00;00;00;04 - 00;00;18;07

Unknown

People's behavior gets amplified with money. So if I'm a spender and more money comes in, I spend more. But the hoarding situation, while it's less frequent in the volume of people who do it, it happens. And if I'm a hoarder, the more money I make, I actually hoard more. It's a fear based thing. Yeah. The best way to navigate is a system and also someone that's not emotionally attached.

00;00;18;07 - 00;00;28;06

Unknown

Yeah.

00;00;28;08 - 00;00;46;10

Unknown

Welcome to the Profit First for Real Estate Investing podcast. Every week we bring you top investors and experts sharing how they create clarity, cash flow and consistent profit. This episode is brought to you by simple CFO. Profit first. Profit always. Let's go.

00;00;46;12 - 00;01;13;23

Unknown

Hey, this is David Richter with the Profit First ROI podcast. I am here live with Mike Michalowicz. It's in his studio, which I think is the coolest thing. I flew to new Jersey. I'm going to give you his home address. Just kidding. Yeah. So very private. Right? Exactly. Yeah. This is. He's got an amazing place. This is so cool to me, Mike, to be out here and with you and especially what we're going to be talking about on these next few episodes and just profit first for real estate investing.

00;01;13;23 - 00;01;29;21

Unknown

So, Mike, thanks for being with me. It's so exciting to be with you. And it's funny, when we just met here first time face to face, I, I was confused. I'm like, this isn't the first time we met face to face, but it is because we've talked so many times over zoom and so forth that kind of blurs that line.

00;01;29;23 - 00;01;47;04

Unknown

It does. And I even won an award one of the years. That's right. Had first professionals. But every single year it's the same time as one of the other masterminds that, like I am heavily involved in that mastermind, actually helped us push a thousand books our first week. No way. Yeah. So I'm like very, very thankful for them.

00;01;47;05 - 00;02;01;15

Unknown

Yeah. And they've been very helpful this entire time. But yeah, I couldn't believe it either. I'm like, I can't believe this is the first time I'm meeting Mike in person. Yeah, well, there's a pinball machine. I saw that, yeah, we have to do a little round of pin. We might have to do that. That sounds like a lot of fun.

00;02;01;18 - 00;02;19;16

Unknown

But I wanted to dive in. If you don't mind, we're going to talk about some things. We've got some notes here as well, too. So, yeah, we, I want to make sure we made the most of this time. But a lot of entrepreneurs out there, and specifically we work with a lot of real estate investors, and a lot of them still feel broke after big deals.

00;02;19;16 - 00;02;35;13

Unknown

So that's kind of the theme that we want to talk about today. There was one guy I one time had on a call. Yeah. And this was a couple years ago. He gets on, he's doing about 20 flips at a time. So I'm like, okay, this is going to be good. Like, I know we can help this guy.

00;02;35;15 - 00;02;57;07

Unknown

He gets on the call. He's like, I'm having the greatest profit from these. I'm going to I'm going to net about 2.2 million from all this stuff that we have going on. But he got on there and he said, there's these four deals that are killing me, the holding costs, and I'm pouring all my money in. He's like, I got on this call to see if I should declare bankruptcy or not.

00;02;57;09 - 00;03;24;11

Unknown

And I was like, what? But can you run that by me one more time? I'm going to make 2.3 million to I'm going bankrupt. Yeah. On the same call where it felt like was it kind of was he coming in with bravado, like I'm successful and trying to show success. And then there on this call. No. Okay. He came in saying that as a preface of like, I've got all these deals and I've got all this money in the pipeline, but it's locked up because I don't have them across the finish line yet, and I really need help.

00;03;24;11 - 00;03;47;00

Unknown

Honestly. He came in a little bit of panic and that's where I you probably see this. A lot of people are more open when you get one on one with them about their business and their money versus the mastermind setting. And yeah, you know, a lot of things like that. So have you seen other people like him that have been in the, you know, I have and in probably in every industry.

00;03;47;00 - 00;04;06;00

Unknown

Yeah. So there's this weird perverted behavior that's necessary. You and I are going to see a client or a prospect. It would be very odd for us to go to prospect and say, you know, we're really struggling. We really need this business, right? You have to say we're very successful. We're the best choice. Yeah, that is necessary even when you are struggling.

00;04;06;07 - 00;04;28;17

Unknown

Conversely, the reality is you may be struggling. And so we perpetuate that. Put that bravado out there because success attracts success. The problem is fake. Success doesn't attract the right support you need. So we have to have that candor. So it is absolutely true. Most business owners I meet with say they're successful when they're really not. And it is hard to peel back the onion.

