You Can’t Save Your Way to Abundance
The Amplified Impact Podcast
October 19th, 2023
Around five years ago, a partner said, “You can’t save your way to profitability.”
It clashed with the idea that saving is king.
The truth is…saving matters, but you can’t save your way to abundance.
When you’re making $40,000 a year, saving a lot won’t make life feel abundant. The key is to earn more. Going from $50,000 to $100,000 made a real difference for me.
At Invictus Capital, we were super efficient with expenses, but it wasn’t enough. Increasing revenue was easier than trying to save more.
Balance your financial game; defense (managing expenses) is vital, but offense (earning more) is the real game-changer.
Remember, you can’t save your way to abundance.
TWEETABLE QUOTE:
“The truth is, defense wins championships, but only if the offense is able to put points on the board.”- Anthony Vicino
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Episode Transcript:
Anthony Vicino:
It must have been like five years ago, right? At this point. I was sitting in a boardroom meeting with one of my partners at Escape Climbing, and he said something at the time which it sounded profound, but then when I unpacked it, I was like, I don’t think that’s technically true. And I didn’t really agree with it because he didn’t wordsmith it perfectly. And over the years, as I’ve continued on my entrepreneurial journey and more gotten more experienced, more more perspective, I understand what he was trying to communicate and how to communicate it a little bit differently. And so I want to share this.
Anthony Vicino:
With you because it’s actually a really.
Anthony Vicino:
Profound idea that came back to the forefront of my mind this past week at Invictus Capital. So what he said was, you can’t save your way to profitability. And at the core of this, he’s not technically right, because yes, you actually can save your way to profitability. And I think the reason that this didn’t jive with me when he first said it was because it conflicted with one of the lessons a mentor had taught me at the very beginning of my entrepreneurial journey, which is that a dollar saved is worth more than a dollar earned. And the reason for that is just because a dollar earned is always on a margin, right? You have your operating expenses. So if you bring in a dollar of revenue and you have say, 50% margins, that means for every dollar of revenue you bring in, $0.50 makes it to your bottom line. But on the other hand, every dollar of expense that you can cut is a dollar that goes directly to the bottom line. So whereas in that example, a dollar earned is only worth fifty cents, a dollar saved is worth a dollar.
Anthony Vicino:
And so that was a message that was very important for me in understanding how critical it was to control for expenses within your businesses. My partner’s insight though was you can’t save your way to profitability. And while that’s technically not true, there is a way of phrasing this that I think is dead on, smack in the middle of the target, and it’s super important to pay attention to it’s. This you can’t save your way to abundance a little bit different than profitability, but you cannot save your way to abundance. And this is very important to understand in your personal finances is that if you’re only making 40,000 $50,000 a year, you can at max, only save $50,000 a year if you were managing to cut down all of your expenses. Now, that is still not a ton of money. In the grand scheme of things, especially if you ever get sick, a loved one gets sick, or you want to be able to take a vacation, go.
Anthony Vicino:
Do stuff, theoretically you have zero expenses.
Anthony Vicino:
So you’re living somehow magically for free. I don’t know how that would be possible, but the point is if you’re only making $50,000, even if you’re able to save like 80% of that, you’re still not going to be able to live an abundant life. And so one of the mistakes I think personal financial gurus make when they’re talking about what you should do at.
Anthony Vicino:
The beginning of your journey, they talk.
Anthony Vicino:
A lot about saving and cutting expenses. And that is very damn true in the sense that you need to not outgrow your expenses. You need to live within your means.
Anthony Vicino:
But in my experience, what really changed.
Anthony Vicino:
The trajectory of my financial life wasn’t that I started saving more. It was that I started earning more. Instead of like making $50,000 a year and trying to instead of save $25,000 a year, I tried to save 30. It was much easier for me to just to go and make $100,000 a year and suddenly that was another 50,000 that could go into the savings or then make 200,000 or 300.
Anthony Vicino:
And so because there is no limit.
Anthony Vicino:
Theoretically to how much you could earn that’s exponential whereas there is only so much you can save and so you can’t save your way to abundance. And I was thinking about this in the context of Invictus Capital because we have roughly 30 buildings that we own and manage. And one of the buildings, this is.
Anthony Vicino:
An interesting one, we were doing our investor communications.
Anthony Vicino:
I was working with our marketing manager to figure out the narrative that we wanted to share with our investors about one particular building where the returns came in just slightly lower than expected by a couple of hundred basis points. Not a huge deal or anything, but I was helping him understand the different levers that go into that ultimate return to somebody. And as we were going through it, our expense ratio was something like 35%. But our pro forma or our budget, the goal was like 40%. So we were actually saving even more. Like we were running more operationally lean and efficient by like 5% than we had intended. So we were saving, but we weren’t in a place of abundance. And so this was the conversation we were having is like how is it that we are 5% under on our expenses and yet we’re still not hitting the target? And the reason for that is because the revenue number wasn’t where we had expected it to be.
Anthony Vicino:
It wasn’t where we wanted it to be. And so the easiest way to change all that complexion wasn’t to try and.
Anthony Vicino:
Go in the next quarter and reduce.
Anthony Vicino:
Our expenses from 35% down to 30% which would be very, very difficult. Instead it would be go and increase our revenue by 5%. That would be the easier solution if we could do it by 1015, 20% even better. And so it’s so important sometimes that we do focus on the expenses but to not get wrapped up into the at the exclusion of everything else when the reality is, in my experience, it’s a lot easier. And I know this is going to sound crazy to you if you’re maybe not making as much money as you want to, it is easier to increase your earning potential than it is to continually cut and starve your expense lines. Now, I’m not saying you should ignore that, but I’m just saying of the two, one of them is typically easier than the other. So you cannot save your way to abundance. Hopefully this makes sense.
Anthony Vicino:
A couple of competing paradoxical ideas that you have to be able to balance. It’s not throw out the baby with the bathwater. You have to be able to walk in the nuance in the gray area between the two ideals.
Anthony Vicino:
You need to manage your expenses, which.
Anthony Vicino:
Is your defense, but you also need to put points on the board, which is your offense.
Anthony Vicino:
And truth is, defense wins championships, but.
Anthony Vicino:
Only if the offense is able to put points on the board. So you got to be able to win both games.
Anthony Vicino:
Hopefully, this gives you a way of.
Anthony Vicino:
Thinking about that, a new framework or a new perspective. And that’s all I got. That’s it? That’s all. I hope this brings you guys a lot of value.
Anthony Vicino:
As always, thank you for being here. We’ll catch you in the next episode.
Anthony Vicino:
But until then, stay hyper focused, my friends.
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