Low Cost Of Living = Freedom

I've noticed a recurring theme lately when talking to entrepreneurs in the making, or entrepreneurs making a change in their lives. Its a trend I've seen over and over again so I wanted to give my opinion on it. One of the biggest hurdles I've seen that prevent people from starting (and succeeding) as new business owners is their cost of living.

When I meet a new entrepreneur, or someone creating a new business, I usually ask them the same question:
"How much do you need to live without a job?"

The answer is almost always much higher than they actually need. Numbers like $40,000, $60,000, $80,000 or I've even heard $200,000 are normal. But I want to challenge that. One of the keys to my success with Airwaves has been the ability to live a GREAT LIFESTYLE on almost nothing.

So my opinion is basically this:
Your life is too expensive and its preventing you from having the freedom you want.

Let me ask you this. Would you consider changing your life and living cheaper if it meant:
-More opportunity to get paid more later
-More freedom
-More travel
-Equity in a growing company
-The chance to work on your passion

If your answer was "YES" then I seriously recommend taking a look at your cost of living. Why?
Because the higher your cost of living, the HARDER it will be for you to get free.

In startups they refer to this as "ramen profitability", which basically means your first goal in business should be to earn enough monthly to cover your cost of living. This is easier if your cost of living is lower because well, the goal is a lower amount, making it easier to achieve.

Here are two budgets. One is an example of a restricting budget and one is an example of mine.

Budget 1 - this will make it HARD to be an entrepreneur:
Rent: $2000 per month
Gym pass: $100 per month
Cell phone: $120 per month
Hydro: $100 per month
Internet: $100 per month
Groceries: $400 per month
Entertainment: $500 per month
TV/Cable: $100 per month
Debt: $300 per month
Car: $400 per month
Insurance: $150 per month

$4270 per month is this person's cost of living.

Their chances of making $4270 per month, or $17,080 in revenue (with a 25% profit margin) in their first few months in business are not very good. They have made becoming an entrepreneur VERY HARD on themselves.

Budget 2 - my actual budget when I started:
Rent: $900
Gym: $40
Groceries: $400
Car2Go: $100
Hydro: $100
Cell Phone $60
Netflix: $12
Internet: $75

$1687 per month was my cost of living.

That meant I only had to earn $6748 per month in revenue (with a 25% profit margin) to become an entrepreneur and dedicate 100% of my time toward business.

As I made more money, I put more things back. A nicer place, a vehicle, trips, entertainment, meals out etc. But not until it was profit. (Even then, you might find yourself having so much fun with the business, you don't care about that other stuff as much and choose to re-invest it).

I know what people are going to say. "Bob, I have expenses, I have debt, I have this and that". My response would be to tackle those issues before becoming an entrepreneur. Would you rather tackle a giant war to start with or a small battle?

If you can live on a little, starting your entrepreneurial life is much much easier. But you have to be willing to cut back. Yes, I know. It doesn't sound that fun. You have to get rid of so much stuff and "downgrade". You have to live in a cheap place in the city centre so you don't need a car. You need to find the cheap version of just about everything from cell phone plans to gyms.

I used to live in a beautiful penthouse loft. When I moved out into an apartment that was way cheaper, people thought I couldn't afford the loft anymore or that I wasn't doing well. It couldn't have been further from the truth. Business was way up! But I wanted to downsize because I wanted to grow the business even faster and make it even better. I knew cutting back on expenses would give me the rocketfuel to put back into the business to generate growth. The funny thing was, I thought moving out of the penthouse with the private rooftop patio would make my life suck. It couldn't have been further from the truth. I am so much happier in a smaller more humble place. It feels more like home and I would never go back.

But that's what entrepreneurship is about. It's about stretching your money and living below your means. Once you do that, you get the most valuable thing ever: FREEDOM. Once you have freedom, you can begin to replace the things you sacrificed to get into entrepreneurship full time. Soon, you will see you will be living above your old standards of life and your business will still be growing.

I know this won't work for everyone and isn't possible for everyone (you might have kids, a mortgage, think this plan sucks, etc). But I can say if I could give my old self one piece of advice before starting in business it would be this exact blog. And luckily, I made that choice myself and I still have a business after all these years.

Its kind of funny, but I still LOVE living cheap. I got used to it. I re-invest just about everything back into the business :)

Before you get going I urge you to ask yourself: How cheaply can you really live and still be happy?
That number is probably WAY lower than you think.