00;04;28;17 - 00;04;47;29

Unknown

But there's often a breakthrough moment. And they have this watershed of tears saying, okay, here's what's really going on, right? And there's a loneliness because from everyone else, you it's like Instagram in the real world. Everyone else has an amazing face, an amazing meal. Everyone's perfect. And so we see this in other businesses and I'm the only one.

00;04;47;29 - 00;05;09;00

Unknown

I'm a sole island that's struggling. The reality is, statistically, it's over 83% of businesses are check to check. The vast majority of businesses are struggling. And here's the craziest part, David. As they get bigger, they struggle more. Yes. Have you seen this? Yeah. Sales translates to stress. Sales translates to responsibility. More means you have to do more.

00;05;09;00 - 00;05;30;05

Unknown

Keith Cunningham right. If you scale cancer, the tumor grows and it's like, oh, I never actually heard that. Yeah I love his book. Yeah. One of my favorite business books of all time besides profit. First off right now is The Road Less Stupid bike. Yes. Okay, I'm not ready yet. And he says that multiple times in that book where you're just trying to scale up, but you've got the wrong foundation or you're just.

00;05;30;06 - 00;05;47;12

Unknown

You're just scaling chaos. Yeah. What are you doing? And that's definitely what this guy was doing. But that's what we see with people, not with two deals in the pipeline, not just with 20. That's where even my background, I was in the real estate world doing 25 deals a month with a company in my early 20s, but we were spending 26 worth of deals out the door.

00;05;47;14 - 00;06;03;17

Unknown

Right. Like, what are we doing? Yeah, there's no money at the end of the month. So what happened to this dude like on that call? On that call, he said, okay, I need you to come in just to see if I need to declare bankruptcy. And I said, that's probably not the case. There's probably some other strategies. There's probably some things.

00;06;03;20 - 00;06;20;08

Unknown

Honestly. He needed profit first in place. He needed a better system to where he wasn't seeing it down the road, like, okay, oh, shoot, I'm already in like code Red and I need to get out of it. And I said, we just need to back that up. And he's like, okay. And so we started working with him. And then he did not need a clear bankruptcy.

00;06;20;14 - 00;06;36;11

Unknown

He could go out and get some loans and do some things, but he just needed that clarity to be able to have someone come in. And like you said, he needed to be able to talk to someone and not put on that fake face like, yeah, everything's great. We've got 20 deals in the pipeline. We're amazing. We got more than 2 million in profit coming in.

00;06;36;19 - 00;06;58;04

Unknown

He had to be able to say actually help, you know, like what's going on, because a lot of people feel that in this space. So there was a time in my life, not in the too distant past where I was struggling financially. I lost all my money. I talk about it in my books. And there was collection bills coming into the house over and over again.

00;06;58;07 - 00;07;20;27

Unknown

And, also other just bills for all these things I was consuming. And I decided not to open them because if I didn't open them, at least I'd never face it. Yeah, but the problem got worse behind the scenes. And so I see that too. This bravado that I've had and default to still under stress of ignore the problem because the problem may go away, but it really amplifies.

00;07;20;29 - 00;07;44;09

Unknown

So, one of the reasons I think we have actually, the bullet point number two here, the Parkinson's law, there's this interesting phenomena to that as we're more successful, meaning more money comes into our business, we consume more. Yeah. So, so true. And this is true for anything. The more time we're given to do something, the the more time we'll take to complete the task.

00;07;44;11 - 00;08;06;01

Unknown

But when it's compressed, the more efficient. And I know we talked a little about your travels in here, yesterday, that because you had compressed time, you had to see your daughter, had to you wanted to and you did for school that you wanted to go here, that you found a very efficient schedule to spend times your daughter, visit the school, take a flight, meet here in the morning, get your exercise and do all these other things.

00;08;06;01 - 00;08;23;22

Unknown

Yeah, because you had a compressed schedule. You're actually more efficient with money. When we compressed what's available, that's what Private First does. When there's less money available, you actually become more effective at managing money. Exactly. And so it's funny, this this guy story, I resonate with it. It's the bigger businesses I work with who are in the deeper doodoo.

00;08;23;23 - 00;08;38;25

Unknown

Right. Like it is. Yeah. And a lot of people ask like, am I too small for profit? First I'm like, you're at the perfect point. Like before you have all these bad habits with your money and you scale that chaos is now's the time to implement it. And if you are down the road like this guy, it's like, okay, there's steps.

