How Estheticians Can Build Financial Freedom Outside the Treatment Room with Mel Abraham

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Welcome to the Esthetician Podcast, the podcast for estheticians who are tired of working nonstop, feeling stuck in their business.
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Hey, I'm Kari Jo, and I'm an esthetician of 20 years.
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I built and I sold my aesthetics company after learning the business side that nobody ever teaches us.
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And each week we are gonna figure out what is actually happening in your business and what to fix first and how to build a business that actually is gonna give you more freedom, more profit, and most importantly, more peace.
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So let's get into today's episode.
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Mel, I'm so excited you are here because we need to have this conversation.
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And it's a conversation that I don't feel like we have in the aesthetics industry enough.
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And it's the one thing that I've noticed time and time again is that aestheticians, we get really good at like making money with our hands, but we're not necessarily building wealth outside of our hands.
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And so today I really want to focus our conversation and how to get really practical.
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And I want every aesthetician that's listening to walk away knowing what their next financial step looks like.
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So good.
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So we get first thanks for having me.
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This is gonna be fun, and I think it's it's a huge need.
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It's and and just so they not to let the pressure off, but just so they know they're not the only ones in this boat.
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Right?
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They're in good company, yes, and Mel works with everyone, like all the celebrities, they all know them, and so we're in really good hands today.
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So one thing that I notice and I see over and over again with aestheticians' income is we are so tied to the income we produce with our hands.
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So like if we get sick, right?
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Or we get burnt out, anything like that, the income just stops.
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Like, how risky is that?
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It's a huge, it's a huge risk.
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I mean, this is I came, you know, as a CPA, it was the same thing.
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If I wasn't billing hours, I wasn't getting paid.
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And and the problem that we have is that we've been indoctrinated into a society that focused on, hey, go get a good job, go get a good profession, build a good career, build a business.
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So they kept our eye on the earnings ball, which is totally fine.
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And they kept saying, earn, earn, earn, earn, earn, which is what you're doing.
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And the the challenges, that what they didn't tell us is that earnings was never meant to give us freedom, it was simply meant to pay us for an impact we were having, a solution we were given.
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And from that payment, we get cash flow.
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That's it, that's where it stops.
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And and until you realize that until you are able to separate your earnings from the efforts to earn them, you will be imprisoned by the earnings treadmill, as I call it.
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And I and I learned this, I learned this the hard way at the hands of a six-year-old, my my son.
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I was a single full-time dad.
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I he was living with me, he had just been with me for six months at that point.
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And he came home from school one day and he said, Daddy, daddy, I drew a picture of you at school today.
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And I kneeled down, look at this picture.
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And next thing I see, I'm thinking it's gonna be us playing ball.
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I think it's gonna be us in Disneyland and all the things.
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And no, it was me standing in front of two computer screens with a phone in each ear.
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He wasn't even in the picture.
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And in that moment, he put a mirror into my soul of honesty that that only a child could do because he didn't that wasn't meant that way.
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But all of a sudden, this whole idea of going, I'm screwing up the greatest gift I had, being a dad.
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And and it it pained me.
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And so many people kept saying, Well, wait a second, you just need work-life balance now.
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But see, think about balance.
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If I have a balance, that means I have a weight on one side, I have a weight on the other side, they're playing tug-of-war, and in the middle, they're balanced.
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But that's like saying I'm gonna put my feet in the frying pan, my head in the freezer.
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On average, I'm warm.
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It doesn't work.
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And what I realized that was missing was not balance in my life, but harmony.
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And harmony comes from being intentional with your time because it's not about equal time, it's about the intention of the time.
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And as an institution's working and and building and doing things, that intention might be just to build for now and know that you're in the season of building.
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But there'll be a time that maybe you'll be in the season of parenting or the season of of mentoring, or the and there's these intentional moments that you put into your your days and your career and your profession that start to allow that.
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That's the one, that's the the first piece.
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And so Jeremy is the one that got me to start looking at how do I separate my earnings from the efforts to earn it?
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And that's where the whole idea of what I teach, the money machine, came up is that you have an earnings machine, it's your practice, it's what you do.
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But the freedom isn't in the earnings machine.
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The freedom is in the money machine.
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Legacy and freedom is in the money machine because we have to take that cash flow, properly build something that works without us efforting all the time.
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Then we have a chance to take time off, then we have a chance to step away, then we have a chance to live a life of choice and say, Do I want to do this?
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You know, five days a week, six days a week, three days a week, and make a choice.
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But until we start to raise the awareness and make the decision, say, oh, I get it.
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I need to earn, but I need to build at the same time.
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That's where we that's that's the miss, that's the missing link.
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I love what you just said about, yeah, I need to earn, but I need to build at the same time.
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Because I feel like so many aestheticians, they follow me because they're like, oh my gosh, you know, I want what Carrie did.
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I want to build or I want to build a business and sell it, retire, right?
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But like while I was, you know, earning with my money, I was also building on the side.
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Yeah.
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And so I want to jump into that a little bit because that is what you talk about is the money machine.
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And I want my audience to really understand what is the money machine?
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Like, can you describe that for us?
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Yeah.
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Yeah.
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Bottom line is what it is.
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It's built, but the money machine is built on a a let's just call it a sources of income that don't require your efforts, as much effort.
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Right now, right now, to do the work that you you're doing, it's a one-on-one relationship between the effort and the earnings.
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You gotta be standing behind the chair or by the chair.
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Otherwise, you step away, the cash machine stops.
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So there's a framework that I teach called the five incomes.
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And what that is, and like a lot of people say, well, I need passive income.
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So I'm gonna I'm gonna break the myth that ain't no such thing as passive income.
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All right.
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Your relationship with your income and your wealth is just that.
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It's a relationship.
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And if you've been in any kind of relationship, you know that if you take a passive approach to the relationship, it will wither and die.
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And it happens with your income and your and and your wealth just the same.
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So when I look at it, I said, I look at it through the eyes of leverage.
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How much effort and time do I have to put in to make that happen?
