9 Money Rules of the Top 1%

Speaker 1 I'm going to share with you the rules of money that made me so rich that I questioned the meaning of making money.

Speaker 1 These controversial rules are what allowed me to go from broke 22-year-old to a multi-millionaire today.

Speaker 1 Some of these rules I picked up on my own during my 27-year career as an entrepreneur, and others I learned from some of the highest net worth individuals you probably know.

Speaker 1 So these are the nine money rules of the top 1%.

Speaker 1 Welcome to the Martel Method. I went from rehab at 17 to building a $100 million empire and being a Wall Street Journal best-selling author.

Speaker 1 In this podcast, I'll show you you exactly how to build a life and business you don't grow to hate. My best-selling book, Buy Back Your Time, is out now.

Speaker 1 Grab a copy at buybackyourtime.com or at any of your preferred online retailers. The first rule is to act your wage.
It's not your salary that makes you rich, it's your spending habits.

Speaker 1 A long time ago, my dad said this. It's not how much money you make, it's what you keep.
33% of millionaires never earned more than $100,000 a year. It meant they knew how to invest their money.

Speaker 1 When I was 21, I made one of the biggest financial mistakes up to that point in my life.

Speaker 1 I had just finished doing a bunch of consulting, got paid a big check, decided to call my little brother Mo and say, hey, come ski on the West Coast. I'll cover everything.

Speaker 1 And for about a 10-day period, we lived a lavish lifestyle. We stayed at the nicest hotels.
We paid for everybody's drinks. We ate at the finest restaurants.
I bought him new gear.

Speaker 1 And at the end of it, he went back home and talked to my dad. And my dad calls me up and he goes, Dan, I heard about your trip.
Did you put any money aside for taxes?

Speaker 1 No, I thought that was my money. No, Dan, you got paid that gross.
You need to pay taxes. Essentially, half of that money wasn't even mine.
And that's the moment I realized I needed some help.

Speaker 1 So I ended up hiring an accountant and he put me on payroll. And then that way, I lived off of what he gave me.
The rest of it was being saved in my business account and I didn't get the two confused.

Speaker 1 Here's what I learned from that experience and how I've brought that into my life. The first one is you have to automate your financials.

Speaker 1 My philosophy is that when the money comes in, I want it it to go out into the different buckets it needs to go to without me ever seeing it. It doesn't matter.
I set it and I forget it.

Speaker 1 Two, I pay myself as little as possible and I live on very little from a consumption point of view. Now, I know you might see me on my private jet or my supercar collection or my real estate.

Speaker 1 I get that. But what you don't understand is I live on a very small percentage of my income and I always have.
Even when I was making millions of dollars a year, I was driving a 12-year-old car.

Speaker 1 I never lived above my means because I realized that if I wanted the capital to be able to invest in opportunities, invest in myself, it needed to be available.

Speaker 1 The third strategy is you can't save yourself to wealth, but you can't spend yourself there either.

Speaker 1 You need to live off of less than you make, automate the process, and make sure you focus on investing in yourself. Which brings us to number two, which is the 10% rule.

Speaker 1 I live on 10% or less of my income today. I know this sounds crazy for a lot of you, and it might not be possible on a lower salary, but this is the goal, not the standard.

Speaker 1 So you might start with 40%, 60%, maybe 80% of what you make, but you can work towards that goal.

Speaker 1 Save 90% and reinvest it in income generating asset, you being the primary asset, and two, things that produce capital.

Speaker 1 And this one's kind of crazy, but I believe one of the best assets to own is a life you're proud of.

Speaker 1 Most people have a scarcity mindset, so they try to live on as little as possible, but then the surplus, they don't do anything with it.

Speaker 1 So what you want to do instead is learn to live off very little, start accumulating, and then decide at what level you're going to start investing in other things, which is what we're going to talk about next.

Speaker 1 Which brings us to number three, which is to prioritize investments. Here's a controversial belief.
Broke people make money to buy things. Middle class people make money to get loans to buy things.

Speaker 1 And wealthy people invest in income generating assets.

Speaker 1 See, some of you guys are like one inch away from opportunities that could actually make you money to cover the payment on something, but instead you take that money and you put it into a depreciating asset.

Speaker 1 And then you got to to keep working and working and working to try to keep up your lifestyle what they should do is say what is the skill that if i invest in to get better at it would have an immediate impact to my income generating abilities like a promotion and my job or can i go learn a different skill that can get me a better job that could make me more money or could i start a side hustle with a new skill that's going to make me just as much money as my current job and is there a way for me to invest to cover the increase in lifestyle you might want which brings us to number four which which is to have a nest egg.

Speaker 1 Here's where most people mess things up. When things happen and they will, like the 2020 global event, it's gonna demand of you resources.

Speaker 1 I had a friend who had a business and because it was shut down the whole time, he hadn't saved up any money whatsoever to cover any of his costs.

Speaker 1 All he needed was about three months of operating costs to weather the storm. And instead, he had to shut down his business.
And this is true for most people in life.

Speaker 1 Most people get into a spot where they can't afford the bad thing that happened to them.