00;08;38;29 - 00;08;53;09

Unknown

It's Yoda. You have to unlearn what you've learned. So we do have to do a little bit of unlearning. But then on the other side, like, do you want this stress a year from now? Like you don't have to repeat these patterns, which is what a lot of entrepreneurs end up doing. They end up repeating those patterns over and over again.

00;08;53;15 - 00;09;13;16

Unknown

They think more deals means more income, means more revenue means more profit. It's like, no, not not necessarily. Not if you keep doing the same things over and over again. And that's where with Parkinson's a lot. And then you're spreading out your money, a lot of people that gives them that peace of mind because now they're intentional with those dollars versus one guy.

00;09;13;16 - 00;09;29;11

Unknown

I said this on my podcast once, and I'll never go back to one big black hole bank account where everything gets so damn good, turn goes out into the swirling vortex of doom, never to be seen again. That's what this guy that he had one big bank account where all this money, like hundreds of thousands of dollars because it's real estate and you get all these loans.

00;09;29;17 - 00;09;51;15

Unknown

So it's really easy in real estate also to know, like, okay, maybe I will be okay because I just got several hundred thousand from my private lender for this flip. And then you have one big bank account and all that money is in there. So you feel great. You start spending that money and then you've got 20 flips in the in the pipeline, and then four of them aren't covered and you've got like 10,000 left to be able to do 50,000 worth of work.

00;09;51;15 - 00;10;11;27

Unknown

Yeah. So you're deep in. Yeah. So I think I've cracked the code on why we behave this way beyond Parkinson's law. So and this is not to be plug in, but I wrote a new book called The Money Habit, which is about personal finance, which is amazing. I don't pick that up. Thank you, thank you. Yeah, I'm really excited about the book and what I believe is if an entrepreneur nails it in business financially but not at home, you're still in trouble.

00;10;12;00 - 00;10;33;09

Unknown

You got to nail both. Yeah, because at home we'll each off the business or vice versa. So I said, but why do people as they make more money blow it. And there's these, these infamous stories of an athlete who makes $100 million and then is bankrupt. The next day, lottery winners. And like, what is this? I found this thing called optimal foraging theory and I geeked out on it.

00;10;33;11 - 00;10;49;18

Unknown

So here's what it is. I'm not foraging theories based on the Neanderthal man. So 15,000 years ago, the predecessor of man. If in his historically, we were hunters and gatherers. Yeah. So if you and I are in the same tribe, we wouldn't sit there and say, hey, you hungry? Yeah. You just go out from Taco Bell tonight?

00;10;49;24 - 00;11;04;06

Unknown

No, it's like we're ug. We're hungry. We go and hunt. But if you and I decide going to hunt together, we're putting ourselves a massive, massive risk here. We're going in the wild. We're leaving the security of a mass tribe. So now it's just me and you out in the wild. There's things there that I wanted to hunt us.

00;11;04;06 - 00;11;21;13

Unknown

Saber tooth tigers and all these different things. We're burning calories. We need to find water. So it's massive risk. So when there's massive risk, what you do is you go on a big hunt. You don't go for like one little rabbit, and we're going to feed the tribe. We're getting the wooly mammoth, man. Yeah, yeah. If we are lucky enough to kill the wooly mammoth, now, a bigger problem presents itself.

00;11;21;15 - 00;11;43;14

Unknown

It is this massive rotting flesh. Right? So the only way to to preserve it is to do what's called gorging in those old videos where you see, like, caveman eating. There's blood all over his face. That's actually, we believe how they truly behaved. Because the best way to preserve calories is to consume calories. Wow. So you go for a big kill?

00;11;43;14 - 00;12;03;25

Unknown

Yeah. And then you eat fast. Then over time, they invented tools to carve and preserve. So you would carve up the meat and preserve it by burying it, smoking it. But the the limbic system of our mind, the, the reptilian part of our mind says, go on a hunt. And then the second you capture it, you better eat it fast or it's going to perish and rot.

00;12;03;28 - 00;12;22;00

Unknown

Today's hunt is the check. The big paycheck comes in. And so maybe it's a it's payroll, or maybe it's the big sale. And you see massive money. Our minds has just killed wooly mammoth must eat and so our mind says eat, eat it, eat it because it's going to rot away. Logically, our prefrontal cortex says, of course it won't rot away.

00;12;22;00 - 00;12;46;13

Unknown

It's fungible. It's money. I can move into a different account. I can hide away. But our limbic, our reptilian mind says consume. Yeah. So we are wired that survival factor. Yeah. There was a study around payroll if you're on a paycheck. They said the optimal pay is twice a day because you won't go into this gorge mindset, get paid in the morning, get paid in the afternoon, and you won't go into this court and you're always satisfied.

