- When you are 50, 55, 60,
we're both old men, we can't go as fast.
He's older.
"Oh, I'm gonna work 12 hours, gonna work 14 hours".
Now Desmin and I were just having a conversation
about how to manage money.
I think that's a very very important topic.
I thought I will share this with you.
I don't know where this goes but I think I wanna give you
some tips that will benefit you as well.
- Yes, thanks sifu.
I guess for context for you guys,
I came just a few minutes ago, I was showing sifu Dan Lok
my finances, right.
I was late on my taxes, believe it or not,
many of you might know my story.
I was on the verge of bankruptcy a couple of years ago.
Thanks to this wonderful mentor of mine who helped me
to not only dig myself out of that mess I was in,
but now I'm living a fairly
I would say-- - Comfortable life.
- Comfortable life, right.
I think most people would aspire
to get to the same position I'm at
and I say that very humbly.
But now what?
What to do next?
I was late on my taxes at first,
my corporate taxes and my personal taxes.
I had to get that mess cleaned up.
Now that that's cleaned up I showed you the numbers.
I guess just to put things for people's understanding,
I don't own a home yet
but I make a multiple six-figure income,
I live in a designer concrete home,
three floors fairly nice and big,
I've got a luxury S.U.V.
I know that you always talk about middle class
buy a lot of assets that are actually liabilities.
I actually just got thrown under the bus here
for one of them,
so I thought maybe you guys could learn at the same time.
I'm at that stage right now
and some of you might be at that stage--
- Or maybe you are just getting started.
You are still going through school and you're wondering.
You just got your first job
and you just have some money coming in.
How do you manage it?
Because one thing I always say
"It's not how much money you make,
it's how much money you keep".
And it's not just how much money you keep,
it's how well you invest that money.
Now think back to when you came to Canada.
You were struggling financially.
You were making just tiny bit of money.
Now, compared to back then, you are ten times.
Ten X what you were making before.
Were did that money go?
- That's correct.
Where's it going every month?
- And think about even if you make two,
three times more than what you're making now,
where would that money go?
It's the habit that's more important, not just the amount.
I hear this all the time,
I used to lie to myself this way too.
"Oh, once I make more money I'll manage it".
That's not how it works.
It's the habit that makes a difference.
I don't care if you're making minimum wage.
You have maybe $2000 coming in every month.
You are not managing $2000 well,
5000, 10,000, 15,000 is going to be exactly the same.
You'll wonder to yourself
"Where did all that money go?".
And in fact you'll probably have more stuff,
you're more in debt, you have more credit card debt
and all that stuff.
Then you think "Oh let me get to the 20,000, 30,000
then all my problems will go away".
It won't.
It's the same happening.
- And it's probably even worse,
'cause I'm in middle-age now,
so I don't have much time so I'm desperately
trying to play catch-up on what are some of the smarter
things I can do with the money I've got.
- First, because most people don't know
that money has many jobs.
- I didn't know that.
- Most people they think that money has one job,
which is to spend.
They think "I get money, I spend money".
Broke people believe,
growing up thinking money has one job.
People who are a little bit smarter know money has two jobs,
which is to spend and to save.
The really smart ones, they know that money has three jobs,
which is to spend and also to save,
and to invest.
- Spend, save, invest.
- The very wise people, they know that money has four jobs,
which is to spend, save, invest and donate.
You look at Warren Buffet, you look at Bill Gates.
Those are the people who really get it.
Money has four jobs.
The way that I used to, and this is not new by the way,
I learned this from the book "The Richest Man in Babylon".
This is not from me--
- The bucket right? - The bucket, right.
It talks about that.
I want to keep it very very simple
because here's what I notice.
If you make your money management system very complicated,
you're not gonna use it,
I'm not gonna use it.
No one's gonna use it.
I want to keep it very very simple,
so I use the bucket money management system.
- So, what exactly is the bucket management,
I guess for simplicities sake?
I mean, I sometimes have discipline.
I think I'm pretty disciplined person,
you would agree.
I find myself having "shit happens", life happens.
"Oh, suddenly this month we need this,
or that month we need this".
- Something always happens.
- It's hard to maintain that discipline
when all these emergencies keep popping up.
- So, very simple. Imagine every dollar that comes in.
You divide it into five buckets.
Very simple.
The first bucket is what I call your necessities bucket.
This is where you pay your bills,
I would say 60% of your money.
Every dollar that comes in, 60 cents goes into this bucket.
Your electricity bill, your car payment, your house payment,
all that stuff, your internet, your cellphone bill.
That's your necessity bucket.
