Latest / Masterminds Podcast / Three Skills Every Wealthy Person Has Mastered || Masterminds Podcast EP51

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Three Skills Every Wealthy Person Has Mastered || Masterminds Podcast EP51 · Masterminds Podcast

• 0:00
  SPEAKER_00: Hi, and welcome to another awesome episode of the Masterminds Podcast.
• 0:03
  SPEAKER_00: Once again, I'm here to help tune and sharpen your most important and your most powerful weapon, your mind.
• 0:10
  SPEAKER_00: Today we're going to talk about something that everybody needs to learn at a point in their life.
• 0:15
  SPEAKER_00: That is, only if you want to build wealth, which is how to manage your money.
• 0:21
  SPEAKER_00: So let's get this straight.
• 0:23
  SPEAKER_00: You know, when it comes to money, there are three skills that you will need to learn along your path of acquiring wealth.
• 0:30
  SPEAKER_00: The first one is how to make money.
• 0:33
  SPEAKER_00: So before we continue with the episode, something interesting just happened in the studio right now.
• 0:37
  SPEAKER_00: After shooting one of my usual solo episodes, somebody asked me questions, which made me realize that sometimes your questions actually allow me to give better feedback and better information.
• 0:48
  SPEAKER_00: So let's do this.
• 0:49
  SPEAKER_00: If you've ever felt like you've wanted to ask me questions or further clarification on anything I've said, you can drop it in the comments and I'll use those questions to do special episodes just to answer you.
• 1:00
  SPEAKER_00: I may even shout out your name so that you understand that I am answering you.
• 1:05
  SPEAKER_00: And also do me a favor.
• 1:07
  SPEAKER_00: I see so many people who are watching my episodes who have forgotten to hit the subscribe button.
• 1:12
  SPEAKER_00: You know, we're trying to grow this community, build masterminds like you and I, who can acquire wealth, who can build their mindset and become more wealthy financially, physically, spiritually, and especially when it comes to health.
• 1:27
  SPEAKER_00: So please do me the favor and subscribe.
• 1:30
  SPEAKER_00: Now let's go back to the episode.
• 1:31
  SPEAKER_00: The three skills you will need are the first one, how to make money.
• 1:36
  SPEAKER_00: Secondly, how to manage your money, and then thirdly, how to grow your money.
• 1:41
  SPEAKER_00: Now, each of these skills comes with a different skill set.
• 1:45
  SPEAKER_00: You need to be a different person at each phase to be able to master the skill.
• 1:50
  SPEAKER_00: Let's talk about first how to make money.
• 1:52
  SPEAKER_00: The person who knows how to make money is the ambitious one, the one who takes risks, the one who's bold, the one who's daring, the one who's always thinking about innovative ways to make money.
• 2:04
  SPEAKER_00: That is the first stage.
• 2:06
  SPEAKER_00: The second stage, now that you've made some money, which could be any amount of money that you've made, you need to now understand how to manage that money.
• 2:16
  SPEAKER_00: That comes with discipline, it comes with emotional clarity.
• 2:19
  SPEAKER_00: This person needs to be patient, the person needs to know how to implement and build systems, the person needs clarity and control over their decisions because managing the money you have is very different from making money.
• 2:35
  SPEAKER_00: Then the third skill, which comes along the line, is how to grow your money.
• 2:40
  SPEAKER_00: This is more the investor type thinker, the long-term planner, the person who's able to look at situations now and project into the future what needs to happen.
• 2:51
  SPEAKER_00: So this comes with foresight, strategic thinking, planning, and being able to project.
• 2:58
  SPEAKER_00: So today our focus is on how to manage money.
• 3:02
  SPEAKER_00: As I mentioned, managing money must always come with a system.
• 3:06
  SPEAKER_00: The first system, which is one of my favorite things to implement, is the 50 30-20 rule.
• 3:14
  SPEAKER_00: Let me explain this as simple as I can.
• 3:16
  SPEAKER_00: All money that comes needs to be split into three percentages: 50% going into your needs, 30% going into your wants, and 20% going into savings and investments.
• 3:32
  SPEAKER_00: Now, this is what I mean.
• 3:33
  SPEAKER_00: 50% of the money that you make, if let's say you're making 1000 cities a month, 500 cities of that.
• 3:39
  SPEAKER_00: This is going to be a harsh calculation.
• 3:41
  SPEAKER_00: 500 cities of that needs to go into your rent, your transportation, your food, your essential clothes.
