It's not about how much you make; it's about how you manage what you make. That's one of the key lessons I learned during my 10 years as an investment banker, working with high-net-worth clients. Whether you're earning $50,000 or $500,000, the strategies used by the top 1% to grow and protect their wealth can be applied by anyone.
And so, in this video, I'm going to reveal the 15-65-20 system: a simple, proven approach that can help you manage your money like a financial expert. Let's get into it, starting with the most important part, which is the 15 cents. That's how much of every dollar you make should be reserved and put aside for yourself.
This is where long-term security really begins, and you're doing this for two really important reasons. Reason one: Peace of mind. Imagine you're going about your day when suddenly you get a flat tire, a surprise medical bill, or an urgent family emergency happens.
Without a solid emergency fund or a cash cushion in place, you're not just worried about the surprise that has just come up; you're now also worried about how you're going to pay for it. This can quickly derail your finances and send you into a tailspin, but not if you have that 15% cushion in place. Start by building a quick access solution fund, enough to cover one month of essential expenses.
This is your first line of defense against life's little surprises. One month's worth of living expenses isn't as much as you think it might be. It doesn't include the Netflix subscriptions you have or any other discretionary spending that you make; it just covers your core costs—things like your rent or mortgage, groceries, transportation, and utility bills.
From there, work your way up to 3 to 6 months' worth of your core expenses. This emergency cushion gives you the ultimate peace of mind, knowing that if something major happens—a job loss, a health scare, or any other unexpected crisis—you’re still covered and you won't have to go into debt to handle it. The security of just having those 3 to 6 months of essential expenses saved up means you can focus on dealing with the emergency itself rather than stressing about how to pay for it.
The second reason to save that 15% is to make your money work for you, and you don't need to be a financial expert to start doing this. In fact, you might already be doing it without even realizing. First, let me show you why this is so powerful and how to get started, even if you're a complete beginner.
Picture two people: Janet and Mike. At age 30, Janet invests a lump sum of $10,000. She earns a steady 6% return each year and doesn't touch the investment for 20 years.
By the time she turns 50, that initial $10,000 has grown to an impressive $32,071 without her adding a single extra dollar. Now, let's look at Mike. Mike waits until he's 40 to start investing; he contributes $2,000 every year for the next 10 years, and it's also earning the same 6% annual return.
By the time he turns 50, his $20,000 investment has grown to $27,944. That's not bad, but it's still less than Janet, even though Mike invested twice as much overall. The difference comes down to the power of time and compound interest.
Janet's money had an extra 10 years to grow and compound, and that extra decade made all of the difference. Her initial $10,000 snowballed into $32,000 even without her adding a single penny. This is what Einstein meant when he called compound interest the eighth wonder of the world: the longer you let your money work for you, the more dramatically it can multiply.
It's like a runaway train, with your returns earning even more returns. So where do you start? You have a few options.
First, if you're contributing to your workplace retirement plan, then you've already started this process. The employer match is essentially free money—your organization will contribute an extra dollar or an extra pound for every dollar or pound you put in, up to a certain limit. For example, say you make $50,000 per year and there's a 5% match.
That means for every dollar or pound you contribute, up to $2,500, your employer will also contribute the same. In the UK, you're automatically enrolled in this plan, but you also want to do a really important thing: make sure that you are contributing enough to max out the match that is offered. That's a really great way to supercharge your savings since your contributions are made pre-tax, and the money grows tax-free until withdrawal.
Secondly, let's talk about tax-advantaged accounts. In the UK, you've got the Stocks and Shares ISA; in the US, it's a Roth IRA. These accounts allow your investments to grow completely tax-free.
That means no taxes on the dividends, no taxes on the capital gains. The government gives you these special accounts as an incentive to save and invest for the long run. But bear in mind that the money you use to invest in it has already been taxed because it comes from the money you earn from your paycheck, so that is after you pay taxes on it.
So again, you pay tax at the start, not at the end, whereas for the workplace retirement plan we just mentioned earlier, you pay tax at the end and not at the start. The key is to max out all of these tax-advantaged accounts first before moving on to regular taxable investment accounts. Now, I know you might be thinking, "Okay, I know what account I need; now what do I invest in?
" The secret is to keep it super simple with passive funds. This is essentially just a way to. .
. tracking the overall stock market. These funds automatically diversify your money across hundreds of different companies, so you're not putting all of your eggs in one basket.
