Money Secrets of the Millionaire Mailman: Part 1 – Gaining Control
Saving money is something that mostly everyone has struggled with at some point in their lives. There are certain times where it seems nearly impossible to get out of debt. For this episode of The Motivational Intelligence Podcast, Dave Naylor and Sean Johnson discuss a time in Dave’s life where he was able to pay off all of his credit card debt- with the help of a man named Jerry who was a million dollar mailman (yes, you read that right!).
With budgeting, negotiating with credit card companies, and working hard, what seemed like an impossible situation turned into one of triumph. Many people assume that financial success is completely based on how much you make, but that actually isn’t true. It is actually determined by what you do with whatever amount of money you make, big or small. With the right structure and discipline, it is possible to save money and also pay off debt, if you do it right!
Interested in hearing more? Be sure to check out our newest episode of The Motivational Intelligence Podcast, entitled “Money Secrets of the Millionaire Mailman: Part 1 – Gaining Control”, and tune in next week for Part 2: Growing Net Worth!
Money Secrets Part 1
Sean Johnson: All right. We got our cappuccinos. We are good to go. How you feeling?
David Naylor: Feeling alright, Little bit of cold coming on but yeah, you know.
Sean Johnson: You’re mixing the cough drop with the cappuccino, which I got to imagine is an interesting combo.
David Naylor: It’s a mentho-lyptus latte, I think I might sell the rights to Starbucks.
Sean Johnson: Yeah, you’re a Pioneer. Is it any good?
David Naylor: So if anybody walks into Starbucks, and sees the mentho-lyptus latte, you heard it here first!
Sean Johnson: Exactly
David Naylor: I have to rush out to the patent office and see if I can get a lockdown before Starbucks.
Sean Johnson: Get that trademark baby!
David Naylor: It’s one of my million dollar ideas. Years ago I read an article where they said that the average person will have seven million dollar ideas in the course of their lifetime.
Sean Johnson: Really?
David Naylor: Yeah, seven some.
Sean Johnson: All right. That’s a well that’s a good spot. I feel like I believe that. I think that you know, the difference is most people don’t really do much about.
David Naylor: Yeah, exactly. Yeah.
Sean Johnson: All right, so that’s actually that this is a good segue. So where I want to start is who is the millionaire mailman?
David Naylor: When I was in college. I worked at a health club. And there was a whole assortment of people at the at the health club and one of them was this guy, Jerry ,who was a mailman and I got to know him.
I would come and help him work out, you know those kind of things. I didn’t really know much about Jerry, other than the fact that he was a mailman and he was a member of the club. But later in my life, Jerry retired and he played a much bigger role in my life than just some guy I met at the gym.
Sean Johnson: So what was going on because you’d mentioned a story about Jerry. What was going on in your life, so he was a retired Mailman, and how did you get to know more about Jerry? What kind of role did he play in your life? What do he do for you?
David Naylor: I’d come out of college. I was in I guess my second job outside of college and then actually, I left there to come to 2logical and in my first year at 2logical, you know, the company was really in its launch phase. I think I made two thousand dollars that year.
And that was also the year that Michelle and I got married. It was also the year that we bought our first house. She was finishing up her Nursing degree and didn’t really have a lot of money coming in.
Sean Johnson: So a lot going out, and not much coming in?
David Naylor: Exactly and basically what I did to help us to get through things is at this time there were all these credit card offers where you could get zero percent interest for six months and all that kind of stuff. So I saw that as my financial Panacea, and so I started borrowing borrowing money on credit cards and it got to the point where I had a little bit over $38,000 in credit card debt. So no money coming in and $38,000 credit card debt. Not exactly a recipe for financial prosperity.
Sean Johnson: Yeah
David Naylor: So basically it got to the point where I was using one credit card to make the minimum payment on another credit card, so I could kind of keep floating us along.
But as you can well imagine, the stress level that comes from that, it was ridiculous.
Michelle and I were fighting over money, like stupid things. I still remember to this day, we were grocery shopping on time and she wanted to buy a little can of clams. It’s probably three bucks and I remember we got into an argument at the grocery store about I’m like, “we can’t afford those” and she’s like “It’s three dollars”, I was trying to Shield her from everything that was going on. I was kind of…
Sean Johnson: Bearing the brunt of it, so she didn’t really have a full picture.
