How to Manage Your Money Like the Top 1%

[00:00] that will change your life if you let it sink in. The richest people in the world are 75% entrepreneurs, 15% investors, 7% inheritors of wealth,

[00:12] 3% athletes, entertainers and artists, So if you wanna know how to manage your money like the 1%, So let's think about it.

[00:28] Entrepreneurs own businesses, investors own assets, Finally, athletes, entertainers and artists own rare skills. you are what's owned.

[00:43] So how can you start owning things like the 1%? I designed this rule so that anyone, can manage their money like the top 1%,

[00:58] it's about how you manage what you make. I've actually used this rule for decades, even though I started out

[01:12] So let's get into it. The first 25% of your income should be going towards growth. By growth, I don't mean some kind of mindset nonsense

[01:29] about growing as a person with the power of meditation. You see, when most people get their paycheck, on useless things they don't even remember buying.

[01:43] owning nothing of value. The system wants us rich for a week, so we've got no breathing room

[01:58] This is effectively modern day slavery. Slaves used to work every day with no pay, Today, people work nearly every day and get paid.

[02:14] on food, shelter, and water. Once you understand this, you can start fighting back and putting it straight into assets.

[02:29] and puts money in your pocket. these assets that you own are working for you Eventually, these assets could even make you more money

[02:41] to invest in assets. because the sooner you start, the better. This is Billy.

[02:53] and this is Phil. he invested $300 a month. and they both stopped investing.

[03:08] Now I'm gonna give Phil a walking stick Right, that's better. Billy put in $200 per month for 40 years,

[03:23] so that's a total of $96,000. However, Phil put in $300 per month for 30 years, which is a total of $108,000.

[03:37] because he saved more each month. because they were investing instead of just saving. which is the average return of the S&P 500

[03:52] then the numbers start to look a little bit different. Fuel's investment will be worth $678,146. Whereas Billy's investment would be worth

[04:07] a staggering $1,264,816. Billy invested $12,000 less,

[04:19] all because he started earlier. That's why you should start now, even if it's small, But how can you actually get started?

[04:34] There are loads of ways to grow your money, So I like to think of them as a scale from relatively safe and steady to high risk, high reward.

[04:48] At the lower risk end, we've got index funds. You are not trying to pick winners. like the S&P 500 I mentioned before.

[05:02] You just let it sit there Then there's real estate. or REITs if you haven't.

[05:14] It's kind of like buying a small share in a building In the middle is skills. the fastest return on investment you'll ever see.

[05:28] I'm talking about things like copywriting, editing, sales, coding, anything you can actually use to bring in income. However, it does take more time to learn,

[05:41] Further up, we've got online businesses, These can pay off big, but they take a lot of effort

[05:53] before you find your. I know it's tempting to try and pick the next Tesla, and you really know what you're doing,

[06:06] So if you're gonna do it without learning the specifics, not your main strategy, I'm talking Bitcoin, Ethereum, NFTs,

[06:22] Can you make money with these? Absolutely. Can you lose it overnight? Also, absolutely. but I never risk more than I'm willing to lose.

[06:35] but not where you build long-term wealth. that actually builds a foundation, Then as you grow more confident,

[06:49] Now we've gotta talk about how to invest, you could be handing over thousands That's why step two is to set up tax-advantaged accounts.

[07:06] to legally save as much money as possible. I'm just sharing what I've personally done over the years. One of the best options is the stocks and shares ISA.

[07:24] and anything you earn is tax free. All you have to do is select the stocks and shares ISA Since I was planning to talk about Trading 212 anyway,

[07:39] in sponsoring this portion of the video. a free fractional share worth up to a hundred pound when they create an account.

[07:52] you'll both get a free fractional share. you've probably got access to a workplace pension.

[08:04] and your employer will match with 3%. You don't pay any tax on the money it earns If you're in the US, your setup's a little bit different.

