- You ask what is the proper limit to a person's wealth?
First, having what is essential, and second,
having what is enough.
In the video I made about how I save and invest 70%
of my income while on my way to financial independence,
I received a whole bunch of questions about how much
money that is, and if it's pre-tax or not.
Let me clear some of that up.
First, it is pre-tax money.
The government is gonna take what they're gonna take,
so that amount is what it is.
Second, I won't tell you exactly how much money I make
every year, or the exact amount I set aside
every single month, because I know some people
that I work with watch my videos.
I'm not about to open up that can of worms, and plus,
I have other streams of income outside of my full-time job.
But I'll give you a little carrot and say that the money
I set aside every year is at least $40,000.
How much more?
Well, you can guess in the comments down below.
In this video, I'm gonna go one step deeper into how
I actually save and invest more than $40,000 per year
to help me reach financial independence sooner
rather than later.
This video isn't gonna be about cutting coupons,
turning old wine into vinegar,
or dumpster diving to save money.
These are things that I do every single day and are able
to be replicated by 100% of you watching this.
Hey, I'm Jarrad with an A, and on this channel,
we like to talk about all things personal finance
and investing, and we try to have some fun in the process.
The first thing I do is take into account the Diderot Effect
before buying anything new.
It's based off something that happened to a French writer
and philosopher named Denise Diderot,
when he bought a brand new robe.
He later said about this robe purchase,
I was the absolute master of my old robe.
I've become the slave of the new one.
The issue wasn't with the robe itself,
but what having the new robe ended up making him do.
This new robe eventually became a curse and cost him
more money than he originally spent on it.
It sounds insane, right?
I mean, how can buying something brand new cost more
than the initial purchase, especially something small
like a stupid robe.
When he hung that robe up in the closet, it made the rest
of his clothes look old and raggedy,
so he needed to buy new clothes.
When he took that robe off and laid it on a chair
in his room, that chair didn't fit in,
because it immediately looked out of place.
And his old shoes that were still in great condition,
didn't match his new robe when he wore it out.
So he obviously needed to buy a new pair of shoes.
Because the more you upgrade one thing in your life,
the more you'll notice that other things around you
just don't fit in any longer.
To balance out your new life with your old life,
you'll need to make additional purchases.
All it takes is one large or small purchase to set you
down this path that can be difficult to get off of.
Take, for example, the car purchase that I made
a few months ago.
I bought a used car that was nicer than the one
that I got rid of.
It's not an extremely expensive car, it's a very modest car
that fits my lifestyle perfectly.
The insurance I carry on my old car was liability insurance,
because, of course, it was an older car and I essentially
had the cash on hand to self-insure it.
So it wasn't very expensive.
But on this newer car, I wanted to get full coverage.
It's an upgrade.
It's worth more money.
And I wanna properly protect it.
Even though I had the cash on hand to self-insure
this newer car right now, I still feel compelled to pay
the extra money for that full coverage just to be safe.
Now I accounted for this additional cost when I made
the purchase, but most people who aren't super personal
finance nerds like me, might not think of this.
On top of that, I also needed to buy a seat cover
for my back seat.
I am a very active person, who takes his dog with him
on hikes and multiple trail runs every single week.
Once we get done playing in the woods,
she'll sometimes have dirty paws, even if I wipe her off
before she gets back into the car.
I can never seem to get her clean enough to prevent her
from tracking dirt all over the place.
Now I've tried putting old bed sheets in the back
of the seat for her to sit on, but it always seems
to fall off and just doesn't work.
Because my car is newer, I don't want her tracking mud all
over the back seat once we get done playing outside.
The upgrade I made to my vehicle
caused these additional purchases.
This isn't to say that you should never
purchase nice, new things.
The point is to think the purchase all the way through
from beginning to end and beyond to realize
what it's actually going to cost you.
If you haven't done it already,
please Hulk smash that thumbs up button.
Weak-minded people are easily influenced
when pressured into something.
Because of that, I do my best not to let outside influences
influence the money that I spend.
We're all people pleasers, because we just want everyone
to like us and think that we are the coolest people ever,
even if it's to the detriment
of our own financial situation.
Over the years I've employed this,
don't give a crap what people think, attitude.
Not in a reckless way, but in a way that gives me confidence
in what I'm doing right now.
Have I made friends mad by not spending money on things?
I sure have.
Do they still dislike me?
Well, some do and some don't.
But the ones who still dislike me for it,
were never my friends to begin with.
They wanted me to stroke their poor little ego
to make them feel special.
I ain't strokin' anything of yours, so put that sucker back
in the bag and zip it right up.
If you don't stand up for yourself in these kinds
of situations, then who's gonna do it for you?
You are the last line of defense for the money
in your bank account.
Quick personal story on this topic.
My little brother, who passed away a few years ago
at the age of 19, had inherited hundreds of thousands
of dollars from his grandpa when he turned 18.
My mom got re-married and my step-dad's dad left a bunch
of money to his blood grandchildren.
Don't go gettin' any ideas like I inherited a bunch
of money, because I didn't get anything,
and I'm okay with that.
Everything that I have has been earned by me and me alone.
I don't want anybody's handouts.
So back to the story.
Within a year and a half, my little brother only had
a couple thousand dollars left.
Now you might wonder how that happened.
Well, once the people around him found out that he had
all this money, they started to influence his spending.
All of the degenerates came out of the woodwork.
Everyone, I mean everyone, became his friend
and wanted him to spend money in a way
that would benefit them.
He was young, dumb, and honestly, a really nice kid,
that just wanted to please everybody and wanted everyone
to be his friend.
