Rich Mind vs. Poor Mind — A Psychologist’s Guide to Building Wealth
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Summary
Brad Klontz is a financial psychologist, wealth manager, and professor, and the co-author of Start Thinking Rich: 21 Hard Truths to Take You From Broke To Financial Freedom. In this episode, Brad explains the critical difference between being broke and being poor, how learned helplessness keeps people financially stuck, and practical ways to develop a wealth-building mindset.
Transcript
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Brett McKay here, and welcome to another edition of the Art of Manliness podcast.
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Many people think becoming wealthy is all about having the right job,
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inheritance, or just lucky breaks. And those things can certainly give you a leg up.
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But according to my guest, the biggest key to building wealth is your mindset.
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As research shows that even high earners can stay broke forever if they're trapped in poor
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thinking patterns, while others can build lasting wealth on modest incomes by developing the right
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mental approach. Brad Klontz is a financial psychologist, wealth manager, and professor,
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and the co-author of Start Thinking Rich, 21 Harsh Truths to Take You from Broke to Financial Freedom.
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Today on the show, Brad explains the critical difference between being broke and being poor,
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how learned helplessness keeps people financially stuck, and practical ways to develop an eugenic
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wealth-building mindset. We also tackle thorny issues like the role of home ownership in building wealth,
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and how to handle relationships that might be holding back your financial future.
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After the show's over, check out our show notes at awim.is slash thinkrich.
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All right, Brad Klontz, welcome back to the show.
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So you are a psychologist who specializes in helping people with their money issues. And we
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had you on the podcast way back in 2019 to talk about this idea of money scripts. And that's
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episode number 529 for those who want to check that out. You got a new book out called Start
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Thinking Rich, 21 Harsh Truths to Take You from Broke to Financial Freedom. This is a book you co-authored.
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And you start off the book in the introduction talking about the difference between being poor
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and being broke. What's the difference between the two and why is it important?
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So our chapter titles are very insulting to poor people. And we felt like it was important to make
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a distinction here because I see it as two very different things. So broke is when you don't have
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any money. I've been broke. A lot of us have been broke. Poor is a mindset. And the problem is
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with a poor mindset, it'll keep you broke forever. And there's a lot of people who,
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for example, are very high earners, but they're living paycheck to paycheck. It doesn't really
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matter how much money you're bringing in. You're never really going to get ahead in terms of your
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net worth and lowering your financial stress if you have that poor mindset. And so a lot of my work
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has been trying to identify what is the mindset of wealth? What do the mindset that ultra wealthy
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people, what do they have? And then what is the mindset of middle class and lower? And what can
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I glean from the research on the ultra wealthy and how they got there to teach as many people
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as possible? And really it started as a personal mission coming from a low income family myself,
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trying to figure out why do all these hardworking, intelligent, God-fearing people that I'm around,
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why are they, why we've been broke for generations?
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Okay. So being broke is just not having money, but being poor, it's about a mindset. And it sounds
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like you can be poor, even though you have a lot of cashflow, you can still be poor.
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Absolutely. I think that many, many Americans are in that position right now.
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And something I think we need to say from the start is that you and your coauthor aren't saying
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that there aren't systemic problems that work to keep people poor and that there aren't injustices
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that may need to be addressed. What this book is about is, okay, even if there's changes you like
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to see, and even if those changes may come in the future, you've got to operate and figure out
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how to get ahead in the current system. So like, what do you need to understand to do that?
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Right. And so looking at it, like the system is, well, first of all, it's obviously unfair. I mean,
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I hope that's obvious to everybody. Like if you grow up lower income, it's very unfair. You're,
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you are not getting access to things that people who have higher income live in better neighborhoods,
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better school districts are getting. It's just absolutely unfair. And certainly I applaud efforts
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to, you know, improve the system, make it better, whatever. And that's really, really important.
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See, I'm a clinical psychologist though. And so when people come into my office,
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I am trying to help them succeed in a very unfair world. We even talk about capitalism in the book.
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It's like, we're not, you know, economists in that sense. We're not out to change a system or
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whatever. Is capitalism good? Is it bad? I mean, you can go ahead and decide that the bottom line is
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it's a game and that's the game we're in. And if we lived actually in a communist country,
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this book would be a survival guide for how to thrive in a communist country. That's essentially
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what we'd be writing. So we're pragmatic about it. We're not taking a side here. It's really,
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really powerful to look at it like it's a game. And so how are you feeling about the game you're
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playing? So first of all, recognize that it's a game. We talk about multiple ways to approach,
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you know, making money. You know, there's the entrepreneur game. There's the, you know,
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corporate game. It's like, just recognize that it's a game. So if you're not happy with the
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results you're getting, you have to ask yourself, am I playing the right game? Maybe you need to
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shift up the games. And then also, do I know the rules? So if you want to grow your net worth,
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since that's what we're talking about here, find out how people are doing it and then go ahead and do
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what they're doing. And as you mentioned earlier, you're coming at this from the perspective of
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personal experience. Like you yourself grew up poor. Yeah. Grew up low income. My parents divorced
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when I was two years old. And if you weren't sort of low income before that happens, you'll be
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afterwards. And so my mom was a part-time teacher and I grew up not having much money. And this was
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something that I faced all along my development and it really does suck. And your coauthor, he weaves
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his story in as well. His parents were immigrants and they were millionaires by the time they
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retired. And they weren't working like a Silicon Valley entrepreneur type thing. They were just doing
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workaday stuff that most people do. Like his dad started washing cars at a car dealership and then
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worked his way up to being the parts manager. Yeah. Adrian's is a fabulous story. His father
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immigrated from Mexico had nothing, you know, had to steal food in Mexico to even eat. I mean,
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experienced a level of poverty that I'll never experience. And Adrian certainly never experienced.