• 3:51
  SPEAKER_00: I don't mean your Gucci bag and stuff.
• 3:53
  SPEAKER_00: Your essential clothes, anything that you need to survive should fit in 50% of your income.
• 4:03
  SPEAKER_00: I know a lot of people are calculating the money they are making and thinking, Chale, I cannot live on 50% of my money.
• 4:10
  SPEAKER_00: You have to.
• 4:11
  SPEAKER_00: So the moment you realize that your needs are over 50% of your income, that means you need to make one of two changes.
• 4:20
  SPEAKER_00: Either you need to spend less or you need to make more.
• 4:25
  SPEAKER_00: Everybody's first thought goes to how do I make more?
• 4:28
  SPEAKER_00: But sometimes you just need to spend less.
• 4:30
  SPEAKER_00: Ask yourself, what can I cut back on?
• 4:33
  SPEAKER_00: If it's transportation and you are taking Uber every day, can you switch to Trotro?
• 4:38
  SPEAKER_00: Can you start walking a certain distance before you take an Uber?
• 4:42
  SPEAKER_00: Whatever it is in your personal life that you can cut back on to be able to fit in that 50% for now.
• 4:50
  SPEAKER_00: Because your money will grow, you will make more money as you grow.
• 4:54
  SPEAKER_00: But in your current situation, if you want to build wealth, make sure your needs fit within 50% of your income.
• 5:04
  SPEAKER_00: And then the 30% that goes into your wants.
• 5:08
  SPEAKER_00: Let's be very honest.
• 5:10
  SPEAKER_00: As much as we are here working hard and making money and we need to survive, you also need to enjoy yourself in life.
• 5:17
  SPEAKER_00: Because if you are waiting for Debbie Debbie BA year, if you are waiting for 10 years down the line before you can enjoy some pleasures in life, you are not going to have the motivation to keep going and keep building that wealth.
• 5:30
  SPEAKER_00: So a part of your income should go into the things that you want.
• 5:34
  SPEAKER_00: Now it's different for everybody, everybody and what their wants are.
• 5:38
  SPEAKER_00: Somebody's want is to be able to have Netflix where they can enjoy series.
• 5:43
  SPEAKER_00: Someone wants to be able to buy ice cream every weekend.
• 5:46
  SPEAKER_00: Someone wants to be able to go to the club.
• 5:48
  SPEAKER_00: Someone just wants to go to the library and read extra books.
• 5:52
  SPEAKER_00: It doesn't matter.
• 5:53
  SPEAKER_00: Nobody can tell you which want is more important than the other.
• 5:58
  SPEAKER_00: Your want is a personal choice.
• 6:00
  SPEAKER_00: But those wants need to fit into 30% of your income.
• 6:06
  SPEAKER_00: So once again, if you're making thousand CDs a month, you have 300 CDs to spoil yourself.
• 6:14
  SPEAKER_00: It's not much at all.
• 6:15
  SPEAKER_00: But it does mean that once you start thinking like that, you can actually implement it, strategize, and make sure that you are living a life, even if it's a smaller life, that you are able to enjoy and it can motivate you for more.
• 6:30
  SPEAKER_00: Now the last 20%, which an actual fact should be the first 20%, is what is actually going into building wealth.
• 6:38
  SPEAKER_00: It's what you are putting into future you.
• 6:41
  SPEAKER_00: I need you to understand something.
• 6:43
  SPEAKER_00: Your needs and your wants that you are spending on are going to go away quickly and you will never get that money back.
• 6:50
  SPEAKER_00: But this 20% is what is building who you are going to become.
• 6:55
  SPEAKER_00: So the first rule about the 20% is you need to spend that money first before spending on your needs and wants.
• 7:03
  SPEAKER_00: Because the first person you need to pay is yourself.
• 7:06
  SPEAKER_00: So as soon as you get any income, put 20% away in investments.
• 7:12
  SPEAKER_00: Now there are different types of investments you can do.
• 7:15
  SPEAKER_00: We all know that you can do the safe investment, you can build an emergency fund, you can download the Achieve app and find a way to do investments over time.
• 7:23
  SPEAKER_00: But whatever it is, as soon as you make money, put that 20% away in investment.
• 7:31
  SPEAKER_00: Let's use the same example.
• 7:33
  SPEAKER_00: If you are making thousand cities a month, that means 200 cities is going into an investment.
• 7:39
  SPEAKER_00: And you pay that first.
• 7:41
  SPEAKER_00: So if your salary is thousand cities, you condition your mind that your salary is actually 800 cities.
