Why The Wealthy Think About Money Completely Differently

I'll post things on Instagram. I remember this was a post that I made a little while ago, and it created a lot of controversy and I did not expect it to, which was, if you invested $100 a month from the ages of 21 until 65, and you put this money into the S&P 500, which is a group of the largest 500 companies in the stock market, and you did that for those years, and you never invested more than $100 a month that you always did, that you would have retired a millionaire. And that created so much controversy because people were very upset by this whole idea that why would I want to wait until I'm 65 or 66 to become a millionaire? And sure, if you don't want to wait until you are 66 to become a millionaire, that's perfectly fine. But the path to becoming a millionaire is you make money, you don't spend it, and then you invest it. Instead, what people say is, I'd rather just enjoy that money now. YOLO. What happens if I don't make it until 65? Who knows if I'm going to be alive that long? I don't even know if I'm going to be able to enjoy my money when I'm 65. So might as well just spend it today. And so what ends up happening is instead of planning for tomorrow, we just want to enjoy our life today and spend our money today. And that is really more of a mindset thing than a practicality thing of what I do with my money. Because when you have that short-term mindset with money, you're never going to achieve any sort of financial success because you're always thinking about, well, you know what? I'd rather just finance that Gucci bag today because who cares? And it's the same thing with starting a business. Starting a business is hard, not just because you have to learn a lot of things, but because you have to have the discipline to work for tomorrow, next week, and next year, maybe even next decade, depending on what the business is. And sometimes, or a lot of times, you have to put in all these reps, put in all this work, see no success, and then keep going because you think that there's a chance that your business might potentially succeed. So that dedication and that discipline is not easy because now you're going against what everybody's saying because now when you're doing this, your friends are looking at you like you lost your mind. Like, you want to just go get a regular job like everybody else and make some decent money? Your parents don't understand why you're a failure. You're sitting there working on some dumb business idea, trying to figure out how to make it work. You're sitting there like, oh, I know that this can work. Everybody's doubting me, but I want to prove them wrong. I just need a little more time. But you don't know if it will succeed or not. And you have to still be able to silence, not just the internal voices in your head that are saying don't do it, but then you have to silence all the external voices that are saying you're stupid, you're a failure, you're doing it wrong, you shouldn't just listen to what everybody else is saying. You should just follow what everybody else does. And you have to still keep going after you get scammed, after you get screwed over, after people say things to you, you just got to keep going. And that's not easy. And that's the mindset of now I have the discipline. I know what I want and I don't care what you say. I believe in me, even if you don't. And you just got to keep going. And what's interesting then is once you start to see that success, that's when everybody says, I've always believed in you. I knew you were going to succeed. I had faith in you from the beginning. You know what, that's that's the part of really being a successful investor and an entrepreneur. It's the same journey. Yeah, totally agree. First, they ask you why you're doing it. Then they ask you how you did it. So I totally agree with that. Let's talk about spending money on dumb things. We were just talking about people saying YOLO in the comments. And I know that you give advice to stop spending money on dumb things you can't afford. So what's the easiest way to understand what you can afford and what you can't afford? Well, I want to go back to what you said about dumb things, because I think that's a very important topic. What wealthy people do is they don't spend hard-earned money on dumb things. What the middle class does is they spend their hard-earned money buying dumb things. And what the poor do is they are financing dumb things. Now, what does that mean? What is a dumb thing? A dumb thing is something that doesn't put any money in your pocket. That BMW in your driveway, it's a dumb thing. That Toyota is a dumb thing. Those clothes, it's a dumb thing. That vacation, it's a dumb thing. Now, nothing wrong with having dumb things. We all like dumb things. That's OK. The question is, how are you buying it? Because what wealthy people want to do is they don't want to work hard to buy those dumb things. That's what the middle class people want to do. I want to get a raise so I can buy a dumb car. I want to get a bigger promotion so I can have a dumb home. Or you want to have that nice stuff. I'm calling it dumb just to make it stick in your brain. Call it whatever you want. But what wealthy people want to do is they