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And what I find fascinating about his family story, and he really traces it to his grandma's
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entrepreneurial nature and hustling and doing everything she could do to get her family in
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America. I sort of compare his family who his dad first generation and he became a millionaire
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and he was a radical saver, right? So Adrian talks about the story of his dad and all the family
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pictures. His dad had a Toyota shirt on that was his work shirt. And in retrospect, he's asking his
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dad, Hey, you know what, what's going on? Why are you always wearing that shirt? And he's like,
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well, I didn't buy clothes for five years. That was his mindset. I'm going to save every penny I
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possibly can. And I sort of compare his family to my family and no risk, no disrespect. I love my family.
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Some branches of my family, we've been in the United States since the Mayflower and both sets
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of my grandparents were living in trailer parks. And so they actually never were able to accumulate
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any money. And it's just such a curious thing to examine. And we've really nailed it down to
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the mindset they had around money. So let's talk about that mindset.
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What are the big differences between a poor mindset and a rich mindset?
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Fairly simple and logical, but I'll talk about the psychology behind it. So essentially,
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how do you become rich? Well, first of all, it's really important to understand
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that most wealthy people in the United States are self-made. And this is a very empowering
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understanding. Like when I was growing up lower income, I thought the only way to get rich was
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to be born rich or you had to go to private school. I mean, I had all these myths about
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millionaires in the United States. And it's really, really empowering to know that no, no, no,
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most of them are self-made, like upwards of 90% in between 80 to 90%. So just understanding that
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they got it on their own. They didn't inherit it. And then you have to ask yourself, well,
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what are they doing differently than people who aren't able to climb the socioeconomic ladder?
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And there's a few psychological elements. The financial elements are living below your means,
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saving a percentage of every dollar you make and investing it. Like this is probably the mindset
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that's the most important. And if you have this mindset at an early age, you'll be a millionaire,
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plain and simple. You can work in fast food your entire life. I've actually done the numbers
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with a lot of young people over the years. The job actually doesn't matter nearly as much as having
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this mindset. And so they're looking to buy assets. They're looking to invest. They're not racking up
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credit card debt. They're not buying stuff to try to impress other people, which is, which is a real
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constant draw in our culture, especially if you're on Instagram and social media, you're always feeling
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less than, and they're looking to invest for the longterm. That's the rich mindset, the poor mindset.
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But conversely, people, you know, they get money, they spend it. They're buying labels instead of
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stocks. They're trying to impress other people. They're not investing at all. And so those are
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the, like the behavioral patterns, but we've also found some really deep psychological beliefs that
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have a profound impact. And, and the one I, that I think is the most important, and this is based on
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all the research in psychology related to success and education, success in relationships, financial
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success. And I have an 11 year old and a seven year old, and this is the number one mindset that
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I'm trying to instill in them. And that is something called an internal locus of control.
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And so this is really the location in which you attribute control of the outcomes you're getting
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in life. This is a rich mindset that if you have it, you will become unstoppable. And I would imagine
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Okay. So if you don't have an internal locus of control, you basically blame your external
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That's exactly right. And so when something's going bad in your life, you know, easy examples,
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like when I walk in the door and my wife's grouchy and she takes it out on me, it's so tempting to
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just blame her for the fact that I'm not feeling understood. And does she really realize how hard I'm
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working? And an internal locus of control would say, hmm, so I wonder if there's anything I can do to
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improve my relationship with my wife. It's a powerful mindset shift because it's so tempting
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to blame everybody else for your problems. And the problem with it is there's a lot of people out
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there you can pin blame on. And a lot of these people are not very nice. And so it's a, you could
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get stuck in this never ending cycle of every time something bad is happening in your life, financially,
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you blame the stock market, you blame the, somebody at the bank loaned you money for a house you
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couldn't afford. Why did they do that to me? And you can find people who are blameworthy, but that
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isn't going to keep you stuck in a cycle of failure.
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Yeah. So having an internal or a strong sense of an internal locus of control, it's all about
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developing your sense of agency that you're able to act on the world and you're not just acted upon.
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Right. And that's ultimately where this strength comes from. It's not about belittling you or shaming
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you. It's about actually getting quite excited that what's happening in your life. You have an
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impact. You helped create it consciously or unconsciously. And if you can recognize that,
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that's when you can make these shifts that are really, really important in terms of becoming
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wealthy. So related to this concept of an internal locus of control, it's like the opposite of it. It's
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something called learned helplessness. How does learned helplessness play into all this?
