My Own Financial Journey
I have not always been financially successful. I once struggled from month to month trying to make ends meet. When I first started making more money, I often lived beyond my means and on many occasions struggled to pay my bills on time. Although I appeared (based on my lifestyle) to be doing well, the reality was that I spent much time worrying about money and my financial situation. In my twenties, I had focused most of my energy and time learning how to make more money. I had the belief (WHICH I KNOW NOW TO BE FALSE) that if I could just make more money, everything would work out. I came to realize that just wasn’t true. My income continued to go up but my situation never really changed. The only real difference from when I was younger (and earning less) was that I now had a whole lot more debt and financial responsibilities (burdens). i.e. fancy cars, expensive trips.
Why spending money feels good? When you are poor, you are surrounded by things you think you want to own but cannot buy. After a while, you associate the feeling of unsatisfied desire with poverty. The flip side of this is that owning something and fulfilling desires make you feel rich.
Making more money is not the answer. You need to learn how to manage your money.
Why Most Financial Advice DOESN’T Apply To Entrepreneurs
For some people, reading financial books can be a frustrating experience. The author may tell a motivating story that inspires you to "do something" but then the book may be filled with technical information that you struggle to understand. The confusion may ultimately leave you with more questions than answers.
Why Getting Rich Slow Doesn’t Work “Get rich slow” is a concept that is very often referenced in financial books and other guides. This idea is branded to be the only way the average person can get rich.
The concept tells you to invest your money little by little and let the miracle of compound interest do its "magic". According to this theory, you can get rich if you save up and invest a little bit of money every month.
However, this is ridiculous.
The main variable in this concept is time. You are asked to save and wait for years. Essentially, this concept teaches you to be POOR all your life, so when you are old and sick, you will finally be RICH. Does this sound like a good plan to you? Putting off your hopes and dreams until you've worked for 40 years?
Out of the millionaires and multimillionaires out there, no one got rich this way.
My strategies are contrarian, counterintuitive, and unconventional! “Most entrepreneurs don’t know how to make money. Fewer know how to keep it and almost no one knows how to multiply it.” – Dan Lok
The Only Three Money Principles You Need To Get Rich & Stay Rich
#1 Master The Wealth Triangle
THIS will give you the Who, What, Why, and When of money.
Most common investing questions I get:
“Dan, I’ve got $10K, what should I invest in?”
“Dan, what do you invest in?”
“Should I pay off my debt first or should I invest first?”
Conventional wisdom teaches you how to get rich on your current income level. Assuming that your income is $120,000 a year ($10k a month) and that you regulate your expenses, you should be able to have a net worth of a million dollar (not counting your house and car) in 7 to 15 years.
1: HIGH INCOME SKILLS (Income)
You making you money
Develop a skill set that can earn you a minimum of 10,000 a month
Turn your expertise, passion or experience into money
Trade hours for high dollars
Provides you with stability, comfort & peace of mind
2: SCALABLE BUSINESS (Cashflow)
Your business makes you money
A scalable business is one that can majorly grow its profits with only minimal increases to your cost
Build a world-class team around you
Provide yourself with excess cash flow to invest.
3: HIGH-RETURN INVESTMENT
How Millionaires Invest
Your money makes you money
Turn your excess cash flow into assets
Generate above-average (more than 10%) returns on your money year-in and year-out
Only invest in things you understand and can control
Grow your net worth and build long-term wealth
You can spend money and enjoy life as long as:
Your first goal: Every year, you will increase your earning ability (high-income skill) by at least 10%. Your second goal: Every year, you will save more than you saved last year. Your third goal: Every year, you will increase the amount you save in terms of a percentage of your income.
Save More, Much More
< $50,000 a year, save 10%;
$50,000 – $200,000, save 15%;
$200,000 – $500,000, save 25%;
$500,000 – $2 million save, 35%;
$2 million – $5 million, save 40%;
$5 million++, save at least 50%
#2 The 7 Levels of an Investor
I learned this from Robert Kiyosaki.
Despite the many different personality types in the world, there are really only seven types (or Levels) of investors.
While it is common for an individual to drift a little from one investor type to another, most people will stay fixed at one level for their entire lives.
