Dan Martell - 9 Money Rules of the Top 1%

00:00:00.000 I'm going to share with you the rules of money that made me so rich that I questioned the meaning

00:00:04.060 of making money. These controversial rules are what allowed me to go from broke 22-year-old

00:00:08.160 to a multi-millionaire today. Some of these rules I picked up on my own during my 27-year

00:00:12.580 career as an entrepreneur and others I learned from some of the highest net worth individuals

00:00:16.460 you probably know. So these are the nine money rules of the top 1%. The first rule is to act

00:00:22.040 your wage. It's not your salary that makes you rich, it's your spending habits. A long time ago

00:00:27.380 my dad said this. It's not how much money you make, it's what you keep. 33% of millionaires

00:00:32.180 never earned more than $100,000 a year. It meant they knew how to invest their money.

00:00:36.820 When I was 21, I made one of the biggest financial mistakes up to that point in my life. I had just

00:00:41.760 finished doing a bunch of consulting, got paid a big check, decided to call my little brother Mo

00:00:46.260 and say, hey, come ski on the West Coast. I'll cover everything. And for about a 10-day period,

00:00:51.180 we lived a lavish lifestyle. We stayed at the nicest hotels. We paid for everybody's drinks.

00:00:56.240 we ate at the finest restaurants i bought him new gear and at the end of it he went back home

00:01:01.440 and talked to my dad and my dad calls me up and he goes dan i heard about your trip did you put

00:01:06.640 any money aside for taxes no i thought that was my money no dan you got paid that gross you need to

00:01:14.320 pay taxes essentially half of that money wasn't even mine and that's the moment i realized i

00:01:18.400 needed some help so i ended up hiring an accountant and he put me on payroll and then that way i lived

00:01:23.620 off of what he gave me, the rest of it was being saved in my business account, and I didn't get

00:01:28.020 the two confused. Here's what I learned from that experience and how I've brought that into my life.

00:01:33.680 The first one is you have to automate your financials. My philosophy is that when the

00:01:38.020 money comes in, I want it to go out into the different buckets it needs to go to without me

00:01:42.480 ever seeing it. It doesn't matter. I said it and I forget it. Two, I pay myself as little as

00:01:47.980 possible and I live on very little from a consumption point of view. Now, I know you

00:01:52.440 might see me on my private jet or my supercar collection or my real estate I get that but what

00:01:57.420 you don't understand is I live on a very small percentage of my income and I always have even

00:02:01.900 when I was making millions of dollars a year I was driving a 12 year old car I never lived above my

00:02:07.500 means because I realized that if I wanted the capital to be able to invest in opportunities

00:02:12.140 invest in myself it need to be available the third strategy is you can't save yourself to wealth but

00:02:17.420 but you can't spend yourself there either.

00:02:19.640 You need to live off of less than you make,

00:02:22.040 automate the process,

00:02:23.240 and make sure you focus on investing in yourself.

00:02:25.260 Which brings us to number two, which is the 10% rule. 0.90

00:02:28.600 I live on 10% or less of my income today.

00:02:31.700 I know this sounds crazy for a lot of you,

00:02:33.540 and it might not be possible on a lower salary,

00:02:35.700 but this is the goal, not the standard.

00:02:37.920 So you might start with 40%, 60%,

00:02:40.340 maybe 80% of what you make,

00:02:42.220 but you can work towards that goal.

00:02:44.360 saved 90% and reinvested in income-generating asset,

00:02:48.140 you being the primary asset,

00:02:49.600 and two, things that produce capital.

00:02:51.760 And this one's kind of crazy,

00:02:53.020 but I believe one of the best assets to own

00:02:55.220 is a life you're proud of.

00:02:56.940 Most people have a scarcity mindset,

00:02:59.220 so they try to live on as little as possible,

00:03:01.520 but then the surplus, they don't do anything with it.

00:03:04.200 So what you wanna do instead is learn to live off very little,

00:03:07.580 start accumulating,

00:03:08.820 and then decide at what level

00:03:10.260 you're gonna start investing in other things,

00:03:11.900 which is what we're gonna talk about next.