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Yeah. So learned helplessness really does help explain why so many people are stuck in a poor
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mindset and can be there for generations and pass this poor mindset down to their kids. And it really
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dates back to some horrific studies that psychologists did on dogs. And so what they would
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do is they would stick a dog in a cage and they would electrify the bottom of the cage and see what
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would happen. Well, you could probably imagine, what would you do in that situation? The dogs try to
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escape. They're yelping, they're barking, they're jumping up and down. And eventually they realize
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escape is impossible. And so they sort of shut down. And this is also an adaptive response and
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they just lay down and they whimper. Okay. So they have learned that I cannot escape from this and
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it's entirely accurate. Now the scary part about this, and I'll say this too, if you grow up in poverty,
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if you grow up in an abusive home, like this is a mindset you will learn. It's like, I can't fight back.
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I can't escape. I'm going to try to survive. And so I'm going to get real small. I'm going to stay
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in the corner. Escape is impossible. I have learned that I'm helpless. Now this is the challenge.
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What they did with those dogs in the next experiment, they put them in a cage that had a
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barrier in the middle. Half the cage would get electrocuted. The other half, no electrocution.
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And then what they would notice is that they'd stick a dog in there who hadn't been in the previous
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trial where they got traumatized and the dog would jump around and then find that, oh, I jumped to the
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other side there. I'm safe. No more shock. But the dogs that were in that first condition who
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learned that escape is impossible, they wouldn't even try. So literally all they had to do is hop
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over this barrier. No more pain. There's escape, you know, and you think about it metaphorically
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for us. There's abundance. There's the financial goals you want. There's the happiness. It's right
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there. And as a psychologist working with people who are stuck in this learned helplessness,
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it's so obvious to me that all they have to do is this it's right there. They don't believe it.
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They don't believe that it's possible because they've been so beaten down earlier on in life
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where escape was indeed impossible. They developed this learned helplessness attitude. And so it's
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so crippling. It's so sad to see, but it makes sense how people end up there. And you'll find that
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they will tell you all the reasons why they can't get it, why it's impossible for them. And it's based
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in a real experience. Like these experiences they had were very, very real. What's so fascinating and so
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should be inspiring is that there's escape right there. They could do it. And if you have that
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learned helplessness mindset, you'll hear things like, oh, nine out of 10 millionaires are self-made
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in the United States. And you'll start to discount that. You'll look for evidence to suggest that's
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not true. And I get this on social media all the time. Self-made, you know, somebody changed your
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diaper. So they'll essentially redefine what the word self-made means to try to prove themselves right.
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And so that's one of those instances of a poor mindset that just keeps people down.
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Well, so how do you increase the size of your locus of control and overcome learned helplessness?
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I think this is like the base issue as a clinical psychologist that you're dealing with. It's like,
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what are the research-backed and then also experience-backed tactics that people can do to start
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increasing their sense of agency and decreasing the amount of learned helplessness?
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Well, first of all, you have to be somewhat open-minded. So you have to want something better
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and you have to believe it's possible to a degree, even if it's like 1%. Do you have 1% agency over
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your life? I can work with that. We just need to get you to the 1%. I think you probably have like
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99% because there are certain things that are going to happen that are outside of your control.
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But I'd love to talk to you about that because maybe we can find some areas in which you do have
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control. But it's just like opening the crack a little bit. And I think one of the things that helps
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the most, and it's one of the reasons why in this book, I'm telling a lot about my personal story
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and Adrian's telling a lot about his and he has such a incredible story. He's most famous on social
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media for making $1.7 million in one year while living in a van, becoming a multimillionaire in
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his early thirties. What we're trying to do there is tell stories because what we want you to do
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is find an example of somebody who came from a similar situation that you are in right now,
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or that you came from and was able to find that success. Because I think that all you need to do is
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see somebody who is like you comes from an area you came from that you can relate to. And then all
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of a sudden the light bulb can switch on for you and be like, Oh, Oh, you mean maybe I can do it.
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Okay. So it sounds like you got to have a little bit of hope, a little bit of faith
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I think so. And it's one of the reasons why, you know, um, I'm passionate about
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Yeah. And then also just start off small with small things. Like Stephen Covey talks about in that,
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in his book, the seven habits of highly effective people. He talks about the locus of control and he
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talks about just doing small things to increase your locus of control. So maybe you can't become
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a millionaire in a year, but like, what can you do now within the range of possibilities that are in
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front of you? What are you able to do? And then do those things. And as you do those things,
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your sense of agency increases. So you can start doing bigger and bigger things.
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I love it, Brad. And so one of the things we really encourage people to do
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is save and invest a dollar today. And, you know, ideally I try, I shot for like 30%
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of my income that I saved and invested. And by the way, I did it immediately when I started making
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money. So I, I felt like I was rich, you know, I was making like 25,000 a year. I was like, Oh my gosh,
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I'm making so much money. Well, luckily I had had this mindset by then I was, I was in school forever.