People get caught up in the "I need to make more money" trap but the truth is your income has very little to do with your ability to obtain financial freedom.
The Seven Levels of Investing has nothing to do with your income but what you do with your income. It’s not how much you make, but rather how much you keep and what you do with it!
Level Zero: The Non-Existent
No savings or investments.
Completely insensitive and unaware of their spending habits or other financial matters.
These people complain about not making enough money. They do not realize that the problem is not necessarily their income but their money management habits.
Example: The Sad Story of Mike Tyson During the 20-year span of his career, Tyson’s income exceeded $400 million. Yet in 2004, before his 39th birthday, he was $38 million in debt!
Level One: The Borrower
The Borrower is usually in a worse financial position that the Non-Existent. But The Borrower's potential for change is greater.
As the name may suggest, The Borrower is often in high debt.
They spend more than they make.
They live in complete financial denial and believe that their situation is hopeless. As a result, they give up all hope.
Level Two: The Saver
In general, The Saver sets aside a small amount of money on a regular basis.
The money is usually deposited into a very low risk but low return method, such as term deposit.
The Saver usually save to spend rather than to invest.
They are unwilling to take any risks.
Level Three: The Passive Investor
The Passive Investors are aware of the need to invest but they are not very good at it.
They make up the two-thirds of the population that we call the "middle class".
They Passive Investor leaves their money decisions to the professionals, i.e. financial planners so they have very little idea of where their money is invested or why.
They are financially illiterate and blindly follow the market like sheep but at the same time they usually love using "sophisticated" investment techniques, such as margins, short-sells, without knowing what it actually means or what the real risks are.
The Passive Investor brags about wins and never discuss losses- they eventually lose money more than 90% of the time.
They are gamblers who believe that they just need one "big hit".
Level Four: The Automatic Investor
Like the Passive Investors, the Automatic Investors are aware of the need to invest. Except, they take an active role in their financial decisions.
They have clearly laid out long term plans that will enable them to achieve their financial goals.
They do not get fancy or too risky; they stick to solid investments such as proven managed funds and hold them for the long-term.
The top two levels of investor are reached by only a tiny percentage of the people on planet earth.
Level Five: The Active Investor
The Active Investors understand that they need clear investing principles and rules of investing.
As the name suggests, they actively participate in their own financial and investment management.
The Active Investors strive to optimize perfomance while minimizing risks.
Their choice of investment may be real estate, discounted paper, businesses or shares.
It is common for them to have long-term annual return rates of 20-100%+.
The main focus for them is to increase their assets and thus, their cash flow.
Rather than investing what is left of their money after spending, they believe in spending what is left of their money after investing.
Level Six: The Capitalist
Very few reach this level of investment excellence and even fewer manage to remain here.
The capitalists have two main principles: to be a good manager of their money (while they are living) and to leave a legacy (to continue after they are gone).
#3 Never Invest In Something You Can’t Understand & control
There is no dangerous investment, only dangerous investor.
You need to know what you are investing in, including but not limited to the industry, the business, the market, the track record...
Set yourself a financial system and follow those principles.
4 POINTS OF CONTROL
Marketing control
Financial control
Key people control
Key decisions control
Bonus Money Principle #4 ACT AS IF
Act as if...
you’re already wealthy and then you’ll surely become wealthy.
you have unshakeable confidence and then people will surely have confidence in you.
you’re a leader and people will follow you.
you are already a tremendous success, and you will become successful.
Most people save their way to bankruptcy.
Waste not, want not. Be tight, be frugal. Cut up your credit cards. Live below your means. Don’t drink the latte coffee in the morning. “A PENNY SAVED IS STILL JUST A FUCKING PENNY!”
I am NOT talking about living off credit cards or borrowed money. I am NOT talking about spending foolishly either.You should buy whatever you want as long as your income grows, AND as long as the gap (saving/investing ratio) keeps getting larger. Instead of cutting up your credit cards, living below your means and always feeling poor.
Three Levels of Thinking
Poor person: “I can’t afford it.”
Resourceful person: “How can I afford it?”
Rich person: “How can I make it make me money?”
“A wallet once expanded can never retract to its original state. Once you get used to living a certain lifestyle, you’ll do whatever you have to to do to continue living that lifestyle.” – Dan Lok
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