[08:20] The Roth IRA is one of the best accounts you can open. but every penny it earns grows completely tax free, The limit on this account is $7,000 a year

[08:36] Even billionaires use this account. reportedly turned his Roth IRA into over $5 billion. in early stage high growth companies,

[08:52] which then increased value significantly. which is basically the US version of a pension. It also grows over time

[09:07] and if your employer offers a match, definitely take it. so here's a list of all the tax advantage accounts Hopefully you can find an account in this list

[09:22] of the tax savings your country offers you. put their money in every month That brings us onto step three, actually start investing.

[09:38] Whether you're on Trading 212, Vanguard or something else, The best thing you can do is set up a monthly transfer

[09:50] into your investment platform, ideally on payday. sitting in your account and get tempted to spend it. or try to time the market.

[10:05] to build a three fund portfolio. The first fund is normally a US stock index fund, like Apple and Amazon for example.

[10:19] which is similar to the US-based one, and the final fund is something called a bond fund, as they're generally less volatile than stocks

[10:34] Let me show you how to set something like this up then I'll leave a link in the description. you can head over to the promo code section of Trading 212

[10:50] to get a free fractional share worth up to a hundred pound. Then go over to pies and then click the plus icon.

[11:02] For our US stock market fund, This Vanguard one should do nicely. the Vanguard Total Stock Market Index Fund

[11:19] This fund is like owning a tiny piece like Apple, Amazon, and Coca-Cola. or distribution in the brackets.

[11:34] as it reinvests your dividends Then let's go and search for our next one, For this, let's select iShares, MSCI World,

[11:48] UCITS ETF with the ticker IWDA and tap Add to pie. This fund is like having a collection of companies like Europe, Japan, and Canada.

[12:04] let's search for iShares USD treasury bonds, 7 to 10 years, UCITS ETF with the ticker IBTM and tap Add to pie.

[12:17] They promised to pay you back with a little extra, Right, now those are added, On this page, you can adjust the percentage allocation

[12:34] If you go with an aggressive approach, which can grow faster, but can also go up and down a lot. where 90% of your money is in stocks

[12:49] This set up is the potential for big returns, If you prefer a slightly less risk then a slightly less aggressive approach

[13:03] with around 80% in stocks and 20% in bonds. It's all down to your age. the older you are, the more bonds you should have,

[13:16] so let's make the S&P 500 60%, the iShares world fund 30% and the bond fund 10% and click Next and then Auto invests.

[13:29] as it shows you how much money you could make you can get back less than you invested but it's still a great way to get an idea

[13:43] of how much you could make based on data back projections. stop fiddling and go and make more money, who build wealth aren't the ones

[13:56] They're the ones consistently putting in more over time. so you can increase your investments. This is where the skill building I talked about in step one

[14:10] If you haven't yet, learn something valuable. then feed it straight back into your investments. (smooth jazz music)

[14:24] should be going towards stability. A lot of people don't realize Some of it needs to be set aside to protect your progress.

[14:39] 'cause I had to learn it the hard way. so when I turned 18 and needed a car to get to work, so I did what most people do.

[14:53] and bought myself a solid little German whip, a VW Golf. and for about three months Then outta nowhere, the engine blew up.

[15:08] I had no backup, no safety net, and no clue what to do, I'd lose my job. more pressure and more stress.

[15:22] To me, that car didn't just break down, it broke my finances If I just had 15% tucked away for stability, Most people don't have a money problem.

[15:36] One unexpected bill, and it all falls apart. you'd be forced to sell your investments at a bad time, That's why you need a margin for error built into your life.

[15:50] Step one is to calculate your stability fund. These are things like your groceries, and any essential services like your internet connection,

[16:08] All of those things combined should give you a total. Let's say that adds up to $1,500 per month.

[16:22] This will equal the ideal stability fund So in this example, that should be $7,500.