David Naylor: No idea. She probably would have married me if she did. So there was all kinds of stress and stuff I was feeling from that.
Sean Johnson: Yeah, that’s kind of all on your shoulder
David Naylor: Oh my god, it was terrible. We all have the low points in our lives. In hindsight, it’s probably true in a lot of situations. Oftentimes our darkest times are the most valuable times, when you have the ability to look in hindsight, and this decidedly was for me.
So, I knew Jerry from the gym and one day, I was there working out and he was there working out and we just got talking. I made some offhanded comment about money or grumbling about it or something like that. And Jerry, very casual said “you know, I’ve always been pretty good with money”, and I kind of looked at him and go “the guys a freaking mailman, I don’t think they pay a mailman a lot of money….
Sean Johnson: Right, yeah!
David Naylor: I had no idea at that point in time the guy was literally a multimillion-dollar Mailman.
Sean Johnson: That’s incredible.
David Naylor: Isn’t it though?
Sean Johnson: Yeah. Like what’s the salary coming in it?
David Naylor: He probably never made more than 50 Grand a year in his life.
Sean Johnson: That’s crazy.
David Naylor: Isn’t it though? Yeah, and it wasn’t like a rich uncle or you know anything like that.
Sean Johnson: Well, that’s what I’d be like, “who did inherit the money”?
David Naylor: Yeah, you know you wonder was he stealing lottery tickets.
Sean Johnson: I feel like people like that are always good case studies for an area of life or specific skill or anything. And Tim Ferris has this this question, “who’s good at this that shouldn’t be?”
When it comes to that, a guy who’s really wealthy that shouldn’t be. Where you wouldn’t think that person would be. They are usually the ones that have really figured out the principles behind it.
David Naylor: and that was Jerry. I asked him if would have lunch with me.
Sean Johnson: Did you buy or did he buy?
David Naylor: He did actually
Sean Johnson: Okay, that’s good.
David Naylor: Yeah, and here’s the first lesson, get someone else to pay. I laid out the situation for him, you know and I said, “you said you were good with money, obviously. I’m not good with money.”
Sean Johnson: Which I think is an important point that you were able to admit that, “Alright, I’m not doing so good with this.”
David Naylor: Yeah. I mean there was no hiding at that point, you know Michelle and I were fighting about it. And yeah, your floating credit card to credit card.
And so I said, will you teach me what it is you’ve learned or how do you do this? Because you know, I’m obviously failing in this aspect.
Sean Johnson: So you sat down with him and I think that’s important, you got to the point where you’re like “okay, I’m not doing so good with this that’s pretty obvious at this point”, but you know finding somebody who is doing well with it and taking the time to try to learn from them is an important point and and probably something that I would imagine a lot of people not seeking that help out because it’s just it hurts their pride to much.
David Naylor: Sometimes desperation is a wonderful thing.
Sean Johnson: Yeah where it’s kind of bad…
David Naylor: Yeah.
Sean Johnson: Yeah, but you were kind of at the point of no return, where you had to figure something out.
David Naylor: Absolutely. I mean things were just heading in a progressively worse situation and I’m six months married at that point in time. I knew I had to do something.
Sean Johnson: Yeah. Okay, so you sit down with to lunch with Jerry and what happens at the lunch?
David Naylor: So, the first thing he asks me is “so well, tell me what’s going on.” So I laid out this situation to him. And I said, “you know the biggest problem is that I just got to get to the point where I’m making more money. I can if I can just make more money than I can afford to basically buy my way out of this situation.” And I’ll never forget how he responded, he goes “that’s not going to help you at all.”
And I literally sat back in the chair. I was like, “what are you talking about?” And he said to me “being financially successful has almost nothing to do with how much money you make.”
Sean Johnson: And here’s a living example of, you know that would be very easy to dismiss if he wasn’t sitting there as a mailman worth a couple million dollars
David Naylor: Exactly. And so it’s like what are you talking about? He said, “everybody thinks that financial independence is based upon the amount of money you have coming in. In reality it has very little to do with how much is coming in and everything to do with how much is going out.”
He goes and so people they always think “I got to make more money but they don’t realize that there is so much is flowing out on the backside that it really makes no difference. So, we’re sitting at the gym having lunch and he said “look around here, there’s a lot of people here that are successful business people. They make pretty decent incomes for themselves. And if you look, I’ll bet you that the vast majority of them are nowhere near as financially successful as you might think they are.”
