this is ronald reed after he died in june 2014 his face was plastered all over the media because of one secret he hid from everyone including his own family ronald amassy 8 million dollar fortune yes or what millionaires die every other day ronald was different he grew up on a poor farm finished only high school and worked as a janitor for minimum wage for most of his life check this out in the 2000s janitors made about 22 000 a year which ronald was able to transform into 8 million dollars and i know how he did it lesson one the wealth formula the most important thing ronald knew was the secret wealth formula that school didn't teach you the formula is how much money you have coming in versus how much money you have going out so income minus expenses equal cash flow if you have a positive cash flow you have money left over if you have a negative cash flow then you're falling into debt in the book the psychology of money morgan hounsell writes that true wealth is actually the money that you have not spent for every five percent of extra income that you save you can retire multiple years earlier check this out let's say your monthly income is five thousand dollars if your cash flow is zero dollars or negative meaning your expenses are five thousand dollars or more then you'll never be financially free you'll need to work until the day you die unless you're a trust fund baby or whatever however if your cash flow is five thousand dollars and your expense is zero and you can maintain this zero dollar lifestyle after retirement you can be financially free right now who the heck has zero dollars in expenses simple right here's where it gets fascinating if you have expenses between zero dollars and five thousand dollars so a positive cash flow after saving enough you can make your money work for you and snowball it into future income and when that future income can cover your living expenses you're golden take a look at this assuming you have an annual income of sixty five thousand dollars and you can save ten percent or six thousand five hundred dollars you can be financially free in 51. 4 years but if you can just save five percent more at 15 you can be financially free in 42. 8 years for just five percent more effort you can shave off more than eight years that you need to work the average american spends nearly eighteen thousand dollars every year on non-essential items come on do you really need to spend 173 dollars on takeout every month lesson two the numbers how much money you've saved up by your current age is key to measure if you're financially on track to be a millionaire by 65 and you need to know this so you can adjust your finances before it's too late check this out if you start saving at 20 years old you need to save 204 dollars per month to retire a millionaire by 65.
if you start saving at 30 you need to save 443 dollars per month at 40 1030 per month at 50 2 795 per month and so on like most things in life the earlier you start the easier it will be because of time but since i don't know your personal financial situation these calculations are based on a few assumptions one you're starting with zero dollars in savings two you can grow your investments by seven percent every year and three you're increasing your monthly contributions each year by two percent to keep up with inflation so if you're depositing a hundred dollars per month in year one you will be depositing a hundred and two dollars per month in year two and so on of course this math changes depending on many factors but the earlier you start saving the better off you'll be what's the best way to save money then here's how i do it and i'll probably get a lot of hate for this stop budgeting and stop tracking everything what the heck are you talking about hear me out do you think that wealthy people have excel spreadsheets where they record this on june 21st i bought two popeye chicken sandwiches for 10 dollars and 51 cents no no they don't i still budget but in a very unique way that makes it easier and saves me a bunch of time but hey don't get me wrong detailed budgeting could still be a good idea if you have a spending problem or if you're not financially stable here's what i do and a better example of what the rich actually does guideline automation i automatically deposit my paychecks into my checking account and each month i automatically transfer the amount i want to save into a savings account and the amount i want to spend into a spending account my spending account includes my fixed monthly bills typical living expenses etc and here's the trick since i know my fixed monthly spend i can set spending targets for food entertainment travel shopping etc and at the end of the month i automatically know what i didn't use because that's the money left over in my spending account which i can either invest with save or roll over to the next spending month if you want to know the free app i use to help me with all this follow me instagram and send me a dm with the message applebot of jeans also beware of scam and password accounts you can get a direct link to my instagram in the description down below and remember i will never ask you for money this guideline automation strategy isn't for everyone but my goal is to simplify personal finance as much as possible because psychologically speaking the more obstacles we have in the way the less likely we are gonna do it lesson three water to plants okay so back to income and it's not gonna be what you think in the book rich habits tom corley shares that more than 75 percent of millionaires came from a poor background and were self-made just like ronald reed but there is one thing that he noticed all millionaires have in common and the irs also verified this fact and it's that nearly all of them had turned that like button into a beautiful black go on give it a tap but seriously nearly all of them had multiple income streams anywhere from three to seven ronald reed had two main ones his janitor job and the second one that i'll share later on there are two main benefits to having more than one income stream one is you reduce your dependency on any single one including your full-time job you might think your full-time job is safe and secure but it's actually much riskier than you think because the moment your boss says those dreaded words you're fired you're financially