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So when we look at the five incomes and we go up the ladder, the amount of effort goes down, the leverage goes up.
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That means that I get more of my time back.
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So at the bottom rung, it's what I call active income.
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And active income is your one-on-one stuff.
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It's your whether you're an employee or solopreneur or something like that, it is one-on-one.
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It takes your effort, it takes a lot of time.
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Step above that is what I call business income.
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That's where you start to leverage.
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Maybe you have some other folks doing some of the work for you.
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You get a little bit of time back and everything, but it still requires you.
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So the bottom two rungs of the five incomes don't really get you to escape the earnings, the earnings treadmill.
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It's the next three that do.
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So the next step up, which is what you did, is asset-based income.
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Buying other assets with the cash flow you're creating from the bottom two, things like real estate or equipment that you you rent, that you can buy it and put it out there, and it's generating cash flow.
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And there's effort to build to buy it and get it set up, but then it cash flows.
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So that's asset-based income.
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Above that is what I call residual-based income.
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You create something like my book.
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You create something once, you sell it, and it keeps selling, and you get paid a residual income stream.
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But you're not having to recreate it every single time.
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Okay.
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And then above that is portfolio income.
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That's your typical investment, stocks, bonds, annuities, those kinds of things.
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When you look at your life, your money machine is built by income streams from the top three asset-based, residual, or portfolio.
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If you don't have that, and we can talk about the accounts and all that stuff, but if you don't have that, then you're you're beholden to the earnings, the active effort that you have.
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So what I tell my clients and my students is I want you to be able to replace at least 80% of your income, your your current lifestyle with the top, the income from the top three.
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That's that's the goal.
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Because when you can do that, it gives you the freedom of choice.
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So I'll tell you a real, and this is the power of this kind of came through with me in 2019.
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2019, everything was going great.
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I'm traveling around the world, I'm speaking on big stages, I'm working with some big entrepreneurs and millionaires and billionaires.
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Life was good.
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I I literally, two weeks before this happened, I stepped off of someone's private jet, a G5.
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It's like if you've never been on G5, you got to do it once and hope someone else pays for it, you know?
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Um, but two weeks after that, I found myself in a hospital bed.
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Now I'm a healthy dude.
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I work out all the time.
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I try to eat healthy.
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I had a sweet tooth.
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But this doctor looks at me and he says, You have a what looks like a five-centimeter tumor in your bladder.
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You have cancer.
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And I go, What?
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I'm not a smoker, not a drinker.
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I no one in my family's ever had cancer.
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How's you know?
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And he says, I said, What do we need to do?
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Just take it out.
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And he says, Well, where it's at, we we have to take it out, but where it's at, I don't know if we have to remove the prostate.
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We might have to put a bag and a tube in for the kidney.
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Um, if it's bad, you lose your bladder and it's cancer.
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Your life's online.
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I'm like, what just happened?
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I'm like, everything got turned turned over.
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I'm like, my son's there, my my wife's there, and and I said, life's changed.
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I said, I'm shutting everything down.
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So I stopped getting on planes, I stopped for the most part, speaking, I stopped doing any of my any of my work, and I said to my my wealth team, I said, turn the machine on.
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Start letting the cash flow come to us so we can I can fight this demon and have the peace of mind that we're taking care of.
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So we didn't reduce our lifestyle.
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Our lifestyle changed just because of the cancer, but we didn't reduce things, we weren't selling things, I wasn't draining accounts.
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I was, I mean, you know, I was like, I didn't sell my wife's shoe collection.
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That would have been a fate worse than the cancer, but um, that's the thing is that I allowed ourselves to live off of the cash flow from the top three without changing everything.
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And then when I came out on the other side of the cancer, um, you know, four, three surgeries, four tumors, and 57 treatments had a recurrence and all that's in there after years of it.
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We just flipped it.
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I told the team, I said, I'm going back to work because I'm in a season of service.
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Let me get out there and do my speaking and my work.
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And that's when I wrote the book and everything.
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And I said, So we shut the machine down.
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I went back to the business and the active income and just kept on going.
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But the machine grew during that whole time.
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That's what I want for everyone.
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Because I believe it's possible for everyone.
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And I'm not saying and building wealth and building that freedom, it's simple.
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It's not necessarily easy depending on any stage or circumstance, but it's still simple.
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And if you just make some specific moves and you stay with it, the math will always math out.
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Yeah.
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Yeah, that is incredible.
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And I think what that shows a testament to is that like your systems actually work because you were under pressure.
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Like it was that was a big pressure moment in your life.
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I also what I love so much is, and I never thought about it this way until I started listening to you, is I loved your ladder because I feel like so many aestheticians, we are so busy.
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And then our next step, because we all get into it for freedom, right?
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And so our next step, we're like, we need a hire, and we hire, right?
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And I know, you know, that's never gonna be freedom.
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And so I love that you called that out, and you're like, well, that's not where you get it.
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Like, and then and I didn't even realize when you were going through the ladder, I didn't even realize what I had done.
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But truly and honestly, I am following your ladder because I did go to like I went, I hired, and then I went to assets, and then I wrote a book and things like that.
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I didn't even realize that I was, but when you I see the freedom that I've gotten from each of those, and that is just clear.
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I was staying.
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I I feel like what so many aestheticians have a hard time with is they're like, yes, that sounds so good, but they don't even see it as being possible for them, like getting the assets or something like that.
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How do we start getting them to think differently?
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So here's here's the first thing to think about.
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There's no one listening to this, watching this that has money issues.
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You don't.
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And now you you if we were sitting face to face, you go, you haven't seen my checking account.
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And I go, I don't need to.
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See, we have money symptoms, they're symptoms of choices, decisions, and behaviors from the past.
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And the challenge is that that becomes really confronting for a lot of people.
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But it also should be empowering because often we think to build wealth, I need to have the magic formula.
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I need to be born on the right side of the tracks, or I need to be good with math and all those things.
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They could be true, but that's not what drives the wealth.
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And the other side of it is that they say, well, I'm just gonna hustle harder.