He said “because think about it, say these folks have significant income but they have significant expenses. They’re paying for this, they’re paying for that. They’re taking expensive trips there, you know. So because they have a lot coming in but have just as much going out, their net worth is no better than somebody who was making half of what they are.
Sean Johnson: Yeah, that’s that’s an interesting it’s you know, I think people’s tendency is the more money you start making, you just tend to upgrade your lifestyle on the same curve of your income going up. Which I guess you’re kind of treading water at that point.
David Naylor: That’s exactly right
Sean Johnson: So you’re sitting there at lunch and he drops this bomb on you
David Naylor: Yeah, he’s already level setting my thought process.
Sean Johnson: Yes. So this is kind of the first lesson that he taught you: if somebody is making more money, it doesn’t necessarily make them more rich.
David Naylor: So what he did is he said “there’s two things that you have to do. The first thing is you’ve got to get control over your money. Once you’ve got control over your money then you can begin to focus on building a net worth. Most people never get any control over their money, and because of that, it’s almost impossible for them to build a net worth.” So for me, the one thing I concentrated a lot on in my life was making sure that I had control over my money and that’s really what allowed me to build the net worth.
Sean Johnson: Yeah. In order to get control over over our money, how do we do that? What/where did he guide you?
David Naylor: So the first thing he said is “you have to put a budget in place right now.” You know that dirty “B” word, and I got kind of reactionary to a budget.
Sean Johnson: That’s what poor people have, a budget.
David Naylor: Exactly, and I was like, I want to make a lot of money so I don’t have to have a budget. And he said, “a budget isn’t something that poor people have to use. It’s something that allows you to be able to steer your money. You can’t steer your money if you don’t know where it’s going.”
Sean Johnson: That’s a great way to put it! Getting it down on the paper, where’s my money going? So what was the process like for that? What did you do? He says the dirty “b” word, you need a budget. And after a little squirming, you give in. What was the next step for you? How did he have you work a budget?
David Naylor: He said, “look at what all of your fixed expenses are.” At that point in time, it was a mortgage, car payments, insurance and those types of things. So he said, “go through and figure out what your fixed expenses are. Some of these things you pay once a year, twice a year. I want you to go through and figure everything out monthly, If you pay your car insurance off every six months, divide that out monthly, so you know what your exact fixed expenditures are every single month.” So, that was the first thing he did.
He said “you gotta know what your baseline is.” And then what he did “the fixed expenditures because you may be able to have some influence over because like maybe you can get little cheaper insurance or something like that. But because you may not have a lot of control over those things, it’s the variable expenses that you really got to get a handle on. That’s the piece that most people don’t pay enough attention to and they don’t realize how much goes out in those variable expenses.”
He gave me a just one of those little like three-by-five spiral-bound notebooks and he said “I want you to carry this with you. And anytime you open your wallet, any time you spend anything on anything, you know any amount on anything, I want you to write it down over the course of the next month. Everything…”
Sean Johnson: Like a cup of coffee.…
David Naylor: Yeah, you know all of those things, your gas tank, you buy some music, whatever it is, you got to you got to write it down. And that was that was an eye-opening exercise as well. I really had no idea how how much all of those seemingly little inconsequential things added up.
Sean Johnson: You were spending a lot more just out of pocket and pulling out your wallet a lot more often than you were initially thinking?
David Naylor: Exactly, and the other thing that it did, this was interesting, it made you aware of when you were doing it because you had to pull it out.
David Naylor: Now you’re much more conscious of this, whereas before I wasn’t paying attention to that at all.
Sean Johnson: Yeah, you’re just pulling out your wallet whenever, kind of just impulse, flying by the seat of pants.
David Naylor: Exactly, yeah, so he had me do that and it took about a month to go through and do all of that and then we sat down again. And he created the categories and he asked me, “how much do you want to spend in these categories?” So we sat down and we went through it.
He had me go home, talk to Michelle and we consciously decided, it was kind of a cool exercise, how much do we want to spend on groceries every week, how much do we want to spend on gas?
So consciously choosing rather than just doing it. The other thing that was cool was that Michelle and I each decided how much did we basically wanted to give ourselves every month to spend. Which was cool because the discretionary money, so to speak. Often you see couples, they get in arguments because he went out and bought this or she went out and bought that and they create this resentment.