[16:37] 15% of your wages should be going You might be thinking this is quite extreme, However, I know from experience that when life hits,

[16:51] So if you only have a couple of months saved up, Step two is to store it correctly. don't make the mistake of parking it in the wrong place

[17:06] as having it in the first place, and for that reason, Firstly, it must be easy to access. This money should be available within 24 hours max,

[17:21] that penalizes you for withdrawing early in return for a bit more interest. and still not be able to access their stability fund.

[17:33] When things go wrong, you need speed, Secondly, it must be zero risk. This is not money you invest, gamble or chase returns with.

[17:47] do not put your emergency fund into the stock market, because when an emergency hits, the market might be down. or anything else that's meant to grow over years.

[18:04] Although this isn't your growth pot, You want it somewhere that earns a bit while it waits with zero interest, then it will be eaten away by inflation

[18:21] That's where high yield savings accounts come in. you can get savings accounts with 4 to 5% interest rates I'll leave some banks in the description.

[18:35] Ally, and Marcus by Goldman Sachs, and they're FDIC insured so your money's safe. Most people think it takes years

[18:49] but if you play it smart, When I was building up my savings, Using them all together help me really accelerate

[19:03] Tactic one is called the paycheck sweep. This is when you take 15% of your income the second it lands You can automate this with a direct debit

[19:17] just like we did with the 25% that goes towards growth. This is a promise you make to yourself

[19:29] you immediately replace it. and it costs $250 to fix, that's fine. but the next time you get paid,

[19:41] you top that $250 straight back up like it was never gone. This one might sound a little bit crazy, These round every purchase up to the nearest dollar

[19:56] So if you spend $3.60, it rounds up to $4 It sounds small but it adds up fast The other way to do this is with cash back.

[20:11] and paying it off in full every month, Once your stability fund is fully stocked, or you can shift it into the final 10%,

[20:27] (smooth jazz music) towards your essentials. Surprisingly, over 60% of Americans

[20:43] earning over $100,000 a year still live paycheck to paycheck instead of actually becoming rich. and still feel broke every month,

[20:57] it's about how much you waste. This was me age 20, and that's my mate. Designer shirt, an expensive watch,

[21:11] I was the opposite, baggy top, cheap watch, just the basics. I could have at least picked up but I was young, so cut me a bit of slack,

[21:26] He had $43 and 20 cents in his account whereas I had $1,000 plus quietly sitting in investments

[21:40] I'd learned from my experience with my car loan disaster, which meant cutting out any unnecessary spending Although this might not seem like a lot,

[21:55] This $1,000 was a start, Wealth isn't what you see, it's what you don't see. by saying things like, I need a safer car.

[22:10] and I deserve a nice meal out, so how can you keep this under control? Well, step one is to get clear on your essentials.

[22:24] because what many people consider essentials nowadays Essentials are the things That means your rent or mortgage, groceries,

[22:37] utilities, transport, insurance, and clothes. Just what you absolutely need. Takeout isn't essential.

[22:51] The gym you haven't visited since January. you keep meaning the cancel, and the list goes on. but so many people sign up for stuff they never use.

[23:06] to free up money is to go through your bank statements if it's not helping you live, work or stay healthy,

[23:19] so why do I recommend capping it at 50%? 60 to 70% of their income on what they think are essentials,

[23:32] it forces you to actually eliminate what you don't need. from wanting to spend more of what you earn which is always something you should be doing.

[23:47] So many people talk about cutting out the little expenses Honestly, I'm guilty of saying this myself. then you first need to focus on the two key categories.

[24:03] For most people, this is the biggest expense, Always renegotiate your rent when the lease is up.

[24:15] than go through the hassle of listing, Even a small reduction or freeze can save you thousands. If you wanna go further, think about house hacking.

[24:30] splitting a place with mates, If you can manage to limit house then that's a pretty good place to be.

[24:43] Car payments are one of the biggest wealth killers. and end up paying for years on a depreciating liability.

