How has Jay Leno managed to become a multi-millionaire and what can we learn about money from him?
Well, that's obvious, you might say to yourself it's because he's made millions and millions
of dollars from being on TV.
Well, yes, that certainly does help but as we've seen from many celebrities and professional
athletes alike, making a lot of money does not necessarily mean that you keep a lot of
money.
And the fundamental principles that Jay Leno used in order to become so financially successful
are things that we can apply in our own lives.
And that's what we're going to be talking about today.
Today we're going to be covering what Jay Leno can teach us about money.
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So how does Jay Leno save his money?
According to a CNBC article from 2016, Leno has always had at least two sources of income
since his working life began and his whole strategy was to live off of just one of those
two incomes and he always chose to live off the smaller of the two if at all possible.
This is of course why the story was considered newsworthy at all because, if true, it means
he has not spent any of his tonight show income, which at its peak was reportedly around $30
million a year.
According to Leno, he managed this by doing at least 150 comedy acts per year while hosting
the tonight show so that he could still have that secondary income to live on.
When asked why he was so conservative in this regard, Leno responded, "So many people get
to be the age I'm at now and they've got nothing because they just blew it all.
I put my money in a hammock and say, 'You relax.
I'm going to go work.'
And when I come back, I put some more money in the pile.
"It sounds ridiculous, but if everything ends tomorrow, I know I'll be fine."
In short, this savings strategy gave him financial peace of mind, which is an awesome thing to
have.
Now most of us have not been the host of a popular television show like the tonight show
and most of us are not making upwards of $30 million a year, but we can all in our own
way implement Leno's savings plan.
Maybe it's a married couple that are living off of one of their incomes and saving the
other.
Maybe it's a single person who has a side hustle that they live off of while they save
their salary from their day job.
Perhaps it's an entrepreneur who lives off of one of their revenue streams and saves
the rest.
Whatever the case may be the effects can be enormous.
Take John and Jane who are a married couple making $24,000 and $30,000 a year respectively.
So neither of them are pulling in the big box but with some creative budgeting, they
would be able to live off of one of the incomes and save the other.
Ideally, they would manage to live off the $24,000 income since it's the smaller one
but even if that wasn't the case the results could still be incredible.
Say for whatever reason they weren't able to make it on $24,000 a year so they lived
off the $30,000 a year income and saved the $24,000 income.
$24,000 a year is $2,000 a month which if invested in the market, generating an average
8% annual rate of return is $112,000 in 4 years, $362,000 in 10 years, $1 million in
19 years and almost $6.5 million in 40 years.
Which according to the 4% rule is over three times more than they would need adjusting
for a 3% rate of inflation over those 40 years in retirement.
And it even easily covers them if they use the more conservative 3% safe withdrawal rate.
Even if we were to change the assumptions and say that they only managed to make a 6%
average annualized rate of return over those 40 years, the results would not materially
change.
Sure the ending net worth after 40 years would be a little over $3.8 million instead of nearly
$6.5 million but they're still easily covered under both the 3% and 4% rules.
For the record, according to the 4% rule, they would need a little over $2.4 million
in retirement savings when they finally decide to hang their boots and a little over $3.2
million using the 3% rule.
As for the single person or entrepreneur who maybe doesn't have a secondary salary income
coming in, could still like I said use some sort of a side hustle to generate that secondary
income.
This is exactly what Leno did himself.
In the CNBC article, which I've linked in the description below this video if you want
to check out the full thing for yourself, he's quoted as saying, "When I was younger,
I would always save the money I made working at the car dealership and I would spend the
money I made as a comedian.
When I started to get a bit famous, the money I was making as a comedian was way more than
the money I was making at the car dealership, so I would bank that and spend the car dealership
money."
The car dealership was Leno's day job and the comedy gigs were his side hustle.
Now as he said his side hustle eventually outstripped his earning potential as an employee
which isn't altogether uncommon but even if that doesn't happen the results can still
be incredible.
Take Chad who's single working a day job paying him $24,000 a year but he also has a side
hustle generating $1,500 a month.
Again ideally he would be able to live off the smaller of the two incomes but even if
he doesn't and instead lives on the $24,000 a year income and banks the side hustle income
he still becomes a multi-millionaire.
He has net worth of over $100,000 in 5 years, nearly a quarter of a million dollars in 10
years, over $1 million by the end of the 25th year, and just shy of $2.9 million by the
time he retires in the 40th year and that's assuming a 6% average rate of return.
If we assume an 8% average rate of return over those 40 years he ends up with nearly
$4.9 million.
He's able to retire comfortably under both the 4% and 3% safe withdrawal rates and it's
all because he made sure he diversified his revenue streams, lived on one, and save the
other.
And the entrepreneur scenario would obviously work pretty much the same way except we would
replace that day job income with some other side hustle income.
And on a personal note, I really love this system.
It may not be the end-all-be-all but it's very simple to implement and over time it
can really work wonders whether you're married, single, working for yourself or for others.
And that's what Jay Leno can teach us about money.
So what did you guys think of this strategy?
Did you already know about it and are any of you using it or something similar to it?
Also, would any of you be interested in hearing more about what various celebrities, investors
and business icons can teach us about money?
I'm thinking of making this into a bit of a series because there's a lot of interesting
stories and lessons out there that don't always get a ton of coverage, but are very fun and
informative or at least I think so.
Let me know in the comments section below.
But that'll do it for me today once again if you enjoyed this video be sure to subscribe
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