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it's not about how much you make it's
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about how you manage what you make
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that's one of the key lessons I learned
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during my 10 years as an investment
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banker working with high net worth
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clients whether you're earning 50,000 or
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500,000 the strategies used by the top
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1% to grow and protect their wealth can
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be applied by anyone and so in this
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video I'm going to reveal the
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15652 system a simple proven approach
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that can help you manage your money like
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a financial expert let's get into it
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starting with the most important part
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which is the 15 cents that's how much of
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every dollar you make that should be
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reserved and put aside for yourself this
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is where long-term security really
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begins and you're doing this for two
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really important reasons reason One
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Peace of Mind imagine you're going about
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your day when suddenly you get a flat
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tire a surprise medical bill or an
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urgent family emergency happens without
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a solid emergency fund or a cash cushion
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in place you're not just worried about
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the surprise that has just come up
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you're now also worried about how you're
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going toay pay for it and then this can
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quickly derail your finances and send
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you into a tail spin but not if you have
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that 15% cushion in place start by
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building a quick access solution fund
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enough to cover one month of essential
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expenses this is your first line of
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defense against life's little surprises
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and one month's worth of living expenses
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isn't as much as you think it might be
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it doesn't include the Netflix
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subscriptions you have or any other
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discretionary spending that you make it
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just covers your core costs things like
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your rent and mortgage groceries
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Transportation utility bills from there
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work your way up to 3 to 6 months worth
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of your core expenses this emergency
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cushion gives you the ultimate Peace of
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Mind knowing that if something major
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happens a job loss a health scare or any
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other unexpected crisis you're still
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covered and you won't have to go into
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debt to handle it the security of just
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having those 3 to six months of
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essential expenses saved up means you
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can focus on dealing with the emergency
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itself rather than stressing about how
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to pay for it the second reason to save
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that 15% is to make your money work for
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you and you don't need to be a finan
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expert to start doing this and in fact
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you might already be doing it without
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even realizing first let me show you why
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this is so powerful and how to get
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started even if you're a complete
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beginner picture two people Janet and
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Mike at age 30 Janet invests a lump sum
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of 10,000 she earns a steady 6% return
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each year and doesn't touch the
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investment for 20 years by the time she
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turns 50 that initial 10,000 has grown
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to an impressive
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32071 without her adding a single extra
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dollar now let's look at Mike Mike Waits
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until he's 40 to start investing he
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contributes 2,000 every year for the
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next 10 years and it's also earning the
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same 6% annual return by the time he
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turns 50 his 20,000 investment has grown
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to
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27,9 44 that's not bad but it's still
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less than Janet even though Mike
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invested twice as much overall the
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difference comes down to the power of
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time and compound interest Janet's money
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had an extra 10 years to grow and
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compound and that extra decade made all
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of the difference her initial 10,000
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snowbo into 32,000 even without her
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adding a single penny this is what
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Einstein meant when he called compound
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interest the eighth wonder of the world
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the longer you let your money work for
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you the more dramatically it can
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multiply it's like a runaway train with
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your returns earning even more returns
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so where do you start you have a few
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options first if you're contributing to
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your workplace retirement plan then
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you've already started this process the
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employer match is essentially free money
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your organization will contribute an
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extra dollar or an extra pound for every
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dollar or pound you put in up to a
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certain limit so for example say you
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make 50,000 per year and there's a 5%
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match that means for every pound or
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dollar you contribute up to 2,500 your
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employer will also contribute the same
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in the UK you're automatically enrolled
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into this plan but you also want to do a
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really important thing and that is to
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make sure that you are contributing
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enough to max out the match that is
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offered that's a really great way to
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supercharge your savings since your
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contributions are made pre-tax and the
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money grows tax-free until withdrawal
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secondly let's talk about tax advantaged
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accounts in the UK you've got the stocks
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and shares Isa in the US it's a Roth IRA
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these accounts allow your Investments to
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grow completely taxfree that means no
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taxes on the dividends no taxes on the
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capital gains the government gives you
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these special accounts as an incentive
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to save and invest for the long run but
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bear in mind that the money you use to
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invest in it has already been taxed
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because it comes from the money you earn
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from your paycheck so that is after you
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pay taxes on it so again you pay tax ta
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at the start not at the end whereas for
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the workplace retirement plan we just
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mentioned earlier you pay tax at the end
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and not at the start the key is to max
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out all of these tax advantage accounts
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first before moving on to regular tax
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for investment accounts now I know you
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might be thinking okay I know what
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account I need now what do I invest in
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the secret is to keep it super simple
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with passive funds this is essentially
