How to Properly Manage Your Money Like the Rich | Tom Ferry

Summary

In this insightful seminar, the speaker delves into the psychology of money, contrasting the financial mindsets of his parents to illustrate how money can be a tool for success or failure. He emphasizes the importance of incorporating your business to reduce taxes, managing funds through multiple accounts for tax, business, and personal expenses, and investing smartly for future growth. By examining the behaviors of the 5%, 15%, and 80% in society, he provides actionable steps to move toward financial independence and avoid common pitfalls, urging attendees to take control of their money and invest for long-term wealth.

Takeaways

• 😀 Money is a tool, nothing more, nothing less. It amplifies the character of the person who uses it.
• 😀 Growing up with different mindsets about money can shape your financial psychology, leading to either an abundance or scarcity mindset.
• 😀 5% of people achieve generational wealth, 15% are middle class, and 80% may rely on work or family for support in their later years.
• 😀 Generational wealth starts at $5 million and above, and it involves building assets and passing them on.
• 😀 The 15% group is financially comfortable, with a paid-off home, savings, and a stable lifestyle, but not extremely wealthy.
• 😀 Many people end up in the 80% group due to poor money psychology, but with proper guidance, they can avoid it.
• 😀 The best financial strategy is incorporating your business and separating personal and business finances for tax advantages.
• 😀 A sound financial structure involves having multiple accounts: business, tax, and personal, with automatic transfers to each.
• 😀 Taxes must be prioritized by setting aside a portion of income right away, ensuring timely and efficient payments.
• 😀 Managing expenses and saving for investments like real estate or retirement accounts are crucial steps for wealth building.
• 😀 Wealthy individuals diversify their income into different accounts for investment, savings, and even fun, creating financial stability and growth.

Q & A

What was the key lesson the speaker learned about money in their mid-20s?

The speaker learned that money is just a tool and not an end in itself. It’s neither inherently good nor bad; how you use it depends on your mindset.

What is the difference between the mindsets of the speaker's parents regarding money?

The speaker’s father believed in spending money to motivate success, like buying luxury items, while the mother was frugal, believing every dollar mattered because of her upbringing in a large family.

What did the speaker's father’s mentor advise him about making money?

The mentor advised the speaker’s father to buy a Rolls-Royce, a fancy watch, and an expensive house to motivate himself to be successful and make a lot of money.

What are the three categories of people the speaker mentions in terms of wealth?

The three categories are: 5% who have generational wealth, 15% who are comfortable and middle class, and 80% who may either need to keep working or depend on others or the government in their old age.

What does the speaker suggest as the first rule to handle money effectively?

The first rule is to incorporate your business and not receive checks personally. This helps you manage your finances more efficiently and benefit from tax advantages.

How does the 15% group handle money differently than the 80%?

The 15% group ensures their checks go into a business account, from which they pay taxes, business expenses, and personal expenses. They treat money more systematically and use it for long-term growth.

What mistake does the speaker highlight that the 80% make when handling money?

The 80% often receive a check and start spending it immediately without planning for taxes or savings, leading to financial instability.

What percentage of a check does the speaker recommend setting aside for taxes?

The speaker recommends setting aside 33% of a check for taxes to ensure there are no surprises when tax time comes.

What is the 'fun account' mentioned by the speaker?

The 'fun account' is an account where you set aside money for discretionary spending, such as vacations or other non-essential expenses.

What long-term financial strategy does the speaker suggest using a 'cash for real estate' account?

The speaker suggests setting aside 5% of every check into a 'cash for real estate' account, which can accumulate over time and be used to invest in real estate, providing a potential source of passive income.