Tony Robbins Financial Independent http://www.youtube.com/watch?v=kMcwoX9u3Tg
The more you can cultivate that sense of wealth, that sense
of abundance, the more you can feel that sense of joy, the easier it's going to
be for you financially. Because you are
not going to be in this scarce, fearful mode.
Now that's not enough by itself, you can have this great sense of
abundance and do the wrong mechanics and be a disaster. But if this is the area to get started with,
you want to have emotional and psychological strength because that is going to
carry you when the mechanics are boring or frustrating, or when things aren't
working out.
People that are pessimists are much more realistic/ more
accurate. If you give them a test and you ask them to look at something and
give a size measurement of it, or to evaluate their own success or failure at a
task. Pessimists are 10X more
accurate. Optimists always see
themselves better than how they did.
They basically B.S. themselves. The researcher found put that the
pessimists who were accurate never pushed themselves because they knew it was
never going to work anyway, the optimist sees it better than it is, so they
keep doing it because they have the illusion they did well, "well I'll do
even better next time." And because
of that optimism, they did it more often, so optimists succeed at a 4-5 fold
depending on the task, but the result ultimately is that they go beyond what a
pessimist would do even though they are not as accurate!
So if you can develop a psychology of resilience in
yourself, you don't have to be optimistic or fake, you can be real. And realness is when you show up, you can be
larger than anything that can happen to you.
You are larger than any financial challenge you can face. The gratitude can put you in that sense of wealth.
The Fijians are wealthy.
Whenever I bring someone over, we have 325 acres and miles of ocean
frontage, but when you go up to these two villages, my friends would say,
"look at these houses, look at these people, they don't really have
electricity, and this and that," but they don't feel poor. It's your identity, the way you define wealth
that determines whether you are wealthy or not. Are there enough things for you
knowing that 2/3 of the planet lives off of $2 a day, that you can really get
yourself to feel grateful? Yes of
course!
How much of
your life do you get today that you never had to create? Think about it, the roads you ride on, the
library, the books you didn't have to write, the internet that you can access
in seconds and get the answer to just about anything, the people in your life
that you didn't have to raise, but are there for you. Think about all the different aspects of your
life. If you want to be wealthy all you have to do is associate. So before we do the financial part, because
financial independence is different than wealth. Wealth is being in that state of mind,
financial independence is being in that state of position where you don't ever
have to work again, that you work because you really want to. I'll give you a clue: if you don't work and
you are financially independent you will be miserable.
I can't
tell you how many friends that I have that have made over 50 million dollars,
one man made almost a billion dollars and was really excited for a while, but
after a while, it was like bored. His
vehicle of his business was always giving him contribution, and he was always
growing, figuring out how to solve problems and all the people he was connected
to in the business, all the employees all the friends and associates, it was
significant because it was worth doing, and he also had this certainty because
he knew the business, and he had this variety because it was always changing. Now he just had this money. So the real secret is to be financially
independent, financially free you want to get to where you never have to work
again, but you do, because you want to.
That's where life gets very cool.
Where you don't have to work again, but you want to, you have to work
harder. I enjoy my life today, I don't
have to work but I do, that's one of the most killer experiences in life. I'm not just saying this as some positive
thinking technique, I'm telling you that this is the secret: to shift it inside
of you and to add the real value. Most
people are trying to pursue something in the future that they already
have. I want you to think about what you
it is you think you want to be wealthy or financially free. What do you want from financial freedom? How will you know when you are wealthy?
Audience member: "When my husband is no
longer stressed about finances."
Then you are probably never going to be free
"I know I need to find out for me what that definition
is… but do I guide him?"
First
of all has she defined this game in a way she has control over? No. So
the chances of her truly feeling financially free or wealthy are slim to none. Have you made more money, how long have you
been with your husband? Do you love
him? does he love you? Are you a rich woman?
"33 years. I love him so much. He loves me, I'm the most wealthy woman in
the world."
Give her a hand for starters! Now notice that if she associates to that
part of her wealth can she get to where she feels rich inside? Yes!
And in that place she can say, "isn't it amazing that I have a man
who cares so much and so deeply for us, that he really wants to make sure we
are doing well in this area. And all his
worry is demonstrating is that he loves me and he wants to take care of me and
our family. How lucky am I? How incredibly rich am I to have a man who
cares that much? Would that be a
different meaning? Would it feel
different? Yes. But if her view is that he has to give up his worry, she can't control
him #1, and #2 he may think that worry is the way to demonstrate love to
himself and other people and you can get financially free by defining the game
in a winnable way. A certain
amount of money that we meet and that covers what we are going to call
financial security.