Speaker 1 and then they end up having to make concessions and sell things on the cheap that causes the whole thing to just cause a negative downward spiral.

Speaker 1 You always want to have a nest egg ready to go in case there's an emergency that needs to get funded.

Speaker 1 So my rule is that in my personal life, I want at least six months of expenses in some kind of saving account. This is liquid, not tied up in stocks where I'm going to pay taxes if I sell it.

Speaker 1 Now, some of you guys may think like six months, that's a lot of money. Think about it this way.

Speaker 1 I've never seen a situation where somebody loses their job, goes to zero, and within a six month period, can't find an opportunity to bring it back.

Speaker 1 If you have six months and something bad happens, you have to reset and that gives you time to not make any massive financial decisions, but just to get back on pace so that you can get in the green again.

Speaker 1 That to me is a competitive advantage. It's going to allow you to sleep better at night.

Speaker 1 And while everybody else is freaking out, you're able to stay calm and make good decisions without being emotional. It allows you to operate from a place of abundance, not fear.

Speaker 1 Before we get back to the episode, if you want to jumpstart your week with my top stories and tactics, be sure to subscribe to the Martel Method newsletter.

Speaker 1 It's where you'll elevate your mindset, fitness, and business in less than five minutes a week. Find it at martelmethod.com.
Which brings us to number five, which is don't be over-leveraged.

Speaker 1 Now, I learned this lesson the hard way when I was in my early 20s. I wanted to buy some new furniture for my place.
So I go to the furniture store, find some incredible stuff.

Speaker 1 I like a deep seated couch because I'm a big guy. I was like, how much is is it? He goes, well, the truth is if you want, you can just finance it, no interest whatsoever for the first two years.

Speaker 1 And at the end of it, if you want to pay it off then, you can pay it off then. So you get essentially free money.
And I was like, I like free money. So I fill out all the paperwork.

Speaker 1 Poof, I get approved. Now, there was a bunch of small details that I didn't understand.
And at the end of it, I ended up paying a lot more for this furniture, financing it than I expected.

Speaker 1 It actually took me another four years to pay off.

Speaker 1 I share that because it's a simple example to understand that sometimes with consumer debt or our home or other types of loans that we just magically get accepted for, we just take all this on and it creates this hole of financial challenges that makes it really hard to climb out of.

Speaker 1 So you need to understand a few things about how the money world works. The bank makes most of their money on collecting debt, especially if you end up converting into a high interest rate scenario.

Speaker 1 Here's what's crazy. 47% of people hold credit card debt month to month.
It just rolls over. And the interest rate they're paying on average is 22%.

Speaker 1 If you're borrowing for a lifestyle that you can't afford, then you're just delaying the ability to create real wealth. If you can't afford it, go make more money to get it.

Speaker 1 Which brings us to number six, which is invest in your skill set. When I was in my early 20s, out of desperation, I read a book and I decided to hire a business coach.
His name was Bob.

Speaker 1 And I barely had any money to pay him. I had two months, but it was an annual commitment.

Speaker 1 And I figured, well, if Bob's good enough, he'll teach me some stuff to be able to pay him month three, four, and onward.

Speaker 1 And in that first year, working with Bob, I did almost a million dollars in income in that business. And I share that because prior to that, spending any money on me wasn't even a consideration.

Speaker 1 I barely was willing to buy books. I didn't feel like I deserved it.
I didn't feel like I was worthy. I was worried that I wouldn't learn.
I would be worried that I would waste my money.

Speaker 1 And what I've learned over the years, if I take all the money I've invested in coaches, seminars, et cetera, it's about $1.7 million.

Speaker 1 If I would have took that money and invested into the S ⁇ P 500, it would have made me some money. But when I look at the income that that knowledge produce in my life, it's like a thousand X return.

Speaker 1 And that's what people don't get.

Speaker 1 If you're not investing in your skills to become more valuable to the market, then you're always going to be at the mercy of other people's decision on how much of a raise you're going to get.

Speaker 1 The 3% to 5% a year. That's not going to work.

Speaker 1 When you're trying to keep up to the Joneses and you're living in new neighborhoods and you see people driving the new BMWs and having these extravagant birthday parties for their kids, and you just feel like you got to go on these vacations to Italy, it just makes it really tough because then you don't have anything left over to invest in your earning potential.

Speaker 1 So, my whole philosophy early, and I got lucky, but I'm going to tell you, is delay the lifestyle expenses as much as possible. Take that money, invest in you to be able to build a surplus.

Speaker 1 Get to a point where your income is more than you're spending and save it. And with that, you'll create real wealth.
Which brings us to number seven, which is know your risk return.

Speaker 1 There's this fun quote that says, when somebody with money meets somebody with experience, the person with experience ends up with the money and the person with the money ends up with the experience.

Speaker 1 That's been my reality. What I've seen is most people get persuaded by people they love getting excited about an opportunity.
They don't have anything better going on in their life.

Speaker 1 So they're like, oh, I don't want to miss this opportunity. So I'll invest.