Michelle and I each set a dollar figure, which was what we basically allowed ourselves to spend. It was totally discretionary, whatever we wanted to do with it. We never fought about that stuff after that, because she gets her money, she can do whatever she wants with it and I do what I want with mine, right?
Sean Johnson: You both had the same amount, right?
David Naylor: Yeah, and so that was a that was one of those things that it took a lot of stresses out of the relationship. But again, it helped us maintain a measure of control.
Sean Johnson: So for a month you track everything, at the end of the month you categorize all those expenses and you have totals for those categories and then you’re looking at that saying “okay, here’s what it is now. What do we want it to be in terms of what we’re spending these categories” and part of that was setting aside discretionary money for you and Michelle.
David Naylor: Yeah.
Sean Johnson: Okay. So at this point, you basically have your budget of what you want to stick to. It’s one thing to have a budget, but how did you actually stick to it?
Because that’s something that is just as important if not more important than just taking the time to put together a budget. How you break the habit and say I’m actually sticking to it?
David Naylor: Yeah. Well, so credit cards were the kind of the bane of our existence, you know in those early phases and we’ve gotten away from this more now. But even in those early phases of things we did everything cash. And so we literally would have this is the money for groceries this month and this is your gas money for this month and my gas money for this month. So that contained it more, it took the variability away from it.
Sean Johnson: So you made it super simple to stay active. Pull out the envelope and this is what I got. Okay, so, all right, so you kept it super simple for yourself. Was that basically it, just making it simple enough to stick to it? What’s to stop you from “I got this envelope in my pocket, we’re going to get gas. But I also have the grocery envelope in my back pocket and I want to go into the gas station and buy some snacks or whatever” What’s to stop you from from doing that?
David Naylor: The fact that you wanted to eat the last five days of the month. You could Rob from Peter to pay Paul if you wanted to but that was the fixed amount there was. You were going to pay the price in some way shape or form.
Sean Johnson: Yeah. So did you have to change the way you are thinking about spending or about money and in order to really buy into this?
David Naylor: Definitely because of the way he set it up I was decidedly very much an Impulse Spender. You know with this kind of “I’ll buy this now and figure out how to pay for it later.” So by by putting the structure in place it it was impossible for me to do that. It made everything much more deliberate.
Sean Johnson: Yeah. Okay, so you just you basically set up the system where you don’t really have a choice, right?
David Naylor: There was there was limited opportunity to cheat.
Sean Johnson: Yeah. Okay. Alright, that’s that’s good. So he has you set up this budget. Puts a system in place where here’s your envelopes for all of these different categories and what you spend for the month and then at the end of the month, for the next month you kind of do the same thing, you fill the envelopes back up?
It keeps it super simple and limited opportunity for cheating. So, part of that was just getting out of the habit of using credit cards it sounds like?
David Naylor: That was huge part and that was really the second thing. We first had to get control of our money, you know with the budget.
So the second thing he did was we sat down we talked about personal debt and he explained to me “there are incredibly smart people in the world who spend their entire careers scheming on how to keep us paying them interest. You know what most people fail to realize is how much of their net worth they lose the interest.
Sean Johnson: It’s because it’s just a it’s hard to see. it’s these little bits at a time.
David Naylor: And it seems like it’s 30 dollars a month that I pay in interest on my car payment or $200 a month my mortgage and those kinds of things. You don’t think about them in the aggregate, over the course of that loan or the course of that mortgage, how much are you paying? And not only that but if you didn’t have to pay and you were able to take that money instead and invest it over the course of time. What difference would that make?
Sean Johnson: Yeah. So not only are you not spending it but you’re actually making money. So instead of paying interest you’re making interest, right?
David Naylor: Right. So, he said “I want you to put in place a plan where you’re minimizing your personal debt. I want you to get to the point where you’ve eliminated a hundred percent. That’s the ideal situation. If you have a mortgage then, have a mortgage but have the shortest mortgage that you can and work to prepay it down. If you can get rid of it, don’t have a car payment. Get to the point where you own your vehicle and you’re not making payments on it.”
His philosophy was absolutely, either eliminate or minimize whatever that personal debt is so that again you’re keeping more of your money for yourself, in my case that allows me to pay off my credit card debts. And once that’s paid off then you can begin to take that money and invest it. One of the other things and this was this was an interesting thing, I again, $38,000 in credit card debt.