This will entail your housing, your cars, your food, and
basic entertainment. How many of you would feel rich if
the income from your investments alone would those four items for the rest of
your life? By the way, that
number is way smaller than what most of you think of when you think of
financial independence, which is where you don't have to work and everything is
covered without working. So let's get the first one down pat,
and you're going to know exactly what that number is for you and what it's
going to take for that number so that you don't have to work to meet it. Then we look at financial independence where
you don't have to work and everything is covered. Then we go to financial freedom and
everything you can think of is covered.
Anything you want to do for yourself or others, that's a different level
isn't it? And most people think of this
gigantic number, but if you ever figure out everything you could want it's
nowhere near as big as you think. Because
it's so big, you never even start the journey.
You don't even talk about, you hope their is going to be some big hit
sometime with your business or something, but you never get going. So the first thing you've got to do is shift from your well-being to how
he thinks and feels. If you can do that,
that might give him the space to be able to see that you are happy. Give her a big hand!
Somebody else, how do you know when you are financially
wealthy, financially free?
Audience member: "When I have enough money to keep everyone around me fullfilling
their dreams."
So when I have enough money to fulfill everyone's dreams
around me, how many have learned that when people create a dream, they usually
create a new one? So that means
basically, you better not stop anything.
So why does it take that to make you feel wealthy?
"I
feel sometimes that I feel luckier than those around me."
So guilt is part of your motivation?
"Yes."
Coming from guilt that's an abundant place (*sarcasm*),
haha. So she can never abundant because she has a belief system
inside of her that is a limitation says, "if I have more than others,
there is something wrong,"
and many people have a thing where they have to give it all away. That puts you in more stress because then you
have to figure out how to do it again. But the most powerful way we impact
other people is by example. So
don't get me wrong, I hope you know that I help feed millions of people a year,
I do projects in Jerusalem, I get to do projects all around the world, I love
what I get to do with my life, big into contribution, gigantic. Not just with my words, but my time, not just
my money, but my time and energy. But I
also learned the balance I didn't know before.
Because I used to think that I earned love by giving everything. And if I have to give you something to get you to love me, then I've just
made a trade. That's not love, that's
horsetrading. Or there are more
direct terms for what that can be called.
What do you call a person who loves you only when you give them
something, like money, a whore!
But that's what it is isn't it? So if you were to make that shift, you could
also say, "if I try to make everyone else’s dream happen, then I can get
the joy of it." Like when I was a
kid and had no money, I made sure I bought lunch for someone, I found a way. Up until my early 20s this was my way of
feeling that I was a giver and not a taker which made me feel good about
myself. But one time I went to dinner
with this wealthy man who had 10X more money than I did. But I wanted to make sure that I was able to
pay and I still have the basic nature, but here's the balance in me now, I
don't have to. Because what happened is this guy grabbed my wrist and
he took the check from me and said, "are you going to cheat me from the
joy I'm going to have of buying you lunch? Are you that selfish?" He got my full attention. So I don't think that pattern of being a giver is going to leave you, and
I don't think it's a bad pattern, it's just out of balance. She doesn't think she's wealthy unless there
is a trade. If you are coming
from abundance and not guilt you can say, "wow there are people that I can
help make a difference here, let me help this person and these people," not because you have to but because you want to, then you are rich. Giver her a big hand! Thank you very much!
Audience member: "Wealth for me would be when I have reached a point where I am
somebody that I look up to in this area, a role model in the financial
area."
Ok I've got a question for you, are you a role model right
now for somebody else?
"uh...hmmm haha, possibly."
Yes you could be?
Yes, so you've already achieved that but you're still not wealthy.
"Well I'm not my own role model."
But would you be the role model you would have had years
ago? Would you be an example of what you
wanted years ago.
"no,
financially not, but in other areas of my life definitely."
Ok so what he's saying is that, “my definition has to be
something that somebody looks up to,” in other words, “I need to be significant,” is the need he wants
(in financial terms and meeting other people's lives). And if you were significant in other people's
lives what would that do for you?
“Well I
meant I want to be a role model for myself.”
But when
you get there you won't look to yourself anymore. When you get there you’ll just be at another
level and you'll be thinking about getting to some other level that you need to
get to so that you can respect yourself.
"That's
a good point. He always makes good
points, do you notice that haha!"