want to own assets that will then pay for their dumb things. Because if I can work to build, let's just say, a couple of rental properties that are paying me a thousand dollars a month. Now, if I use that money to go out and buy a dumb watch, I don't have to work hard to get it. I work hard to buy the assets and the assets keep paying me to buy my dumb things. That's what wealthy people are working for. They're working to own the assets to pay for the dumb things while the middle class are working hard to buy those dumb things. And that's what keeps the majority of people broke. Now, it goes back to, well, how do you know if you can afford it or not? Because the reality is, if I'm going to be just completely honest, for the average person to be able to fund their lifestyle through their assets, it's going to take a lot of time and a lot of effort and a lot of work. It doesn't happen tomorrow. And you got to be able to feed yourself and have a car and do all that nice stuff, too. So how do you know what you can afford? Well, the first thing is stop financing things that don't pay you, period. And this goes to your car, too. And this, I know, upsets a lot of people. But the reality is you got a $50,000 car in your driveway. If you can't afford that $50,000 car with cash, don't go out and buy it. And that's where people say, well, how am I supposed to be able to afford a car then if I can't finance it? You put $8,000 down to go out and buy that $50,000 car, take that down payment, go out and buy a used car. And that one's tough because now you got to downgrade from a BMW to a Toyota Corolla used. And this is so hard because when you start to make money, your car is one of the easiest ways to show it off. I like nice cars. But the first time I made a million dollars in a year, I'm driving a car that doesn't have a bumper on it. It's got a crack in the windshield that's got rust on the sides because I know I want to take that money and put it back into my own asset, put it back into my own business. My employees are driving better cars than me because I know that that car is just a liability. So I want to put my money into an asset that's going to pay me first. So if you're financing your car, that's the first thing you want to take a look at, because not only is that car losing value, but you're paying interest on that car that's losing value. So it's a double whammy. So stop financing things that don't pay you. The only exception to this would be the home that you live in. The way you build wealth in the stock market is not by chasing hot stocks. It's through what I call ABB, Always Be Buying. And I just wrote a brand new book called ABB, Always Be Buying, how you can build wealth in any market, where I break down the exact strategy of how you can build wealth in the stock market and turn your extra money into income or more wealth. That way you can now use the stock market to build wealth. And because you're watching my video, I'm going to give you a digital copy of my book completely free. I have that link for you if you want to download it down in the description below. And when you sign up for the book, you're also going to get access to Market Briefs, which is my newsletter for investors completely free, where my team is breaking down what's happening in things like the economy, housing, stocks, crypto, and global markets. It's read by hundreds of thousands of investors every single morning. So if you want to get my e-book and Market Briefs all for free, all you have to do is sign up. And I have that link for you down in the description below. When it goes to actually buying some things, you have to make sure you can actually be able to afford it, not just buy it. You want to go out and buy a thousand dollar phone? Most people assume that, OK, if I can't finance it, because that's most people's definition of affording a new thousand dollar phone, I can afford the $80 monthly payment. Well, we already said why you can't do that. Now, if you want to buy the thousand dollar phone, if I got a thousand dollars in the bank, I can afford the thousand dollar phone, right? No. If you want to actually be able to afford that phone, what I like to do is follow what I call a rule of five, which says if I can't buy five of them, I can't afford one of them. So if you've got a thousand dollars in the bank, you can go out and afford comfortably a two hundred dollar phone. And this now requires and this is hard. I know people here and it's like, what the heck is wrong with this guy? Is this guy crazy? How am I supposed to live my life and even eat? This is going to require serious cutbacks on a lot of people's lifestyles. But the reality is becoming financially fit is not for everybody. It's not easy and it's tough. And I mean, it's just it's a sacrifice. It is not easy. I never said it was going to be easy. Not only now are you going to have to make cutbacks, your spouse is going to look at you like you lost your mind. Your parents are going to look at you like you lost your mind. Your friends are going to think you like that you lost your mind, too. And then on top of that, you have to start living a little bit smaller. Is it possible? Yeah. Is it hard? Absolutely. But if you do that now, all of a sudden you're going to