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I'm gonna take on more classes, I'm gonna work more hours, and that doesn't do it because here's what happens you may end up with a big bank account, but you have a horribly bankrupt life account.
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And neither that's not success.
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It is a behavior.
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And so the first thing to realize is that it's our decisions, choices, and behaviors that impact our wealth.
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Now, most people come to wealth, and this is a framework I call the wealth priority pathway, where we go out and we earn income.
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We then pay for our lifestyle, and we see what's left over, and we take that and we say, that's what I'm gonna build my wealth with.
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The problem is that means that you're building your financial future with scraps, whatever's left over.
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And you'll use excuses like, I'm young, I'll get to it one day, and you placate it.
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Those that build wealth will look at it differently.
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They'll say, I'm gonna earn income, I'm gonna invest first, I'm gonna take care of my future first, and then I'm gonna look at what's left.
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And if what's left is what I'm what I'm gonna use to build my life, and and now I you'll hear people say, Well, then it wouldn't be much of a life.
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I say, Well, great.
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Now you know it.
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So now we need to go back and look at one, and this is where most people stop.
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I gotta look at my spending.
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I gotta cut, I gotta cut, I gotta cut, I'm gonna cut out the lattes.
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The lattes aren't making you broke, okay?
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But the fact of the matter is that we do want to look at where our money is going.
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And in a practice like an aesthetician, do you have do you have inventory sitting on shelves that is taking up cash flow that maybe isn't good management for inventory, all kinds of things, and in personal life.
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But hear me on this.
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You can never cut your way to wealth.
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We have to look at the other part of the equation, and that's your income.
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And so we have to start looking at how do I elevate my income so that I can take care of my future and my present at the same time.
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And so now we got to look at things through the eyes of the income.
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And the first place when someone says, I need to earn more, my first statement or question to him is, have you owned your worth first?
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Here's what I mean by this.
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And I come, like I said, I come from a profession of the accountants.
00:18:44.880 --> 00:18:53.680
We bill by the minute, the hour, whatever you want to call it, horribly devalue the solution.
00:18:53.680 --> 00:19:00.240
And so now what we're doing is we've commoditized it, and now there's no value in it.
00:19:00.240 --> 00:19:11.599
See, we need to look at the solutions that you provide and stand in the conviction of the transformation of the person that's sitting in the chair.
00:19:11.599 --> 00:19:20.640
And when you do that and you present it in that way, they're no longer buying a session.
00:19:20.640 --> 00:19:24.880
They are buying the transformation, which is far more valuable.
00:19:24.880 --> 00:19:31.359
And now we start to other because the first stopping place, well, I'll work more hours, I'll take on a side gig, I'll go drive for Uber.
00:19:31.359 --> 00:19:39.599
No, let's first own our value and make sure that we can stand in the conviction of it and know that some people may not pay it.
00:19:39.599 --> 00:19:48.880
But there will go, there'll be those that absolutely will honor it and say, I get it because this is this solution, the transformation is valuable to me.
00:19:49.200 --> 00:19:53.359
Okay, guys, Mel is talking about creating assets and building wealth.
00:19:53.359 --> 00:19:57.119
But before we build wealth, we've got to stop leaking money.
00:19:57.119 --> 00:20:04.400
And one of the biggest leaks I see solo estheticians is simply missing new clients because they're with another client.
00:20:04.400 --> 00:20:08.400
I wanted to bring on Kate to explain what is actually happening.
00:20:08.400 --> 00:20:13.519
So, Kate, why do so many potential clients never leave a voicemail?
00:20:13.759 --> 00:20:15.119
That's a great question.
00:20:15.119 --> 00:20:19.519
A missed call isn't just a missed message, it's often a missed client.
00:20:19.519 --> 00:20:24.640
And today's consumer don't behave the same way they did 10 years ago.
00:20:24.640 --> 00:20:27.839
Most people won't leave a voicemail anymore.
00:20:27.839 --> 00:20:31.279
They'll simply call the next business that enters.
00:20:31.279 --> 00:20:42.240
If you don't have a system that immediately texts them, acknowledge their call, and follows up while you're with the client, you're likely losing people you never knew wanted to book.
00:20:42.240 --> 00:20:50.880
You spend the money and time getting the phone to ring, but if no one responds quickly, that marketing investment is wasted.
00:20:50.880 --> 00:20:53.200
And this is why we built Zolie.
00:20:53.200 --> 00:20:56.960
Zolie answers calls in the owner's own voice.
00:20:56.960 --> 00:21:03.039
It answers repetitive questions about service hours and even parking directions.
00:21:03.039 --> 00:21:06.640
It gets appointments straight onto the owner's calendar.
00:21:06.640 --> 00:21:12.160
And on top of that, Zolie also does things that human receptionists cannot do.
00:21:12.160 --> 00:21:15.359
It filters out spans and sells calls.
00:21:15.759 --> 00:21:16.240
Yeah.
00:21:16.240 --> 00:21:17.839
Well, that was so helpful.
00:21:17.839 --> 00:21:28.160
And if you're listening to this, and this is something that you guys are actually struggling with, well, I have partnered with Zolie because I really believe this fills a gap for solo estheticians.
00:21:28.160 --> 00:21:31.200
You can learn more using my link in the show notes.
00:21:31.200 --> 00:21:36.000
And Kate has also given the Esthetician podcast listeners 20% off.
00:21:36.000 --> 00:21:39.039
So use Kari Jo when you are signing up.
00:21:39.039 --> 00:21:41.359
Now let's get back to the episode.
00:21:42.319 --> 00:21:46.799
Now, what we can do is we get the income up in some ways.
00:21:46.799 --> 00:21:53.440
And there's there's literally nine ways to elevate your your revenue and everything.
00:21:53.440 --> 00:21:59.759
But what happens is that now you can get a little more excess to start using that.
00:21:59.759 --> 00:22:00.880
To build.
00:22:00.880 --> 00:22:07.200
And here's the other side of it is people will say, well, when I make more, then I'll start building.
00:22:07.200 --> 00:22:09.279
Here's the problem.
