7 Financial Habits I Know At 40 That Work

Summary

In this financial advice video, the speaker reflects on seven crucial financial lessons they learned over two decades, wishing they had known them at 20. Key takeaways include understanding compound interest, mastering essential business reports like P&L and balance sheets, recognizing the power of multiple revenue streams, viewing oneself as an asset, discerning between good and bad debt, and overcoming wealth psychology barriers. The speaker emphasizes investing over saving and the importance of enjoying life while learning financial wisdom.

Takeaways

• 💡 The importance of understanding compound interest and how it can significantly impact wealth over time.
• 📈 Learning the three key financial reports for business: Profit and Loss (P&L), Balance Sheet, and Cash Flow Statement.
• 💼 The significance of multiple revenue streams in both personal finance and business growth.
• 💰 Recognizing oneself as an asset and investing in personal development to enhance one's value.
• 🏦 The distinction between good and bad debt, and the role of debt in business growth and personal finance.
• 💭 Addressing and improving one's wealth psychology to overcome negative beliefs about money.
• 🌟 The concept that saving money is not always the best strategy; investing and spending wisely can yield higher returns.
• 🚀 The power of investing in businesses and assets that have the potential for high returns on investment.
• 💸 The realization that fear can hinder financial success, and the necessity of being comfortable with making and spending money.
• 🌐 The speaker's personal journey from backpacking on a budget to staying in luxury hotels, reflecting the impact of financial lessons learned.

Q & A

What is the main theme of the video transcript?

The main theme of the video transcript revolves around the seven financial lessons the speaker wishes they had known in their 20s, which have contributed to their financial success later in life.

How old was the speaker when they started reflecting on their financial lessons?

The speaker was 40 years old when they started reflecting on the financial lessons they wish they had known in their 20s.

What is the first financial lesson mentioned in the transcript?

The first financial lesson mentioned is the understanding of compound interest and how it's crucial to let money work for you rather than just letting it sit in a bank account.

Why is the compound effect significant according to the speaker?

According to the speaker, the compound effect is significant because it illustrates how a dollar can grow over time when invested in an instrument that compounds, leading to wealth creation.

What are the three important financial reports for business owners that the speaker discusses?

The three important financial reports for business owners discussed are the Profit and Loss (P&L) statement, the Balance Sheet, and the Cash Flow statement.

Why did the speaker emphasize the importance of understanding the P&L, Balance Sheet, and Cash Flow statement?

The speaker emphasized these reports because not understanding them led to financial loss due to embezzlement, highlighting the necessity of knowing them for business financial health.

What does the speaker mean by 'multiple revenue streams'?

The speaker refers to 'multiple revenue streams' as having more than one source of income, either in personal life or within a business, which can significantly increase overall earnings.

Why is considering oneself as an asset important according to the speaker?

Considering oneself as an asset is important because it encourages investing in personal growth and development, which can lead to increased earning potential and financial success.

What is the difference between good debt and bad debt as explained by the speaker?

Good debt, according to the speaker, is debt that is used to grow wealth, such as business loans for expansion. Bad debt is debt that does not contribute to wealth creation, like high-interest consumer debt.

How does the speaker's view on wealth psychology impact their financial decisions?

The speaker's view on wealth psychology impacts their financial decisions by recognizing the importance of having a healthy mindset towards money, which influences how they save, invest, and grow their wealth.

What is the speaker's stance on saving versus investing money?

The speaker advocates for investing money into ventures that yield returns rather than solely saving it in a bank account, as they believe in the power of compound growth and active wealth creation.

Outlines

00:00

💼 Financial Lessons from 20 to 40

The speaker reflects on turning 40 and shares seven financial lessons they wish they had known at 20. They recount their early years of backpacking and staying in cheap hostels, contrasting it with their current stay at the luxurious Four Seasons Hotel in Sydney. The lessons are intended to help listeners understand money better and achieve financial success faster. The speaker emphasizes the importance of learning from their experiences and applying these lessons to accelerate financial growth.