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So I was in my late twenties and I had read books about it. I'm like, okay, so I'm going to, I got
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to do this if I want to become wealthy. And so that's immediately what I did. And to tell people
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like, Oh, you got to save 30% of your income. Like, and Adrian saved 95% of his income that
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you're living in a van. That's like an impossible dream for most people. You know, if I catch it just
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before you get your first job, it's very, very easy. But many of us have a life, you know, and we have
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kids and we have a mortgage and we have car payments, whatever. So do 1%, like commit to
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investing 1%. And we have chapters in the book too, that sort of challenged this notion that you
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can't afford to invest. I hope you had a chuckle with some of those. They're very real examples with
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good math behind them, but you can't afford to invest. Like I just want to sort of push back a
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little bit on this, but just do 1% because what it takes for you to invest 1% of your income,
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you got to go open an account. You got to look into, Oh, should it be a Roth IRA? You got to
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figure out what I'm going to invest in it. By the time you do that groundwork, that that's essentially
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most of the work it takes to become wealthy. So start with 1%. We're going to take a quick break
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for your words from our sponsors. And now back to the show. I want to get into more specific tactics,
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personal finance tactics. So you have a chapter about investing early and investing, even if it's just a
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dollar or just a percent of your income. And there's some personal finance advice out there.
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I'm sure you see a lot of it because you're like in that personal finance, TikTok, Instagram world,
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where there's a whole bunch of talking heads giving out different bits of advice. And there's this idea
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that, well, you shouldn't invest until you have paid off your debt, but you say, no, you don't need
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to wait until you pay off your debt to start investing. Yeah. Like as a psychologist, I think it's a
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terrible idea for several reasons. First of all, I get it on the math side. You know, if you've got like
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a credit card, that's got 35% interest here, I am saying, well, you need to start investing.
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And you're like, Whoa, you know, I'm going to be shooting for an eight or 10% return. And this,
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yeah, I understand. I get it. I get it. I just want you to start investing right now.
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Now let's say that you can put 10% of your income towards paying off debt, investing, whatever,
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make it 1% and do the rent, the 9% over there. But, but the problem is for a lot of Americans is you're
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never going to be out of debt ever. You know, what's going to happen is you're going to pay off
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your credit card debt and then you're going to pay off your student loan. Now you've got a mortgage for 30 years.
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Then there's another car payment, then your kids go to school. I mean, the idea that once I pay off
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my debt, then I'll start investing, you are going to lose the most important thing in the wealth
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formula. And that is time. Time is the most important thing. You want to have money invested
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for as long as possible, because that's where that magic of compound interest really starts to
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snowball. And that's where these small amounts you're putting in each month become worth millions.
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It's that time factor. So invest as young, as early as you can. And if you're not doing it now,
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Okay. So for someone who's listening to this and they're, they're feeling overwhelmed because they
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got student loans. I mean, they got a mortgage, they got a car loan and they're like, I just don't,
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I don't have room for investing. So what would that look like? I know it's going to vary from
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person to person, but broad strokes, how do you balance paying off debt and doing investing at the
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Yeah. I say, don't make it too complicated. I love the idea of identifying like three financial
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goals, getting really excited about them. We did a study on this where we had people visualize those
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goals, you know, and we saw a 73% increase in savings after just doing that for an hour. So people
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went from about 10% to over 17% because they were so excited about it. So whatever that is, whatever
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that goal is for you, maybe it's financial freedom at a certain age, maybe it's a house someday,
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like get a real exciting, clear vision of it. And then just decide how much you can right now.
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Like maybe you have a goal, you want to save 10% of your income towards this goal or whatever.
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You can only do 1%. You just commit to doing it and learning what it takes to do because it's
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really not all that complicated. And then you, you also recommend when people do start investing,
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don't complicate your investments. You don't have to do the whole penny stock, Robin hood,
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you know, AMC stuff, like just get an index fund and pile your money in that. So you don't have
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to think about it. That's exactly right. And I, as I mentioned, grew up low income and that was a
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huge mistake I made when I had a hundred thousand dollars in student loan debt. And I saw a buddy
00:21:10.100
of mine make a hundred thousand dollars in one year trading stock. And he was trading stocks on margin.
00:21:14.840
This guy knew nothing about what he was doing. Cause I even asked him, I said, why are you buying
00:21:18.020
that stock? He's like, I have no idea. Click. And I was like, it's really that easy. And,
00:21:22.120
and I got appalled. The reason I make Tik TOK videos is because I got appalled because a few
00:21:27.040
years ago, I'm like, Oh my gosh, day trading's back. I saw it on Tik TOK. And so now I'm a
00:21:33.060
psychologist, but I also own an asset management company. So I actually manage money like close to
00:21:37.620
a billion dollars for ultra wealthy people. So I actually know what wealthy people do because I do
00:21:42.900
it for them. And what they don't do is any of the stuff that you're seeing people sell you on get
00:21:48.780
rich quick ideas, whether it's, you know, I'm going to, I'm going to be a trading crypto.
00:21:52.560
I'm going to be trading stocks, you know, this new NFT to me, I put it in the same bucket as,
00:21:57.180
as lottery and it's a get rich quick scheme. I fell for it coming from a lower income environment.
00:22:04.040
You'll hear stories about people who made it so big on this coin or that coin. It's so seductive.
