, the incompetency sometimes of the people that you're paying the least amount of money to may not be in your best interest later on down the line.
Speaker A:Right now because it's cheaper to just stop by Chick Fil a and spend $10 instead of this meal prep service that is $50 a week.
Speaker A:It may seem inconsequential, but I'm telling you, in the long run it adds up.
Speaker A:What I want you to understand from my own experience of fumbling so many times, thinking that I'm saving So much money versus my thought process should have been okay based on where I'm at right now, what do I need to change to make sure I'm staying ahead in my life?
Speaker A:Based on the people that have been servicing me, are these the right people to be servicing me when.
Speaker A:When I'm at the next level in my business, when I'm at the next level in the next stage in my life, and here's a few good ways to know that.
Speaker A:Maybe it's time you find people that are above your level so they could bring you along.
Speaker A:One of the things is if you're working with service providers and you're feeling like you're telling them what to do, and I know you're nodding your head like, oh my God, yes, that's me.
Speaker A:And you feel like you're telling them what to do.
Speaker A:You feel like you're doing their work for them.
Speaker A:You feel like you're asking them constant questions that they should be thinking about but they're not thinking about.
Speaker A:That's a sign.
Speaker A:That's a sign.
Speaker A:If you're in your personal life and you feel like, I feel really tired throughout the day, I have low energy.
Speaker A:That's a sign.
Speaker A:The signs don't have to be major for us to decide.
Speaker A:It's time to make a decision to change.
Speaker A:We're always seeking and looking for these big signs, life altering signs in order to make a decision.
Speaker A:What I'm telling you to do is, is look for the small signs in order to make the decision today.
Speaker A:That's what I wanted to talk about and let you know is that saving could be very expensive.
Speaker A:So in your life, I want you to take personal audit of your life areas that it's time for you to evolve in.
Speaker A:In your business, I want you to look at people in your business, people that service your business and understand.
Speaker A:Okay?
Speaker A:Is it time to evolve in these areas as well?
Speaker A:That's my homework to you.
Speaker A:Thanks again for tuning in to this episode and I'll see you next week.
Speaker B:It's been a long time and I miss this feeling it feels like freedom it feels like healing Floating off the floor past the ceiling the wind in my hair I can see the light at the end of the tunnel as I'm taking flight Man, I'm feeling like myself again Man, I'm feeling like myself again it's been a long time and I miss this feeling.
