Why EVERYTHING Changes After $10K!

Summary

This video highlights the importance of saving your first $10,000 as a critical milestone in wealth-building. It explains how breaking this mental barrier boosts self-efficacy and accelerates future financial goals. The video covers momentum in savings, how small goals lead to larger achievements, and how investing more yields higher returns while keeping the same risk. Additionally, it emphasizes the importance of paying off high-interest credit card debt before investing, building financial discipline, and practicing delayed gratification to achieve long-term financial success.

Takeaways

• 💡 Focusing on saving your first $10,000 is more achievable and impactful than aiming for $1 million right away.
• 🧠 Reaching $10,000 helps break the mental barrier in wealth-building, making higher financial goals more approachable.
• 📊 A 1997 study by Bandura showed that breaking goals into smaller, specific steps improves success and self-efficacy.
• 🔢 Round numbers, like $10,000, are psychologically more motivating than numbers just below the target, even if the difference is small.
• ❄️ Saving the first $10,000 builds momentum, similar to a snowball effect, where accumulating wealth becomes easier as you progress.
• 🚨 Having $10,000 in savings provides a financial buffer for emergencies, which can reduce stress and improve mental well-being.
• 💸 Larger investments yield more significant returns with the same risk, making the risk-reward ratio more favorable as your wealth grows.
• 💳 It's critical to prioritize paying off high-interest debt, like credit card debt, before focusing on investing.
• 💪 Reaching $10,000 signifies financial discipline and the development of good money habits that can be strengthened over time.
• 🎯 The key to building long-term wealth is to reinforce habits by focusing on delayed gratification and long-term rewards instead of short-term purchases.

Q & A

What is the significance of saving the first $10,000 according to the video?

Saving the first $10,000 is significant because it breaks the mental barrier of wealth-building, making larger financial goals seem more achievable. It serves as a psychological milestone that transforms how one perceives money.

How does reaching $10,000 affect your self-efficacy in personal finance?

Reaching $10,000 improves self-efficacy, which is the belief in your ability to accomplish financial goals. This builds confidence and motivates individuals to pursue larger goals, as the initial success reinforces the idea that they can continue to build wealth.

What is the 'snowball effect' mentioned in the video, and how does it relate to saving money?

The snowball effect refers to how financial momentum builds after reaching $10,000. As you continue to save and invest, your wealth grows faster due to compounding returns and the initial capital generating additional income.

How long does it take to save the first $10,000 compared to the next $10,000, and why?

In the example given, it takes 8 years to save the first $10,000 by saving $1,000 per year with a 10% return. However, saving the next $10,000 only takes 4.7 years due to compounding interest and momentum, making each subsequent goal easier to achieve.

Why is having $10,000 important for dealing with emergencies?

Having $10,000 acts as a financial buffer for most common emergencies, such as car repairs or medical bills. It provides peace of mind and allows individuals to focus on other priorities without the stress of unexpected financial burdens.

What is the 'unfair risk-reward ratio' mentioned in the video?

The unfair risk-reward ratio refers to how the returns on larger investments are significantly greater while the risk remains the same. For example, investing $10,000 at a 10% return yields $1,000, while investing $10 yields just $1, even though both carry the same risk.

Why is it important to pay off credit card debt before investing?

It's important to pay off credit card debt before investing because credit card interest rates (often over 20%) are much higher than the average stock market return. Failing to pay off high-interest debt results in a financial loss, even if your investments grow.

How does saving $10,000 help establish good financial habits?

Saving $10,000 helps build financial discipline and establishes habits such as budgeting and saving consistently. These habits are essential for long-term wealth accumulation, as they form the foundation for reaching larger financial milestones.

What is the concept of 'delayed gratification' and how does it relate to wealth-building?

Delayed gratification refers to the ability to resist immediate rewards in favor of larger, long-term gains. In the context of wealth-building, it means sacrificing short-term desires, like luxury purchases, in order to invest and achieve long-term financial security.

Why is it psychologically important to reach round numbers like $10,000 in savings?