So what you are doing is playing a game: No amount of money will ever make you wealthy. Because as soon as you get there, you will
raise the game. Now here's what's
great about that: to continue growing in all areas of your life. If you can grow emotionally should you?
yes. If you could give more should you? yes. If
you could grow intellectually should you? yes.
If you could give more love should you?
yes. If you could grow more
financially should you? yes because
growth is life. But having to grow in order to feel significant enough
means you will always be poor. It's a
game that never ends.
So here's a story.
Listen carefully: There is this great king. He perceives himself to want to be greater
than all other kings because he wants to do good. So he doesn't just want to have one kingdom,
many kings have one kingdom. He wants
two kingdoms, two palaces because after all you do need to locations to move
to. So he builds a second kingdom and
for a while he's pretty excited. For about
a week or a month people come to see his second palace and they say, "you
have two palaces, you are unbelievable."
And the king says,
"yes, I know, I am a role model for myself." But it doesn't seem to last because after a
while he says, "maybe I need a third kingdom. I've been to both of those and they're
getting kind of boring." It's a lot
of work to keep the two kingdoms going, but he doesn't notice that. He doesn't have much time to notice anything
else, he's just busy spending too much time doing the kingdom thing. And one day he gets the answer. One day he hears about this amazing
monk. This monk has a loincloth and he
just goes from city to city sharing what his knowledge of God, and his
happiness. And people gather around him,
while most pass him on the street. He is
given food from people because he is always adding value, so he doesn't worry,
he eats and does well. He has no fear. And he perceives himself to be a very wealthy
man. He has one item that was given to
him by his family - it's a little lamp that he can use for a little heat or to
read at night. The king hears that when you rub this lamp and ask for
something, unlike Aladdin's lamp where it just gives it to you, it gives you
twice as much as what you ask for.
And the king gets excited. He
says "bring me this man. He doesn't
need this lamp, I can be a role model for myself and others, I can be
significant." The monk comes to the
king and bows to him saying, "you are such an amazing role model. These two palaces are beautiful, they're
amazing, I'm so grateful to be here."
The king asks "I'm fascinated with you, how do you survive living
on the street?" The monk says,
"Well I love people and I share with people my ideas, and when you love
people you tend to do ok." The king
really wants the magical lamp and offers to trade for a “better, lighter lamp.” The monk doesn't want to trade his lamp for a
new one, "no please sir, this lamp was given to me by my family and I just
value it because of the gift of what it represents." The monk then leaves the palace in all due
respect. The king though goes in to rage:
"how dare he deny me what I want, how dare he deny me twice as much! Think of the role model I can be! He doesn't even use it!"
So he gets the lamp by force and locks himself in his
bedroom chamber. He asks the lamp,
"oh great lamp, give me 100 peices of gold." The lamp responds, "Oh great king why
not have 200." The king gets
excited and says, "fine give me 200."
This escalates and then
he starts asking for 100 beautiful women, (why not 200?) and it gets more and
more intense because the lamp is expanding his point of view. And the king is saying, "god I'm
thinking so small." And this goes on for three days and
nights. He won't let anyone in. Just him and his lamp. And he starves to death and dies. And that's the end of the story
(21:15).
"I guess really what it amounts to is being able to
contribute, help and influence in a positive way." Yes, but what to take you away from is
waiting to become wealthy. Because are
there other people in this world, if I took you to Africa, if I took you to
plenty of parts of this country, if I took you right now to the Tenderloins
district here in San Francisco, is there someone there that you could mentor, is there someone there that
you could mentor and change their life financially, psychologically, physically,
emotionally with what you already know beyond anything they could imagine? "yes." Then don't wait to be wealthy, start rich and
then get financially free as well. Give
him a hand!
By the way is this making sense to you? I don't want you to go away and make more
money and still not be happy, and still not be fullfilled. Until you define the game in winnable ways, you never win. And you chase it, and you die chasing it. That is not to say you should take your life
to a whole other level and be able to give gifts, but don't wait. If you can own that you are already wealthy I can promise you you'll get
to a richness financially 10X faster than with the identity you have of
limitation. That's the essence of what
I'm talking about here.
Now let's talk about money.
If you've really grasped what we have, we're not talking about
verbalization, but you can really feel it.
You really feel abundant. From
that place, what does it take mechanically to get to financial
independence? Wealth is a product of the
mind. Again there is no
amount of money that you ever achieve will make you feel wealthy. Only gratitude will as well as living a life
where you know you're contributing and adding value will. Where you are a giver not a taker. That doesn't mean that you don't receive, but
someone who is always looking at what am I getting out of every single thing
they do is always poor. Because they
live in scarcity.