find more money and this more money now you can start putting towards your assets. I call it a decade of sacrifice. You got to put in the decade of work where you're living smaller and working to earn more money just so you can buy more assets. And if we go through the decade of sacrifice, which most people, the majority of people would not be willing to do that. But if you can go through the decade of sacrifice, you'll be able to come out of this decade way wealthier and you will be able to go out and buy the nice stuff that you want, those dumb things and no longer have to really worry about the price while everybody else is figuring out how they can pay it off. You can go out and buy it without even worrying about it. It's going through that real sacrifice of how can you spend less and earn more? So one thing that you mentioned a few times is never finance anything that isn't going to pay you. What's an example of something that you finance that does pay you? So this could be potentially going out and buying rental properties. This could be potentially going out and buying a business. It could potentially, and I say this with a word of caution, because I know a lot of your audience are entrepreneurs, be used in your business to finance your growth. But if you're just starting off as an entrepreneur, do not go into debt. It's one of the most risky things they can do. If your business is making $3 million a year and now you're like, you know what? If we had an extra $1 million, we would be able to scale this from 3 million to $25 million. We just have to go out and invest in this new machinery or something along those lines. And you don't want to go out and sell equity in your company because you know that the equity is going to be way more valuable than the 9% you have to pay on the debt. That is a different financial decision as opposed to, well, I want to start this business idea. How about I go out and finance it? I remember talking to my bank manager one day, I walked in and they were telling me about this client that wanted to buy this pet grooming business. And I think they wanted to get like an $85,000 loan for this pet grooming business. They didn't own or buy any real estate with it. It was just a business inside one of this retail strip plazas. And that $85,000 business was going to be a losing business because I think it made $40,000 or $45,000 a year. But the owner who worked in the business didn't pay themselves a salary. So they say they're making $45,000 a year, but they're not paying themselves anything. So if you pay yourself $45,000 a year, the business makes zero dollars. And then on top of that, there was this clause which said that they had no restrictive covenants, meaning that owner could have sold the business and then opened up another pet grooming business right on the other side of the street. Like there was no non-complete clause. And so this lady was thinking about buying that business for $85,000. And thankfully, the manager denied them and said, this is just too risky for us. But this is where if you're starting off as an entrepreneur, do not go into debt to start your business ventures. Yeah, no. Go out and hustle. But if you're if you're making a few million dollars a year and you want to and you know how you can scale it and you don't want to sell equity, you want to raise debt, then that's something you can consider. But understand the risks. So I'm going to say something that you might disagree with. So like as you're talking about, like, be frugal, don't spend all your money, don't spend more than you can afford. All I keep thinking about as a hustler, as somebody who's been an entrepreneur for a long time and now I'm making a ton of money. But when I was younger, you know, I had to get there. My mentality is always like, let me just work, work and make more money. Make more money, make more money. Now it's worked for me. Right. That mentality. And I spent whatever I want, wanted and what I spent on sort of like Ramit Sethi, he also has been on the show, his perspective of like your money dial. So what do you actually enjoy? So it's like I spent money on things I liked, clothes, bags, whatever, whenever I wanted. And my mentality was like, I'm going to work hard, bust my butt, worked like 16 hour days a lot for many, many years. And, you know, now my business this year is going to make five million dollars a year, you know, so it's like I did well having that mentality, but not everyone I think can be that way, that scrappier or can make money from nothing. I basically made money from literally nothing. I had no investors. I just did it from just grit and hustle. So what's your perspective on that? Because I think some people don't fit in this personality of just being frugal. Like, I don't think I would have been as successful had I not sort of also spoiled myself in the way that I wanted to be spoiled along the way, if that makes sense. Well, you had the money to buy it. Yeah, you weren't going into debt to buy those handbags. No, if you can, I have nothing against buying nice things. If you want to buy something nice, go ahead. Make sure you can afford it first. If you if you got one hundred thousand dollars in the bank and you're thinking about buying a five thousand