Psychologically, round numbers like $10,000 are more satisfying and motivating than similar but non-round amounts like $9,999. Reaching a round number provides a sense of accomplishment, which encourages individuals to keep working toward their next financial goal.

Outlines

00:00

💡 Focus on Small Financial Goals to Build Wealth

The author shares valuable advice from a millionaire: instead of aiming for a million dollars right away, focus on achieving your first $10,000. This advice highlights the importance of setting smaller, manageable financial goals. Reaching the first $10,000 helps overcome the mental barriers of wealth-building and builds confidence. Research by Bandura supports the idea that breaking down goals into smaller, achievable steps leads to greater success. The author recounts personal experiences, explaining how hitting that first milestone completely changed their perception of money, transforming what seemed unattainable into something possible.

05:02

🎯 The Momentum of Achieving $10,000

Reaching the first $10,000 sets the stage for financial momentum, much like a snowball rolling down a hill. Initially, saving this amount may take years, but subsequent financial goals become easier and faster to achieve as interest and investments accumulate. The example provided shows how saving $1,000 per year with a 10% investment return reduces the time it takes to reach each successive $10,000 goal. The key takeaway is that the momentum generated from the first $10,000 accelerates further wealth accumulation, making it easier to reach higher financial milestones.

10:02

🛡️ $10,000 as an Emergency Buffer

Having $10,000 saved acts as a financial buffer for life's unexpected emergencies, such as medical bills, car breakdowns, or job loss. This peace of mind allows individuals to focus on more important areas like health, knowing they have a safety net. The author emphasizes that saving $10,000 not only provides financial security but also helps free up mental energy, which can be redirected toward maintaining physical health and well-being.

💪 Train Well: Building Financial and Physical Strength

The author introduces Train Well, a platform that helps individuals stay consistent with their fitness goals by offering customized workout programs tailored to personal goals and schedules. The author shares their experience of working with a personal trainer through the app, noting how it helped maintain accountability and discipline. Just like with finances, having a structured plan and someone to hold you accountable is crucial for building both wealth and physical strength.

📈 The Unfair Risk-Reward Ratio of Investing

The author explains the concept of the 'unfair risk-reward ratio' in investing. They compare two scenarios: investing $10 and $10,000 in the stock market with the same risk and a 10% return. While both investments carry the same risk, the larger sum generates significantly higher returns. This demonstrates that the more money you invest, the greater your financial rewards, without increasing your risk level. The message emphasizes the power of compounding and the importance of building up a significant initial investment.

⚠️ Prioritize Paying Off Credit Card Debt

Credit card debt, with its high-interest rates, is a major obstacle to wealth-building. The author shares a cautionary tale of a friend who racked up credit card debt during a trip, highlighting how easily high-interest debt can spiral out of control. They urge readers to prioritize paying off credit card debt over investing, as the interest on debt often exceeds potential investment returns. Paying off debt first is crucial to avoid losing more money than you gain from investing.

🏆 Building Financial Discipline and Good Habits

Saving $10,000 not only marks a financial milestone but also shows the development of financial discipline and good habits. However, the author warns that at this stage, these habits are still fragile and need to be reinforced. They reference the book 'The Power of Habit' and describe the habit formation cycle: cue, routine, and reward. The real reward for financial discipline is long-term comfort and security, and the author encourages readers to focus on refining their habits for continued success in their wealth-building journey.

Keywords

💡Mental Barrier

A mental barrier refers to psychological limitations that prevent individuals from achieving certain financial goals. In the video, reaching the first $10,000 in savings is highlighted as a significant mental barrier for wealth-building. Breaking this barrier helps individuals realize that larger sums, like $20,000 or $100,000, are attainable.

💡Self-efficacy

Self-efficacy is the belief in one's ability to accomplish specific tasks or goals. In the video, it is mentioned in the context of personal finance, where people with higher self-efficacy are more likely to succeed in achieving smaller, incremental financial goals. This builds confidence toward larger goals, as demonstrated through the journey of saving $10,000.

💡Snowball Effect

The snowball effect refers to the momentum that builds as small successes compound into larger ones. In the context of the video, saving the first $10,000 is compared to rolling a snowball down a hill, where the savings grow faster after the initial momentum is gained. As wealth increases, it becomes easier to accumulate more due to interest and investment returns.