05:01

📈 The Power of Compound Interest and Revenue Streams

The speaker highlights the importance of understanding compound interest, a concept they did not grasp until their 30s. They explain that money in a bank account not invested is not growing wealth. They also discuss the significance of multiple revenue streams, both in personal life and business, and how diversifying income sources can lead to financial success. The speaker shares their journey of learning to generate multiple income streams within their businesses, which they consider a game-changer.

10:03

💹 Embracing Good Debt and Wealth Psychology

The speaker discusses the concept of good debt versus bad debt, admitting their initial aversion to all forms of debt due to their upbringing. They later learned to differentiate and utilize debt strategically for growth. Additionally, they touch on wealth psychology, expressing their past negative beliefs about money and the wealthy. The speaker shares how these beliefs hindered their financial progress until they addressed their mindset and learned to value themselves as an asset, investing in personal growth and education.

💰 Investing vs. Saving: The Journey to Financial Freedom

In the final paragraph, the speaker emphasizes the importance of investing money to generate wealth rather than merely saving it in a bank. They recount their realization that saving money does not equate to financial growth, especially when considering the profits made by banks using customers' deposits. The speaker advocates for investing in oneself and in businesses, sharing their experiences with starting and scaling successful companies. They conclude with the advice to not be afraid of money, to make it, and to spend it wisely, reflecting on their own financial evolution.

Keywords

💡Compound Interest

Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods. In the video, the speaker emphasizes the importance of understanding compound interest early on, as it is a powerful tool for wealth creation. The speaker regrets not grasping this concept sooner, which could have accelerated their financial growth. The concept is illustrated by the idea that a dollar invested and allowed to compound over time can grow significantly more than a dollar saved in a non-compounding account.

💡Profit and Loss (P&L) Statement

A Profit and Loss (P&L) statement, also known as an income statement, is a financial report that outlines a company's revenues, costs, and expenses during a specific period, providing a summary of the company's financial performance. The speaker in the video mentions this as one of the three crucial financial reports for business owners, highlighting the importance of understanding where the money is coming from and where it's going. The speaker's realization of the importance of the P&L statement came after experiencing financial losses due to lack of knowledge about this report.

💡Balance Sheet

A balance sheet is a financial statement that provides a snapshot of a company's financial position by presenting its assets, liabilities, and equity at a specific point in time. It is one of the three key financial reports for businesses, as mentioned by the speaker. The balance sheet helps in understanding the overall health of a company by showing what it owns and owes. The speaker wishes they had learned about the significance of the balance sheet earlier to better manage their financial decisions.

💡Cash Flow Statement

A cash flow statement is a financial report that provides aggregate data regarding all cash inflows and outflows a company experiences during a specific period. It is crucial for understanding the liquidity of a business and ensuring that it has enough cash to meet its obligations. The speaker in the video stresses the importance of the cash flow statement, using the analogy of 'never running out of runway' to illustrate the danger of a business running out of cash.

💡Multiple Revenue Streams

Multiple revenue streams refer to the various sources of income that a business or individual can have. The speaker in the video advocates for diversifying income sources, both in personal finance and in business. They share their experience of how focusing on creating multiple revenue streams within their businesses significantly improved their financial success. This concept is key to building a resilient financial foundation that is not reliant on a single income source.

💡Asset

An asset is an economic resource that has value and can be used to produce positive economic outcomes. In the video, the speaker reflects on the importance of viewing oneself as an asset, emphasizing the need for personal investment in education, health, and personal development. They express regret for not investing in themselves earlier, which could have accelerated their personal and financial growth.

💡Good Debt vs. Bad Debt

Good debt and bad debt are terms used to differentiate between types of borrowing that have different impacts on one's financial health. Good debt is typically associated with investments that will generate returns, such as a mortgage on a property that appreciates in value. Bad debt, on the other hand, is debt incurred for depreciating assets or consumables that do not generate returns. The speaker in the video discusses their initial negative perception of all debt and the subsequent realization that not all debt is detrimental, which is a pivotal concept in financial management.