ruined two you can supercharge your cash flow formula if your monthly expenses is three thousand dollars you can try and live more frugally maybe reduce your spending to 2 400 but there will always be a limit to how little you can live off of even eating nothing but instant ramen and drinking water requires money but if you manage to earn just a little bit more even 100 a week your cash flow will increase substantially to earn more money you could do the traditional thing do a bit of overtime ask for a raise get extra qualifications and get a better job or do what i did when i was working full time start a side hustle side hustles are a great way to make extra money in fact this youtube channel it all started as a side hustle back in 2020 which thankfully i was able to turn into my full-time job depending on the side hustle you start it will require you to work extra a couple of hours every few days but trust me it'll be worth it in the end but listen i get it maybe starting a new income stream is the last thing on your mind because you're under a lot of high interest debt which by the way the total debt owed by the average us household is a whopping 155 622 so instead of paying off a bunch of debt and bills separately what if you could consolidate your debt with a personal loan at a smarter interest rate that only requires one fixed monthly payment and has a super clear payoff date sounds cool right that's where upstart can help out the sponsor of today's video upstart has helped over 1. 8 million customers with their financial journey already and what's cool is that upstart knows that you're more than just your credit score so instead of just solely looking at your credit score like every other financial institution out there they also look at other things like your income your employment and other stuff that you provide in your loan application with the goal of finding you a smarter rate if you're interested you can discover your rate in just five minutes and you can check your rate without impacting your credit score for loans between one thousand to fifty thousand dollars once approved you can receive your funds in as little as one business day find out how upstart can lower your monthly payment today when you go to upstart. com vincent or click in the link in the description below that's upstart.
com vincent don't forget to use our url to let them know we sent you lesson four beyond the wealth formula ronald didn't become a multi-millionaire from just perfecting this cash flow formula he had one other secret up his sleeve when he died the truth finally came out no one not even his family knew about this ronald had been investing in about 95 different stocks throughout his lifetime and after going through all of his stock picks i found one common theme throughout all of them and this is where it gets interesting investing your positive cash flow is the key ingredient to building wealth but it's vital you do it correctly i'll show you the easiest way to get started but first here's the mistake that you absolutely need to avoid you've probably heard a lot about day trading before you see it on tick tock on instagram on youtube about people analyzing charts buying and selling 20 different times a day hoping it goes up thinking it's really exciting and is the key to getting rich but here's what they don't tell you ninety percent of day traders lose money ronald in all his wisdom didn't day trade instead he was an investor who focused on the fundamentals of a company which meant he analyzed the company's intrinsic value and made sure the investment made sense both quantitatively and qualitatively so no he wouldn't have yellowed his life savings away on meme stocks like gamestop and amc speaking of stocks here are three freebies just for you you can give two free stocks valued up to seven thousand dollars with moomoo if you deposit one dollar three free stocks valued up to six thousand three hundred dollars would weeble if you deposit one dollar and five dollars in bitcoin for free if you sign up with coinbase through my links in the description down below lesson five rice and chess there is one single investing mistake that everyone commits that costs them hundreds if not thousands of dollars but first i want to tell you a story centuries ago there was an emperor in china who learned about chess and was so impressed by this game that he offered the game's inventor one wish anything he wanted the inventor humbly said that he just wanted rice one grain of rice on the first square of the chessboard then two grains on the second four on the third and someone doubling all the way through to the 64th black and white square the emperor quickly agreed smirking thinking that this was such a silly and simple request but this single promise led to the collapse of his entire dynasty by the 30th square alone the emperor's dead had amounted to over a billion grains of rice by the time he reached the 64th square the emperor owed him 18 quentin tillian with a q grains of rice bankrupting the entire kingdom and this is exactly what ronald reed did his plan was to invest for the long term where his money compounded for decades and every two weeks when he got his janitor paycheck he would keep adding to his investments let's say you save one thousand dollars in year one and you get a ten percent interest on it you'd make a hundred dollars in year two you'd make a hundred and ten dollars because your investment is no longer just a thousand dollars with your one year interest it's now worth one thousand one hundred dollars after year two your investment is worth one thousand two hundred and ten dollars so your interest made in year three will be one hundred and twenty one dollars over time you are an interest on the money you originally saved and the interest you received for that original amount if we graph this out we can see an exponential growth curve which is why albert einstein said compound interest is the eighth wonder of the world and this is exactly how 99 percent of warren buffet's wealth was actually earned after his 50th birthday according to the book psychology of money when the book was written buffett's wealth was 84. 5 billion dollars but 84. 2 billion dollars was achieved after his 50th birthday and it's because of the magic of compounding buffett started investing since he was 10.