Sean Johnson: which is a is a lot but I think the average American probably has like nine or ten Grand in in credit card debt. So it’s like not an uncommon thing and then you don’t even touch the the student loans, which is how many trillions of dollars, particularly my generation is student loan debt.
David Naylor: So, you know and it’s it’s not only 9 Grand in debt. But look at what the average interest rate on that is. For me back in the days, my average interest rate for $38,000 was over 19%. I was taking one credit card and using it to make a minimum payment on another credit card. Jerry’s showing me this he goes “if you keep making the minimum payments, it’s designed so that you will never pay off that credit card debt.” So the bank’s goal in that is to keep you paying them nineteen percent interest for the rest of their life.
Sean Johnson: Yeah, because you’re basically at that point with the interest if you’re doing the minimum payment, you’re just treading water.
David Naylor: Exactly.
Sean Johnson: The misconception is people think that even if they’re doing the minimum payment, they think that they’re paying the debt down, they’re not…
David Naylor: They are just covering the monthly interest.
Sean Johnson: Yeah, exactly. So they’re staying exactly where they are. Paying a couple hundred bucks to not go more into debt, but staying exactly in the amount of debt that already are.
David Naylor: So he’s explaining this dynamic to me and he said “so what I want you to do is go negotiate with your credit card companies.Right now they’re charging you 19%. That’s the the single most profitable product they have is their credit cards and they don’t want to lose you and so that gives you real power. I want you to go and negotiate that interest rate down.”
I’m like 27 years old, how the hell do I negotiate with the bank? He goes “It’s simple, you just call them. You tell them that you’re getting these other credit card offers in the mail where they’re offering you low introductory rate if you sign up for their credit card. And so you just go and you tell them that you’re really happy with their bank and you don’t really want to leave but, these people are offering me a better deal. Can you offer me a better deal? Match what they’re giving or lower my rating then I won’t go?”
Sean Johnson: Yeah
David Naylor: And they all did it! It absolutely freaking worked. I call Charter One and I go through my spiel with them and next thing I know, I go from 19% to 0% for the next six months.
And then after six months, I go back and I negotiated. So I literally took five credit cards that that balance was scattered out and took the the average interest rate from being over 19% to under 4%. So now I’m at least I’m in a position where I can start paying down some principle on these things.
Sean Johnson: Yeah, you’re at least not making the minimum payments. You got start working it down.
David Naylor: Yeah. Yeah, so, you know, it’s funny because there was only one bank that wouldn’t negotiate with me and it was Capital One.
I told him “you know I’m going to move my balance off of your card and take it somewhere else” and they like dug their heels in right?
So I applied for another credit card. I transferred it onto that credit card and and I canceled the the Capital One. What’s funny is I probably get three credit card offers a week from Capital One to this day and every time I get it I just said look at it, and I smile and I said you just should have negotiated with me 27 years ago.
Sean Johnson: Yeah now you’re never getting me.
David Naylor: I know.
Sean Johnson: All right, so one kind of Illusion that’s broken in talking to Jerry is you could actually negotiate this stuff.
David Naylor: Yeah. I had no idea. I had no idea that you could do that.
Sean Johnson: Yeah I wouldn’t have thought that, I would think the interest is what it is. Yeah, and they’re not going to change it or the person you’re going to talk to isn’t going to have the power to change whatever.
David Naylor: Yep and only one Bank wouldn’t do it, every other one was willing to do it because candidly if you think about it, he banks make money on the on the spread. If we’ve got a checking account with them that they pay us one percent interest on right?
So the cost of the money to them is 1% and then they’re giving it to me on a credit card at 19 percent. They’re spread is 18% so as long as they’re getting more than one percent it’s still profitable.
Sean Johnson: So you can actually negotiate these things? You negotiate the interest down and you’re in a spot where you’re at least starting to pay down some of the principles.
David Naylor: We structured it based upon the interest rate. He has me attack the credit cards that had the higher interest rates first.
My income was gradually starting to come up a little bit, Michelle at that point had gotten a job as a nurse so we had her income coming in. We had a little more cash flow coming in. We had more structure over where we were spending our money so that our lifestyle wasn’t changing as she got a job and as I started to make a little bit more money in my job.