00:22:09.279 --> 00:22:12.319
Time is your greatest lever.
00:22:12.319 --> 00:22:25.519
If I put a dollar away at age 20, okay, and I just invest it over time, by the time I'm age 65, it goes up 88 times.
00:22:25.519 --> 00:22:34.640
If I wait to age 30, just 10 years, it only goes up 23 times.
00:22:34.640 --> 00:22:40.799
So point being is that the earlier you get in the game, the better off you are.
00:22:40.799 --> 00:22:42.720
And remember, I said it's behavior.
00:22:42.720 --> 00:22:48.880
So I don't care whether you say to me, hey, all I got is 50 bucks.
00:22:48.880 --> 00:22:51.279
I can do $50 a week.
00:22:51.279 --> 00:22:52.000
Great.
00:22:52.000 --> 00:22:54.160
Let's start with 50 bucks a week.
00:22:54.160 --> 00:23:00.480
50 bucks a week put into an SP 500 fund over 30 years.
00:23:00.480 --> 00:23:08.079
50 bucks a week over 30 years, $200 a month, is going to turn into hundreds of thousands of dollars.
00:23:08.079 --> 00:23:13.200
And then all of a sudden you sit back and say, Well, maybe I can go a little more.
00:23:13.200 --> 00:23:20.880
And what happens is that you go to maybe four or five hundred dollars a month.
00:23:20.880 --> 00:23:25.200
Now all of a sudden, that turns into close to a million dollars.
00:23:25.200 --> 00:23:27.039
And it's just a little thing.
00:23:27.039 --> 00:23:33.920
I did this with with hair, uh, a group of hairstylists that I spoke at their at their national conference.
00:23:33.920 --> 00:23:36.079
And I said, here's what I want you to do.
00:23:36.079 --> 00:23:38.240
And the institutions, you can do this too.
00:23:38.240 --> 00:23:45.759
Now, I I I clearly don't go to an institution, but um, and so I don't know how the services are are priced.
00:23:45.759 --> 00:23:53.039
I do know my wife does, but but here's the thing: what I told the hairstylists to do, and and I'm gonna invite you to do the same thing.
00:23:53.039 --> 00:23:57.279
Take the first service every single week, put it away.
00:23:57.279 --> 00:23:58.720
Investing's done.
00:23:58.720 --> 00:23:59.839
Now get on with it.
00:23:59.839 --> 00:24:00.799
That's it.
00:24:00.799 --> 00:24:05.119
Just make it simple and make it automatic and put it away.
00:24:06.240 --> 00:24:08.240
Yeah, yeah, I love that.
00:24:08.240 --> 00:24:15.920
And I think that what I took from that is just start where you can.
00:24:15.920 --> 00:24:17.039
Do you know what I mean?
00:24:17.039 --> 00:24:36.079
And I think that that is the problem because what ends up happening if we don't do what you just said is then I get on these phone calls with these aestheticians that are in their 60s and they're tired and their body hurts, and they're like, I just want to be done, but I didn't do anything, like I didn't start.
00:24:36.079 --> 00:24:36.960
Do you know what I mean?
00:24:36.960 --> 00:24:45.279
And so I think I love that just however much you can or taking that very first appointment and getting started with that.
00:24:45.279 --> 00:24:46.480
I feel like that's so simple.
00:24:46.480 --> 00:24:48.480
I feel like that's something we can all do.
00:24:48.480 --> 00:24:54.079
I am wondering, because you do have like a lot of CPA knowledge and things like that.
00:24:54.079 --> 00:25:07.759
So if you are an esthetician, I'm just wondering where if you have a bunch of extra money after, like, say we put some away and things like that, where would you put your money to work?
00:25:07.759 --> 00:25:13.519
Would you put it into like an emergency fund debt retirement?
00:25:13.519 --> 00:25:14.079
Where would you go?
00:25:14.640 --> 00:25:16.799
So this is a this is a great, a great question.
00:25:16.799 --> 00:25:20.880
Let me I'm gonna step back to what you said about starting now, real quick.
00:25:20.880 --> 00:25:25.359
Yeah, just I want to give you some some data because this will hopefully get them to understand.
00:25:25.359 --> 00:25:28.799
Most of us think that we're building wealth and it's a linear thing.
00:25:28.799 --> 00:25:33.039
If I need a million bucks and I want it in 10 years, it's a hundred thousand a year.
00:25:33.039 --> 00:25:33.599
No.
00:25:33.599 --> 00:25:40.880
Think about this: $10,000 a year at 8%, $10,000 a year at 8%, $833 a month.
00:25:40.880 --> 00:25:46.799
It will take you, by doing that, it will take you seven and a half years to hit the first hundred thousand.
00:25:46.799 --> 00:25:51.440
It will take you twenty and a half years to hit half a million.
00:25:51.440 --> 00:25:55.839
So now you're 20 and a half years in and going, I'm only halfway to a million.
00:25:55.839 --> 00:25:57.039
Are you kidding me?
00:25:57.039 --> 00:26:00.480
But that's when what the wealth creation curve takes off.
00:26:00.480 --> 00:26:06.400
To go from a half a million to a million, it takes you only seven and a half years.
00:26:06.400 --> 00:26:12.400
It takes you actually less time to make the last half a million than it may took to take the first hundred thousand.
00:26:12.400 --> 00:26:19.920
That's why getting in the game with whatever you got starts to eat up the time and get the game going with that.
00:26:19.920 --> 00:26:20.720
All right.
00:26:20.720 --> 00:26:23.039
So going to your question now.
00:26:23.200 --> 00:26:23.599
Yeah.
00:26:23.839 --> 00:26:25.200
There is a hierarchy.
00:26:25.200 --> 00:26:27.359
It's something that I call the wealth priority ladder.
00:26:27.359 --> 00:26:27.680
Okay.
00:26:27.680 --> 00:26:29.839
And it's something that I talked about in my book.
00:26:29.839 --> 00:26:30.559
It's there.
00:26:30.559 --> 00:26:34.240
Um, but it literally, here's the here's the challenge.
