Money Principles I Know Today But Wish I Knew in My 20s transcript

I am going to share 11 Money Rules that made me a multi-millionaire these aren't your typical hacks but rules that help me go from streets of Mumbai to boardrooms of companies that created over $60 billion in value so let's get into it my first money rule is to get in the right headp space head or h a d stands for Hope extraction abundance and discipline let's start with hope as humans we live in Hope don't we it is our driving force it reminds me of an actor who has made more money than Tom Cruz you've probably never heard of him he is the Superstar from India and his name is shauk Khan and he has such an incredibly positive hopeful mindset he says when the movie gets released on Friday and I realize my movie is a big giant super hit everybody's high-fiving the entire weekend is a celebration but come Monday I go back to work to make a better movie and if I make a flop Friday is a disaster I spend the entire weekend crying but come Monday I get back to work to make a better movie that's what life is about it's about moving forward to the next play with hope regardless of success or failure that mindset about focusing on tomorrow is super important for Building Wealth next is e for extraction everybody has these Demons of self-doubt I have them they Cloud our emotional reality thoughts like I'll never have enough money or I'll never be good enough or money is evil but all of that is just a voice in your head none of that is true you know when I was growing up in Mumbai I applied to this University in Boston I got in with full scholarship and yet the Visa officer in Mumbai rejected my Visa because I did not even have $200 to buy a one-way ticket from Mumbai to Boston I remember crying in front of my dad that evening and we both felt like failures and fast forward to today I'm surrounded by some of the most powerful minds in the world of technology and finance the key is to extract and pull out these toxic beliefs that tell you that we're not worth it that we're meant to fail replace them replace them with positive mantras next after e comes a which stands for abundance now being rich and feeling Rich are two entirely different things dig rajad Gupta CEO McKenzie it's one of the most haloed and Powerful consulting firms in the world and he was on the board of Goldman Sachs Proctor and Gamble he used to advise Melinda and Bill Gates Foundation and I think he was already worth about $130 million when he got involved in an insider trading Scandal and he went to prison and lost it all his money his Fame his reputation his influence so you've got to know when enough is enough the next is d d stands for discipline getting rich is hard but staying rich is much harder it requires a different type of discipline a different type of humility Mike Tyson was once worth $400 million but he made poor choices he trusted the wrong kind of people and he went bankrupt from $400 million to bankruptcy Kanye West he's worth about $2 billion but nearly lost all of it both Tyson and Kanye eventually recovered and they course corrected but the lesson we can learn from all of this is that if you cultivate the heads space you will have emotional wealth and when you have emotional wealth the financial wealth will follow that's how the world Works rule number two is the rule of 25x understand it and manage your burn rate when it comes to financial planning gen Z beats out Boomers nearly 70% of gen Z today feel they are on track or even slightly ahead in terms of retirement saving only 50% of Boomers feel that way so what's the difference is the 25x rule here's how it works figure out how much your expenses every year would you spend on over the entire year multiply that number by 25 that's the total amount of investment that you must have before you can retire why at 25x is based on this 4% rule which states that if you're Investments are generating on average 6% return you can safely withdraw 4% each year and you will not run out of cash so let's do an example and keep the numbers simple let's say your annual expenses are $40,000 $40,000 time 25 that's 1 million that investment in the market on a typical year should return $60,000 and you can withdraw 40,000 and spend that's your magic number to Achieve Financial Independence dependence now please remember markets will fluctuate you know for example if the market is returning 2% in a given year and you try to withdraw 4% you're already behind now right because you're eating into your investment and there are years when the market is going to just completely tank in 2008 it went down by 50% I remember it was painful the key takeaway here is to manage your burn rate not just your earn rate because 80% of our financial success comes from what we don't end up buying next rule number three plan for Murphy's Law anything that can go wrong will stop focusing only on financial future start planning for financial failures I was a sea-level executive at a terrific company and rarely have I seen such a phenomenal product and I ran sales and marketing account management customer success Solutions engineering and our next product launch was supposed to be a game changer and we were super excited about it and then everything changed uh database bug caused a severe delay couldn't fix it in time the launch never came our customers got really mad and we lost trust I don't think we ever recovered after that setb the customers left I lost my job and over time the company kind of faded away into to Oblivion these things happen to the best of us life will throw as curve balls and that's why you need your emergency fund aim for having at least 6 months worth of living expenses tucked away somewhere and don't touch it moving on to rule number four love your luck but what if I told you there is a way to engineer your luck and by that I mean do everything that maximizes your ability to be lucky be in as many right places as you can be with the the right skills surrounded by the right people and the right time will come you might say that's not about money but it absolutely is if you're not swinging the bat every single time the Home Run you're hoping for may never come I love the story of Nick jonus he was just six and sitting in a hair salon with his mom was getting her hair done and he was just sitting there getting bored and so he started singing to amuse himself and a woman who was also a customer in the same Salon overheard him singing and she w walked up to Nick's mom and said Hey listen you have to contact this talent manager and he's looking for kids who can sing Nick obviously had Mad Skills to sing like that that compelled that woman to walk to his mom but what led to an incredible career in music and movies was a complete accident these stories highlight how chance can shape and lead to your career breakthroughs because luck loves to reward hustle rule number five is super important always play the long game this one thing I'm going to tell you is your ticket to long-term financial success imagine you start investing $400 every month in S&P or some index fund and you start at the age of 21 and you continue it until you retire at 67 you will have over $1.7 million when you retire now you may have heard about this idea before but here's the crazy part you're total out of pocket contribution in your final retirement fund is just about $220,000 that's it so where did the rest of the $1.5 million come from that's the long game I'm talking about that's the magic of compounding that's money making money while you're asleep so start early and automate your Investments make it a ritual and then be patient because