But financial independence means you never have to work
again in order to live your life. You
work just because you want not because you have to. How do we get there? The lesson is going to be so simple that you
will sarcastically remark: "thank you for the fantastic thought" but even though you may know this
intellectually, focusing on this is the difference. Can you be a person who is honest in your
values and not honest in the moment? Can
you be a loving person but not be loving in this moment? Yes, Why?
Because whatever you focus on, where focus goes energy flows. So I don't care how sophisticated you are if
you are going to focus on what we are giving you right now, even if you know it
cognitively, you haven't linked enough emotion to it consistently or if you are
here, it's because you want to do it more and better.
The formula for financial independence is so simple. You can't achieve financial abundance unless
you apply this not only in a cognitive sense, but consistently in your
life. And that is: Spend less than you earn. Most people spend more than they earn. What do you do with the money you don't
spend? you invest the difference.
I want you to create a money machine.
So while you're sleeping, it's still making you money. So you are no longer trading the most
valuable resource for money (time for money).
Now you are trading money for money.
You want money to go to work so that it's making a difference. You want to create a machine. You want it to feed you so you don't have to
work. That's what the money machine
is.
Now if you spend less than you earn and you don't invest it,
you aren't going to get much value. The second secret to this is that
you've got to reinvest your returns for compounded growth. How many of you have taken a big hit and
taken the money and spent it on something?
There's nothing wrong with that, but you have to make sure you reinvest
your returns so that you get compounded growth.
It is the most basic principal in the world and we all know it
intellectually. But are you emotionally
associated enough that you are utilizing it to the maximum capability? If you don't, you're not going to get
financially free. You will never get financially independent by
your earnings alone. There are three
areas in life that you don't wnat to go to an expert. An expert can coach you, but you want to make the decisions. #1 is your kids. If you're going to be the screw up you should
be the screwup, not someone else in this area.
Because at least if you screw up you knew you gave your all. And if you give your all you learn from your
screw up and can still make a difference.
But letting someone else tell you how to raise your children
is insane, to think that they know more than you do about your own child. They can coach you, you can learn from them,
but you've got to make those decisions.
What's another area like that? Physical health. If you don't learn this area because you
think it's too complex, that I'm going to give this decision to somebody else,
that someone else may be totally sincere and sincerely wrong. I'm not lecturing you on what to do, I'm lecturing
you to inform yourself and make the decision.
Because if you let someone else make the decision, the consequences are
too great for your children and for your health. And I'll tell you another area that's really
important. Your psychology, having
someone else give you a label, telling you what to do, same thing with ending
up with a challenge in your body. The
last area that's is crucial to money.
A lot of people say, "I don't have time for this, I don't
understand this, I need to go to an expert for this." I'm not here to sell you some financial
investment or plan because if I did that then I would have a self interest
process and that's not going to serve you.
That doesn't mean that someone can't sell you something, it just means
that I'm coming here to advise you on how to make better decisions, not tell
you that you should do this individual thing.
Because what individually you need to do changes. And by the way, even if you have the best
intent can you be wrong? yes. So I'm not here as a registered investment
advisor, I'm not here to sell you a stock or a bond, I'm here to teach you a
better way of evaluating so you can make better choices more of the time. Because when you get to the financial area,
when you meet somebody, the old phrase "when a person with experience and
knowledge meets a person with money, what happens? The person with the money ends up with
experience and the person with the experience ends up with the money. And even if the intent is purely positive, if
this person screws up, no one is going to care about as much about your
financial world as you. No matter how
much they care, no matter how much they're committed, because it's your
life. And if they make a mistake and
they are sincere, they get the learning.
Which will make them better in the future. But if you make the mistake and you have this
concern, you can have the learning.
And there is value in that.
Every one of you is going to lose money.
There is no way you won't! One of
the top 10 financial traders in the history of the world who I work with is not
even right half the time. How can you
make billions of dollars if you aren't even right half the time? I'm going to show you: it's called asset
allocation. It's the way you invest,
it's what you do. So the first step is
spend less than you earn and invest the difference. Second step is reinvest your returns for
compounded growth until you reach the home run, the money machine, until you
reach the critical mass of investment capital that creates the annual income
you want. Whether you are investing in
cars, stocks, bonds, real estate, financial instruments, what are you investing
for? You are not investing for
returns. That illusion will keep you
from getting to the end game. If you are
wealthy, here is what makes you wealthy, income! Not assets.