00:26:34.240 --> 00:26:36.160
And this is something we're not taught.
00:26:36.160 --> 00:26:37.920
So there's nothing to be embarrassed with.
00:26:37.920 --> 00:26:40.480
Look, as an accountant, I wasn't taught this.
00:26:40.480 --> 00:26:41.920
They taught me how to count the money.
00:26:41.920 --> 00:26:44.720
They didn't teach me how to keep the money or build the money.
00:26:44.720 --> 00:26:45.279
Yeah.
00:26:45.279 --> 00:26:47.519
I had to figure this thing out.
00:26:47.519 --> 00:26:56.960
And so there is a hierarchy, a recipe, if you will, that allows you to say, How do I optimize things?
00:26:56.960 --> 00:27:01.920
Now, when I look at things, I say, how do I make things safe first, growth second?
00:27:01.920 --> 00:27:04.799
I want an unshakable foundation for y'all.
00:27:04.799 --> 00:27:11.440
So the very first money I have people put away is at first, is I call it a comfort fund.
00:27:11.440 --> 00:27:19.680
I want you to put $1,500 or one month's expenses aside in a high yield savings account.
00:27:19.680 --> 00:27:20.799
That's it.
00:27:20.799 --> 00:27:22.960
This is not your emergency fund.
00:27:22.960 --> 00:27:27.599
This is a the transmission breaks, something happens.
00:27:27.599 --> 00:27:33.920
It's I'm not going in the ditch and I'm not swiping a credit card and I'm not going to parents or friends saying I need to borrow money.
00:27:33.920 --> 00:27:38.319
And so this is one of those things that once you do it, you do it once and it's done.
00:27:38.319 --> 00:27:44.480
So I'll tell people like, do me a favor, just go around in your house and see what you're not using.
00:27:44.480 --> 00:27:49.759
Put it on Facebook Marketplace, sell it, get the cash, put it aside.
00:27:49.759 --> 00:27:54.799
Now you know you have the comfort of having something there in case.
00:27:54.799 --> 00:28:02.480
From that, the next stage, the next step is to look at two things at the same time.
00:28:02.480 --> 00:28:07.599
Now, this is where me and a lot of the other personal finance folks uh differ.
00:28:07.599 --> 00:28:13.680
A lot of people will tell you get yourself out of debt before you start investing.
00:28:13.680 --> 00:28:15.599
I think it's a mistake.
00:28:15.599 --> 00:28:19.599
Now, mathematically, it makes sense.
00:28:19.599 --> 00:28:22.559
Practically and behaviorally, it doesn't.
00:28:22.559 --> 00:28:25.039
Because remember, I said it's a behavior.
00:28:25.039 --> 00:28:34.880
Debt payment and debt management is a very different habit and mindset and muscle group than wealth creation.
00:28:34.880 --> 00:28:37.599
I think you need to do them at the same time.
00:28:37.599 --> 00:28:44.720
And because if you don't, it's like the it's like the dude that goes in the gym, works his upper body, never does the lower body.
00:28:44.720 --> 00:28:48.640
You know, he's fine until he puts on shorts and you go, what is that?
00:28:48.640 --> 00:28:52.960
Um, so I want you to take the next set of dollars.
00:28:52.960 --> 00:29:03.119
And if you have uh consumer debt, credit card debt, student loan debt, things that are for lifestyle, that kind of stuff.
00:29:03.119 --> 00:29:06.559
First, I need you to stop going into debt to fund your lifestyle.
00:29:06.559 --> 00:29:09.680
That means that there might be some cutting and some tough decisions.
00:29:09.680 --> 00:29:16.160
But then take those balances and get yourself on a debt payment plan, either an avalanche or snowball method.
00:29:16.160 --> 00:29:17.599
Um, I've got a tool.
00:29:17.599 --> 00:29:18.319
It's free.
00:29:18.319 --> 00:29:19.279
They can go get it.
00:29:19.279 --> 00:29:22.240
It's go to MelAbraham.com forward slash no debt.
00:29:22.240 --> 00:29:27.920
Put your stuff in there, decide which way you want to pay it down and just follow it.
00:29:27.920 --> 00:29:28.799
Just pay it.
00:29:28.799 --> 00:29:37.119
So now you're paying your debt down while at the same time taking a portion of it and putting it in an emergency fund.
00:29:37.119 --> 00:29:39.279
I call it a peace of mind fund.
00:29:39.279 --> 00:29:41.440
Same high yield savings account.
00:29:41.440 --> 00:29:45.279
I want the emergency fund is three to six months of cash.
00:29:45.279 --> 00:29:52.079
Peace of mind fund, I want you to push to nine to 18 months, especially in this kind of business.
00:29:52.079 --> 00:30:01.759
If you're not buying the chair, if you have, God forbid, something like that happened to me, you need the liquidity to keep that unshakable foundation in place.
00:30:01.759 --> 00:30:10.880
As you get that done, if I have my debt covered or is getting paid down and I got my emergency fund in place, now I can start to look at investing.
00:30:10.880 --> 00:30:15.359
And this is where I turn around and say, okay, now we're going to take money and start putting it away.
00:30:15.359 --> 00:30:21.519
The goal is that I'm going to end up out of destructive debt, so I have no debt.
00:30:21.519 --> 00:30:29.839
I have liquidity in a high yield savings account, and now I'm putting away 20 to 25% of my income in investments.
00:30:29.839 --> 00:30:35.759
Now, where you allocate that is different.
00:30:35.759 --> 00:30:43.200
Now, most of the most of the the aestheticians, they're independent, so they're not working for a company where there's a 401k and a match.
00:30:43.200 --> 00:30:49.039
So at the uh at the bottom of that, I would try to get the match, but it it typically doesn't apply.
00:30:49.039 --> 00:30:58.079
So at the start, the easiest, simplest thing to do is to open up an IRA, actually a Roth IRA.
00:30:58.079 --> 00:31:01.440
Because here's the thing.
