When to Decide to Start Spending Money Ep 408

Summary Notes


Alex, the host of "Mozi Nation," shares his entrepreneurial journey, emphasizing frugality and strategic reinvestment for business growth. From sleeping on a gym floor with minimal living expenses to achieving over $100 million in annual revenue at acquisition.com, Alex highlights the importance of maintaining a low expense-to-income ratio for wealth accumulation. He advocates for spending on what truly adds value rather than societal status symbols. With co-host B acknowledging his points, Alex underscores the peace of mind gained from financial security and the joy of pursuing business for passion rather than material gain, encapsulating his philosophy of wealth as a balance between income, expenses, and personal satisfaction.

Summary Notes

Playing the Game for Love

  • Alex emphasizes the importance of engaging in business for passion rather than solely for financial gain.
  • The goal for Mozi Nation is to help people focus on the joy of the game.
  • Discusses the concept of acquiring customers, increasing customer value, and retaining them while sharing failures and lessons learned.

"It's really about playing the game. And I think that that has been, I think the goal, if I have for Mozi Nation, is that everyone can get to a point where they're just playing the game for the love of the game."

The quote encapsulates the ethos of Mozi Nation, which is to encourage entrepreneurs to engage in business out of passion, not just for profit.

Entrepreneurial Spending Decisions

  • Entrepreneurs often struggle with when to start spending money.
  • The balance between saving and spending is crucial, especially for material wealth accumulation.
  • Alex discusses the regret some high-income earners feel after spending all their money.

"And one of the things that a lot of our portfolio companies struggle with is when to decide to start spending money."

This quote highlights a common dilemma for entrepreneurs: determining the right time to invest in their business growth versus conserving funds.

Personal Financial Management

  • Alex shares his personal experience with managing living expenses from the early days of his entrepreneurial journey.
  • He focused on minimizing personal expenses to secure financial stability.
  • Alex's frugal living included sleeping on the gym floor, avoiding a car payment by paying cash, and eating exclusively from cash sales.

"So I slept on the gym floor. So I had no rent besides my business rent, but I had no personal rent."

This quote illustrates Alex's commitment to minimizing living expenses during the initial phase of his business, showcasing his financial discipline.

Growth and Lifestyle Changes

  • Alex's income increased to $15,000 a month while maintaining low personal expenses.
  • He emphasizes the importance of earning significantly more than spending for financial security.
  • The transition from minimal personal spending to a slightly increased lifestyle is discussed.

"And so, anyways, even during that time, I was able to increase my income to about $15,000 a month. But I tend to be very security driven, and I've noticed that about myself. So I like to make a lot more than I'm spending."

Alex's quote reflects his financial strategy of prioritizing income growth over increasing personal expenses to ensure security.

Business Expansion and Personal Sacrifice

  • Alex details the phase where he and his partners reinvested earnings into business growth instead of taking dividends.
  • He lived off savings for three years while expanding from one to six gyms.
  • Personal sacrifices included sharing a room with another person to keep living costs low.

"That's when I went from one to six gyms, and I really took no dividends in that period of time."

The quote describes a period of reinvestment and personal financial restraint that facilitated the growth of Alex's business.

Asset Management and Income Generation

  • Alex bought a condo, which he later rented out for additional income.
  • He mentions his involvement in gym turnarounds with Leila, indicating another business venture.

"Now, the next season that happened was, I bought a condo, and I bought a condo because I really liked the condo. I thought it was well priced and whatnot, and I lived there for a very short period of time, and then I realized that I could rent it for $3,500 a month."

This quote reveals Alex's strategic move to invest in real estate and generate passive income by renting out his condo, demonstrating his financial acumen.

Business Growth and Revenue

  • Alex discusses the initial success of his business, reaching $200,000 to $300,000 in monthly revenue.
  • Despite high revenue, Alex's personal income remained low due to not taking distributions.
  • He emphasizes the importance of taking distributions to mitigate risk, referencing past experiences of losing everything.

"And so these launches, at that time, from a business perspective, got us to about 200, 300,000 a month. Now, that was revenue. My income was still very, very low, and that's because, again, I didn't take distributions because I didn't learn that lesson yet."

This quote highlights the discrepancy between business revenue and personal income due to the lack of distributions, which Alex later identifies as a lesson learned.

Personal Lifestyle and Expenses

  • Alex lived frugally, staying in an extended stay for $800 a month and eating Chipotle frequently.
  • He owned a car in cash (a Prius) to minimize expenses.
  • Upon settling in Albuquerque, living expenses were reduced further, with rent at $1,200 a month and a shift to meal prepping.