00:03:13.440 which brings us to number three which is to prioritize investments here's a controversial

00:03:18.000 belief broke people make money to buy things middle class people make money to get loans to

00:03:23.600 buy things and wealthy people invest in income generating assets see some of you guys are like

00:03:28.960 one inch away from opportunities that could actually make you money to cover the payment

00:03:34.000 on something but instead you take that money and you put it into a depreciating asset and then you

00:03:38.720 you got to keep working and working and working to try to keep up your lifestyle what they should

00:03:43.440 do is say what is the skill that if i invest in to get better at it would have an immediate impact

00:03:48.720 to my income generating abilities like the promotion and my job or can i go learn a

00:03:53.760 different skill that can get me a better job that could make me more money or could i start a side

00:03:57.840 hustle with a new skill that's going to make me just as much money as my current job and is there

00:04:02.800 way for me to invest to cover the increase in lifestyle you might want which brings us to number

00:04:08.400 four which is to have a nest egg here's where most people mess things up when things happen

00:04:14.220 and they will like the 2020 global event it's going to demand of you resources i had a friend

00:04:20.760 who had a business and because it was shut down the whole time he hadn't saved up any money

00:04:25.260 whatsoever to cover any of his costs all he needed was about three months of operating costs to

00:04:30.200 weather the storm and instead he had to shut down his business and this is true for most people in

00:04:34.880 life most people get into a spot where they can't afford the bad thing that happened to them and

00:04:39.300 then they end up having to make concessions and sell things on the cheap that causes the whole

00:04:43.660 thing to just cause a negative downward spiral you always want to have a nest egg ready to go

00:04:48.840 in case there's an emergency that needs to get funded so my rule is that in my personal life i

00:04:54.120 want at least six months of expenses in some kind of saving account this is liquid not tied up in

00:04:59.440 stocks where i'm going to pay taxes if i sell it now some of you guys may think like six months

00:05:03.460 that's a lot of money think about it this way i've never seen a situation where somebody loses

00:05:08.180 their job goes to zero and within a six month period can't find an opportunity to bring it back

00:05:14.480 if you have six months and something bad happens you have to reset and that gives you time to not

00:05:19.360 make any massive financial decisions but just to get back on pace so that you can get in the green

00:05:24.260 again that to me is a competitive advantage it's gonna allow you to sleep better at night and while

00:05:28.860 everybody else is freaking out you're able to stay calm and make good decisions without being

00:05:33.420 emotional it allows you to operate from a place of abundance not fear which brings us to number

00:05:39.340 five which is don't be over leverage now i learned this lesson the hard way when i was in my early

00:05:44.300 20s i wanted to buy some new furniture for my place so i go to the furniture store find some

00:05:49.420 incredible stuff i like a deep-seated couch because i'm a big guy i was like how much is

00:05:53.660 it he goes well the truth is if you want you can just finance it no interest whatsoever for the

00:05:58.300 the first two years and at the end of it if you want to pay it off then you can pay it off then

00:06:02.100 so you get essentially free money and I was like I like free money so I fill out all the paperwork

00:06:06.360 poof I get approved now there was a bunch of small details that I didn't understand and at the end of

00:06:11.820 it I ended up paying a lot more for this furniture financing it than I expected it actually took me

00:06:18.380 another four years to pay off I share that because it's a simple example to understand that sometimes

00:06:24.280 with consumer debt or our home or other types of loans

00:06:28.000 that we just magically get accepted for.

00:06:30.140 We just take all this on

00:06:31.740 and it creates this hole of financial challenges

00:06:34.600 that makes it really hard to climb out of.

00:06:36.840 So you need to understand a few things

00:06:38.140 about how the money world works.

00:06:39.820 The bank makes most of their money on collecting debt,

00:06:43.020 especially if you end up converting

00:06:44.480 into a high interest rate scenario.

00:06:46.580 Here's what's crazy.

00:06:47.480 47% of people hold credit card debt month to month.

00:06:51.700 It just rolls over.

00:06:52.580 and the interest rate they're paying on average is 22%.

00:06:56.600 If you're borrowing for a lifestyle that you can't afford,

00:07:00.520 then you're just delaying the ability to create real wealth.

00:07:03.820 If you can't afford it, go make more money to get it.

00:07:06.540 Which brings us to number six,

00:07:08.140 which is invest in your skillset.