00:22:10.060
It's a poor mindset. It's a poor mindset. Even, even on the like day trading, like 97% of day
00:22:15.240
traders lose money, 3% make money, but only one of those people make more than minimum wage.
00:22:20.180
Their studies show that the longer you do it, the worse you do. Even the pros on wall street
00:22:25.160
can't consistently beat the market. And so what makes you think you can do it?
00:22:29.320
Some of that's random error. It's just not how people get rich, but it is how people stay poor
00:22:34.200
because they have this idea. I'm going to make it quick. And I get why I get why you have it,
00:22:39.260
man. I had it, you know, it's like being poor sucks. And so you don't know how people become wealthy.
00:22:44.300
So that's what you're very tempted to do. And so to your point, and I can't give financial advice
00:22:48.580
because I don't know what, what everyone's circumstances, but I'll tell you that a lot
00:22:52.700
of personal financial experts suggest as, as starting out, look at a Roth IRA. So just
00:22:58.100
investigate that. And then when it comes to investing research, something called a target
00:23:03.060
date fund. And what you'll notice is that has a few key factors in there that are really
00:23:07.840
important. It's diversified. So instead of like buying one stock, you own thousands of stocks
00:23:12.280
instead of buying one size of stock, like a small company, a large company, you got all
00:23:17.000
of them across the world. It's very diversified. It adjusts as you get older. So it'll become
00:23:23.200
more conservative as you get older. The point is you open that up and then you forget about
00:23:26.840
it. And then you focus on what wealthy people focus on. Self-made wealthy people don't focus
00:23:31.820
on trading stocks. They don't do that. They outsource it to these fund companies or a financial
00:23:36.900
advisor, as we're describing right now. And what they do is they focus on making more
00:23:41.680
money so that they can invest more money. And that's how they get there faster.
00:23:46.500
Okay. So it sounds like becoming wealthy is pretty boring.
00:23:49.780
It's pretty boring. And I know it sounds terrible. And I know that many people aren't believing
00:23:53.580
me right now. And I just, a big part of our book too is we don't want you to make the same
00:23:58.200
mistake. Save yourself some time. The poor mindset towards investing too is like, I'm going
00:24:02.280
to take this thousand bucks and I'm going to turn it into 20,000 bucks this year. There are
00:24:06.060
so many sharks out there waiting for you to do that. And they're just going to make money
00:24:09.640
off you. Nobody does that. Who's wealthy? Nobody. And people who do that don't become
00:24:16.000
So you got a chapter with another provocative title, get rid of your poor friends. If you
00:24:21.880
want to get rich. When I read that, I was like, man, this is harsh. What do you mean by
00:24:26.140
It is harsh. And I wish I could blame Adrian. I wish he was here. I like to blame the most
00:24:29.960
offensive chapters on him. But if you've read any self-development books, you have probably
00:24:35.600
heard something like, you know, you're the average of your five closest friends. Like this
00:24:39.760
is very common knowledge. And in, in psychology, it makes sense. So we have spent 99% of our time
00:24:47.560
on earth in hunter gatherer tribes of about a hundred to 150 people. And we're very closely
00:24:53.160
connected. You know, we ate what they ate. We wore what they wore. We were, we did what they did.
00:24:59.060
Okay. And so that's the way we're wired. And so if you are hanging around a bunch of people
00:25:05.320
who have a poor mindset, now, remember, we're talking about a poor mindset. We're not talking
00:25:09.400
about being broke because I know a lot of broke people and I spend five minutes with them. And
00:25:14.800
I'm like, Oh, Oh, this kid's going to be a multimillionaire, like slam dunk. Like I could
00:25:18.260
just tell they have a rich mindset. I also know people who make, you know, six figure incomes,
00:25:23.020
multiple six figure incomes. And I'm like, Oh, they're going to be broke forever because
00:25:27.340
they have a poor mindset. They just spend the money as soon as they get it.
00:25:31.100
And so what we're talking about here is if you want to climb the socioeconomic ladder,
00:25:36.740
you're going to have to distance yourself from people who have a poor mindset because they're
00:25:40.760
going to suck you right into it. They're going to suck you into the spending. They're going to
00:25:43.420
suck you into the competition around, you know, who can have the fanciest watch, who can have the
00:25:49.300
most expensive car. And that mindset does keep you broke. It'll keep you broke forever. And so what
00:25:54.500
you want to do is find people, first of all, if you don't want to lose all your friends
00:25:57.660
immediately, try to convince them to come with you on this journey. Let's start there.
00:26:02.460
And you'll find a lot of them sort of refusing. What you want to do is be looking for people who
00:26:07.180
have this rich mindset, who are bragging about it. It's so, it's so cool too. I've met some
00:26:11.880
communities. There's this whole thing called the FIRE community, which is stands for financial
00:26:16.360
independence, retire early. And I just went to one of the meetups over here in Colorado,
00:26:19.920
these, these people, and they're crazy. They're having conversations that are very different.
