9min chapter

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How Neil Patel Spends $200K a Month

Moneywise

CHAPTER

The Evolution of Entrepreneurial Spending

This chapter explores the entrepreneurial journey of a successful entrepreneur, focusing on the advantages of bootstrap ventures and the financial strategies that led to their success. It highlights a significant shift in spending habits from luxury indulgence to prioritizing essential needs and charitable contributions, redefining personal happiness through altruism.

00:00
Speaker 2
Funny enough, I made my most money as an entrepreneur in all my bootstrap ventures. I made the least amount of money from all my venture-backed
Speaker 1
businesses. His biggest business is called Neil Patel Digital, and it's a bootstrap agency that specializes in the SEO, and it rakes in around $100 million a year in revenue. Along with the agency, Neil Patel Digital also owns a handful of software companies. We
Speaker 2
stop counting, and we don't look at it as how many businesses anymore, because we're buying, we buy a lot every single year, and we just merge them into the main parent companies.
Speaker 1
Aside from the agency, one of the biggest software companies that Neil Patel Digital owns is called Crazy Egg. It's a software that helps track your website visitors.
Speaker 2
Crazy Egg was probably the largest business I ever created and then took the money from that to create more companies. And then there's pretty much just two, Crazy Egg and Neil Patel Digital. And that's it. Everything else just fits in with one of those two companies. So
Speaker 1
at this point, basically all of Neil's wealth has come from buying and building businesses. The
Speaker 2
way I evolved as an entrepreneur is I took all the money that I made from software because I had high margins. You're talking about some of these businesses are running at like 70 plus percent EBITDA. Started taking the cash flow and then using the cash flow to reinvest in other businesses that spit off more cash flow. I've tried doing a lot of different ventures like raising money for companies, investing in stock markets, doing a ton of angel investments. I've generated the most income from reinvesting in other businesses that I control. And when I mean control, either own fully or control majority. So
Speaker 1
all of this has led to a net worth for Neil of over nine figures. And what's crazy is, you're going to see in this episode, Neil shares everything, but he didn't exactly share anything about his net worth other than saying it was at least nine figures. I could say. I don't want to say. So when I started this interview with Neil, I told him the reason I wanted him to come on was because of that blog post that I read that was like 10 years old. The blog post that said that he needs to spend only $15,000 a month in order to be happy. Now, let me recap that 2014 blog post that I keep referring to. The blog post is called How a Ferrari Made Me a Million Bucks. In the article, Neil detailed his frugal lifestyle. He said that he lived at home until he was around 23. Then he moved to an apartment, which as he described it, was across the street from a drug park in Seattle. And overall, he spent relatively little money. But then something happened that changed his perspective on money. Someone gifted him a $6,000 watch. And what he noticed was that he got a lot of attention because of the watch. And it was a good type of attention. People who he eventually did business with came up to him. And that was like his conversation starter was that fancy watch. And that insight led him to an experiment where he started spending money on luxurious things to see which stuff would start conversations with the people that he wanted to meet. And eventually what he found was even if he didn't buy these items, even if he was just around luxurious, nice stuff, people started talking to him. He didn't even have to buy it. I've
Speaker 2
never owned a Ferrari. I think the Ferrari was me driving a Ferrari on a racetrack. None of them have been mine, though. I'm shocked on how many people hit you up being like, wow, cool car. And even if you tell them it's not yours, you're like, sure. You know what I mean. But
Speaker 1
it's actually a good thing. According to Neil, his lack of Ferrari was probably best for all of us. I'm
Speaker 2
a terrible driver. Like the amount of times I got into car accidents, almost all of them were my fault. Hey,
Speaker 1
I'm happy that he's able to admit that. But I digress. In the article we're talking about, Neil himself said that he really didn't give a shit about most of the stuff that he was buying. And yet he kept spending and kept getting connections because of it. He called it lifestyle marketing. It's got a good ring to it. But then he got sick of it. The whole point though of this entire conversation is a comment that he made about the blog post. Years later, after the blog went live, he said that he was spending all of this money basically to portray an image of being successful. In fact, he said he spent $250,000 on furniture. However, in reality, he could only have spent $15,000 a month and he would be perfectly satisfied.
Speaker 2