00:07:10.160 When I was in my early 20s, out of desperation,

00:07:12.860 I read a book and I decided to hire a business coach.

00:07:16.180 His name was Bob and I barely had any money to pay him.

00:07:19.460 I had two months, but it was an annual commitment.

00:07:21.340 And I figured, well, if Bob's good enough,

00:07:23.780 he'll teach me some stuff to be able to pay him

00:07:25.620 month three, four, and onward.

00:07:27.140 And in that first year working with Bob,

00:07:29.380 I did almost a million dollars in income in that business.

00:07:32.380 And I share that because prior to that,

00:07:34.560 spending any money on me wasn't even a consideration.

00:07:37.820 I barely was willing to buy books.

00:07:40.680 I didn't feel like I deserved it.

00:07:42.100 I didn't feel like I was worthy.

00:07:43.780 I was worried that I wouldn't learn.

00:07:45.500 I would be worried that I would waste my money.

00:07:48.380 And what I've learned over the years,

00:07:49.540 if I take all the money I've invested

00:07:51.420 in coaches, seminars, et cetera,

00:07:53.320 it's about $1.7 million.

00:07:55.300 And if I would have took that money

00:07:56.580 and invested into the S&P 500,

00:07:59.660 it would have made me some money.

00:08:01.300 But when I look at the income

00:08:03.060 that that knowledge produce in my life,

00:08:05.720 it's like a thousand X return.

00:08:08.100 And that's what people don't get.

00:08:09.920 If you're not investing in your skills

00:08:11.940 to become more valuable to the market,

00:08:14.280 then you're always gonna be at the mercy

00:08:16.280 of other people's decision

00:08:17.740 on how much of a raise you're gonna get.

00:08:19.220 the three to five percent a year that's not going to work when you're trying to keep up to the

00:08:23.220 joneses and you're living in new neighborhoods and you see people driving the new bmws and

00:08:28.100 having these extravagant birthday parties for their kids and you just feel like you got to go

00:08:32.660 on these vacations to italy it just makes it really tough because then you don't have anything

00:08:37.620 left over to invest in your earning potential so my whole philosophy early and i got lucky but i'm

00:08:42.980 i'm going to tell you is delay the lifestyle expenses as much as possible take that money

00:08:48.140 invest in you to be able to build a surplus get to a point where your income is more than your

00:08:54.140 spending and save it and with that you'll create real wealth which brings us to number seven which

00:08:59.900 is know your risk return there's a fun quote that says when somebody with money meets somebody with

00:09:05.040 experience the person with experience ends up with the money and the person with the money ends

00:09:09.000 up with the experience that's been my reality what i've seen is most people get persuaded by

00:09:13.400 people they love getting excited about an opportunity they don't have anything better

00:09:18.120 going on in their life so they're like oh i don't want to miss this opportunity so i'll invest see

00:09:22.120 when you invest or do things outside of your area of competency you're putting the whole thing at

00:09:27.320 risk for you to understand risk and investment i want to show you the risk investment quadrant so

00:09:32.680 you have risk on the side and return potential on the bottom then i want you to place all your

00:09:37.480 opportunities in one of the four boxes. Bitcoin would probably be in the high risk, high return.

00:09:42.380 Then you got index funds, low risk, low return. Then you've got low returns, high risk. Now,

00:09:47.360 that's a trick question because you shouldn't have anything in that box. And then buying a

00:09:50.760 business or real estate with value add, that's low risk, high return. What you want to do is

00:09:55.060 maximize your investment in the bottom right box. The best business to be in is the business you

00:10:00.560 know. So if you're a real estate agent, stay in real estate. If you're a designer, stay in design

00:10:05.060 projects. If you're an editor, stay in media projects. But the business you know is where

00:10:10.060 you want to be investing in your skills or in opportunities. What I do now is I get situations

00:10:15.140 where there's asymmetrical reward, meaning that I can invest or buy a business with some level of

00:10:21.520 upside that's guaranteed because I know what I'm doing. And the fixed downside, because it's an

00:10:26.960 industry that I know better than most, I don't personally guarantee it. So I'm not putting my

00:10:31.200 whole personal net worth at risk and then i take that thing and i can add value to make it bigger