00:26:24.200
They're like bragging about what percentage of their income they're investing. They're
00:26:28.180
having competitions on who's paying the least amount for the best coverage for their auto
00:26:33.400
insurance. If you, if you rolled up with a Tesla or an expensive car at one of these
00:26:37.800
things, they would look at you like you're an idiot. I mean, they would, they would just
00:26:41.540
like look down on you. Um, because that is a tribe that is focused on getting financial
00:26:47.220
independence. And so they're using all the tools, even to the degree, which I don't connect
00:26:51.340
with. Right. But cause it's so extreme, but they want it so bad. They're willing to do
00:26:55.500
that. So the general idea here is if there's a goal you want to achieve, you should surround
00:27:01.440
yourself with people who are moving in that direction or who are even a step or two ahead
00:27:06.060
of you, because you are going to subconsciously, you're going to drift towards what your closest
00:27:13.400
Yeah. And you're, you talk about your friends with a poor mindset. It can often be like crabs
00:27:18.880
in a bucket, right? You're trying to get, trying to improve yourself, but then like,
00:27:21.900
I don't like that. And they're going to try to bring you back down. Did you experience that
00:27:24.740
when you're trying to, you know, work your way up in the world?
00:27:27.840
I did. I did. And it's, it's easy to look at those crabs as being nefarious. You know,
00:27:33.220
they're not, they love you. This is really what it comes down to. It's, it's that tribal
00:27:38.660
mindset. It's like all of a sudden they see you and you're packing up your stuff and you're
00:27:43.180
about to leave the tribe and they love you and they don't want to lose you. And so they
00:27:47.460
will try to sabotage you. They'll try to keep you back in the tribe because they're, they're
00:27:52.280
afraid you're going to drift away and you're not going to be a part of their life. And
00:27:54.780
so that's the way I look at it. It's not like they're trying to tear you down because they're
00:27:58.320
trying to be mean. They don't want to lose you. And so I would hear things like, oh, it
00:28:03.260
must be nice, you know? And that could be like, must be nice that you have this car, must
00:28:07.700
be nice that you have some retirement savings, must be nice that you, you're able to take
00:28:11.900
a vacation or you're able to work less. And I've spent a lot of time to trying to teach
00:28:16.640
the people closest to me how to make more money. And one of the things I love about collaborating
00:28:20.620
with Adrian is that's his deal. Like he teaches people how to make money online. And, and
00:28:24.720
just, just as an example, too, I got an 11 year old who's making five grand this month
00:28:29.040
by doing one of these side hustles that Adrian talks about in his book. That that's true
00:28:33.200
too. I'll show you the receipts. So I tried, and I will continue to try to support and
00:28:37.940
model, but the bottom line is there's pressure and you feel guilty. And what I've noticed
00:28:42.580
over time, not just in my life, but many other people's lives, there tends to be a bit of
00:28:46.140
a drift because people start to feel bad around each other. And if you think about it as an
00:28:50.460
example, let's say that all of a sudden you've got 50 times the net worth of your best friend.
00:28:54.680
It's like, when is it going to start to be awkward? You know, is it like you pay for their
00:28:58.660
dinner every time you'll say, of course I do. Well, what about your trips? You're going to
00:29:01.820
pay for the first class ticket or like in that movie bridesmaids, you're going to make
00:29:05.880
them go and, you know, and coach while you're up in first class. It creates all these awkward
00:29:09.380
situations and people don't really want to talk about it. They don't know how to deal
00:29:12.180
with it. And then they sort of drift apart. And so I think people know that on a visceral
00:29:17.380
level. And so I see people come into money and then blow it all because they actually
00:29:23.060
don't want to leave their tribe because of all that deep emotional connection and stress
00:29:28.540
that ensues as you start to leave your tribe. And so that's why I think it's really important
00:29:32.780
to make connections in this, you know, tribe that you want to join someday, whatever tribe
00:29:40.680
And you, you also talk about, you don't have to cut off your friends completely or even
00:29:44.240
family members. Like you just have to learn, like it's an issue as you try to make yourself
00:29:47.900
better and try to make a better life for your family or your immediate family for yourself.
00:29:52.020
There's going to be that awkwardness. You just have to learn how to deal with it. And
00:29:54.980
you might have to just learn how to live with that tension and be okay with it without
00:30:00.240
Yeah. And maybe you don't talk to them about some of the things you're doing.
00:30:02.760
You know, maybe you're just not as open about your income. You know, I, I talk about Adrian
00:30:08.700
a lot cause we're buddies, but like when I call Adrian and I, I tell him about, you know,
00:30:12.400
my net worth went up this or I got this business. He's like, yeah, that's awesome. And, and
00:30:16.180
there are people I wouldn't call because I'd feel guilty and they'd be like, yeah, that's
00:30:19.360
great. You know, you're talking about this business deal that you just signed, you know,
00:30:23.100
that's three years of my income, you know? And so you just have to be careful because
00:30:27.760
that's a terrible feeling. And subconsciously you're actually going to probably try to
00:30:32.060
sabotage yourself subconsciously because you feel terrible about it.
00:30:37.160
Another observation you make and you write about this in the book is that poor people,
00:30:40.960
people with a poor mindset, they don't ask for help. How have you seen this manifest itself
00:30:48.000
Yeah. So this is something that, that came out in one of the studies I did on the ultra
00:30:52.920
wealthy comparing them to, it was actually upper middle class, the ultra wealthy were much more
00:30:57.520
likely to have professional help like financial advisors and CPAs and attorneys. And I've noticed
00:31:03.680
this as a self-inflicted glass ceiling that a lot of lower income middle-class people have.