Let's say you're making 1000 bucks a month, hypothetically.
600 bucks goes into this.
You're making 10,000, 6000 goes into that, very simple.
So that's 60%.
The next bucket is what I call your emergency bucket.
Then 10% of your money, every dollar that comes in,
goes into this bucket.
Emergency money means money put away for a rainy day.
It could be medical expenses,
it could be something happens to your family,
you want to have that money there.
People talk about emergency funds.
I don't like to touch this money.
- How do you not touch that?
- I just put it away.
What I do is I actually go to my bank banker,
set up a bank account where every dollar comes in
it goes into this account.
- It's like a savings account. It's nothing fancy.
- I don't touch.
I do not touch.
It just goes into there.
Don't feel like "Oh yeah, I want to take a vacation,
let me dip into that money".
That's not--
- You wouldn't use that money to buy gold or investments
or stocks or something came up, you wouldn't touch it?
- No.
From a psychological point of view,
what I notice is when you have cash it attracts more cash.
I don't have time to go into all of that,
but what I notice is when you have money,
when you have the habit of accumulating money
you accumulate more money.
When you don't have the habit of accumulating money,
you always have no money.
It doesn't matter how much money you make.
That's the second bucket.
The third bucket is the investment bucket.
That's also 10%.
So, 60%, 10%, 10%, that's your future.
That's your retirement.
"The Richest Man in Babylon" talks about pay yourself first.
This is the pay yourself bucket. The 10%.
It's that 10%.
Then you have 10% is, what I call, your learning bucket.
This is where you learn your skills.
You go to the events, get coaching,
seminars, online courses. 10%.
So imagine you've got a thousand bucks.
600 bucks goes into the first necessities.
Then you have a hundred bucks goes into the emergency.
A hundred bucks goes to investment.
A hundred bucks goes to learning,
it could be reading a book.
The last one, that last 10%, that's your fun bucket.
- The fun bucket, okay.
- That's your Montblanc pen,
that's your chutoro, that's your sashimi.
(laughing)
- It might be a little bit big,
that bucket might be a little bit big right now.
- If you know it's 10% then there's no guilt.
When I buy something fancy like A.P. watch
I use the fund money.
I do not touch all these other money.
Then there's no guilt,
but if you don't put it in a bucket then it's very easy
"Oh well, I should take that vacation."
Suddenly, your learning bucket, that's gone.
Your emergency bucket, that's like, next to nothing.
- I've got a question sifu.
I know that you also say "Invest in yourself",
and my investment bucket is very small right now and,
as you know, where we live it's very expensive.
I mean, I would be saving for years
before I could even make a small investment.
Correct me if I'm wrong,
but I've taken some of that investment money
and have invested it into learning.
I've doubled-up my learning by investing in myself
to get higher income skills.
Then through the high income skills
it increases more income,
and then I should start now to fill that up.
- You notice, when you use the bucket systems,
the first reaction most people have is
"I can't live off 60%, there's no way in hell.
That's not enough."
Then you know you need to upgrade your skills
so you earn more.
We talk about this a lot.
- So not just cutting coupons, saving money--
- We're not talking about that.
At the same time, while you're increasing your income
you need to have the habits in place.
I rather if you cannot do the 10% right now,
do 1%.
- Do something.
- Do 2%.
Because you need to have the habit in place.
If you have zero habit and you think it's some future thing
that's gonna happen.
It's not gonna happen.
If you cannot do, okay let's say 80%, going into that,
let's do 5, 5, 5, 5.
- Would the bankers look at you weird if you go to a bank
and just say I want--
- They would.
Doesn't matter; they're broke.
It doesn't matter.
It's the habit that makes the difference.
Your investment bucket, that's your golden goose.
I think I was reading statistics,
the average Americans,
more than 50% of Americans have less than $500
in their savings account.
- Yeah, many of them don't even have--
- 500 bucks.
- The three months you need the--
- Oh, forget three months! 500 bucks.
It means that one emergency, wiped out.
They're one paycheck away from poverty.
That's like 50, 60% of the American population.
America is one of the wealthiest countries in the world.
- I've got another question.
I'm not sure if you wanna add that also
with this discussion.
The leveraging of credit cards and rebuilding of credit,
I know you're not a credit specialist,
you're a mentor and so forth,
but I was always told that,
and obviously the accountants
that you have introduced me to have been very helpful,
to divide and make sure you have two clear credit cards.
One for business use and one for personal use.
- Yeah, one corporate.
- Then even that, to not max them out every month.
To use 60, 70% then pay them down.
- Make sure you don't accumulate any credit card debts.
You pay that off every single month.