Speaker 1 See, when you invest or do things things outside of your area of competency you're putting the whole thing at risk for you to understand risk and investment i want to show you the risk investment quadrant so you have risk on the side and return potential on the bottom then i want you to place all your opportunities in one of the four boxes bitcoin would probably be in the high risk high return then you got index funds low risk low return then you've got low returns high risk now that's a trick question because you shouldn't have anything in that box and then buying a business or real estate with value add that's low risk high return.

Speaker 1 What you want to do is maximize your investment in the bottom right box. The best business to be in is the business you know.
So if you're a real estate agent, stay in real estate.

Speaker 1 If you're a designer, stay in design projects. If you're an editor, stay in media projects.
But the business you know is where you want to be investing in your skills or in opportunities.

Speaker 1 What I do now is I get situations where there's asymmetrical reward, meaning that I can invest or buy a business with some level of upside that's guaranteed because I know what I'm doing and the fixed downside because it's an industry that I know better than most.

Speaker 1 I don't personally guarantee it. So I'm not putting my whole personal net worth at risk.
And then I take that thing and I can add value to make it bigger. That's win-win.

Speaker 1 Before we get back to this episode, if you prefer to watch your content, then go find me on YouTube. I have this episode on YouTube.
I'm Dan Martell on YouTube.

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Speaker 1 Now let's get back to the episode. Which brings us to number eight, which is to build a personal P ⁇ L.
Here's a crazy idea. I think every household should treat their house like a business.

Speaker 1 You have profit and loss. You have your salaries you take in, you have expenses, and you either have money saved over at the end of the month or you have a loss.

Speaker 1 And it's not a good business to be in if you're not making money. So if you don't know how to save, fix it.

Speaker 1 A lot of people don't want to manage their money because they're worried to find out what the numbers actually say. And the truth is that if you put your head in the sand, it doesn't make it better.

Speaker 1 Not being good with numbers is not a reason not to know where you're at. What's crazy is that this concept also applies to really wealthy people.
I had a friend, Manny, he had a very big business.

Speaker 1 He was making tens of million a year. And he used to tell me, I just want a simple life.
And I go, why is that? He goes, I just don't want too many things to manage. Okay.

Speaker 1 Well, can I offer you some suggestions? Yeah, what's that?

Speaker 1 Well, if you want all this other stuff, multiple homes and vehicles and boats and all that, why don't you just hire somebody to manage it all? Like, why are you managing it yourself?

Speaker 1 And he's like, well, I don't know. I should have somebody manage it.
Do you have somebody manage your stuff at work? Yes. Perfect.
You bring it to your home. That's what I do.
I have a house manager.

Speaker 1 She's responsible for all the things that are my responsibility or my wife's. And because of that, there's no stress.

Speaker 1 You can hire somebody to own and manage your stuff so that you don't have to be a burden of it.

Speaker 1 I think if you have possessions and you're a prisoner of those possessions, it doesn't matter if you have a little bit of money or a lot of money.

Speaker 1 If having nice things stress you out, you are a prisoner to those nice things. You are a prisoner to your possessions.

Speaker 1 But what I discovered talking to my wealthy friends, and this is a big secret, is the wealthiest people aren't managing their own estates. They have estate managers.

Speaker 1 They have people that run their personal life just like a business. How do you do that? You have a P ⁇ L.
You have your income. You have your expenses.
You create budgets.

Speaker 1 You do the same thing you would in a business. You just do it with your personal stuff.

Speaker 1 Some people call it a family office right where you have a team of folks maybe your wealth managers your accountants your legal team and they sit down and they review your investments your decisions and make sure that everything is working as best it can to avoid the amount of taxes you're paying to make sure you have the right insurance covers to make sure your portfolio is well balanced which brings us to number nine which is money is a tool not the goal the goal of life is not to just have a lot of money It's to use that as a resource to create, to expand, to serve other people.

Speaker 1 I know some people that are so poor, all they have is money. They don't have relationships.
They don't have opportunities. They haven't grown.
That's why I drifted for two years. I didn't expand.

Speaker 1 I wasn't learning things. I wasn't trying to create in this world.
It doesn't matter if you have a million dollars or a hundred million dollars. It's who you get to become in the process.

Speaker 1 That journey of creating wealth is really about doing the work on you. If money is just a store of value and like a battery, it needs to be put to work.
If not, it's not useful.

Speaker 1 If you don't use it to help other people and you're just helping yourself, it's going to feel lonely.

Speaker 1 The point is, use the money to buy you time so that you can invest it in yourself to become more valuable. So you can reinvest it in making more money to buy more time to become more.

Speaker 1 And focus doing work on projects that light you up. It's why I wrote my book, Buy Back Your Time.
Everything's in there. If you don't focus on becoming more, then the world is harder.

Speaker 1 When you can get to a place, regardless of how much money you have, where no matter what happens to you, you can be happy that it's not about the possessions, it's not about the money in your bank account.

Speaker 1 That's special, and it requires you to go ahead and do the work. It requires you to get better.

Speaker 1 If you like these nine money rules and want 21 more principles of the top 1%, click the link and I'll see you on the other side. Thanks for listening to the Martel Method.

Speaker 1 If you like this episode, could you do me a huge favor and go leave a review? This helps us get the podcast more ears and helps more people get unstuck, reclaim their freedom, and build their empire.