00;12;46;15 - 00;13;03;25

Unknown

So interesting. Yeah. So we are wired to gorge. The thing is, we need the tool. The carving tool. Right? Carve that meat up that wooly mammoth and then bury it or smoke it or preserve it. And that's the about multiple accounts. And when that happens, we get this satiated sense of it's in control and we don't need to consume it all now.

00;13;03;25 - 00;13;21;19

Unknown

Yeah. Which is funny that you bring that up, because I equate a lot of real estate investors to professional sports players, where maybe they're in their first year of real estate, they do their first flip, and in that one flip, they've made as much as they made in the last 12 months at a W2. Yeah. And it's like, oh my gosh, what do I do with all this money?

00;13;21;19 - 00;13;49;06

Unknown

And usually it's gorging. It is. Yeah, we throw it all but we reinvest all back into the business and then there's nothing left over or those deals don't keep coming or the real estate, the closings get pushed back. So it's like, oh my gosh, here we go. Here's the up and down roller coaster. Yeah. So that's why I tell people if you're in those beginning stages, you're in the best place to start getting that, carving that out and giving you the different bank accounts, making sure you know where your money's going.

00;13;49;08 - 00;14;06;20

Unknown

If you're already down there and you've been gorging, well, now maybe we have to purge a little. You know what? Maybe I did it to the different accounts, and we've got to get a good system in place. It's like you're going from gorging to a professional, you know, storage system. Yeah. And this is where we have to take it in steps and get you to where you need to be.

00;14;06;20 - 00;14;26;21

Unknown

So then breaking it up in the allocations. That's right. Yeah. There's lifestyle creep at the end of the day. Yeah. And I experience this myself. As my income increased very quickly, I decide my lifestyle should increase this way because as it's perception, my income will always stay that way. But when my income dropped and that's normal, like income increase, it will drop over time and hopefully on a average it goes up.

00;14;26;21 - 00;14;43;04

Unknown

But it may not. It may not every time it dips. So our lifestyle will go up to meet our income very quickly. Right. The same rate. Yeah. But when it dips we don't drop the lifestyle because there's a thing called loss aversion. Once I possess or you possess something, we want to keep it forever. It's part of us.

00;14;43;07 - 00;15;01;23

Unknown

So the analogy I use it is like a shiny new car, that sports car. I've always wanted that sports car. Well, one day I actually make the purchase, the I make the purchase and now I can't afford it. So what do I do? I, I cancel insurance, I keep my garage. I'm not going to drive it. I will get second job to pay the payments just to keep it because it's my baby.

00;15;01;23 - 00;15;17;25

Unknown

Yeah. The funny thing is, I didn't get that second job when I was looking to buy it. I just got it and now I go to extremes to preserve it. So what happens is we lose our income and we're going to go to extremes to preserve it. Well, you had initially generate more income. Maybe you'll work harder and longer, but I'm not generating enough.

00;15;18;01 - 00;15;32;21

Unknown

But we're so afraid of losing it. We are logical. And that's what we start saying. Well, the only way to get income is that I'm going to borrow money. Okay? You run the credit card, I'm going to move money around. Yeah. And then you're in this trap that destroys you financially. Yeah. And then we see that all the time.

00;15;32;28 - 00;15;54;00

Unknown

That's something too. On my personal journey, I had to fight a lot to be like, okay, we're actually making more money. It's like thankfully, because of books like Profit First and having a background of, like, at least if there's a system, it holds me accountable. Yeah. Then if you have someone holding you accountable, that's like taking it into overdrive to be like, okay, I can't do anything without them seeing what I'm doing.

00;15;54;00 - 00;16;18;19

Unknown

So that helps a ton, because even in my own business, I have a CFO for my business and making sure that, okay, I'm the entrepreneur and I'm the CEO, and even though I run a CFO type business, like I need to be held accountable because then if I go too crazy or if I'm like trying to take too much, or on the flip side, if I'm not taking enough and I'm bringing stress to the organization, then I need someone to be able to say, hey, this is what's going on.

00;16;18;22 - 00;16;35;09

Unknown

You need to be able to do this guilt free and like, here's the plan and like, here's where you should be at this point. So that way it's not just me saying, okay, this is what I in the first few years of business, Mike, it was like, okay, this is great, and I think I can grow. But I had a lot of guilt myself of like, oh, can I take more?