💡Murphy's Law

Murphy's Law states that anything that can go wrong, will go wrong. The video mentions this concept to highlight the importance of having financial reserves, such as $10,000, to cover unexpected emergencies like medical bills or car repairs, thereby creating a buffer for unforeseen expenses.

💡Risk-Reward Ratio

The risk-reward ratio describes the relationship between the potential return of an investment and the risk involved. In the video, it's explained that investing $10,000 in the stock market yields significantly higher returns (e.g., $1,000) compared to investing a smaller amount like $10, even though the risk is the same in both cases.

💡Credit Card Debt

Credit card debt is the amount owed on purchases made with credit cards, often accruing high interest rates. In the video, it is emphasized that paying off credit card debt should be a priority before investing, as the interest rates (typically around 20%) can quickly erode any financial gains from investments.

💡Delayed Gratification

Delayed gratification is the ability to resist the temptation for an immediate reward in favor of a larger, long-term benefit. The video compares individuals who make short-term purchases (e.g., a massage chair) with those who invest their money for future comfort and wealth-building, emphasizing the importance of long-term thinking in personal finance.

💡Financial Discipline

Financial discipline refers to the practice of consistently managing money responsibly, including saving and avoiding unnecessary expenditures. The video underscores that accumulating the first $10,000 requires developing good money habits, which become foundational for future wealth-building.

💡Emergency Fund

An emergency fund is a reserve of money set aside to cover unexpected expenses, such as medical bills or car repairs. In the video, saving $10,000 is portrayed as a critical step in creating a buffer against financial emergencies, providing peace of mind and reducing stress.

💡Compounding

Compounding refers to the process by which the value of an investment grows exponentially over time as returns are reinvested. In the video, this concept is illustrated by the snowball effect of saving and investing, where the initial $10,000 generates interest, speeding up the accumulation of wealth in the future.

Highlights

Stop focusing on making a million dollars; instead, focus on your first $10,000.

Reaching $10,000 shatters the first mental barrier of wealth building, making larger goals seem more achievable.

1997 study by Bandura highlights that breaking mental barriers is key to personal finance improvement.

People are more successful with smaller, specific goals than larger, vague ones.

Seeing $10,000 in a bank account can be transformative for people who grew up without much money.

Round numbers like $10,000 have a psychological impact that smaller, similar amounts don’t provide.

Reaching $10,000 creates momentum for bigger financial goals, like the start of a snowball rolling downhill.

Momentum accelerates wealth growth; the time to reach the next $10K shortens significantly after hitting $10,000.

$10,000 can provide a financial buffer for emergencies and give peace of mind.

Having a financial buffer helps you focus on important areas like health, freeing up mental energy.

As your investment grows, the risk stays the same, but the returns increase significantly, demonstrating an unfair risk-reward ratio.

Credit card debt, with an average interest rate of 20%, is a major obstacle to building wealth.

Paying off credit card debt should take priority over investing because of the high interest rates.

Saving your first $10,000 builds financial discipline and strong money habits, a key step many fail to achieve.

Delayed gratification, focusing on long-term gains rather than immediate wants, is crucial to building lasting wealth.