💡Wealth Psychology

Wealth psychology refers to the mindset and beliefs surrounding money and wealth. It encompasses attitudes towards saving, investing, and spending, as well as one's sense of self-worth and financial identity. The speaker in the video talks about overcoming negative wealth psychology, such as feeling unworthy of wealth or believing that wealth requires unethical actions. They emphasize the importance of cultivating a healthy relationship with money to achieve financial success.

💡Investing vs. Saving

Investing and saving are both methods of managing money, but they differ in their potential for wealth creation. Investing involves putting money into assets that are expected to generate returns, such as stocks, real estate, or businesses. Saving, particularly in a low-interest-rate environment, often involves depositing money in a bank account where it earns minimal interest. The speaker in the video advocates for investing as a more effective strategy for growing wealth compared to traditional saving methods.

💡Financial Education

Financial education refers to the knowledge and understanding of financial concepts and practices, including personal finance management, investment principles, and economic theory. The speaker in the video underscores the importance of financial education, sharing that their lack of early financial education led to missed opportunities and mistakes. They encourage viewers to seek out financial education to make informed decisions and accelerate their path to financial success.

Highlights

The importance of understanding compound interest and its role in wealth creation.

The significance of learning about the three key financial reports for business: P&L, balance sheet, and cash flow statement.

The power of multiple revenue streams in both personal life and business.

Recognizing oneself as an asset and the importance of investing in personal growth.

The distinction between good and bad debt and the role of debt in business growth.

The impact of wealth psychology on financial success and the need to overcome negative beliefs about money.

The concept of investing and spending money wisely rather than just saving it in a bank.

The realization that saving money in a bank may not be as beneficial as investing it.

The journey from a hostel to a luxury hotel and the financial lessons learned along the way.

The idea that money in a bank account not invested is not creating wealth.

The necessity of understanding financial instruments that allow for compound growth.

The importance of not being afraid to focus on where money can compound and grow.

The lesson of not waiting to learn about finances until it's too late, as it can lead to financial loss.

The value of diversifying revenue streams within a business to increase financial stability and growth.

The need to see oneself as an asset and to invest in one's own education and personal development.

The concept that not all debt is bad and learning to use debt strategically can be beneficial.

The psychological barriers to wealth and the importance of changing one's mindset around money.

The advice to enjoy life in one's 20s but also to be mindful of financial lessons that can lead to success.

Transcripts

I want to share with you the seven

Financial lessons I wish I knew 20 years

[Music]

ago when I was 20 years old right I

recently turned 40 years old when I was

20 years old uh I was at the time

probably backpacking around Island uh I

was staying at 11b per night you know

hostel and now 20 years on I'm standing

staying right now here in the Four

Seasons Hotel in Sydney and I'm 40

recently turned 40 so I'm thinking what

are the lessons that I learned from

these you know 20 years ago over my 20

years that I wish I knew when I was 20

and I started to write them down with a

piece of paper cuz my mind works it like

that I thought why not share them with

you what are the seven Financial lessons

I wish I knew in my 20s so 20 years ago

as I said I was back back here around

the world I didn't know much about money

uh and it took me a long time to get to

where I am today so what are the things

that might help you to get there faster

and to understand money more so let me

just give you these seven seven kind of

lessons that I wish I knew and these are

in no particular order but they're all

the important things that have helped me

to build financial success over the last

two decades so hopefully you can get

there faster than I did so one of the

lessons would be definitely around the

understanding of compound

[Music]