00:31:10.440
I call it do-it-yourself-itis because I come from a family of do-it-yourself-itis. And by the way,
00:31:15.840
this is a survival technique when you don't have much money. So I had one of my aunts did everybody's
00:31:21.460
taxes in the entire family. Cause she had a semester of taxes and getting an associate's
00:31:27.260
degree and she did it all for us. My dad grew up on a farm, you know, something breaks, you fix it
00:31:31.760
yourself. You can't afford to pay for it. And so the challenge here, cause I get that the challenge is
00:31:37.520
that it can keep you stuck because for example, with your taxes, you know, you could pay some CPA
00:31:44.780
hundreds of dollars. And the first time I did this, by the way, I outsourced my taxes immediately.
00:31:50.240
I had a 10 X return. Like these people found some stuff I could write off and found some ways to do
00:31:54.660
this or that. And all of a sudden I'm like up a thousand dollars. So I paid them a couple hundred
00:31:57.880
and I'm, and then I just, I've seen this pattern repeatedly. So don't be afraid to ask for help
00:32:02.660
because the do-it-yourself-itis, that lower income middle-class mindset is going to sort of shame you
00:32:07.480
for doing it. And so the intervention there is only poor people are afraid to ask for help. That's a
00:32:11.540
poor mindset. Rich people are actually there. They're actually, it's easier for them to humble
00:32:16.200
themselves and saying, look, I don't know. I don't know how to do this investing stuff. That that's sort
00:32:20.200
of a tribe thing too. Like when you're, as you become wealthier, you're much more comfortable
00:32:25.860
outsourcing some of that. And part of it is your social circles. Cause you know, an accountant,
00:32:30.120
you know, you know, attorneys, like when I was growing up, I didn't know any of those people.
00:32:32.800
So for me, there were foreign outsiders and I, we didn't trust them at all. So it was really hard
00:32:36.980
to make that leap to asking for help. And so just to understand most rich people in the U S are self-made
00:32:42.980
and most of them have no problem asking for help. And so when I discovered that in my own research,
00:32:48.300
I'm like, Oh, I started to look around. Are there areas of my life I could ask for more help?
00:32:56.540
So you have a chapter on building wealth about home ownership. Um, and this is, this is like in
00:33:04.140
the personal finance world. It's a very contentious topic. And you and your coauthor have divergent views
00:33:11.400
on homeownership when it comes to becoming wealthy. So what's your take on the role
00:33:16.120
homeownership can play in developing wealth? Yeah. So Adrian has a bunch of spreadsheets in
00:33:21.920
the appendix. If you want to nerd out on, if you paid rent and then you invested the difference,
00:33:28.760
how you would be better off 20, 25 years from now. And it's, his math is really compelling. It's like,
00:33:34.940
okay, fine. The thing that tripped me up though, is that nine out of 10 millionaires own their own
00:33:40.200
homes. And there's a large percentage of people's net worth is accounted for by home ownership.
00:33:46.460
And so when you look into it a little bit deeper, you realize, first of all, nobody's going to go
00:33:50.600
invest the difference in terms of how most people do it. And it, so it becomes a forced savings for
00:33:56.360
you. And so you're going to pay your mortgage, right? You're going to pay your mortgage before
00:34:00.800
you go blow it at fancy dinners or on a car you can't afford, you're going to pay your mortgage.
00:34:05.460
And so I think that's the association and there are other benefits to owning a home,
00:34:11.040
but I think that's the reason why you see that close correlation between wealth and home ownership.
00:34:15.700
It's because it's a forced savings that you're going to pay every day. It sort of forces you to
00:34:19.440
pay yourself first, which is one of the main concepts in becoming wealthy.
00:34:24.120
I'm curious, what would you say to someone who is listening to this podcast? I know a lot of our
00:34:29.420
audience that might be in their forties, fifties, and they feel like they're behind on their financial
00:34:35.440
goal timeline. Any advice for them? Like, they feel like, ah, it's just too late for me. And
00:34:40.280
maybe that's like a, you know, learned helplessness or a lack of locus of control. What would you say
00:34:46.060
to these guys who are in their forties, fifties, sixties, who just like, ah, it's too late for me?
00:34:50.300
Yeah, I get it. And first of all, it's not too late. I see this a lot too. Like people are like,
00:34:55.660
oh, you know, I'm in my seventies. I don't want to invest money because I'm afraid of losing it.
00:34:59.440
I'm like, dude, you're going to live 30 more years. Like we need to have some money invested.
00:35:03.860
That's going to grow. We'll put some in a more conservative, you know, area, but this isn't
00:35:08.140
an all or nothing thing. Like if you're 40, 50, or even 60, you know, you got 10, 15 more years to
00:35:13.040
make more money. You can dramatically increase the quality of life you're going to have in retirement.
00:35:18.120
Now you might have some social security coming in. You can have an extra thousand or 2000 a month,
00:35:23.300
even starting in your sixties and just think about what that would be like for you.