And so that gave us a little more money to be able to start actually working down that credit card debt. So we paid it off, highest interest rate to lowest interest rate. It took me three years to totally be able to pay that off. It was one of those things where I didn’t think it would ever get paid off and so it really seemed like a rather hopeless situation. To this day I can still remember the day I sent that last check to pay the debt off and it was like a weight of the world is off my shoulders. It’s such a cool feeling.
Sean Johnson: Yeah. How did you stick to that over time? Because that could seem like an eternity. You know in three years to pay that debt down. How did you stick to that? How did you know? How did you not just go “whatever, I’m never going to get out of this I might as have some fun or you know, whatever.”? How did you get yourself to stick to it?
David Naylor: Being broke was just such an incredibly crappy feeling. And it’s funny because it was that dumb can of clams.
I mean, that’s what did it. I was like “I never want to be in that position again. I never want to be in a position where if Michelle wants to spend three dollars on a can of clams.”
Sean Johnson: You want her to have the can of clams
David Naylor: Yeah, I got to sit there and make a stink about it. I just never ever ever want to be in this position again.
Sean Johnson: Yeah, so it drew the line in the sand.
David Naylor: I just kept reminding myself of that moment, you’re standing in the grocery store and her looking at me and with just utter dismay and and me digging my heels in over stupid can of clams. And I just never wanted to feel that way again.
Sean Johnson: Yeah, I would imagine there are times and probably a lot of the time, during that phase of paying it off, where you felt like throwing in the towel? Was that kind of your strategy, thinking of the can of clams?
David Naylor: Yeah. That was the image in my head and there was also a real satisfaction to get one credit card paid off and it is zero balance and then you cut that credit card up and it was like the sense of Freedom.
And so it was a it was a really really good feeling in that sense and and a sense of accomplishment. Michelle and I weren’t having the money arguments that so many couples have, we feel like we’re making some progress. In terms of things, a lot less stress, a better sense of satisfaction and in that regard just a sense of control. That I didn’t feel before.
Sean Johnson: Yeah. Alright, so you get to this point, it takes you three years to pay down. You send the last check-in. What happens then?
David Naylor: So Jerry had us put a budget in place. He put me on the mission to eliminate that personal debt, at least the credit card debt in that phase.
Sean Johnson: Was that the singular mission at that time? Were you doing other things with your finances?
When he said, “I put together a budget in place and stick to it”, did you stick to it? All right. Next is minimize personal debt. Was there anything else from financial standpoint that you were working on at that point? Or were you, basically nothing else matters until you pay down the credit card debt?
David Naylor: The biggest goal is getting rid of the credit card debt. Because it was the highest interest rate debt, right? He basically did the same thing with me as it relates to the mortgage and the car payments and those types of things, but the credit card interest rate was higher, so there was much more of a focus in that regard in the early phases.
Once the credit card debt was gone, then the next mission was making sure that we don’t have car payments. Then it was attack the mortgage and get to the point where you’re out from underneath that bird. Literally it was, “How do you get to the point where you don’t have to pay anybody interest?”
Sean Johnson: Yeah. So you get to the point and you you start working down all those different types of debt, when you get to that point or in the midst of working down that debt, is there anything else in terms of getting more control over your money that Jerry was pointing you to?
David Naylor: After we got rid of the credit card debt. We always bought used cars, because you don’t have the big depreciation. He said, “you want to look for something about three years old. If you can find something that’s about three years old, you’re not at the point where you have a bunch of maintenance stuff, and you may have stolen some warranty left on it.” He goes, “you got a good reliable car, but somebody else is eating all the depreciation on it”. So he guided us in that way, in fact he actually introduced us this guy Ron.
Ron, who at the time was an ophthalmologist and sold used cars on the side. His big thing was Toyota’s. He would go to the car auctions and and get these relatively newer, low mileage Toyota’s and bring them back and flip them. We bought our cars from Ron, he gives us a good deal on them, so that allowed us to make sure that we weren’t overpaying for cars. And we got them paid off as quickly as possible.
With the mortgage what he did was, we had a 30-year mortgage. And he said, “I want you to take your mortgage payment and divide it in half. And you get paid every two weeks.” I think our mortgage payment at that point in time was about twelve hundred dollars a month or something to that effect to me, which seems really reasonable today.
And so he said “divide it in half $600, you know every two weeks. On the 15th, send $600 to your bank and on the 39th, send $600 to your bank. So I was like “what difference does that make?” He goes, “figure it out. If you pay it monthly you’re going to make 12 payments a year. If you send them six hundred dollars every two weeks, you’re going to make 26 payments this year. So divide that in half, because that’s 13 payments, we were making one extra monthly equivalent of one extra monthly payment a year.”