dollar bag, you can buy it with the rule of five easy, right? It's it's it's just a matter of understanding. OK, well, you know, I could invest the money, but I feel like I want this. All right, fine. There's nothing wrong with buying nice things. Go ahead and buy it. But just understand, you know, if you invested it, you might be able to get a little bit more return, but you got to enjoy life, too. Yeah. As long as you can afford it. Yeah, totally. OK, so let's say we save our money. How should we go about thinking about retirement? Because I think a lot of the entrepreneurs listening to this show, we don't have the same advantages of working in corporate where there's like a 401k match and it's all formal. Some of us may have 401ks if we are able to get them privately or whatever. But how should we think about retirement as entrepreneurs? So, well, if you're an entrepreneur, chances are you're probably not thinking about retirement because you started a business because you love the business. And so for most entrepreneurs, retirement is really not something you really think about. So if you are an entrepreneur, I would say the first thing is understanding what does that actually look like for you? Because I personally could never see myself sitting on the beach every day and doing nothing. I have to be doing something. Like if I go on a vacation with my wife, she knows I'm spending half the day working because if I'm not working, I just I just don't feel right. I enjoy what I do. So the first thing is, what do you want to do now? Eventually, yeah, there's going to be a point where you might want to wind down a little bit. But what does that actually look like? Now, if you want to be able to generate income without you having to work, the way you do that is by buying assets. Now, there's two ways to do that as an entrepreneur. You have the the I am the Elon Musk way where you're putting all of your wealth back into the business, that you make money, you don't care about stocks, you don't care about real estate. All you're doing is trying to build your business, period. Well, now your value is in the business. You could potentially sell the business, assuming that you have a sellable business. There's a great book called Built to Sell. I think that's what it's called. I highly recommend that book if you want to know how to build a sellable business. Otherwise, you could take the alternative option, which is you pay yourself a salary for working in the business. This is what I do. I pay myself a salary. Then out of the salary that you get paid, you treat yourself like an employee where you invest that money like any employee would do at somebody else's company. Like I invest my money into stocks, into real estate, into startups. But you have to treat yourself like an employee and work to build that that retirement fund, whatever you want to call it, using the income that you're generating. And this is where you're going to have to decide that balance, because if you take money out of a business and you go put it into the stock market, you might be able to get a 7, 8, 9, maybe 10 percent return on your money. That would be like a great case scenario. You're not guaranteed to make money, it might go down, but historically, that's what we've seen. In your business, your money could grow by 20, 30, 40, 200, 300, 400, 2,000 percent. There's really no limit. But your business could go bankrupt tomorrow and you have nothing to show for it. So you kind of have to figure out what type of entrepreneur and personality you want to be and where along the spectrum you are. Yeah, I love that. I'm definitely an entrepreneur myself, just for my listeners. I tend to invest most of my money back into my business. All my podcast or money that I get from sponsorships, I put straight back into my business. And that's how I was able to do it with no investors. So let's talk about active versus passive strategies. You were just talking about investing. First of all, what is the difference between an active strategy and a passive strategy? So I call an active strategy when I'm looking for an individual investment. If I go out and I buy a piece of real estate, that's an active investment because I have to go and find this property. If I go out and I invest in individual stock, I have to find that stock. If I go out and invest in a startup, I have to find that startup. So these are all active strategies. A passive strategy is now like for me, every Wednesday I have cash that leaves my checking account and it automatically gets invested into a portfolio of ETFs. These are funds in the stock market. This happens automatically whether the market's up or down. I don't have to touch it. It just happens without me even looking at it. So that happens every Wednesday, no matter what. So my passive strategy is autopilot. My active strategy is me going out and looking for individual deals. Now, what you need to do as an investor is figure out what type of investor do you want to be? Because some people want to be involved. They like to read financial statements. They want to go out and actually look for these deals and be spending that time doing that. More risk, more potential return. Others will say, I don't got time for that. I'm trying to