interest that you might have heard that

before the idea of compound but I didn't

understand it I didn't understand that a

dollar in your bank account unless it's

but to work is not actually growing it's

not getting anywhere it's not creating

any wealth and when I learned in my my

kind of probably in my 30s really so 10

years after this um about the idea of

compound the idea of that you know $1

compounding every single day you know in

some instrument so whether it be a

business or whether it be a stock or

whether it be real estate that's going

to make you more money than then you

know saving a dollar that's not doing

anything or putting a dollar someone's

not actually making any money so

compound and I could also talk about the

effort and the compound of effort but to

keep this about finances because I want

to teach you the finance lessons the

idea that I really wish I learned early

on cuz I came from a poorer um upbring

right so both my parents didn't really

have any money they were divorced when I

was younger they didn't really have any

money so when you don't really have much

money you don't really when you make

money you spend it and anything you

don't spend you save and you squir your

way into a bank account but

a dollar in the bank account is not

going to make as much as it going into

an instrument that's compounding and

growing now I didn't realize any of that

so I wish I worked out earlier that and

wasn't afraid to focus on where my money

could compound and understand that um

that that the body money in the bank

account wasn't going to make me Rich so

the first all you understand about

compound and how that works compound

interest and and compounding money the

second lesson for me was a business

lesson uh a financial business lesson

which I learned early on and and that

was the three most important reports

that you need to learn if you own a

[Music]

business and not knowing these these

reports meant that someone actually

embezzled and stole a lot of my money so

take this lesson early on cuz I wish I

knew it so there's three reports you

need to care about as an entrepreneur

number one the PML the profit and loss

or if you're American the income

statement that shows how much money is

coming in what are you spending on and

then your your EB your money you get

after everything before you pay taxes so

your profit or loss your balance sheet

your balance sheet really shows where

you're at when it comes to your income

but also your debt positions other other

Equity you might have and it kind of

brings the whole health of the company

into one sheet now I didn't want to

learn any of this early on that was like

the last thing I wanted to know about

but actually it's one it's probably the

most important thing that I look at now

when I'm I'm starting business or I'm

acquiring businesses are looking at um

the finances of a company so the second

thing is about it third thing is the

cash flow statement that really is all

about knowing where your position is

from a cash perspective and there's a

saying in business and that is that um

never run out of the runway never run

out of Runway I just fing recently um

literally a couple hours ago yeah I tell

you you don't want to land and run out

of Runway because then you're screwed

right so the second lesson for me is the

three reports p&l balance shet and cash

flow statement you've got to learn all

of those I wish I learned that earlier

on the third thing is the power of

multiple Revenue streams in your life

let alone in a

[Music]

business so in a life you might have a

job okay that's one Revenue stream but

do you have some stocks that could be

another Revenue stream do you have some

investments in the business that could

the revenue stream uh do you know in in

my world of businesses well then I want

to have I want to focus on having more

than one Revenue stream inside each one

of my companies when I when I learn when

I worked that about it was a game Cher

what I worked out that you can have a

company and then focus on finding

multiple ways to bring more money into

that one company it really did change

the game for me because I I found it it

it was easier and I suppose it comes

back to the compounding thing right when

you started to learn more ways to bring

money into your business not just a one

way you got good at like maybe sell

onine okay cool that's fun but what else

maybe sell in person okay cool but what

else so when I learned that you can

build lots and we do dozens and dozens

of of income streams in um in most of

our companies and sometimes we don't get

dozens in every one of them but if we

can get five or six or 10 or eight you

know that's more than having one right

so income streams uh what else do I

write down uh I'm an

[Music]

asset I wish I knew that earlier I'm an

asset you know we spend so much money on

you know looking after painting our

house because we can sell the house or

um you know if the car if we crash the

car we we know we get the dent fixed or

you know all of these assets that are

around us we treat them accordingly but

we're an asset I wish thought that

earlier on because I didn't invest into

me I didn't invest into my education

into my you know spirituality and who I

am and my feelings my emotions and and

who I'm becoming so I wish that I saw

myself as an asset early on I don't I

didn't I don't think I I definitely know

that I didn't because I just didn't grow

up in an environment where I think that

that was um that was what you were I you

know you got a job and you bought a

house hopefully and you paid it off when

you were 150 years old and then you

retired you know a couple months before

you die like it wasn't it wasn't

anything more than that so I I think

knowing I'm an asset that would be

important what else I wrote down was my

my number five was and this was a big

one for me because I came from a a

family with not a lot of money and that

was not all debts

[Music]