Transcripts

so the best advice I've ever received

from a millionaire was this stop

focusing on making a million dollar

instead focus on your first 10,000 and

at the time I didn't fully understand

what that meant but I'm really glad I

listened in this video I'm sharing six

reasons why everything changes after

saving your first

$10,000 first reaching $10,000 shatters

the first mental barrier of wealth

building like all of a sudden the

thought of saving $155,000 or even

$20,000 doesn't seem so crazy anymore a

1997 study by Bendera found that

breaking mental barriers is something

that many people Overlook but it is by

far the most important aspect of

personal finance because you need

self-efficacy to improve and it's been

years since you've taken the SAT

self-efficacy is basically when you

believe in your own capabilities to

accomplish something like if you start

playing a brand new video game and

you're a level one Warrior there is

literally no way in heck that you think

you can beat a level 99 Mage it's

literally impossible Bandera found that

people who were given specific smaller

goals were way more successful than

those who were given larger vague goals

and this is something that I've

experienced firsthand like I didn't grow

out of money so when I first took my

personal finances seriously I could even

wrap my head around like a five fig

number like even when I was doing side

hustles like reselling candy at school

or designing clothes and selling them I

was still only thinking in hundreds

maybe a thousands but tens of thousands

never crossed my mind but when I first

saw my bank balance go to 10,000 it

completely transformed how I perceived

money and I know I know it's just

numbers on the screen but for someone

who didn't really grow up with much just

seeing that for the first time it just

makes everything feel possible you know

and for some reason $10,000 is always

the first mental barrier for many people

well a 2010 study found that people

respond much more to goals or objectives

framed in round numbers like if you Sav

$9,999 it's essentially the same as

$10,000

but for some reason it just doesn't hit

the same as when we see those nines turn

into zeros and we literally see five

figures in the bank account or if your

Apple watch tells you that you've walked

9,892 steps a day there's a good chance

that you would go out of your way to

walk another 108 steps to round it all

out next your first $10,000 is only the

beginning because $10,000 builds a nice

momentum for your next financial goal

your first 10K is like the first

snowball that you roll down a hill as a

snowball rolls along it's going to start

picking up Snow and it gets larger and

larger and the momentum carries it down

the hill at first it's not going to seem

like much right it's just snow going

downhill but eventually over time the

momentum will keep on piling on and it's

going to become overwhelming let's say

you start at $0 and you save and invest

$1,000 a year with an average 10% return

on your investment in the stock market

getting to your first $10,000 in this

scenario would take you about 8 years

but a mistake that most people make now

is that they think think it'll take them

8 years time 10 or 80 years in total to

get to

$100,000 but that's wrong thanks to the

momentum we just talked about it'll take

significantly less time for you to get

to 100K like after you have your first

10K getting your next 10K to $20,000

would only take you 4.7 years because

your initial 10,000 is generating you

interest and you're still keeping at it

with the $1,000 contributions every year

now 20K to 30k is going to take about .5

years 30k to 40K is going to take about

3.3 years and then from 40K to 50K it's

going to be about 2.2 years it's

fascinating to see that once you reach

$10,000 you can reach each additional

$110,000 faster than the previous one

and remember this is assuming that you

don't get any raises and you're only

able to save $1,000 a year if you can

increase your income over time and you

can save 2,000 or 3,000 a year just

imagine how much faster it would be to

reach 100 ,000 next if you ever planned

anything big like a surprise birthday

party a trip event or a vacation then

you've experienced Murphy's Law which

states that anything that can go wrong

will go wrong because suddenly your car

is going to break down you're going to

lose your job or you're going to break

your foot and now you owe a ton of money

in medical bills the good news is

there's a really solid chance that

$10,000 is going to dig you out of most

common emergency expenses essentially

having $10,000 puts a sizable buffer

between you and your financial

emergencies and this is really important

because it's going to give you peace of

mind just by having this buffer kept to

one side and available for you to tap

into whenever you need it it's going to

help you free up your mental energy to

focus on more important things like your

health and I don't think this is said

enough but it's great to build your

wealth but it's equally if not more

important to invest in your body like I

struggled with going to the gym for a

long time because I always had an excuse

when life got busy but what I think is

helpful is just having someone there to

to hold you accountable to make sure you

prioritize your health and body that's

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next and this one's a doozy there's the