run my business or I'm not interested in doing that. I have other things to do or I just want to not have to stress about it because the markets just scare me. That's fine. So you just kind of have to pick which strategy is right for you and then, or maybe both, and then fund that strategy. The active strategy, you've got to fund it and then you have to go out and actually find the deal. Like you're looking for a good deal at a good price. Passive strategy is just every week, every two weeks, every month, money just automatically keeps flowing into your investments. When I first started learning about money management, I avoided using a credit card because I thought that credit cards are bad and evil. And then when I realized that I knew how to spend my money and I wasn't going to spend money I didn't have for credit card perks and points, I realized that I could earn more cash back. I could earn more perks and points for doing nothing except making the transactions that I would normally make anyways with a credit card instead of a debit card. And that's why I partnered with my sponsor, Finance Buzz, to put together an article of some of my favorite credit cards. Now here's the caveat. If you don't know how to manage your money, don't use a credit card. But if you're comfortable using a credit card, in this article with my sponsor, Finance Buzz, I go over some of my top credit cards based off of different types of tiers. If you have credit card debt and you want to pay it off faster, I go over some of the top 0% APR credit cards. This will give you an opportunity to attack the credit card debt faster while not accruing any interest during the 0% APR period. I go over some of my favorite cash back credit cards that we can earn more points and cash back while you spend on your normal transactions. I go over some of my favorite travel cards for those of you that are traveling more often and earning more income. And then I go over some of my favorite business credit cards as well. So if you know how to manage your money and you're comfortable using your credit card, you can see some of my top credit cards right now in the free article that I have for you down in the description. So I know that you love real estate. You've been doing it for a long time. At what point in our journeys do you suggest that we dabble in real estate? Is there a certain amount of cash we should have or like, how do you suggest, like, when is the green light to know, like you're ready to start investing in real estate? There's really, I wouldn't say there's a green light. Like I, I got started in real estate during the bottom of the 2008 crash. So you don't need much money to get started then. But I was also doing it at a time where most people were not investing in real estate, even the people that had way more money than I did, way more education than I did. So I think the main thing is you got to make sure you can afford the deal and you have to make sure that the deal is actually making sense financially, meaning that it's cash flowing. Um, because what a lot of people do, and you see this in every real estate cycle, is people will buy a real estate deal. Let's just say they bought this deal for a hundred thousand dollars and it will make next to no money in profit every year, or maybe a thousand dollars in profit a year, a 1% return because they think that they're going to be able to sell this property for $200,000 in 12 to 24 months. So they don't care about the cashflow. I don't recommend doing that because what happens if you can't sell it for profit? What happens if the economy goes down? What happens if something goes wrong in a neighborhood and now you can't sell it? Now, not only are you not making any money, your money is tied up and you can't get out. Maybe you have to sell it for a loss. That's too risky for me. So what I look for is I look for deals that have cashflow. Generally, I'm looking for a 7% cash on cash return. So if I'm buying a hundred thousand dollar property, I'm assuming all cash. For this example, I want to see $7,000 of profit after expenses hitting my bank account every year without factoring in appreciation. Now, if home prices go up, good. They go down, no big deal. I'm still getting my cashflow. And even if something goes wrong in the economy and we have to cut rents, I still have a margin to be able to reduce rents and still be profitable. So I think the first thing is just knowing your strategy. And then second, being able to actually go out, find a deal and afford that deal because, you know, people talk about no money down real estate on the internet. No money down real estate has been extremely profitable for me. Not because I'm buying real estate, no money down, but because those no money down people end up in foreclosure and then their banks come to me to sell me the property for pennies on the dollar. So I do not recommend no money down real estate, um, because it's extremely risky, especially if you don't know what you're doing. Um, and you are the first to lose your shirt when things go wrong. Hmm. That's some great advice. Um, so one quote that I found from you is you say everyone in America should be a business owner. However, not everybody should be in the business of starting a company