If it's within that 60%, you're fine.
- So that would--
- All the credit cards, all the expenses,
all of that, that's fine.
- So, use the credit card to pay for the utilities,
pay for those things and anything like that, but then--
- Just don't leverage using the fund money.
You only have one thousand bucks of fund money,
I'm gonna spend 3000 "Oh it's okay, I'll put it on my card.
I'll pay it back next month."
That's what you don't want to do.
Think about it, if you're paying 18, 20% on a credit card
interest rate, and you are saving 1%, then do the numbers.
Something is wrong.
Here's the thing, what I learn is this.
This is the bare minimum.
"The Richest Man in Babylon" talks about a 10%.
It's like bare minimum, meaning that if you wanna be
comfortable in 20, 30 years,
if you want to get there on a fast-track,
this number is too low.
- Too low, too slow. I can see it being very slow.
- I was writing an article, I will share this with you,
if you are making less than 50k, 10% is good.
If you're making 50 to 200k,
your investment bucket needs to be at 15%.
If you're making 200 to 500k, 25%.
If you're making a million or more, 35%.
That means then, that 35 goes to investments,
what shrinks is your necessities bucket.
You cannot be making a million bucks--
- And your necessities keep being--
- You're still spending
If you're making a million, 350k, that's fine.
- Maybe like eight pieces of sushi,
not like 20 pieces of sushi.
- Three pieces of sushi and then get a udon, it's cheap.
- Don't be buying all your friends sushi,
the chutoro, all the big stuff.
- For example, I tease Dasmin, I say
"Oh man, that's when you spend like 200 bucks on sushi".
In my mind I'm like "holy fuck", 'cause that's 200 bucks
if you can put in some kind of investment, in a stock,
in 20 years that meal is expensive.
- It's not just $200, that cost me probably $1000.
- It's not just $200.
I'm the last guy that'll tell you not to enjoy your life,
and things like that, do it this way.
As your income increases, you do it this way.
Your fund money, spend whatever you want.
- It's kind of a reward,
maybe once a month if you did something that was worth it,
that earned more, that was worth it.
- That's no problem.
You can reward yourself every month,
just don't go over the limit.
You want this to be automatic.
When this requires you to sit down and do it,
it won't happen.
I'm just telling you, it won't happen.
It has to be done automatically.
- Talk to the banker-- - Talk to the bank.
Your banker will look at you weird and say
"Why do you set up four, what the hell is this?".
Then you've gotta pay a couple bucks for the account
fees, forget about that stuff.
It doesn't matter.
It's the habit of it.
Then you have fun with this.
At first when I did it, I had no money.
But I did it with 1%.
1% just emergency.
I was spending more on learning
but it was just no money, 'cause I was in debt.
I still do it, then it's like 1.5%, 2%, 3%, 4%.
One person inspired me so tremendously, Sir John Templeton,
from Templeton fund, billionaire.
He started off
investing 1% of what he earns
and spends 99%.
Didn't have a lot of money.
Before he passed away, he was only spending 1%
of what he earns, and 99% invested.
He reversed that.
Then you get excited looking at your emergency fund,
"Oh, yeah. You know what, things are okay.
If something happens I could take care of my family,
I could make that happen.".
- Now the emergency fund is whatever I've paid off
on the credit cards I guess.
Sure, I may have some good credit
but that's the only emergency fund.
- Then you look in your investments like
"Holy shit, I've got next to nothing".
Most people have next to nothing.
That's why they think
"let me buy some stocks or cryptocurrency".
You don't look at that, you just look at that--
- What's a healthy number to get to
in your investment bucket
before you can even look at investments?
- Just put it into it.
Don't even think about that so much.
The right thing, if you do your due diligence,
aim for, don't get greedy, 7, 8, 9%, 10%.
Don't get greedy with it.
Don't go "Oh, I'm gonna get a 20% return".
Forget about it.
What you want is a consistent return,
that 8%, that 9% but over a long period of time.
Let's say you're gonna retire at 65.
You say, "Okay, have that much time",
but knowing if you don't put money into it now.
- I don't have much time for that.
Another 25 years.
- Knowing that when you are 50, 55, 60, we can't go on.
We're both old men we can't go as fast.
He's older.
(laughing)
We can't go "I'm gonna work 12 hours, gonna work 14 hours."
It's exhausting.
When I was younger, 20-something years old,
I can do this for 10 hours straight.
Now two hours into it my back aches,
my neck aches, my hand--
- I gotta go spend some more money on a massage.
- Seriously right.
I go get a massage every single week.
It's the same thing.
That's how we manage money.