00:35:27.260
And so people underestimate the power of compound interest, even under shorter time periods, 10,
00:35:33.700
20, 30 years. We, we use 25 years as an example in our book on where people, if they cut down
00:35:39.260
expenditures, how they can have millions more 25 years from now. But when, when I've actually run
00:35:44.660
the numbers with people who are in those age categories, they're sort of blown away by looking
00:35:49.820
at how much they could have. And I would just encourage listeners, if you don't believe me,
00:35:53.260
just find online something called a compound interest calculator. Just Google it. There's
00:35:58.000
a bunch of them and start putting in the numbers. So what if I invested 10,000 a year? What if I
00:36:04.060
invested 1,000 a year? And you play around and you say like, well, I'll just give you this number
00:36:08.820
because this is the average return in the U S stock market for a hundred plus years. Just throwing
00:36:13.120
there like, what if it was an eight or 10% return a year? How much money would I have?
00:36:16.980
And that type of calculator, I think if you do it, you are going to instantly realize
00:36:23.240
that you could do a lot, even starting out later. Do you have any advice for dads who want to help
00:36:30.960
instill a rich mindset in their kids? Yes. So first of all, talk about money with them.
00:36:38.280
The biggest mistake parents make is they just don't talk about it and they don't talk about it
00:36:41.760
because they're stressed or they feel like they're not, they hadn't done exactly what they wanted to do.
00:36:45.400
Who am I to teach my kids? Your kids are learning. They're learning all the time. That's the first
00:36:49.900
thing. Second is I would encourage them if you're doing allowance or if you're helping them make
00:36:55.380
money, model it for them, but then also make them invest it. You know, one of the things I hear
00:37:01.100
parents complain about, Oh, I give my kid the money and they just blow it. It's like, well,
00:37:04.060
of course they just blow it. That's what everybody does. You got to train them. So my kids know
00:37:09.100
they get a dollar they're investing right off the top. So half of it isn't even theirs. Half of it
00:37:14.800
is their financial freedom, their future. And my kids are so into it. They asked me to show them
00:37:19.820
their balances every day. They're investing their every dollar they get. They want to invest it. I
00:37:24.040
mean, they're, they're fired up about it. And so funny, my 11 year old, my wife is like, well,
00:37:27.460
why don't you spend some of that, Ethan? And he's like, why you guys, I don't need anything. You guys
00:37:31.560
give me food. You give me clothes. He goes, I'm going to retire when I'm 40. That's my 11 year old. He's
00:37:35.600
fired up about it. So you have to model it for them and put strings on it. So whatever values you
00:37:40.920
want to teach, if you want to teach them that, Oh, it's important to be charitable. You know,
00:37:44.360
a 30 year allowance goes to spending. A third goes to investing. A third goes to charity and help them
00:37:49.080
sharing your values, help them decide what charity to contribute to, and maybe even go down and hand
00:37:54.880
the check over in person. So think about, you know, money is a huge reinforcer. It's a huge part of
00:38:00.160
their lives. And it always will be, what values are you wanting to pass down to them? And then
00:38:06.180
figure out how can I structure that to show it? Yeah. Starting a Roth IRA account. I did that for
00:38:12.140
my kids and it's amazing, like how fired up they get about it. Cause you try to explain to them
00:38:16.560
compound interest in the abstract and it's, they, you know, they might not get it cause they don't
00:38:21.300
like, wow, it doesn't make any sense. But then when they get that Vanguard statement every month,
00:38:25.940
they're like, Oh, wow, this is crazy. Like how much money I've made in the stock market for the
00:38:30.740
past, you know, three years. Absolutely. And it's the pictures, it's the emotion talking about why
00:38:36.860
this matters. You can have a profound impact on your kids and they're hungry. They want to be taught
00:38:41.460
by you. So make sure you do it around money. Well, Brad, this has been a great conversation.
00:38:45.920
Where can people go to learn more about the book and your work? Yeah. So the book is called
00:38:50.280
start thinking rich. And so go to start thinking rich.com slash art of manliness. And so for any
00:38:56.700
listeners of yours who go there, we'll have some special bonuses for them, but they'll, you'll see
00:39:00.460
the book and some other tools we have to help people really start thinking rich. Fantastic. Well,
00:39:06.160
Brad Klontz, thanks for your time. It's been a pleasure. Thanks for having me.
00:39:09.880
My guest name is Brad Klontz. He's the coauthor of the book, start thinking rich. It's available on
00:39:13.800
amazon.com and bookstores everywhere. You can find more information about his work at his website,
00:39:17.740
bradklontz.com. Also check out our show notes at aom.is slash think rich. We find links to
00:39:23.340
resources. We delve deeper into this topic. Well, that wraps up another edition of the AOM
00:39:35.080
podcast. Make sure to check out our website at artofmanliness.com where you find our podcast
00:39:38.560
archives, as well as thousands of articles that we've written over the years about pretty much
00:39:41.920
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00:39:48.600
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00:39:51.800
we had something out of it. As always, thank you for the continued support. Until next time,
00:39:55.420
it's Brett McKay. Remind you how to listen to anyone podcast would put what you've heard into action.