Assets you can buy and they can change in value all the time, you need
income. Some people are very wealthy on
paper and they have no liquid assets and if something happens to those assets,
they are in deep stuff. So you need
income. Ultimately if you are trying to
build a money machine, you will invest in an antique car but you won't ever be
willing to sell it, it's not an investment, it's an acquisition. Because what you are really wanting is this
car, not building to create your critical mass so that you have a money machine
so you don't have to work. When you
spend less than you earn invest the difference, and as you get compounded
growth you reinvest the difference for more compounded growth, you're going to
eventually get to a mountain of money that is enough that without working, the
interest on that money alone in that secure environment will give you the
income so that you never have to work again.
Then you have a money machine.
That's different than having X amount of assets on your net worth. By the way, these can change in an
instant. If the market changes the feel
about real estate, the companies that you've invested in, that can all change
within an instant.
The only reason to invest: to have income for life without
working. And to do that you've got to get a critical mass of capital where the
interest on it alone you can live on that income and you can live the life you
want without working. And the only way
to do that is to do those first two steps: spend less than what you earn,
invest the difference and reinvest it until you hit that critical mass. And we are going to show you ways to make it
happen. Everyone's goal then is: I'm
building a money machine. And it's
purpose is to give me income for life without working, hallelujah!
How to do that is actually a lot simpler than you
think. You've got to think of this as
your target. Now you're on track if you
are spending less than you earn, investing the difference, reinvesting for
compounded growth, and working to attain that critical mass to get you free,
and do you even know what that number is?
Because if it’s a general giant number and you keep moving the number,
you'll never get there. You have to
define, "this is what it is." Think of this as a bottom line: you
must pick out a minimum financial goal for yourself and you've got to pick out
a specific percentage of income to invest periodically no matter what. A specific percentage of your income. If you don't do that, then you can forget
this course. You can make a whole bunch
of money, but you won't be practicing the fundamentals, and eventually you'll
make a mistake and you'll lose it. If
you're going to change things, you really need to put yourself in a position
where you say, "this is what I'm going to invest, this percentage of my
income, where you pay the investments first before you pay all the other
bills." Because if you pay the
investments first, and you keep doing it and it's a pure discipline (and by the
way the best way I know about doing this is to have that money taken straight
out of your account as soon as it gets there.
You can do it automatically and then put it into a money market. Think about this: success in life comes when
you make good judgement. When you make
good decisions in your relationships, your body, with your family, and with
your finances, with everything you get success.
So if success in life comes from good judgement and good decisions,
judgement often comes from experience.
And experience often comes from bad judgement. That's the secret. That's why 80% of psychology comes back to
when I make the mistake: "oh my god, my numbers come down and I'm not
making progress!" Instead of
saying, "I can never get there!" it's about redoubling your
efforts.
And it really helps to have a role model as this man pointed
out. I was shortly with Michael Milton
shortly after he came out of prison.
Michael was the junk bond dealer who made billions of dollars from
himself and other people the 1980s. He
funded Ted Turner, he gave him his start, he gave all kinds of companies their
start. But he also did some things that
put him in jail. by the way, in jail how
wealthy do you think he felt? Not very. He was able to keep a significant amount of
his money, he paid fines, he spent a period of his life there, and when he got out
of jail, he developed something called cancer.
So what good is the money? So he
spent his life trying to figure out how to change and even though he had a lot
of money, he felt like he was starting over in terms of his identity, in terms
of his respect for the way people look at him, so he began by trying to do good
works, but he was really feeling defeated until he met an interesting guy, a
guy named Carl Eller. I was talking to
Michael later on, he actually wanted to have one of my companies into his
group, he wanted a piece of it, but the deal was not the right deal for me and
looking back on it, it was the right choice not to do it even though he is a
very bright man. But he had the
experience, and I had the company and the money, and I realized that when I
worked out the investment deal, I made an intelligent choice moving forward
fortunately. But what I got out of that
meeting was more than the investment we could have made together. What I'd like to give you is a role model who
still guides me. What this man, Carl
Eller, did was in 1952 he was a man who got involved in outdoor
advertising. He went to work for a
company and he worked there ten years for that company. Then in about 1962 he found himself in a
position where he had learned enough and had enough compounded experience, (10
years working for someone else, learning the business, learning to make
intelligent choices), he said, "I'm going to use a little of my own money,
I'm going to leverage it, and I'm going to buy my own company in the outdoor
advertising business. And he did that in
Arizona. Then his next 6 years of his
life he builds that company up and about 6 years later he builds it up enough
that all of a sudden he looks at his life and says, "I can merge this and
get more value. I can work with someone
else, I can see what those guys did at that other company that I worked for,
they didn't just work, they merged with other companies." So he follows the model he learned. And sure
enough he merges with a local radio and television station there in
Arizona. And the value of that company
grew immensely. So now he's got another
10 years and he's got 16-17 years into this business now, you think you can
compound things over 17 years if you compound things and you are smart? yes. Do you think all the decisions he
made were good ones? no. Did everything he do make money? no. He
failed at many things but he had this psychology that said, "if it didn't
work, that's experience and we're going to learn from it and make a better decision."