bad there's good debt and there's bad

debt and I just thought debts bad debts

bad debt bad debt bad you know and I

thought but I thought hang on a second

when I got more wise I suppose and I

started to research more find me a

company that's doing really really well

that you know of that doesn't have debt

on their balance sheet I mean they all

use debt to grow but I thought hang on

never have any debt so what's what's

good debt what's bad debt and having a

better relationship around that and

learning about that what's good debt

what's bad debt um that's important

important and that leaded into my six

point and that was wealth

[Music]

psychology I had really terrible uh

Hang-Ups around money and and thoughts

around money so for example I thought

that if you wanted to if you had to to

have money you had to be you know you

had to be uh come for money uh I thought

that you had to you know be you know you

know be a be be a bad person or do

something wrong um you know because I

grew up you know in the location or an

area where where those that had money

had either come from it or they were you

know they were dealing they were doing

something like that so I had a really I

didn't have great psychology around

money so it took me a lot longer to get

it but then here's the kicker when I got

it when I got it I wasted it because I

didn't feel worthy of having it and that

took me a while to work out and so I

would just spending on stupid crap that

just didn't serve me you know and so I

really had to work on my psychology that

was important and I think the last one

for me I wrote down that I wish that I

could go back I could zoom back to that

kid and say still man have fun go out

enjoy yourself in your 20s however

here's a couple of of lessons Financial

lessons I wishing you my 20s this last

one would be spending and not

[Music]

saving we get sold this dream this idea

I think that that you know you make

money save save save save save save save

when you look at the reality

mathematically on saving money in a bank

account and how much money that that

those companies that you give that money

to make which some of the most

profitable in the world and then what

you could do with that money wow it was

a GameChanger for me when I worked that

out um I I am a big believer in in in

investing money into things that are

going to make me money um and for me I

focus on investing into me and investing

into businesses cuz that giv my greatest

Roi I've been you know very fortunate

enough to be ble to start build grow and

scale some some pretty successful

companies some six figure businesses

some seven figure businesses some eight

figure businesses uh and even nine

figure businesses uh and then also

that's myself and then invest into other

businesses that have done really well

and learn even you know businesses that

that are worth almost to you know almost

what what SpaceX I'm invested in that

that's probably worth about 400 billion

at the moment and it'll become a

trillion dollar company soon so I've

seen a lot and I've learned a lot around

money so I think for me the idea of

investing money and spending money

versus scrolling it away to a bank

account and I worked out that that that

was something I had to really um work on

Within Me is being okay to not I don't

so a lot of people I find have to have

this kind of comfort level like oh I'm

com as long as I've got five grand in my

bank account or two grand or 10,000 or

100 you know the wealthier you are the

bigger that barometer gets and I worked

out that you know why don't why do I

need to have that I'm not saying don't

have money for food and look after your

family yourself but is it is it really

really critical that you save every

dollar or is it more critical that you

put that money to work that's what I I I

I um didn't know so I would focus on

spending rather than saving and I and I

worked out a long time ago that scared

money doesn't make money you want to

make money you can't be afraid of money

you can't be afraid of making it you

can't be afraid of spending it so that

was my journey so there's seven there's

seven I if if any of these help you if

one of them help you let me know which

one you loved I don't know other the

comments but there's seven things that I

wish that I could go back and I could

insert those financial lessons into

Aaron when he was 20 when he was

backpacking around uh Europe I wish I

could tell him those financial lessons

as well so I hope you loved it I hope

you learned from it if it helps let me

know in the comments if you want more of

this stuff I'll do more of this stuff

there you have it my seven lessons that

I wish I learned in my 20s that would

have got me further faster and maybe it

would have taken me two decades to be

able to do it not that I didn't have fun

and enjoy my hostel time

uh but uh to be here in one of the best

hotels in the world uh in one of the

best cities in the world uh and and be

able to sit here in this amazing suite

and making this video for you it really

makes me think back to the lessons that

got me here and what I wish I learned

earlier on the Abit my seven lessons my

seven lessons I was shown you in my 20s

my seven Financial lessons that I was

shown you in my 20s that would have made

me um achieve some goals even faster in

life and I really hope they're going to

help you