"So my rent expense was month. We had a car that we owned in cash, which was the Prius during this period of time. And that was it. That was the only expenses, was the extended stay, and then us eating Chipotle and stuff."

This quote explains Alex's minimal living expenses during a period of business growth, highlighting his frugality and focus on saving.

Business Model Transition

  • Alex transitioned from personally conducting gym turnarounds to having sales teams do it on the company's behalf.
  • This change allowed him to centralize operations and move to a more stable living situation in Albuquerque.

"So then from there, we said, you know what? Maybe we should settle down. And that's when we switched to having sales teams fly out and do this stuff on our behalf and do the gym turnarounds, and we could stay central."

The quote describes a strategic shift in the business model to improve efficiency and stability.

Wealth Accumulation

  • The business's revenue increased dramatically to $1.5 million a month.
  • Alex's personal savings grew significantly, allowing him and his partner to buy a $1.8 million house in cash in Austin.
  • Despite increasing wealth, Alex maintained a modest lifestyle, with minimal living expenses and a focus on work.

"During this period of time, the business went from the turnaround business at $300,000 a month to 1.5 million a month."

This quote indicates the rapid increase in business revenue, which led to substantial wealth accumulation for Alex.

Personal Finance Philosophy

  • Alex emphasizes the importance of valuing personal expenditures over business valuations.
  • He and his partner continued to live modestly, even when the business was highly profitable.
  • They pursued a conservative approach to spending, driven by fear of losing their wealth.

"The car we owned in cash, which was Prius, aka hashtag Mozimobiles. Those of you who are valuing your business over your personal expenditures."

Alex is advocating for a personal finance approach that prioritizes having control over personal assets and minimizing liabilities.

Lifestyle Changes and Realizations

  • After achieving financial security, Alex and his partner indulged in luxury by purchasing a Bentley, but soon realized it did not align with their values.
  • They sold the Bentley at a loss but were happier for it, understanding that expensive possessions were not important to them.

"I talked to Bradley and I talked to Bert Castillo, friends of ours, and they were like, dude, you got to spend some money. And I was like, all right, so we bought a fancy car and I realized quickly that we didn't care and so we sold it."

This quote reflects a brief departure from Alex's usual frugality, followed by a quick return to his core values regarding money and possessions.

Personal Finance and Wealth Accumulation

  • Alex and their partner practiced frugality by eating out only once or twice a month.
  • Their business revenue increased from $1.5 million to over $4 million a month during a period of disciplined spending.
  • They accumulated around $30 million in cash and assets after taxes without selling any business equity.
  • Alex emphasizes the importance of taking dividends and focusing on profitability rather than reinvesting all cash back into the business.
  • Derisking by saving and having cash available helped them sustain their companies during unexpected events like COVID-19.

"Our wealth continued to grow because everything that was in excess from an income perspective just poured straight into our savings."

"I think we accumulated around, I want to say $30 million after taxes in cash and assets or cash equivalents, things like that."

"I learned to take dividends because I realized that I was giving myself an excuse by reinvesting every dollar of cash flow into the business, which a lot of times meant that I just wasn't really focused on profitability."

These quotes highlight the strategy of saving excess income, the significant wealth accumulation as a result, and the shift in mindset from reinvestment to profit-taking for financial stability and growth.

Lifestyle and Relative Spending

  • Alex lived in a $1.8 million house, which they could afford to pay for in cash every month based on their income.
  • Despite the high value of their home, their spending was modest relative to their income.
  • Alex's approach to spending and lifestyle is security-driven, ensuring that their living expenses are always a small fraction of their income.

"Yes, we lived in a $1.8 million house and yes, we sold the house for $4,000,000.02 and a half years later."

"Relative to my income, and this is why I wanted to make this video, is for context, right?"

These quotes illustrate that although Alex's living arrangements might seem luxurious, they are carefully calibrated relative to income, maintaining a high level of financial security.

Liquidation of Assets and Current Expenditures

  • In 2021, Alex and their partner sold all their personal assets, including three businesses, a car, and their house.
  • They began renting a condo for $15,000 a month and spending the same amount monthly on food and eating out.
  • Their lifestyle is structured with a focus on time management and relaxation, with evenings spent dining out and unwinding.

"Now, after that, those of you, some of you know, is that in 2021, we sold everything."

"We spend about $15,000 a month on food and eating out."

These quotes detail the decision to sell off personal assets for liquidity and the current living expenses, which are aligned with their lifestyle choices and financial capabilities.

Travel Preferences and Cost-Benefit Analysis

  • Alex and their partner previously flew private for convenience but have since switched to using JSX for west coast travel.
  • JSX offers many of the benefits of private flying but at a fraction of the cost.
  • The decision to change their mode of travel was based on a cost-benefit analysis that favored JSX over private jets.