00:31:01.440 --> 00:31:06.720
Now, the Roth IRA you can put like $8,8100 a year away in that.
00:31:06.720 --> 00:31:09.200
You don't get a tax deduction for it.
00:31:09.200 --> 00:31:10.960
But watch what happens.
00:31:10.960 --> 00:31:17.599
The money you put away in a Roth will grow tax-free for the rest of your life.
00:31:17.599 --> 00:31:24.480
So you put $8,000 away for a couple of years and then it grows like crazy.
00:31:24.480 --> 00:31:29.440
When you need the money after age 59 and a half, you pay no tax.
00:31:29.440 --> 00:31:31.440
And it's grown tremendously.
00:31:31.440 --> 00:31:42.160
There are people, Peter Thiel, who was the founder of PayPal and all that stuff, he took the PayPal stock, put it in a Roth IRA, and it grew to billions.
00:31:42.160 --> 00:31:46.720
Do you know that he can pull all that money out of the Roth Ira?
00:31:46.720 --> 00:31:48.640
Never pay a dollar tax in it.
00:31:48.640 --> 00:31:50.160
It's totally legal.
00:31:50.160 --> 00:31:52.079
And everyone has access to it.
00:31:52.079 --> 00:31:53.759
People are screaming, that's not fair.
00:31:53.759 --> 00:31:55.200
Well, it is fair.
00:31:55.200 --> 00:31:56.319
That's in the code.
00:31:56.319 --> 00:31:58.400
We just got to be smart enough to use it.
00:31:58.400 --> 00:32:01.279
So my first place I would go is to the Roth.
00:32:01.279 --> 00:32:02.720
Now there are some limits.
00:32:02.720 --> 00:32:09.680
If your income is too high, and depending on the year and whether you're married, that you know, 150,000, 250,000.
00:32:09.680 --> 00:32:14.960
I'm I don't remember the numbers off the top of my head, then you don't qualify for a Roth.
00:32:14.960 --> 00:32:18.559
And if that's the case, then I would just do a regular IRA.
00:32:18.559 --> 00:32:21.599
Or you can do something something a little more complicated.
00:32:21.599 --> 00:32:24.960
But the point is that we're putting money away.
00:32:24.960 --> 00:32:32.400
And I'm going to take it a tax advantage way of putting it away first and then move into a regular brokerage account.
00:32:32.400 --> 00:32:34.000
So that's how I would do it.
00:32:34.319 --> 00:32:35.759
Yeah, that's really interesting.
00:32:35.759 --> 00:32:43.920
Because I think most people think of going to 401k, but then you're going to get taxed on that, right?
00:32:43.920 --> 00:32:44.640
Is that right?
00:32:44.960 --> 00:32:47.680
So this is a good question.
00:32:47.680 --> 00:32:49.519
You can do a 401k.
00:32:49.519 --> 00:32:54.079
And the only reason I picked the Roth or the IRA is because it's simpler.
00:32:54.079 --> 00:32:56.559
You don't need to go open up a 401k.
00:32:56.559 --> 00:32:58.880
You just go to a brokerage house and say, I need a Roth IRA.
00:32:58.880 --> 00:33:02.319
So that's the easiest, lowest threshold way to do it.
00:33:02.319 --> 00:33:09.599
If you have the cash flow and and everything, you're better off doing a 401k because the limits are higher.
00:33:09.599 --> 00:33:18.400
So you can go and open up a if you don't have employees or your only employees a spouse, you can do a what's called a solo 401k.
00:33:18.400 --> 00:33:23.119
Now instead of 8,000, you can put in $22,000, $523,000.
00:33:23.119 --> 00:33:28.240
So you get almost three times, three times the the limit.
00:33:28.240 --> 00:33:33.680
And when they create the 401k, you can make that a Raw 401k.
00:33:33.680 --> 00:33:36.079
Now two things happen with this.
00:33:36.079 --> 00:33:40.400
Is one, instead of 8,000, you can go to 20 something thousand.
00:33:40.400 --> 00:33:43.359
But two, remember I said there was an income limit?
00:33:43.519 --> 00:33:43.680
Yeah.
00:33:43.920 --> 00:33:47.839
There's no income limit on a 401k on a Raw 401k.
00:33:47.839 --> 00:33:49.920
The income limit doesn't apply.
00:33:49.920 --> 00:33:55.599
So you could you could use a 401k to do the same thing to get more money away.
00:33:55.599 --> 00:34:00.799
But if we're just starting out and cash flow is tight, the easiest thing is a Roth IRA.
00:34:00.799 --> 00:34:07.759
And now down the road you can put a 401k in and and make it a Roth 401k.
00:34:08.079 --> 00:34:09.679
Yeah, that's really good.
00:34:09.679 --> 00:34:13.199
So let's say I would love your opinion on this.
00:34:13.199 --> 00:34:16.159
So let's say we built our savings.
00:34:16.159 --> 00:34:20.079
We're, and I love how you were like, you know, pay off debt.
00:34:20.079 --> 00:34:30.639
I do love your philosophy of pay off debt and do the retirement at the same time because I do think that it is harder to pay off debt if you want the spender.
00:34:30.639 --> 00:34:31.440
I'm a girl.
00:34:31.440 --> 00:34:33.039
I like to spend, you know what I mean?
00:34:33.039 --> 00:34:36.000
It's easier to save than it is to spend, you know.
00:34:36.000 --> 00:34:38.000
So I do like doing both of them.
00:34:38.000 --> 00:34:41.519
So say we're doing all that.
00:34:41.519 --> 00:34:55.679
Now I'm starting to wonder like, should I keep pouring money into growing my business or should I start buying outside assets outside of my business?
00:34:55.679 --> 00:34:57.199
What would you do?
00:34:57.920 --> 00:35:00.960
So it's a yes and question.
00:35:01.199 --> 00:35:01.440
Yeah.
00:35:01.599 --> 00:35:01.920
Really?
00:35:01.920 --> 00:35:04.880
It's a yes and answer, I guess, is how it look at.
00:35:04.880 --> 00:35:07.360
You got to make a decision, right?