00;16;35;09 - 00;16;55;19

Unknown

We are growing. I was more of like the conservative, like saving and probably pouring as much in. And so that's where I had to be very careful. But that's where a lot of people come to us and they're on all different spectrums. And what I love about Profit First is that I believe if you're on either the save or the spend extreme aspects, profit first helps you get to the middle.

00;16;55;19 - 00;17;13;13

Unknown

It helps you get to be like, okay, if you're a spender, it helps you to save. If you're a saver, it helps you to spend what you need to spend. It gives you a system. So you're not just gorging. I love that analogy. You're not gorging all the time, but then you're also not just hoarding. You don't take that back and you just put it in your cave, and now it's rotted and you're like, what did I do?

00;17;13;13 - 00;17;31;21

Unknown

You know, like I just way to take that analogy, that that step, that hoarding is a real problem too. The interesting thing is that people's behavior gets amplified with money. So if I'm a spender and more money comes in, I spend more. But the hoarding situation, while it's less frequent in the volume of people who do it, it happens.

00;17;31;26 - 00;17;51;16

Unknown

And if I'm a hoarder, the more money I make, I actually hoard more. It's a fear based thing. Yeah, the best way to navigate, yeah, is a system. And also someone is not emotionally attached. Yeah. So, for my organization, we have two people. We have a profit. First professional. Nice. And, Karen, in this case, and she she's she's an emotionally attached, that's all.

00;17;51;16 - 00;18;12;15

Unknown

She's like, this is the way we do things. And even though I'm the guy who created the system, she's enforcing on me. And then we have our internal person. That's Kelsey, who manages numbers. So we have three people involved. The numbers. But we're all looking at the same system. What's so interesting is when we talk about the numbers, the interpretations means very emotionally based on like, we can get this podcast studio, we can justify it.

00;18;12;17 - 00;18;29;14

Unknown

Kelsey's like, well, the numbers are there, but the data shows that we shouldn't set up a studio as opposed to renting it. And then Karen's like, numbers are not there. I want us to be more profitable. We're not doing it and it triggers great conversations. But to your point, it doesn't take us to any extreme. It puts us down the path of the best right approach.

00;18;29;15 - 00;18;45;12

Unknown

Exactly. It's taking to where you should go as an entrepreneur versus like what you're usually tugged at emotionally. That's right. Or it's not just the numbers crunchers saying this is how you run your business. It's more of like, we have to have that yin and yang. You have to. Yeah. So that's where. And to close up here, where can they find the Money habit book?

00;18;45;12 - 00;18;59;00

Unknown

Because obviously you wrote this book to get inside the personal finances and making sure that they have a good system for that. So how can they get that book? Yeah. Thank you. So the money habit, just to give context, is written for the entrepreneur. It's they can nail the numbers at home but also written for their team.

00;18;59;00 - 00;19;17;02

Unknown

Yeah. Because if your team is worried about their finances, you're paying the cost of. Exactly. In fact, there was a study from the USA today, magazine or newspaper a year ago, and in August 2025 said the that financial worries become a part time job for most people. We worry so much about finances. So we as alleviate that.

00;19;17;05 - 00;19;33;13

Unknown

The book's available at my website which is Mike motor Bike. I have Mike piccolo, it's dot com. No one knows that spot. So like the motorcycle like motor bike.com. And you see the book there. It's available every retailer on the planet. So awesome. So they could go on Amazon too. But they could go on Amazon or your local bookstore.

00;19;33;13 - 00;19;54;14

Unknown

I'm a big fan of local stores. Okay. Awesome. Yeah, I get that. So that you could get that anywhere. Anywhere. We highly encourage you to get this if you're struggling and you don't have a system in your personal life, or if you have a team and they can be lifted up as well too, and pouring into your team also to wrap this up, if this resonates with you, if you're making money but feeling broke as an entrepreneur, especially if you're a real estate investor, we want to help you.

00;19;54;19 - 00;20;13;09

Unknown

That's where you can go to simple cfo.com and just reach out to us. You'll probably talk to me or someone on our team just about how we can get profit first in your system and making sure you're not just gorging gorging on that. You know, that great. You know, behemoth out there. I want you to be able to split up those deals, get more money, pay yourself guilt free.

00;20;13;11 - 00;20;29;17

Unknown

That simple cfo.com. Mike, thank you so much for being on this list, Joy. Thanks, brother. That's it for today's show. Be sure to subscribe, review and share this episode. If you're serious about financial systems and keeping more of your profit, visit simplecfo.com to take your free discovery call today.