and not everybody should be in the business of operating a company. Talk to us about that. In America. In this capitalist system, you make money through equity, where that's where wealth is built. How do you get the equity? You can get the equity of owning real estate, ideally rental properties, or you can get the equity from investing in other businesses. Business owners are the wealthy people in America, along with real estate owners. You have to be a business owner. Now, most people should not be trying to manage a company or build a company or start a company. How do you do that? Well, the stock market has made it very accessible. You can start investing in companies with as little as a dollar. And the, the thing that, that a lot of people get kind of down on is, well, if I invest a thousand dollars, that's a lot of money I have to invest in, might not see that much of a return. I might even lose my money. But the thing is the goal isn't to invest a thousand dollars at one time. The goal is to invest a thousand dollars every month for the next three decades. Now you'll start to see that money grow and compound and really start to build more ownership and equity, which is where now you can start to see that growth in your equity. And that's where everybody in America needs to be a business owner. That way you can win in this economic system because not only now do you get that profit share, but you also get the tax benefits from investing instead of just earning from your labor. Yeah, that's so true. And as we close out the interview, I just want to talk about recession and the economy for a moment. So I want this show to be evergreen. A lot of people go back years later, right? So I'm not going to ask you if we're going into a recession or not. What I'm going to ask you is for whenever we seem to be going into a recession, how can we thrive as entrepreneurs? Well, recessions create more opportunity than any other time. And if you look at it from the perspective of an entrepreneur, some of the biggest companies around today were created during recessions. Uber, Airbnb, I even think Microsoft was started during a recession. So it creates opportunity because if you're an entrepreneur, number one, people are looking for jobs when a recession happens. And when people are desperate for jobs, they're willing to work for less money. So if you're an entrepreneur, that can benefit you in that sense. Now, it's tough because people don't always have money to buy your products. But this forces you to be more creative. This forces you to be more lean. And really, again, it goes back to smart financing of a company, because if you have a ton of debt and now people are not buying your stuff, you have a whole bunch of expenses that you can't get rid of because you can't make that debt go away. But if you're smart with your money and you're smart with your finances, now it's all about now, how can you lean out the company? How can you be creative? How can you attract the top talent and how can you build and grow? Because if you can build and grow through that downturn, that will set you up to thrive when the economy is growing as well. So Jaspreet, thank you so much for sharing all of this financial knowledge. Before we close the show, I'm going to ask two questions that I ask all my guests. The first is, what is one actionable thing our young and profiteers can do today to become more profitable tomorrow? The first thing that I would say, because I was just having a conversation with one of my friends about this, is if you have cash sitting around in a savings account, check and see if it's a high interest savings account. Because at the time I was recording this, you have a lot of high interest savings accounts that are paying four to five percent in interest for doing nothing except sitting there that are FDIC insured. So if you have some extra cash sitting around, at least you're generating a little bit of interest on that. I just realized I didn't ask you about inflation. Talk to us about what we need to know about inflation, because I think that's really important for my listeners to hear. Well, inflation is a hidden tax. It disproportionately hurts the financially uneducated, and it disproportionately benefits the financially educated because inflation hurts consumers. It hurts your ability to spend. Whether you're rich class, rich, middle class or poor, everybody has to spend, everybody's a consumer. So when you go and buy a new car, you go out and buy your groceries, or you buy a vacation, you're going to pay more dollars. But it benefits the investors, because now if you are an investor, you own a piece of the production, meaning you own a piece of the business that's selling the items. So if your business is selling the items for more dollars, you benefit from inflation. So inflation hurts the average person while benefiting the financially educated. There's two things that I want you to know. Number one is that a recession is always coming. Recessions are part of our economic system. They've happened every decade for the last century, and they're going to continue happening. So a recession is coming, but nobody knows when. The second thing is that recessions create millionaires. More millionaires are created.