00:35:07.360 --> 00:35:11.679
At some level, am I going to build the business?
00:35:11.679 --> 00:35:14.079
And what am I building the business for?
00:35:14.079 --> 00:35:15.679
Am I just trying to get rid of you?
00:35:15.679 --> 00:35:17.519
So let's just look at myself.
00:35:17.519 --> 00:35:24.960
I have the option to build my practice and build everything in a way that I potentially could sell it.
00:35:24.960 --> 00:35:28.880
But in order to sell it, that meant that I needed to bring people in.
00:35:28.880 --> 00:35:30.639
I needed to manage the people.
00:35:30.639 --> 00:35:33.599
And at one point I had 29 people working for me.
00:35:33.599 --> 00:35:45.920
Um, and and so I had to bring people in, I had to build something that could run without me so I could then transfer it, meaning I got to transfer the relationships and all that stuff.
00:35:45.920 --> 00:35:54.159
That didn't excite me because after going through managing 29 people, I go, I don't, I don't really want to do that.
00:35:54.159 --> 00:36:02.559
So in that moment, I realized I just made a decision that said, I'm not going to build something to sell.
00:36:02.559 --> 00:36:08.880
And even if I did, 80% of businesses that get listed don't get closed, don't get sold.
00:36:08.880 --> 00:36:15.280
So it's not, it's not the windfall that a lot of people think that it could be.
00:36:15.280 --> 00:36:26.000
Uh and so so if we're betting our whole future on selling the business, I think what we should do is build the future and assume that it doesn't get sold.
00:36:26.000 --> 00:36:28.880
And if it gets sold, it's it's icing on the keg.
00:36:28.880 --> 00:36:35.199
So we have to make the decision of how we want to run the business and what we're gonna do with that with that business.
00:36:35.199 --> 00:36:45.840
Then once we do that, the plan has to be in place to say, okay, no matter what, whether I'm selling it or not selling it, I need to build something outside of it.
00:36:45.840 --> 00:36:51.440
And that's in the upper three elements of the of the five incomes.
00:36:51.440 --> 00:37:06.320
That means that I'm either acquiring real estate, I'm either building something, maybe it's products and stuff that I can get residuals and sell to other salons and things like that, or or I'm investing in stocks and bonds and all of that type of stuff.
00:37:06.320 --> 00:37:11.679
Because if I don't do that, the only way out is selling a business.
00:37:11.679 --> 00:37:15.119
Now, I have to invest in the business.
00:37:15.119 --> 00:37:24.320
So that means that when I do my my planning, I've got to have a portion of my profits that's used to build like this.
00:37:24.320 --> 00:37:27.280
Is called the Apple's Cashway Cashflow Matrix.
00:37:27.280 --> 00:37:44.960
It's like I gotta have the profits that are coming out, and then some of them are gonna get split and go back into the business, and others are gonna go to build this other, this, this other asset pool that allows me at some point to say, do I want to do this anymore?
00:37:44.960 --> 00:37:49.119
Or do I want to just sell it and know that this machine is taking care of me?
00:37:49.119 --> 00:37:51.760
It doesn't matter what I get on the other side of it.
00:37:51.760 --> 00:37:55.840
So it's not a it's not an either or.
00:37:55.840 --> 00:37:59.119
It is something that we have to plan for the and.
00:37:59.119 --> 00:38:05.840
And so, because your business is going to need the cash flow to fund it and to grow it for a period of time.
00:38:05.840 --> 00:38:10.159
But your your money machine still needs that too.
00:38:10.639 --> 00:38:15.440
Yeah, I think that was so smart because I have talked to some aestheticians.
00:38:15.440 --> 00:38:28.639
They're like getting ready to retire, and they're not really interested at that point in bringing on a bunch of employees because I mean, heavens knows, we know it's a lot of work, you know.
00:38:28.639 --> 00:38:32.079
And so they're like, Well, what do I do now?
00:38:32.079 --> 00:38:46.000
And so I love that you gave them a second option, you know, like it's not just this, that's icing on the cake, but here there's another option for you to still get there.
00:38:46.000 --> 00:38:48.320
And I think that's valuable.
00:38:48.960 --> 00:38:50.079
Yeah, it's huge.
00:38:50.639 --> 00:38:51.119
Yeah.
00:38:51.119 --> 00:39:02.719
Well, Mel, I am so grateful that you came on today's podcast because I just believe that financial education is like the one thing that is missing so much.
00:39:02.719 --> 00:39:10.239
We teach so much on skills and marketing and everything, but I believe that we have to get financially educated to grow.
00:39:10.239 --> 00:39:16.320
And so I love listening to you and everything that you say, I always learn something.
00:39:16.320 --> 00:39:20.960
Like, I'm always like, wow, I never thought of it like that, even on this episode.
00:39:20.960 --> 00:39:26.960
And so I know that there are so many other estheticians that are gonna be listening to this episode and they're gonna feel the exact same way.
00:39:26.960 --> 00:39:29.119
So, how can they find you?
00:39:29.119 --> 00:39:31.599
How can they learn more?
00:39:31.599 --> 00:39:33.679
And where should they start?
00:39:33.920 --> 00:39:39.199
I think, well, I got a bunch of stuff on my on my website, melabraham.com.
00:39:39.199 --> 00:39:55.119
Um, my YouTube channels where I put out two videos a week going through different topics, different things, and it's it's not it is about finance and and and wealth and money, but it's more than that.
00:39:55.119 --> 00:40:02.880
Because if if all I did was teach you how to build a bank account, then I I failed horribly.
00:40:02.880 --> 00:40:04.559
I want you to live a rich life.
00:40:04.559 --> 00:40:22.880
And rich life means that it's your design, it's based on your values, it's what you want, and that you're experiencing and feeling life, and that there's joy in it, and it's not just chasing commas and zeros in a bank account because we can all do that and be miserable at the end of the day.
00:40:22.880 --> 00:40:29.039
And so I talk about all those things and how to make sure that that we we do that.