• 7:50
  SPEAKER_00: This is one of the oldest tricks in the book.
• 7:52
  SPEAKER_00: You know, when you read Richest Man in Babylon, well, they say 10%.
• 7:57
  SPEAKER_00: That's from Richest Man in Babylon.
• 7:58
  SPEAKER_00: But where we are in the world right now, that you want to build wealth faster, I believe 20% works better.
• 8:06
  SPEAKER_00: If you are able to build this discipline, that every money that comes, you put aside 20%, you will be amazed at how your wealth is going to grow so quickly over time, especially because of the power of compound interest, which we'll touch on a bit later.
• 8:23
  SPEAKER_00: Now I know as I'm saying this, it sounds beautiful, and I know so many people are watching and thinking, Charlie, bro, you don't know my situation, you don't know what's going on.
• 8:31
  SPEAKER_00: Charlie, life is hard, things are too tough.
• 8:34
  SPEAKER_00: 50, 30, 20, I can't do it.
• 8:36
  SPEAKER_00: But the truth of the matter is you can.
• 8:38
  SPEAKER_00: And the reason you are suffering to do this is something very simple, which Morgan Housel talks about the psychology of money.
• 8:46
  SPEAKER_00: Let me tell you a secret.
• 8:48
  SPEAKER_00: Most of your spending habits, most of the reasons that you spend money uncontrollably and do things that you shouldn't do, is not because you need it, it's not because you need to survive, it's not because life is hard, it's because of the psychology of money.
• 9:05
  SPEAKER_00: It's how you think about money, how you feel about money.
• 9:10
  SPEAKER_00: So most of the decisions we take when it comes to money are actually more emotional than logical.
• 9:16
  SPEAKER_00: Let me give you an example.
• 9:18
  SPEAKER_00: When your life is hard, when your life is very, very hard, which most of our lives are very, very hard, you tend to make bad decisions when it comes to money.
• 9:28
  SPEAKER_00: Because after a long week of working and stress and stress from your peers, stress from your family, the whole world feeling like it's against you, when it gets to the weekend, you are looking for a release.
• 9:41
  SPEAKER_00: You are just so tired, and you are looking for something to make you feel alive again, and you end up going to spend too much on something that you shouldn't have just to get that release.
• 9:54
  SPEAKER_00: So that becomes emotional spending instead of logical spending.
• 9:58
  SPEAKER_00: And then one of the biggest things that affects most of us without ever realizing is we spend to impress others instead of spending on what we care about.
• 10:12
  SPEAKER_00: I want you to build a filter which you use anytime that you are going to spend money, whatever you are going to buy, whatever you are going to do.
• 10:23
  SPEAKER_00: Ask yourself if nobody in the world ever saw what you are about to do, would you still want to do it?
• 10:33
  SPEAKER_00: That bag that you are going to buy, that new phone that you are eager and saving towards to buy, that trip that you want to take, that meal that you want to go and eat.
• 10:48
  SPEAKER_00: If nobody ever knew about your expenditure, if nobody ever saw the bag, if nobody could ever see a post of your food, if no one would ever know that you went on that trip, would you still want to do it?
• 11:04
  SPEAKER_00: See, most of the time we don't realize we are taking decisions because of other people.
• 11:09
  SPEAKER_00: A lot of people spend time making the outside of their house look nice and not care about the inside because they are more concerned about what people are looking at than what they are enjoying.
• 11:22
  SPEAKER_00: A lot of people change phones for status, a lot of people buy fancy clothes to impress people, but most of the time you are making the wrong decision because you care more about other people's opinions on you than you do about your opinion on yourself.
• 11:42
  SPEAKER_00: So when you're able to change the psychology, when you start realizing that you are living for you, anytime you are spending money, which you have the full right to spend because it's your money, spend it for a reason on something that is for you, not for somebody else who actually doesn't care.
• 12:00
  SPEAKER_00: You know, I watched Morgan Housel say something which is very funny that we see somebody driving a flashy car, we see somebody living in a mansion, somebody going on a vacation, right?
• 12:12
  SPEAKER_00: And what we think is that wow, if I drove that car, if I went on those vacations, if I lived in that house, then people would see me as important, people would think highly of me, people would believe I am valuable.
• 12:28
  SPEAKER_00: But what we forget is in that moment, we aren't thinking about the person.
• 12:33
  SPEAKER_00: When that guy drove and parked in his Rolls Royce, we aren't actually thinking about him.