And then I give away all the furniture in my apartment too. And then I live there a period of time with no furniture.
Speaker 1
So fast forward to 2022 and I talked to Neil and he told me something that blew my mind. He told me how much money he spends per month now.
Speaker 2
Right now, if I had to guess on my burn rate, 120 to 180 a month. What? That's insane. That
Speaker 1
gets us to the answer of the question that I originally asked, which is, what changed? How did he start with $15,000 a month and multiply that by 13 times and that's what he's spending now? The answer, you probably could have guessed. It's
Speaker 2
called marriage and having kids. It's not really of choice.
Speaker 1
But the more nuanced answer is that he spends this way because he can. Something important to understand is how much your mindset around spending is shaped by your past. If your whole life you grew up only being able to spend $100 a month at the grocery store, and then all of a sudden you could spend as much as you want, that's going to be a direct contradiction to all of those learned behaviors, the way that you used to behave. But, and this is a huge but, spending and not worrying about money is a huge part about why we work so hard to make it in the first place. So if you're not embracing it, and this is something I ask myself all the time, what's the point? Of course, there's a huge downside to this. There's a huge downside to recklessly spending and throwing your money. But even at the top of his spending, Neil isn't doing that because he understands his own wealth, he accepts it, and he recognizes the fear of losing it is mostly irrational. Listen, I know it can be a tough thing to wrap your head around. I struggle with it as well. But you make money so you can have nice things when you want them. So buy them, be smart, and buy them. That said, there's still a lot to glean from Neil's spending evolution, including how he spends with no budget and while still healthily growing his net worth. And also, and this is a shock, how his spending of around $200,000 a month, how that's nothing compared to some of his friends. But let's find out Neil's approach of spending shifted from $15,000 a month to the most extravagant era of spending in his life, living in Las Vegas.
Speaker 2
In my last house, I spent $2 million on furniture, okay? The one I lived in in Vegas. Literally, you would see it on Architectural Digest if we show the pictures of it. And we refuse to let people take pictures and showcase it. And in Vegas, that house had the highest price per square foot sale in history for a custom house. We spent that much money on it. What's been the
Speaker 1
mindset shift of going to $15,000 a month to $200,000 a month, sometimes I imagine even more, has the threshold of, for me it was a long time when I was broke, it was like anything above $100, I'm going to sweat. Anything less, I'm not going to think about it. Now it's like I'm not going to sweat if it's above five grand. Anything impulse buy below five grand, it's like whatever, if you want it, just get it. Has that number changed of the threshold of like you're going to sweat versus your, or not sweat, but you're going to think about versus not think about?
Speaker 2
No, not really. I don't have a threshold in my head. I just really look at something like, do I want it or not? Like if I actually look at my credit card and what I spend, like if you exclude donations just to maintain household life insurance, which I cut down on, I used to have a whole life policy, turned it into a term policy. But if you look at just the basic necessities, like a home, HOA, electricity, et cetera, I could easily live under 30 grand a month. It's not like I need to spend more or less or anything like that. And that's a lot. And that's including things like kids schooling and whatnot. Life isn't too expensive. What's really expensive for us, I think the biggest chunk of our expenses is donations. When we first did our last, my first million, I would spend more things on things like experiences, going to the Super Bowl and flying private and all this kind of stuff. That doesn't happen these days. We cut out a lot of that kind of stuff. And I'm not saying those things are bad or good. My wife and I just had the philosophy of, like, it's cool going to the Super Bowl. We did it. I'd rather give the money to some kid who is from Missouri or somewhere, and they can't afford to go to college, right? Like, for us, that just makes us more happy. So we cut off most of the spending in areas that really don't matter. And we decided to just give more to other people. And I'm not saying that's the right decision or wrong decision. It just makes us more happy as individuals. You're not flying private anymore? No, I will go Southwest. If I go from here to Vegas, which funny enough, I have to go in a few weeks, I will go economy on Southwest Airlines. I don't think Southwest doesn't even have first class, but I go economy. Would
Speaker 1
you go economy on Southwest with your family? No. Neil says he could do 30K a month or so, but he doesn't because he doesn't need to. And he's not trying to hide it.

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