00:10:36.880 that's win-win which brings us to number eight which is to build a personal p l here's a crazy

00:10:42.560 idea i think every household should treat their house like a business you have profit and loss

00:10:49.120 you have your salaries you take in you have expenses and you either have money saved over

00:10:54.240 at the end of the month or you have a loss and it's not a good business to be in if you're not

00:10:59.120 making money. So if you don't know how to save, fix it. A lot of people don't want to manage their

00:11:03.660 money because they're worried to find out what the numbers actually say. And the truth is that

00:11:07.420 if you put your head in the sand, it doesn't make it better. Not being good with numbers is not a

00:11:12.060 reason not to know where you're at. What's crazy is that this concept also applies to really wealthy

00:11:17.840 people. I had a friend, Manny, he had a very big business. He was making tens of million a year.

00:11:22.700 And he used to tell me, I just want a simple life. And I go, why is that? He goes, I just don't want

00:11:26.680 too many things to manage okay well can i offer you some suggestions yeah what's that well if you

00:11:33.720 want all this other stuff multiple homes and vehicles and boats and all that why don't you

00:11:38.040 just hire somebody to manage it all like why are you managing it yourself and he's like well i don't

00:11:42.420 know what i should have somebody manage it do you have somebody manage your stuff at work yes perfect

00:11:47.560 you bring it to your home that's what i do i have a house manager she's responsible for all the 0.99

00:11:52.080 things that are my responsibility or my wife's. And because of that, there's no stress. You can

00:11:57.080 hire somebody to own and manage your stuff so that you don't have to be a burden of it. I think if

00:12:02.320 you have possessions and you're a prisoner of those possessions, it doesn't matter if you have

00:12:05.080 a little bit of money or a lot of money. If having nice things stress you out, you are a prisoner to

00:12:09.920 those nice things. You're a prisoner to your possessions. But what I discovered talking to my

00:12:14.340 wealthy friends, and this is a big secret, is the wealthiest people aren't managing their own

00:12:17.780 estates. They have estate managers. They have people that run their personal life, just like

00:12:22.480 a business. How do you do that? You have a P&L, you have your income, you have your expenses,

00:12:27.300 you create budgets. You do the same thing you would in a business. You just do it with your

00:12:31.540 personal stuff. Some people call it a family office, right? Where you have a team of folks,

00:12:37.260 maybe your wealth managers, your accountants, your legal team, and they sit down and they review your

00:12:41.720 investments, your decisions, and make sure that everything is working as best it can to avoid the

00:12:46.520 amount of taxes you're paying, to make sure you have the right insurance coverage, to make sure

00:12:49.700 your portfolio is well balanced. Which brings us to number nine, which is money is a tool, not the

00:12:54.840 goal. The goal of life is not to just have a lot of money. It's to use that as a resource to create,

00:13:01.840 to expand, to serve other people. I know some people that are so poor, all they have is money.

00:13:07.560 They don't have relationships. They don't have opportunities. They haven't grown. That's why I

00:13:12.380 drifted for two years i didn't expand i wasn't learning things i wasn't trying to create in this

00:13:17.820 world it doesn't matter if you have a million dollars or a hundred million dollars it's who

00:13:22.260 you get to become in the process that journey of be creating wealth is really about doing the work

00:13:27.820 on you if money is just a store of value and like a battery it needs to be put to work if not it's

00:13:34.700 not useful if you don't use it to help other people and you're just helping yourself it's

00:13:38.780 going to feel lonely. The point is use the money to buy you time so that you can invest it in

00:13:43.400 yourself to become more valuable. So you can reinvest it in making more money to buy more

00:13:47.540 time to become more and focus doing work on projects that light you up. It's why I wrote my

00:13:52.440 book, buy back your time. Everything's in there. If you don't focus on becoming more than the world

00:13:57.520 is harder when you can get to a place, regardless of how much money you have, where no matter what

00:14:02.100 happens to you, you can be happy that it's not about the possessions. It's not about the money

00:14:06.800 your bank account that's special and it requires you to go ahead and do the work it requires you

00:14:12.480 to get better if you like these nine money rules and want 21 more principles of the top

00:14:17.360 one percent click the link and i'll see you on the other side

Dan Martell - October 15, 2024

9 Money Rules of the Top 1%

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