• 12:39
  SPEAKER_00: We are putting ourselves in his shoes and thinking that people will think about us.
• 12:45
  SPEAKER_00: But if you realize that means when you finally attain it and you drive the Rolls Royce, nobody's thinking about you either.
• 12:52
  SPEAKER_00: They are also just putting themselves in your shoes and thinking that when they attain it, people will think about them too.
• 12:59
  SPEAKER_00: So, in actual fact, we are all chasing some validation which we will never get.
• 13:05
  SPEAKER_00: So, when you want to be able to control your habits on spending, the first thing is understanding that psychology on why do I even want to spend this money?
• 13:15
  SPEAKER_00: Why do I really want to buy this phone?
• 13:17
  SPEAKER_00: The food that I'm so eager to buy, is it really nicer than my cocoa and beans?
• 13:23
  SPEAKER_00: Or is it that I want to flex Amma on the street so that she sees that me too, I can buy Chinese food.
• 13:30
  SPEAKER_00: Is there a real logical reason behind your spending?
• 13:36
  SPEAKER_00: Or is it just emotional and is it just for the flex?
• 13:40
  SPEAKER_00: If it's just for the flex, cut it out.
• 13:42
  SPEAKER_00: If it's an emotional decision, think logically because there are other ways to attain that emotion you are looking for.
• 13:50
  SPEAKER_00: Now we can't talk about making emotional decisions when it comes to managing money without talking about a big problem: lifestyle inflation.
• 14:00
  SPEAKER_00: So most of us don't realize when lifestyle inflation creeps up on us.
• 14:05
  SPEAKER_00: So I gave an example of you're making 1000 cities a month, which is difficult to manage in the to spend only thousand cities for a whole month.
• 14:14
  SPEAKER_00: I've already told you keep 200 and spend only 800 cities.
• 14:18
  SPEAKER_00: And then your boss tells you, Kojo, I like what you're doing.
• 14:22
  SPEAKER_00: I think I want to elevate you at work, give you a promotion.
• 14:26
  SPEAKER_00: So now instead of making 1000 CDs, you are going to be making 1500 CDs.
• 14:32
  SPEAKER_00: As soon as we hear that, bing, bing, bing, bing, bing, we get excited and we start to imagine the life that we can now live on the 1500 CDs.
• 14:42
  SPEAKER_00: But what if instead of inflating your lifestyle to match your new amount of money?
• 14:49
  SPEAKER_00: What if you kept going for a few months like that money never came?
• 14:54
  SPEAKER_00: What if when you started to make 1,005, the same way you are survived on 800 CDs for the past one year?
• 15:01
  SPEAKER_00: What if you keep surviving on 800 CDs for another six months and put aside that new money that has come in investing in your future self?
• 15:12
  SPEAKER_00: Would you die?
• 15:13
  SPEAKER_00: No, you wouldn't.
• 15:14
  SPEAKER_00: But you would elevate your wealth.
• 15:17
  SPEAKER_00: Lifestyle inflation happens to so many of us.
• 15:19
  SPEAKER_00: Where as soon as we start to make a little more money, we want to elevate our lifestyles too quickly.
• 15:26
  SPEAKER_00: Sometimes we even elevate our lifestyles before the money comes.
• 15:29
  SPEAKER_00: When somebody promises us some money three months ahead, we start to spend extra money that we don't even have right now.
• 15:36
  SPEAKER_00: We go and borrow money because we know money is going to come.
• 15:39
  SPEAKER_00: Buy new clothes, change our car, do this, do that because money is coming.
• 15:43
  SPEAKER_00: And lifestyle inflation is one of the surest ways to keep you poor.
• 15:50
  SPEAKER_00: You have to avoid lifestyle inflation.
• 15:53
  SPEAKER_00: Avoid it like a bad headache.
• 15:55
  SPEAKER_00: So, like I keep talking about, managing money is about building systems.
• 16:00
  SPEAKER_00: So I'm going to mention two systems that you need to build to manage your money effectively.
• 16:06
  SPEAKER_00: The first one is an emergency fund, or as some like to call it, peace of mind fund.
• 16:13
  SPEAKER_00: Now, life can be very difficult.
• 16:16
  SPEAKER_00: You don't know what's going to happen in this world that we are living in.
• 16:20
  SPEAKER_00: You know, it's it's it's naive to think you are never going to go through a crisis or go through a difficult position in life.
• 16:27
  SPEAKER_00: You know, everybody at some point in time in their life have lost their job, had a health crisis, lost somebody in their family, gone through something that they never thought would happen to them.