So over the next 15-16 years he basically moves into the
position where this company has some real value and he sells it with his
partners to Gannett, the company that owns USA Today, a really large firm. 1980 he becomes chairman of Columbia Pictures. And in a short time from 1980-83 taking what
he's learned form the advertising business, he grows Columbia pictures and he
helps them to merge with Coca-Cola. so
by 1983 this man has been working since 1952 (that's how long I've been doing
that I've been doing, that's how long the person accumulated 70 million
dollars, just by investing in other peoples stuff, not by having to do it. You don't have to be a great entrepreneur to
make money. You can invest in a great entrepreneur. You can look at someone like Bill Gates and
say, I'm going to own a piece of him, I don't have to work around the clock,
let him. There are a lot of ways to make
money that are easier than running your own business and this man Carl loved
running his own business.)
So by 1983 he's accumulated a net worth of 500 million
dollars. It's certainly worth a billion
dollars today. So what's he going to do,
he's in his late 50s at this stage of his career, so he's got all this money
and he doesn't have to work, so he doesn't for a while. But he starts to go crazy. He
says,” I've got to do something with my life,” you can only go to so many
beaches, you can only go through so many Dacquiris. I want to do something productive. So he comes up with the idea that he is going
to take over a company called Circle K.
At that stage the company was doing about 700 million dollars in sales,
so he goes into partners and goes in and puts up virtually all his money to
make this deal happen. He thinks he is
going to turn this company around and he does.
He turns Circle K in roughly 5 years into the 2nd largest convenience
store in the world behind 7/11. He's got
like 4,5000 stores in the US, 15-1600 over seas in over a hundred countries,
just an amazing growth record. He takes
the company from 700 million in gross sales to over 7.5 billion in that short
period of time. So now in the early
1990s he's looking pretty good. Then in
2 years the entire company reverses it's fortunes and goes bankrupt and he
loses 500 million dollars, everything he's accumulated in 62 years of his
life. He has nothing, Not only does he
have nothing, he owes 100 million dollars at 62. How many of you have thought you were in bad
financial trouble and it wasn't that bad?
Pretty much everybody!
So you thought, "oh I lost my job, I lost my income, my
investment went terrible, or the house I bought wasn't worth as much, or I
bought a stock and I lost it, or I went through a divorce and it was terrible
and I lost half my money," trust me, this experience makes yours look like
nothing. Now what do you do after
working for roughly 40 years of your life, your 62, everyone respects you, you
are really well known, and now you are a total failure and you owe 100 million
dollars, 99% of the planet would go bankrupt obviously. But he decided that there was still
time. That was psychology, not
mechanics. What did I tell you?
80% of financial freedom, financial independence and all of wealth is
psychology, 20% is mechanics. At
62, he had the guts to say, all I've got to do is to get a small amount of
money, I've got to get into compounding money again, I've got to make better
choices, which at this stage will not be difficult. What took me roughly 40 years to develop I
lost in 3 years, but if I didn't lose the 38 years of experience, of what I've
learned, of what who I am, so he didn't say I'm starting over, he said,
"I'm going back to what I know."
And at 63, he went back to Phoenix, Arizona nad he leverage people in
how much he thought he could get and he got a small outdoor advertising company
and he started "over" but he didn't call it that, he said, "I'm
going back to what I know, so that I can make some better intelligent
choices." So what happens? In less than 5 years he build that company
up, compounds it in 25 cities, and he builds himself to where at age 68 years
old, he now is a billionaire again, he sold his company to Clear Channel. He wasn't even a billionaire after 40 years.
So this is a lesson in one thing: psychology. But it's also important in the next most
important mechanic you need to know, because everybody's going to make some bad
choices and they're going to cost you seemingly everything. Or you may even make a conscious choice,
you're going to make something, changing a relationship can cost more than half
your money depending on how your life is structured financially, but it may be
worth it. How do you not be destroyed by
that? You have to be strong
psychologically but you also have to avoid it.