He goes “What that will do is cut about a third off of your mortgage, the life of your mortgage.” So if you have a a 30-year mortgage, you’ll pay it off in about 20 years.
Sean Johnson: Wow, Jerry the Mailman
David Naylor: Yeah, Jerry was a genius. That’s how he helped us to begin to get past the car payments and then get the house paid off that much faster. Now the great thing was is that once you got rid of the credit card debt, we had more money that we could throw towards the cars, get the cars paid off.
Once we get the car’s paid off then we had more money that we can throw towards the mortgage and you know, so it was kind of a cascading effect that it allowed us to get out from under the mortgage as well.
Sean Johnson: Yeah. So what was the driver? What was the thing that allowed you to stick to this? Your at this point, you’re declaring war on on any sort of debt and that sort of Interest that’s not particularly sexy or exciting. So what is it that that allowed you to just stick to that as opposed to doing a little bit, but you know not being quite as as strict or stringent especially as your income starts to go? How are you not like “let’s just splurge a little bit and do this, that or the other thing.”?
David Naylor: Well, that did happen. As we got out from underneath the credit card debt, that was the first big hurdle, but you know simultaneous as that was happening, you know, Michelle got a job. I was making more money. So what we did is we adjusted that discretionary, it’s kind of like her money and my money. We adjusted that so we had a little bit more discretion there, but there was still a boundary lines to keep us in check. But the other thing we did is in the budget we had, some of the pressures came off, we put more money in there for entertainment and those kinds of things.That also helps so it didn’t feel like we were on this highly restrictive diet where we didn’t have any money to spend or anything like that. So there was the wiggle room.
Sean Johnson: Yeah. You gave yourself a little slack. What was your what was your self-talk like through this phase? You know because this is a few years I imagine, you know what it’s
David Naylor: It’s funny, because this happened 27 years ago. All the same strategies. I mean, it’s different now than it was then because we’re just in a different place in our life, but in terms of the structure side of things, all those things are still in place.
Sean Johnson: Yeah. So how have you stuck to that over this period time? The more freedom I guess or the more liquidity you have the easier it would be to just say “I don’t need to do that anymore.”
David Naylor: Yeah, there’s a tremendous peace of mind that comes from having a measure of control over your finances. Look at it this way, I remember years ago listening to a guy speak and he talked about the difference between a prosperity mindset and poverty mindset. And this is how he described it. He said, “because you know how you feel when you’re walking around and you’ve got a dollar in your wallet. That’s the poverty mindset. You’re walking around and you got a dollar.” All you got is a dollar. Yeah, he goes, “versus walking around and having a thousand dollars in your pocket. Yeah, because that’s a prosperity mindset. And you carry yourself differently based upon that because you don’t worry about things the same way.”
People don’t realize how big of a stressor money is. I mean, it’s the number one thing couples fight about, imagine being able to put yourself in a place where you don’t have that stressor.
Sean Johnson: Yeah, and that’s and that’s really what the driver was for you?
David Naylor: I didn’t even know that place existed, prior to meeting Jerry. I thought everybody just goes through life and you’re always going to be stressed out about money and you’re never going to have enough and you know, you’re going to be worrying at the end of the month about “how am I going to pay these bills, what am I going to do?” Not sleeping at night and I just thought that was how you lived your life. And he taught me, you don’t have to live your life that way.
Sean Johnson: So that was kind of the the end game, where that place and peace of mind emotionally is what kind of drove you to stick to it and continues to drive you to stick to it and I would imagine, you’ve mentioned a few times, just like this sense of control in terms of like in terms of looking at at debt in and interest. It seems like beyond the math of how much more gets paid out, where Jerry was is, “all of this debt and all of this interest is you not being in control of your own money”
David Naylor: Somebody else is controlling you
Sean Johnson: So get rid of anybody else having any control over what you can do. That would be, I think a big motivating factor as well, even beyond the numbers and decimal point. So this is kind of mentioned, this is two phases basically where you’re getting control over your money and then once you have control over your money, your you’re building your your net worth.