00:40:29.039 --> 00:40:31.360
So those are probably the the two biggest things.
00:40:31.360 --> 00:40:39.760
I also have something that is that we've started to put people through, it's called a constraint diagnostic.
00:40:39.760 --> 00:40:50.320
What we don't understand is the financial pressure we're under is no different than the hip pain you might have and that you've normalized in your life.
00:40:50.320 --> 00:40:55.920
Because you sit back and go, it's there and you just kind of go through, or hand pain, or whatever it is.
00:40:55.920 --> 00:40:58.400
But we've normalized the financial pressure.
00:40:58.400 --> 00:41:01.840
And the financial stress creates financial pressure.
00:41:01.840 --> 00:41:05.840
That financial pressure creates emotional load.
00:41:05.840 --> 00:41:16.079
That emotional load infects our relationships, our health, and everything we do, even the interactions with the client, because now it impacts something called decision noise.
00:41:16.079 --> 00:41:18.159
How do we make decisions and choices?
00:41:18.159 --> 00:41:27.039
Now all of a sudden, that pressure causes you to take on a client that you wouldn't otherwise take on because you're making a decision from survival and cash in that perspective.
00:41:27.039 --> 00:41:33.280
We created a diagnostic tool, constraint diagnostics, it's on my website, totally free.
00:41:33.280 --> 00:41:42.000
But you go in, you answer 15 questions, it'll let you know where you are in the matrix and it'll let you know what your primary driver is.
00:41:42.000 --> 00:41:43.519
Is it is it financial pressure?
00:41:43.519 --> 00:41:45.039
Is it emotional load?
00:41:45.039 --> 00:41:46.320
Is it decision choice?
00:41:46.320 --> 00:41:52.239
And then what's the recipe, at least the first stage of the recipe, to start to get it fixed?
00:41:52.239 --> 00:41:55.760
I think those are probably great places to start.
00:41:55.760 --> 00:42:00.800
Um, and then just to realize that wherever you are, you are.
00:42:00.800 --> 00:42:03.440
Whatever choices you made, you made.
00:42:03.440 --> 00:42:06.159
I have not made great choices in my past.
00:42:06.159 --> 00:42:08.880
I lost one-third of everything I owned in a Ponzi scheme.
00:42:08.880 --> 00:42:09.280
All right.
00:42:09.280 --> 00:42:10.239
This guy did.
00:42:10.239 --> 00:42:15.360
Like wiped out between me and two friends, we lost over four and a half million bucks.
00:42:15.360 --> 00:42:19.519
But I rebuilt it and tripled it within 18 months.
00:42:19.519 --> 00:42:24.079
So my point is that whatever happened in the past is the past.
00:42:24.079 --> 00:42:25.360
Don't beat yourself up.
00:42:25.360 --> 00:42:28.159
Don't sit back and go, I wish I would have started at 20.
00:42:28.159 --> 00:42:28.639
You're right.
00:42:28.639 --> 00:42:31.199
I wish I started at one, but I didn't.
00:42:31.199 --> 00:42:37.440
So we start where you're at, we give you the tools that you need, we get you on the path, we don't complicate it.
00:42:37.440 --> 00:42:44.800
Bottom line is this spend less than you make, put the excess away, get the money to work harder for you than you did for it.
00:42:44.800 --> 00:42:48.639
And now all of a sudden we're separating your earnings from the efforts to earn it.
00:42:48.639 --> 00:42:51.199
And that machine will give you a life of choice.
00:42:51.519 --> 00:42:51.920
Yeah.
00:42:51.920 --> 00:42:53.840
Wow, that is amazing.
00:42:53.840 --> 00:43:07.039
And I just have to double down on what you said because I feel like it's so important to pick people, mentors, and people that inspire and that you listen to based off of their values.
00:43:07.039 --> 00:43:19.440
And I think that's one reason that I resonate with you is because of everything that you've gone through in your life, like it has, I think you really found the value of time.
00:43:19.440 --> 00:43:29.360
And when I sold my business, one of the main reasons I sold it is because I was like, I just gave up all that time with my family just to build that.
00:43:29.360 --> 00:43:30.880
And I'm never doing that again.
00:43:30.880 --> 00:43:32.000
Do you know what I mean?
00:43:32.000 --> 00:43:33.039
And so true.
00:43:33.039 --> 00:43:39.360
I I think it's so important to find mentors that have the same values as yours.
00:43:39.360 --> 00:43:47.920
And I just really I resonate with everything that you that you put out there because you do value that time with your family.
00:43:47.920 --> 00:43:52.960
And I think that's what all of us moms and even dads, we want that time.
00:43:52.960 --> 00:43:55.440
And so I want to thank you for everything that you're doing.
00:43:55.440 --> 00:43:58.079
And I'm gonna put all those resources in the show notes.
00:43:58.079 --> 00:44:01.519
And Mel, thank you again for coming on the Esthetician podcast.
00:44:01.679 --> 00:44:05.920
Oh man, thank you for having me and just reaching out and saying, Hey, would you be interested?
00:44:05.920 --> 00:44:07.280
The answer is yes.
00:44:07.280 --> 00:44:08.639
This is what I'm here to do.
00:44:08.639 --> 00:44:14.480
Like it's I'm in a season of service, and thank you for giving me the gift to be able to serve your audience.
00:44:14.880 --> 00:44:23.760
If today's episode hit home for you, the next thing I want you to do is go and download my free esthetician weekly number tracker.
00:44:23.760 --> 00:44:28.239
Most estheticians are trying to fix everything all at once.
00:44:28.239 --> 00:44:35.039
When really, it's usually one number that is quietly breaking the business.
00:44:35.039 --> 00:44:40.880
This tracker, it helps you figure out what number is actually hurting your business first.
00:44:40.880 --> 00:44:49.039
So when you know what to focus on, instead of feeling like you're all over the place, you can start changing your company.
00:44:49.039 --> 00:44:54.639
You can download it at Karijopatterson.com forward slash start.
00:44:54.639 --> 00:44:58.880
And remember, you don't need to fix everything at once.