unfair money risk reward ratio

specifically the Returns on your

investment is going to increase

significantly as the amount of money you

invest grows larger while the risk

itself stays the same and I know that's

a mouthful but just bear with me let's

say you invest $10 in the stock market

naturally that investment in the stock

market is going to come with some risk

and by the end of the year let's just

say you make a 10% return meaning that

you made an extra $1 or you have a total

of $1 at the end of the year now I'm not

trying to be mean but $1 is a pretty

small insignificant amount of money and

I bet if you look on the sidewalk hard

enough you'd probably scrap together

enough coins to add up to $1 so in this

example you risk $10 for a measly extra

$1 at the end of the year but and this

is where the risk reward ratio comes in

if you actually had $10,000 to invest in

the stock market and you have the same

10% return You' actually have $1,000 at

the end of the year which is I don't

know about you but significantly more

money and what many people don't realize

is that in both these scenarios you took

on the same amount of risk in the stock

market you waited the same amount of

time but because you started with more

money you took a advantage of the unfair

risk reward ratio now I think it's fair

to say that credit card debt is a big

problem in 2024 the average credit card

interest rate is over 20% Which squashes

any chance you have at Building Wealth

like I had a friend in college who made

some pretty questionable choices in his

senior year he saved up $3,000 for a

Europe trip to treat himself for

graduating college and it was all going

fine he was having a great time he was

staying in hosts until he decided to

later stay in an additional 4 weeks he

was just swiping his credit card for

everything and he didn't realize that he

massively overspent his initial $3,000

budget until he got home then he tried

to pay off his credit card debt with his

savings but obviously he eventually ran

out of money and what's worse is that he

was planning to look for a job when he

returned from his trip so he was missing

all his credit card payments and his

debt was just getting huge thanks to the

high interest but on the bright side

sort of the average credit card debt a

person in the US has is around

$636 meaning $110,000 is more than

enough to wipe out your credit card debt

and you still have cash left over for a

celebratory pineapple pizza I very

rarely say this but taking care of your

credit card debt is one of the few

things you should always do before you

start investing and here's why let's say

you rubbed Mr magic lamp and he gave you

$10,000 and now you want to use it your

First Financial responsible Instinct

might be to invest that money into the

stock market because everyone says

that's how you build wealth if you do

that and assume a 7% annual average

return you're going to have about

$10,700 by the end of the year but if

you also have a credit card debt worth

$10,000 and it has an average annual

interest rate of 20% Then by the end of

the year your credit card debt will be

$112,000 since you didn't pay it off the

problem is by choosing the investment op

option you're effectively earning $700

from the stock market but you're losing

$2,000 to credit card interest which

puts you about $1,300 behind for most

people credit card interest rates

strangle your chance of becoming wealthy

so you want to make sure that you clear

up your credit card debt first next and

something that's not acknowledged enough

is saving your first $10,000 means you

built some sort of financial discipline

and good money habits because people

don't just randomly stumble into this

kind of money 44% of Americans say they

can't afford a $11,000 emergency expense

so you've already done a great thing by

having $10,000 while $10,000 isn't

nothing it's also not that much money in

the grand scheme of things at this

amount the money habits that you

established are still pretty weak right

they're being propped up by little

sticks right now and you need to

reinforce those six so you can go up

from 10,000 to 100,000 according to the

book The Power of of habit you can

strengthen Habits by following this

process Q routine and reward basically a

q prompts a certain Behavior a routine

are the actions themselves and rewards

reinforce those behaviors which

ultimately form automatic repeatable

habits for instance the real reward for

most of us is a comfortable life and I

know that sounds kind of vague but just

hear me out the guy who spends $5,000 on

a reclining massage chair and the guy

investing $5,000 in the stock market are

in it for the same reward a comfortable

life and they both have the same queue

it's when they receive their paycheck

but the difference is their routine for

the massage share guy his routine is to

make a short-term purchase for the

immediate Comfort now but with the

stocks guy his routine is to make a

long-term investment so he can have a

more sustained comfortable life over the

long term dare I say 25 massage chairs

in Psychology this is called delayed

gratification once you sacrifice many of

your immediate ones so you can build

towards a bigger prize sometime in the

future it actually feels more rewarding

it's like saying no to the small cupcake

now because you know you're going to get

a chocolate three- layered ganache cake

later on if you have $10,000 you've

already accomplished the hardest part of

the wealth Journey which is starting

your financial habits now just focus on

refining your routine and focus on the

long term and that's going to get you to

$100,000 and eventually 1 million and

remember the first 100 people to sign up

with my link gets 14 days free and $25

off their first month which leads me to

something that you've got to start

accepting and it's that even if you're

trying your hardest to be better with

money sometimes you might still feel

like you're not doing it enough and that

might be because you don't know why

looking poor is so important click here

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