[24:56] buying used, reliable cars at least until your income can support a nicer car.

[25:08] It should be under half of your essentials fund. you could even consider getting rid of the car entirely because it's not just the car payments you save,

[25:24] but also the insurance, maintenance, and parking charges, Once you've got those two areas under control, Use rules, not willpower.

[25:38] your willpower disappears, and that's exactly why the top 1% don't rely on it. that make the right choices automatically.

[25:51] Every time I was tempted to buy something I'd run it through a few key questions. and help me stay focused on the bigger goal.

[26:07] So firstly, ask yourself, is this an impulse purchase? It's likely something and if it fits into the essential categories

[26:19] However, if the answer is yes, The trip behind this is pausing for seven days ask yourself again if you still want it.

[26:37] That's the funny thing about waiting seven days. and it wasn't that important to begin with. it is time for the next question.

[26:52] If the answer is the brand, then don't buy it. If it's an essential, that will do the job just as well, if not better.

[27:08] Wealthy people don't throw money at brands They really think about the value. Well, if you buy a $60 pair of boots

[27:20] and wear them a hundred times, that's 60 cents per wear. But if you buy a $200 pair of designer trainers and going too cheap isn't smart either.

[27:33] in the wash is still a waste of money. So if you answered value, will this improve your life?

[27:46] a conscious intentional purchase, go ahead. it's probably just about impressing someone, It's not worth your money.

[27:59] you'll be able to decide without even consciously thinking about the questions. Remember, it isn't about being tight,

[28:12] (smooth jazz music) This is the 10% that keeps you sane.

[28:24] stability and essentials. and then wonder why saving feels so pointless. I've realized it's the little things that refuel you

[28:38] in the first place. 92% of people say they overspend because saving without joy starts

[28:53] and that's exactly why this 10% exists, not as an excuse. It's a thing and most importantly sustainable.

[29:08] you have to be strategic with how you use it. To make something guilt free, The truth is you can spend your 10% on whatever you like.

[29:23] which should make them more guilt free. such as trips away or just weekend getaways.

[29:35] It's also a great way to de-stress. I completely ignored the importance of vacations,

[29:47] The doctors diagnosed me with stress-induced shingles. and that's when I went on my first ever ski trip. Since then, I've made it a priority

[30:01] Instead of seeing it as a waste of time or money, because it helps me stay sharp and more importantly, Next is hobbies.

[30:14] This could be painting, gaming, photography, This is valuable as it keeps you passionate. so by doing it in your spare time,

[30:27] so you can work harder for longer. Dinner, concerts and experiences. and it was a big mistake

[30:40] Having a strong social network is so important, Finally, we have gifts. but for your loved ones.

[30:53] You can see how most of the stuff I teach in these videos Back when I was focused on chasing my goals, I often forgot birthdays and special occasions.

[31:07] that I overlooked what mattered in the present. about receiving gifts. and we started exchanging anniversary gifts

[31:22] They're about the thought, the connection, Step two is to preload the fund. and call it your joy jar.

[31:37] You can actually have multiple current accounts which makes things very simple. of 10% of whatever you make to be deposited

[31:52] So if you make $2,000, send 200. It doesn't matter how much it is. Just make sure you don't cheat.

[32:07] stability, or essentials when it gets low. When you know this fund money is limited, This is exactly how you protect your goals

[32:24] or you pass something in a shop that you really love. If you don't have a particularly large joy jar

[32:36] above anything else. Bro's gonna die with all his money, and I get it. From the outside, it might look like I'm depriving myself,

[32:50] I don't need a garage full of cars That stuff might look rich, but it doesn't feel rich to me. such as a ski trip with my wife,

[33:05] meeting you guys in New York, So there you have it, the complete 25-15-50-10 rule.

[33:18] then I'm gonna leave that video right up there, Make sure to subscribe if you want to grow your wealth. Okay, I'll see you over there.