David Naylor: You know, there’s one other thing that Jerry did too, that we should talk about. He had me adopt what he called the “save and buy mentality.” Up to this point in time as I mentioned, I was kind of an impulsive spender. Buy it now, figure out how to pay for it at the end of month or I’ll buy it now and put in on the credit card and I’ll pay it off at the end of the month. So he described this “save and buy” as, “establish a set amount of money, and anything that is more expensive than that set amount of money, I want you to save for and then pay cash for.” And I was like “well Jerry, what’s the big deal? I mean isn’t that basically the same thing as if I pay the credit card bill off at the end of the month. He goes. “No, it’s not. If you put in place a “save and buy mentality”, so for us back at that point in time, it was two hundred dollars, that was kind of our floor. And so anything over 200 bucks, you save and buy, with the exception of cars in house. So if we need a new TV or yeah, a washing machine or whatever. So I remember I was talking about it and here’s what the save and buy mentality will do for you. He said, “number one, it’s going to stop you from making those impulse purchases. It was going to force you to really think through things like, do I really want this do I really need this? Is this something that’s that’s you know of critical importance?”
Sean Johnson: curbs the impulse.
David Naylor: The other thing that’ll do, he goes, “you’re buying yourself time to do the research. To make sure that you’re getting the best deal, that you’re buying the best product and it gives you time to really do the research. The third thing it’ll do, you’ll find that it makes you really appreciate the things that you buy a lot more because you value them more because you saved for them, you paid cash for them.”
And in all three of those things were 100% true, it was absolutely, you can’t have a and buy mentality and impulse purchase, you know, just it absolutely curbs that. It forces you to think about is this really important? I mean I can think of scores the things back in the day where you know, you know, I really need this and then you know 20 30 days later.
Sean Johnson: you know, toss it in the closet.
David Naylor: And in the things that I did, I did stick with that. I did say for he was a hundred percent right. I mean I value those things so much more because I had done the research because you know, I’d really made sure that I got the best deal for my money or the best product for what I was paying. Yeah, so. And we and that’s another thing that we’ve stuck with overtime. Now that you know, the dollar amount as, you know is we’ve gotten older and stuff his change but that you know the save and buy mentality again, some folks it is day we still do.
Sean Johnson: Yeah. Well so so in terms of getting control of your money, there’s. You know, there’s the budget piece which I would imagine now, you could probably do if you’re you could do at this moment if you just look at your credit card statement or your online statement, whatever
David Naylor: Especially if you’re a person, I mean now we use cash a lot less than we ever used to yeah, which again. I don’t know is necessarily a good thing. Yeah, you know there’s a lot of very smart people who strategize that if you know that if we make the process of spending money easier, people will spend more money and and the fact that the average person is carrying nine thousand dollars in credit card debt, I think pretty well proves that. I think there’s something to be said about going back to you know, maybe a little bit more of a cash based mentality because then it’s a bit more real.
Sean Johnson: Yeah, make it harder for yourself to the spend the money. So the big things with getting control were budget, minimizing debt and this this “save and buy” mentality that that he instilled. So at this point, those were kind of the three pillars. I guess if you will of the first phase which is get control over your money, right and then you mentioned the second phase and the second phase is more about if you have once you have control of your money, that’s the I guess more of the exciting part. Yeah of building your net worth from that point exactly. So. Why don’t we do this, because we dove pretty deep on this one, why don’t we make this a two-parter? Yeah, so we can get a break you can get a refresh your cough drop cappuccino..
David Naylor: I know, the tickles coming back in the throat here, time to get another menthol cappuccino
Sean Johnson: Yep at coming to a Starbucks near you. Alright, let’s do that
David Naylor: What the guys name, Howard Schultz? Howard if your listening buddy, I want a royalty on this, give us a shout out!
Sean Johnson: Just you’ll be like the the Whopper guy for McDonald’s, this one percent you’ll be set. Alright, so we’ll do we’ll do a part 2 on this and part two is going to be about the exciting stuff of building your net worth. And so we’ll circle back around to that!
*Transcription was edited for clarity
Show Notes: Money Secrets of the Millionaire Mailman: Part 1 – Gaining Control
3:40- Dave’s money struggle
10:00- What determines financial success?
18:30- Coming up with a budget
20:47- Sticking to the budget
31:11- Working off the credit card debt
35:25- How to continue to save money
38:31- What Dave was working on
39:48- What happened after getting rid of the debt
46:15- How to stick to a budget even when more money is involved
50:32- Concluding thoughts