If he was here today and you were going to ask him, besides your
psychology, what was the biggest mistake you made? He would say one thing to you and I want you
to hear it now and even though you may have understood it intellectually, you
don't associate enough emotion to it because my guess is that is why you are in
this room. That mistake was asset allocation. This is not sexy, this is not completely new
for some of you, but you need to be fully associated, (when you are green you
grow, when you are ripe, you rot) you've got to get back to being a beginner on
asset allocation. Because what happens
is that when you become a sophisticated investor, you tend to look at:
"where can I put my money to where I can get the largest return?" And that's the biggest mistake you can make
in your life. It's counter
intuitive. But asset allocation is the
single most important decision you are going to make in your financial
future. You screw this up, and you can
do everything else well and end up empty financially. Not unwealthy if you stay associated to your
financial strength, but you are certainly not going to be financially
free. And this was the mistake he
made.
What does asset allocation mean? It means you are going to make the wrong decisions
at times: you're going to get the best advice, you're going to study the past,
the market shows there is an upward trend, the real estate market is trending
upward, gold is trending upward, or something is trending upward and you feel
like you are missing out if you don't get in.
And so sure enough you get this piece in you where the fear starts to
happen and you don't want to miss out and everyone is telling you it's looking
like the right thing, it looks like the right thing, and it should be the right
thing, and your timing is wrong. Can you
do the right thing at the wrong time?
Yes. Let me tell you another
secret to life: if you do the right thing at the wrong time, you get
pain. If you plant in the winter,
I don't care how hard you work, I don't care if you work day and night, you
work to the bone and you plant your seeds in the middle of the winter, what's
going to happen when Fall comes, are you going to be rewarded? No! So
if you don't understand that the seasons are changing, you're in trouble. But even if you do everything right, you can think it's Spring time can't
you?! And be wrong. So how do we protect ourselves? The answer is Asset allocation: it is the
secret you must give yourself and I can promise you in two days all of you will
forget what I'm saying right now.
Because many of you who will be making momentum investments, and some of
you in this room will make $3000 in the last four hours and they're going to
make a trade, some will make $100, some $500, but someone else is going to lose
$1000 or $500. And what everyone is
going to focus on is the person who made $3000 and they're going to put all
their money in this momentum investment where supposedly they will make 10%-20%
on this investment today!
Every part of you goes, "that's how I get my money
machine! I want to get my compounded
interest, I want to get the best return I possibly can!" so they put all
their money into there and the wrost thing that can happen to you is like Las
Vegas, you win. It's the worst thing
that could possible happen to you, because
When I was a kid I was not into throwing my money away
because didn't have much money. I was
not into gambling. I wanted to give it,
share it, do something fun, get people to light up, but I ended up going to
Vegas with friends of mine. And they all
bet, and I just said, "I'm going to hang out with you guys, go to the
shows, watch." So I sat there and
watch and didn't bet anything until the last day. On the last day I thought, "well I'll
play a little bit of blackjack, it's simple, you can anticipate the logic of
it, you rationalize the whole thing, and I won $1800 and that was like an
unbelievable amount of money because I started out with $300. Worst thing that can ever happen! Because once you get that jackpot, what do
you always think? I'm going to get it
again. That's how they make money in
Vegas, because they set up the compounding on their side. They know what the ratio of results are and
they know all they need to do is to get you to keep doing this because
eventually the house is going to win because the house has the economic
advantage. The longer you go, the
greater the chance you are going to leave empty handed. That's how they can build a hotel that costs
2.2 billion dollars! How can you afford
that? You have large margins in
profits! And what does that come from,
people who got the big jackpot. So the
worst thing that can happen is that you make investments and you get a
homerun. And the homerun gets you to
start thinking you are really smart, and maybe you are really sophisticated,
but there is a day when the whole game changes and it's difficult to predict
that sometimes because it's impossible.
What is asset allocation: out of the money you invest, we're
going to create 3 buckets, a really simple way to think of it from now on (it's
help you understand where you are going to put your money into investments
every year). If you don't spend less
than you earn, you're going to have nothing to invest. If you spend less than you earn, you're going
to have something to invest. Do you need
to come up with a specific number, a percentage that you are going to invest
every year? Yes. Where are you going to put that money? Whether it's $10, $100, $1000, $10000,
$100000, a million $ a year, a million $ a month, it doesn't matter. You're going to put it if you're smart into
these three buckets of asset allocation.