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just a way to track the overall stock
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market these funds automatically
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diversify your money across hundreds of
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different companies so you're not
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putting all of your eggs in one basket
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and they come with super low fees which
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means more of your money gets to work
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for you once you've got those tax
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advantage accounts set up and you're
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contributing regularly you can let those
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passive funds do their thing no need to
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constantly Tinker or try to beat the
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market just set it and forget it it's
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literally the lazy person's path to
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wealth and it's a strategy used by the
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world's most successful investors I go
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into a lot more detail on this in my
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free master class which has three more
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slots left for today and tomorrow we
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cover the differences between type of
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funds the common mistakes that can cost
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beginner thousands and how to turn just
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100 a month into over a million the link
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is in the description below this video
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and again it's a completely free if you
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want to check out before we dive into
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the rest of the video I wanted to take a
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moment to introduce the sponsor of
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today's video and that is skillshare an
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online learning platform which I've
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personally been using and benefiting
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love most about skillshare is its
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there's really something for everyone to
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explore and expand their skills right
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now I've just finished and I'm
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implementing the learnings from the
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class by Jules on how to create the
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ultimate Google calendar Workshop this
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is what I mean there's literally a class
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on the most random things that you don't
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even think of but will add value to your
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free the first 500 people to use the
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all the videos you want now let's talk
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about the 65 cents that's the portion of
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every dollar that should go towards your
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fundamental expenses this is where the
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basics live things like the rent or
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mortgage groceries utilities
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transportation and any other musthaves
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that keep life running smoothly and this
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is the trickiest part because these
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expenses have a sneaky way of ballooning
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out of control but you know how it goes
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you get a raise and suddenly that old
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apartment feels too small or you decide
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to upgrade your car and what seems like
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progress can actually backfire when
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those upgrades come with higher rent and
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maintenance or insurance cost your
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expenses will grow to match your income
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unless you fight them off and that's
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where setting a firm limit on your
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fundamental expenses makes all the
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difference the 65% cap keeps your core
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expenses in check so that you aren't scr
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scambling just to cover the basics and
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I'm not going to lie this is in many
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cases harder said than done especially
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if you're living in an expensive city
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and according to the office for National
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statistics housing is the largest
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spending category representing about 19%
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of the total weekly expenditure so that
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includes things like rent or mortgage
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interest payments and utility bills and
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the second largest category is
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transportation which makes up
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approximately 14% of household spending
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and that includes things like vehicle
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purchases maintenance Fuel and public
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transport have a look at your own
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spending write down what your biggest
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spending categories are once you know
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where your money is currently going you
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can then look for ways to optimize the
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biggest costs can you negotiate a better
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deal on your rent can you swap that
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daily commute for a more affordable
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option it's not about cutting out the
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little joys in life it's about finding
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ways to keep the big unavoidable costs
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under control giving your budget more
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breathing space for the fun things in
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life and that last 20 cents is where
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that fund begins in the book Di
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the author shares a really powerful idea
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which I absolutely love and it's that
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the ultimate goal isn't to die with a
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massive bank account but to use your
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money to create a rich and a fulfilling
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life and the 1% know the secret they
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intentionally make room in their budgets
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for guilt-free enjoyment and so should
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you because all work and no play is a
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Sure Fire path to burnout and studies
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show that people who give themselves a
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little flexibility in their budgets are
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far more likely to stick to their
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financial goals over the long call it's
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kind of like going on a strict diet if
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you never allow yourself a cheap meal
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eventually you're going to break and
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binge that same principle applies to
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money now you might be thinking won't
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that derail my savings and Investments
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not at all in fact probably the opposite
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if you don't carve out a portion for
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guilt-free spending you're much more
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likely to overspend down the road or
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even worse give up on your savings and
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Investments entirely that's why the
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15652 rule recommends using 20% of your
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income for fun enjoyment and personal
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fulfillment in fact you could even
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reframe this 20% as an investment in
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yourself by making sure you stay
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motivated balanced and energized you're
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actually increasing the odds of sticking
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to your long-term Financial plans so in
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practice this can mean treating yourself
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out to an exceptionally nice dinner once
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a month or finally pulling that trigger
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on a new bag that you've been eyeing or
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even planning a really fun getting away
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with friends the key is to give yourself
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permission to enjoy 20% of your income
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without feelings of guilt or shame so
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those are my top tips on managing your
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money like the 1% the 15 65 20 Ru if you
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found this video useful I'd appreciate
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if you could take a second to subscribe
00:10:01
to the channel thank you and see you
00:10:03
next week
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