How To Manage Your Money Like The 1%

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 15652 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 that 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 toay pay for it and

then this can quickly derail your finances and send you into a tail spin 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 and 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 and mortgage groceries Transportation 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 six 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 finan expert to start doing this and 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 32071 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 27,9 44 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 snowbo 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 so for example say you make 50,000 per year and there's a 5% match that means for every pound or dollar you contribute up to 2,500 your employer will also contribute the same in the UK you're automatically enrolled into this plan but you also want to do a really important thing and that is to 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 taxfree 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 ta 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 advantage accounts first before moving on to regular tax for 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

track 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 and they come with super low fees which means more of your money gets to work for you once you've got those tax advantage 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 master class which has three more slots left for today and tomorrow we cover the differences between type of funds the common mistakes that can cost beginner 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 a completely free if you want to check 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 a 4 hour and with topics spanning from 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 bin 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 musthaves 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 and maintenance or insurance cost 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 scr scambling 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 and according to the office for National statistics housing is the largest spending category representing about 19% of

the total weekly expenditure so that includes things like rent or mortgage interest payments and utility bills and the second largest category is transportation which makes up approximately 14% of household spending and that includes 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 Di 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 a fulfilling life and 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 Sure Fire path to burnout and 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 call it's kind of like going on a strict diet if you never allow yourself a cheap 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 15652 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 out 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 getting away 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 Ru if you found this video useful I'd appreciate if you could take a second to subscribe to the channel thank you and see you next week