"We flew private because it saved us time, and it turned travel from a negative into a positive. But JSX, I think, accomplishes all that."

"It's not expensive. And so we stopped flying private because spending $50,000 on a plane flight, if I can get basically the same benefit for $400, is worth it."

These quotes explain the rationale behind changing travel habits from private flights to JSX, emphasizing time savings, convenience, and cost-effectiveness.

Business Growth and Income

  • Alex's business, acquisition.com, is currently generating over $150 million a year.
  • The business has grown significantly, and Alex maintains a conservative figure in videos to avoid updating the number frequently.

"We're doing over $100 million a year, but right now we're over 150."

This quote indicates the current scale and success of Alex's business ventures, demonstrating substantial growth in revenue.

Income and Lifestyle Correlation

  • Alex discusses the disparity between income growth and lifestyle expenses, highlighting that their lifestyle hasn't increased in proportion to their income.
  • Emphasizes the importance of being security-driven, which influences their spending habits.
  • Suggests that maintaining low personal expenses is key to material wealth accumulation.

"I don't think our lifestyles have increased at the proportion that our income has."

This quote illustrates the concept that Alex and Leila's income has grown significantly without a corresponding increase in their lifestyle expenses, implying disciplined financial behavior.

"If the goal is material wealth accumulation, then the lower your personal expenses, the more you will accumulate."

Alex is making a straightforward point about wealth accumulation: keeping personal expenses low allows for greater savings and wealth growth.

Peace of Mind and Financial Ratios

  • Alex believes peace of mind is based on the ratio of income to expenses.
  • He introduces the concept of a "fu number," which represents financial independence.
  • The speed of reaching this number depends on both income and spending.

"And your peace of mind will be predicated on the ratio between your income and your expenses."

This quote emphasizes the idea that financial security and peace of mind are a result of a favorable balance between what you earn and what you spend.

Conscious Spending and Value

  • Alex challenges the societal norms of spending, advocating for purchasing based on personal value rather than societal pressures.
  • He mentions the "Mozi mobiles" and potentially "mosey mansions" hashtags as part of a movement to reconsider spending habits.
  • The discussion includes the decision-making process behind flying private versus a more cost-effective alternative, JSX.

"It's really less about living cheap and more about spending money on the things that you value rather than what society has told us to value."

Alex is encouraging conscious spending, where individuals prioritize their values over societal expectations when it comes to financial decisions.

"Am I buying this because I want status from other people or because I really think that this thing confers value?"

This quote prompts listeners to reflect on their motives for making purchases, questioning whether they are driven by a desire for status or genuine value.

Wealth and the Game

  • Alex defines wealth as a ratio between income and expenses and the resulting peace of mind.
  • He shares his personal goal of achieving "enough" to feel peace of mind and now continues to grow wealth for the love of the game.
  • Alex believes that wealth is about the process of becoming, not obtaining, and that true wealth is a state of mind.

"Wealth is the ratio between income and expenses and the peace of mind that you have from knowing that you have enough."

Alex encapsulates his definition of wealth, emphasizing the importance of financial security and the psychological comfort it brings.

"Wealth occurs, or you become wealthy the moment you decide you are, because you will realize at some point that money will buy you freedom, it will not buy you happiness."

This quote suggests that wealth is a mindset and that while money can provide freedom, it cannot purchase happiness.

Value Assessment and Spending

  • Alex encourages listeners to critically evaluate the value they derive from their purchases relative to their cost.
  • He discusses the importance of the income to expenses ratio, regardless of absolute income levels.
  • Advocates for investing in skills to increase earning potential and accelerate wealth accumulation.

"Are these things that I'm buying really adding more value than the price that I'm incurring to purchase them?"

Alex is advising listeners to assess the actual value they get from their purchases, encouraging them to think critically about their spending decisions.

"It's about the ratio between income and expenses."

This quote reiterates the theme that financial well-being is not about how much you earn in absolute terms, but rather how you manage the relationship between your earnings and your expenses.

Gratitude and Community

  • Alex expresses deep gratitude for his audience, acknowledging their support and the sense of community it provides.
  • He shares a sense of connection with his audience, indicating that it makes him feel less alone.

"I don't deserve this audience that you guys have come together. You guys are amazing, and I'm so grateful."

Alex is showing appreciation for his audience's support, indicating that he values the community they have formed around his content.

"It definitely makes me feel less alone."

This quote reveals Alex's personal feelings of connection and solidarity with his audience, which he finds meaningful and supportive.

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