your money will grow very slowly at first and it will will compound very quickly at the end next rule number six you need to become the CFO of your own life I have said in hundreds of corporate board meetings and in every single board meeting one thing is absolutely certain the CFO or the Chief Financial Officer will face the toughest questions from the board about cash flow burn rate Capital allocation hiring cost hundreds of other metrics you know a CFO once told me after board meeting and it was a tough board meeting for him because you know the board pressured him for answers that he didn't have and he said man it was more painful than going through a surgery without anesthesia every successful company needs a good CFO to steer the company towards profitable growth the same should apply to our financial life treat your personal finance with the same discipline and rigor of a CFO here are the three things that you can start doing today one create a monthly or quarterly financial statement for your personal finance don't need to track every penny but you should know generally where your money is going do you really need all five streaming subscriptions do you have to have the most expensive espresso in town every day so you'll learn from it you'll start adjusting you'll start optimizing number two don't get bogged down with perfection what if you don't know Excel or Google Sheets that's okay he make a bullet list in a document or use apps like mint or you need a budget it's all good you know start small keep it simple and number three set up three key automations automate bill payments automate savings and automate investing that's it take the human emotion out of it once all three are automated whatever is left is yours to spend okay next up is rule number seven don't shy away from from using the fword Warren Buffett still lives in the same house that he bought in the ' 50s the founder of Ikea flies economy and drives old beat up Volvo and keano Reeves is frequently seen taking the New York City Subways so what's the common thread here the f word is frugality modest living is the best way to become wealthy turn off that consumer brain and there's a deeper idea here too we all know that true happiness comes from having incredible experiences and deep relationships right it does not come from owning things the things you own end up owning you so learn to be frugal and please learn to find joy in things that money can't buy next we're on to rule number eight understand when debt is good and when it's bad most people don't know this but not all debt is bad there is a company that I'm working with right now and the CEO told me me that he took a significant amount of debt to fund an acquisition I was surprised because they had cash they could have used Equity but they went the Third Way and when I dug in and I had this conversation with their CFO I realized that it was a very smart move if you had bought a house in January of 2021 you would have locked in the mortgage rate of around 2.7% pretty low pretty good but if you bought the same house in October or 2022 the mortgage rate would be over 7% the first one is a very wise move the second one is incredibly risky you've got to know when the time is right and think of debt like fire good debt can keep you warm bad debt burns your house down that brings me to rule number nine be an investor not a gambler invest like you in Silicon Valley not like you're in Vegas a good friend of mine who was a great CEO uh took his company public and the IPO was amazing his net worth was tied to his company stock so obviously he became very wealthy even post IPO the company was doing very well but then the market crashed and his stock plummeted from 70 to pennies and he couldn't even sell because he was in this lockout period so he had to just sit there and watch his entire network drop from over 7 million to less than $70,000 that's why we have to learn from the Venture capitalists in Silicon Valley they diversify to spread their risk so how do we as individuals diversify think of a three tier pyramid so at the base is your emergency fund cash and bonds for a rainy day and it's not going to make you a lot of money but it's important to have a very strong base a very strong foundation so you can take calculated risk with the rest of it the middle of the pyramid is the moderate risk Investments for most of us that portion is going to be the biggest part of our pyramid index funds 401ks ETFs this is where you aim for that long-term steady growth and on top that's about 5 to 10% of your total portfolio you will take higher risks That's The Swinging of the bat that I'm talking about there is a potential for for greater reward but the risks are higher so start with a strong base and build out the middle and go to the top only as your income and wealth starts growing and no matter what you do don't end up with an inverted pyramid where your base is so thin and at the top you're exposed to so much risk remember investors spread their risk gamblers go all in the next rule is number 10 invest in your financial education if you want to be financially free you've got to be financially fluent Studies have shown that high school students who took personal finance classes during their high school years ended up with a much higher credit scores as adults now think about it a few early lessons in finance improve their Financial Health for decades to come so you should commit to learning more about Finance as well use courses YouTube books podcasts mentors whatever it takes think about it as your investment as your R&D or research and development a biotech CEO I work with recently told me that they put in 89% of their budget into R&D can you imagine investing 89% of your entire income into your financial R&D your financial education of course you can't do that even if you put 10% of your time on building your financial chops the rewards would be huge finally we're at ru number 11 the most important one on the list invest in your relationships what is the most valuable asset you own right now it's not your car house or stocks it's your network when I graduated from business school the United States was going through a major recession everybody was getting fired no one was hiring a lot of us were unemployed for a long time and the only thing I remember focusing on was networking I would I would call I would email meet people for coffee just spend hours and hours on LinkedIn on Outreach after about 6 months I got hired and that was because of someone in my network and here's the thing every single upward move in my career has happened because of my relationships not just because of my skills you're going to need Matt skills don't get me wrong but it's your network that compounds your skills it is a multiplier Social Capital just like Financial Capital has that compounding magic and that's why LinkedIn data shows that 85% of jobs are filled through networking and I talked to so many folks in their 20s who are spending hours and hours refining their resumés and posting it on sites no one's going to read them so instead try to spend all that time building relationships even if you do it for two two or 4 hours a week connect with an Alum your peer as someone who's leading in your industry a mentor reach out and don't be ashamed don't be scared what do you have to lose and this is the most important insight about relationships don't just build them invest in them focus on giving more than receiving and that is a proven path to financial success if you found this video helpful please please hit the Subscribe button so you don't miss out on new videos like this every week