The first
bucket is the security bucket. When you think about investing, there are
two types of investments. There are
fixed income investments (a guaranteed rate of return assuming they
deliver). IS there risk in any
investment? yes. So there are ratios of risk, and as we know,
no risk, no reward. So if you don't
invest you're going to lose a few than if you invest at times, and if you don't
invest you are never going to have a money machine, and you are never going to
be financially free. So fixed income
investments are going to get you a guaranteed return, a bond. A bond: the company says "I guarantee
you, you give me your money, I will deliver at this time at this date, this
percentage of return to you. So it's
fairly secure.
The second type of investment you can make is something
that's growth driven. And growth
investments are where you probably have a greater potential for growth, which
means you have a greater return if you are successful, but if you aren't
successful, do you have a guaranteed rate of return? no, growth investment you
have the potential of greater return, but the risk of greater loss. There is no
guarantee in a gross investment, no matter how long it's been going that way,
there is no guarantee. We start to get
the illusion that it's always going to go up, but it isn't necessarily. So where do you put your money if you are thinking
security vs. not security? You security
bucket is where you want to put investments that are secure by nature. Because they are secure, is this going to
give you a huge compounded return per year?
No. But can it give you a huge
compounded return even if the number is small and you do it long enough. Yes!
So what we want to do is your first investments have to be in your
security bucket. Everyone wants to do
the opposite. Because why would you want
to go and put some money into something where you are only getting 5%-8% on,
when you can go do something else where
you know you can make 20% on? Because
the 5-8% is totally guaranteed by that promise, government, company, or
whatever that situation may be. And if
you screw up in your growth investments you've got how much? ZERO.
What did Eller do? He
put everything into his growth bucket.
He went, "why would I put my money in my security bucket? I've got $500 million dollars, I can do all
these different things, if I can leverage here I can make my goal of a billion
dollars. I wouldn't have to worry about
putting money into my security bucket."
You might say, "well it worked out well for him!" But how many Ellers are there in the
world? Most people when they face what
looks like financial ruin they say, "it's over. I can't start over again at 40, 50, or 60,
much less 63." Very few people
would do that. And even though he did he
had to make some good choices and have a little bit of luck. And you get really lucky when you work for 50
years your guts out. Right? And you won't persist, you won't give up, you
have this incredible psychology, you figure out how to create value. But most people won't recover from that. If there's anything he'd do, he wouldn't have
billions of dollars and all that stress, if all he'd done if he had put a
certain percentage in his security bucket.
The question becomes, "what percentage goes into your security
bucket?" IF you don't have 2-6
months of cash that covers your overhead, you're in deep trouble. And today, it's amazing, people with enormous
incomes spend when they don't have 6 months of cash on the side. And if something happened where they lost
their job or something happened if they lost their job, or the economy got hit,
or a terrorist attack occurred and everything got locked up, they'd be in huge
trouble.
The first step to getting financially secure, not
financially independent is to make sure you've got enough cash so that if
something happens you can go for six months, you've got freedom. This has got to be a basic financial goal,
but nobody wants to do that because it's not sexy! And you're saying, "I can be using this
for compounded growth!" Yes, but
you could lose and then you could start with nothing. How much should go in the security bucket: 6
or more months, a year, it depends on your psychology, but whatever is going to
make you feel secure is individual for everybody. It's different for everybody. This is where you've got to know the truth of
who you are, not what you project. And
some people are more certainty driven, some are more security driven than other
people, some need to have more security drive right now in order to keep their
life balanced. You will also put in your
IRA investment, insurance investment (which is protecting you), your home
investment (don't think of your home as an investment, because for most of you,
you're eventually not going to sell that home and get income off of it. Some of you may be accumulating the same
homes and buy that smaller home and take that critical mass and it's going to
take care of you for life. If you're
doing that great. But the place to put
your home in terms of leverage is your security bucket.
(56:21) Because if you don't have a home you're going to be
very stressed out. So I've got to think
of my compounded interest outside of my home.
Fixed income investments all fit
in this category.
There are a few ways you are going to learn about growth:
the buy and own strategy, which is the strategy as the owner. And by the way, the buying and holding is
less risky to some extent than momentum because of the timing, but it can be
just as risky. What is momentum
trading? That's when you are no longer
an owner, you are a trader. Everyone is
a financial trader. Most of you are
trading time for your money. Here you
are trading money for money.