• 16:39
  SPEAKER_00: And I'm sorry to be the spreader of bad news, the bearer of bad news.
• 16:44
  SPEAKER_00: It will happen to you at some point in time in your life.
• 16:47
  SPEAKER_00: How you handle it all depends on if you are ready for it.
• 16:51
  SPEAKER_00: So this is what an emergency fund is.
• 16:54
  SPEAKER_00: First of all, you need to understand about how much you are spending monthly.
• 17:00
  SPEAKER_00: So let's say, like I mentioned, you should be able to, if you're making thousand cities, you are spending about 800 cities a month.
• 17:08
  SPEAKER_00: Now, an emergency fund is being able to save up from three to six months of your monthly spending in a secure place which is attracting interest but is easy to access.
• 17:26
  SPEAKER_00: Let me explain that properly.
• 17:29
  SPEAKER_00: So you put aside enough money that can last you three to six months if something goes wrong, if you lose your job, if you have an accident and you're incapacitated, whatever happens, for the next three to six months, you are safe.
• 17:45
  SPEAKER_00: You can continue to live at your current standards because you put that money aside.
• 17:51
  SPEAKER_00: But not only should you put the money aside, it should also be in an investment.
• 17:56
  SPEAKER_00: Because you have to remember, because of inflation, if you are not able to put your money in investment, your money is reducing every single day.
• 18:06
  SPEAKER_00: So saving money is not good enough.
• 18:08
  SPEAKER_00: Any money you put aside should be in an investment.
• 18:11
  SPEAKER_00: However, it should be in an investment that you can withdraw on quickly because you don't want a case where you are hit by a car, you are in the hospital, you need to pay for surgery, you need to pay for something, and they are now telling you, oh, your money is locked in bonds, you can't liquidate it for the next four to five months.
• 18:32
  SPEAKER_00: No.
• 18:33
  SPEAKER_00: So you should have three to six months of your monthly expenses in any investment that has express withdrawal, that has a way you can access it quickly, but it's acquiring interest every single month.
• 18:49
  SPEAKER_00: That's your emergency fund.
• 18:51
  SPEAKER_00: Now, the second system that makes you more powerful than you can imagine is expense tracking.
• 18:59
  SPEAKER_00: A lot of people don't know the importance of calculating your money, of recording your money.
• 19:05
  SPEAKER_00: You should be able to write down every single day.
• 19:09
  SPEAKER_00: Take it like something you do before you sleep or something you do when you wake up in the morning.
• 19:14
  SPEAKER_00: Just write down all the money that you spent.
• 19:16
  SPEAKER_00: 50 cities on both roots, 100 cities on Uber, you know, 40 cities on my yogurt.
• 19:22
  SPEAKER_00: It doesn't matter.
• 19:23
  SPEAKER_00: Write down every money that you spent.
• 19:26
  SPEAKER_00: When you are able to do this consistently, the first thing is it starts to teach you where the bleeds are in your spending, it starts to make you understand what you are spending on that you shouldn't be spending on.
• 19:39
  SPEAKER_00: And the second thing is it teaches you your own habits, especially when it comes to emotional spending, because you'll start to realize that I'm spending more money on things that I I may not necessarily care about.
• 19:53
  SPEAKER_00: If you look at your your budget or you look at your expenses, and maybe the most important thing to you is, I don't know, going out with your friends.
• 20:01
  SPEAKER_00: But you look at your expenses and you're spending a lot of money paying for Netflix and Amazon Prime and ShowMax and a DS TV subscription when you are actually mostly going out with your friends.
• 20:12
  SPEAKER_00: So why are you spending all that money on subscriptions when you are not going to be in the house?
• 20:20
  SPEAKER_00: So you need to actually be able to track your expenses to understand what you care about versus what you are spending your money on.
• 20:29
  SPEAKER_00: If you're able to track your expenses consistently, it is the first trick that will change your mindset on money.
• 20:37
  SPEAKER_00: When you understand your relationship with money, you will be able to build a better relationship.
• 20:43
  SPEAKER_00: So, in summary, with the three important skills on money development, the first one is to make money, which needs you to be bold.
• 20:52
  SPEAKER_00: The second one is to manage money, which needs you to be disciplined.
• 20:57
  SPEAKER_00: And the third and most important one along your path to wealth is to grow money, and that needs you to be patient.
• 21:05
  SPEAKER_00: As always, I hope this episode has brought you closer to being the mastermind I know you are destined to be.