They come with super low fees, which means more of your money gets to work for you. Once you've got those tax-advantaged accounts set up and you're contributing regularly, you can let those passive funds do their thing. No need to constantly tinker or try to beat the market; just set it and forget it.
It's literally the lazy person's path to wealth, and it's a strategy used by the world's most successful investors. I go into a lot more detail on this in my free masterclass, which has three more slots left for today and tomorrow. We cover the differences between types of funds, the common mistakes that can cost beginners thousands, and how to turn just $100 a month into over a million.
The link is in the description below this video, and again, it's completely free. If you want to check it out before we dive into the rest of the video, I wanted to take a moment to introduce the sponsor of today's video, and that is Skillshare, an online learning platform which I've personally been using and benefiting from for the past two years. Skillshare offers thousands and thousands of high-quality classes across a really wide range of creative and business-related topics taught by industry experts and top-notch instructors.
What I personally love most about Skillshare is its commitment to making learning accessible and fun. The classes are broken down into really short, digestible lessons that can fit into your schedule, whether you have 15 minutes or four hours. With topics spanning everything from graphic design and entrepreneurship to productivity hacks and personal finance, there's really something for everyone to explore and expand their skills.
Right now, I've just finished and I'm implementing the learnings from the class by Jules on how to create the ultimate Google Calendar workshop. This is what I mean; there's literally a class on the most random things that you don't even think of, but will add value to your life. If you want to check it out for free, the first 500 people to use the link in the description will get one month of a free trial.
You can binge-watch all the videos you want. Now let's talk about the 65 cents. That's the portion of every dollar that should go towards your fundamental expenses.
This is where the basics live—things like the rent or mortgage, groceries, utilities, transportation, and any other must-haves that keep life running smoothly. And this is the trickiest part because these expenses have a sneaky way of ballooning out of control. But you know how it goes: you get a raise, and suddenly that old apartment feels too small, or you decide to upgrade your car, and what seems like progress can actually backfire when those upgrades come with higher rent, maintenance, or insurance costs.
Your expenses will grow to match your income unless you fight them off, and that's where setting a firm limit on your fundamental expenses makes all the difference. The 65% cap keeps your core expenses in check so that you aren't scrambling just to cover the basics. And I'm not going to lie; this is, in many cases, harder said than done, especially if you're living in an expensive city.
According to the Office for National Statistics, housing is the largest spending category, representing about 19% of the total weekly expenditure. That includes things like rent or mortgage interest payments and utility bills. The second-largest category is transportation, which makes up approximately 14% of household spending, including things like vehicle purchases, maintenance, fuel, and public transport.
Have a look at your own spending. Write down what your biggest spending categories are. Once you know where your money is currently going, you can then look for ways to optimize the biggest costs.
Can you negotiate a better deal on your rent? Can you swap that daily commute for a more affordable option? It's not about cutting out the little joys in life; it's about finding ways to keep the big unavoidable costs under control, giving your budget more breathing space for the fun things in life.
And that last 20 cents is where that fund begins. In the book “Die,” the author shares a really powerful idea which I absolutely love, and it's that the ultimate goal isn't to die with a massive bank account but to use your money to create a rich and fulfilling life. The 1% know the secret: they intentionally make room in their budgets for guilt-free enjoyment, and so should you, because all work and no play is a surefire path to burnout.
Studies show that people who give themselves a little flexibility in their budgets are far more likely to stick to their financial goals over the long haul. It's kind of like going on a strict diet; if you never allow yourself a cheat meal, eventually you're going to break and binge. That same principle applies to money.
Now you might be thinking, "Won't that derail my savings and investments? " Not at all; in fact, probably the opposite. If you don't carve out a portion for guilt-free spending, you're much more likely to overspend down the road or, even worse, give up on your savings and investments entirely.
That's why the 15-65-20 rule recommends using 20% of your income for fun, enjoyment, and personal fulfillment. In fact, you could even reframe this 20% as an investment in yourself; by making sure you stay motivated, balanced, and energized, you're actually increasing the odds of sticking to your long-term financial plans. So in practice, this can mean treating yourself to an exceptionally nice dinner once a month or finally pulling that trigger on.
. . A new bag that you've been eyeing, or even planning a really fun getaway with friends—the key is to give yourself permission to enjoy 20% of your income without feelings of guilt or shame.
So, those are my top tips on managing your money like the 1%. The 15-65-20 rule. If you found this video useful, I'd appreciate it if you could take a second to subscribe to the channel.
Thank you, and see you next week!