It was an absolute disaster that quickly cleaned out
his bank account and ultimately played a part
in ending his life.
We all need to act more like adults and not let people
push us around with how we spend our money.
It might not even come across in a straightforward
and obvious way.
It can happen in a way that we don't even realize.
Know what you are and know what you're not.
I think it's important to know who you are and the kind
of life that you wanna lead.
For example, I'm not someone who values
physical objects very highly.
I could care less how nice my car is.
I could care less what you think about the home
that I live in.
And I could care less what you think about the clothes
that I wear on a daily basis.
Appearing wealthy is less important to me
than actually being wealthy.
I've had this dream since I was a young lad,
probably about this high, yay high.
Now it's not as good as Martin Luther King Jr's dream,
but it's still a dream that motivates me.
But I have this dream to be one of those people with a ton
of money who, if you look at them, then you have no clue,
to the point where it would make you question
your own personal decisions.
To achieve this lifestyle, I don't buy really dumb sh,
because I know what I am and I know what I am not.
If you know what you are, and you are very clear on that,
then that can help stop yourself before you hit that point
of no return.
The goal is to be careful of lifestyle creep,
because once you increase your lifestyle and the level
of spending, it is more difficult to bring yourself down
if you have to.
I grew up around a couple that were some
of the nicest people that I've ever met.
We'll call them Jack and Jill.
I cannot say a bad thing about their personalities
and how they treated other people.
They were extremely kind and giving.
Jack and Jill appeared to have a ton of money.
Now at one point, I think that they did because they have
pretty legit high-paying jobs.
It's the same story that we always hear though.
Income increases, lifestyle increases at the same rate,
if not faster, income decreases, lifestyle does not,
until it's forced to, because you lose your house
and everything in it.
I've learned to accept what I am
and know what I don't wanna be.
I'm someone who just wants to live a simple life
that isn't dictated by the things that I buy.
I'm not someone who needs to wear fancy schmancy clothes.
I like wearing my jeans, steel-toed boots,
and a cheap American apparel shirt.
I don't wanna become a slave to the things that I own,
because the things that you own,
will eventually start owning you if you're not careful.
- Things you own, end up owning you.
- If you know what you aren't, then that's gonna give you
a chance to catch yourself before you commit to buying
something that you know just isn't you.
If I'm being completely honest with you, I actually laugh
at the people who live extremely lavishly,
because it makes me wonder what their mental state would be
if we took those things away.
My guess is that the majority of their sense of purpose
is tied to the objects that they own.
Just like one of my favorite stoic philosophers, Seneca,
once said, a wise man uses many things,
but needs none of them.
If you're someone who has an expensive taste,
then that's fine, don't beat yourself up about it.
You just need to be a little bit more careful and aware
of your natural tendencies.
This, by no means, makes you a bad person or even an idiot,
but it does make you even more vulnerable to spending money
that you know you shouldn't on things that don't actually
make you happy.
I save money by keeping my ego in check at all times.
Everyone's got one, but we all kind of suck at putting it
in its place when it matters the most.
If we let our ego go unchecked for long enough,
then it makes us lose touch with reality.
We start to become a glutton for everything around us.
The thought of how important you are and why you need
to buy this or that, starts to consume your actions.
But it doesn't stop there though.
This spending spree eventually starts to go down the path
of buying things to impress people or make them look at you
in a certain positive light.
You start to think that you deserve things because
of who you are, what you've done, the hard work you've
put in, or for the sheer fact that you're breathing.
Could you imagine how big of a mess our lives would be
if when we were younger we got everything we wanted?
I mean, holy smokes, I'd probably have some of the ugly,
actually, I know that I would have some of the ugliest
tattoos on my body right now, and I probably would've
accumulated piles and piles of pricey clothes that are
most likely somewhere in a landfill by now.
I mean, thank goodness that I either didn't have the money,
wasn't old enough, or just wasn't allowed
to buy those things.
As children, we don't understand how powerful
our egos really are.
I mean, hell, even as an adult, it's easy to forget.
I'd love to tell you that I've mastered this,
but I personally haven't.
It's something that has to be at the top of my mind
on a regular basis.
At least a handful of times this year, I personally
caught myself wanting to buy something, not because
I actually wanted it, but because I thought that it
would impress people if they knew that I had it.
Luckily, I spent years and years working on checking my ego
at the door, so I was able to stop myself
before any money left my pocket.
Social media makes it so much easier to share what's
going on in our lives that we start to spend money
and do things that are more shareable.
Our actions become less genuine and more ego-filled.
Once again, I am not saying that you shouldn't spend money
on nice things, but ultimately, you need to take a step back
before making that purchase and ask yourself if no one
ever knew that I had this, then would I still buy it?
If I could, we'll say, never show this to anyone,
then would I still buy it?
I pay very, very close attention to people I come
in contact with.
They are the best teachers on what not to do with my money
or my life.
Think of someone in your life that you know for a fact
that you'd never wanna become.
They're those people that always make you slightly
turn your head and think to yourself, wow, that is insane.
Why would you do that?
Is this real life?
It can be someone that you've known in the past
or right now.
It can be someone that you've never actually met,
but have noticed something that they did.
Heck, it could even be you from the past.
This exercise isn't intended for you to look down
on other people, but instead, it's a way for you to evaluate
your actions based on what someone else is doing.
Even the thought of potentially doing what they're doing
should absolutely disgust you to your core.
The last thing you wanna do is become them,
so you have to do the complete opposite.
And if you don't have anybody like this in your life,
then make 'em up in your head.
Make up the most ugly, horrible person in your head
and be the absolute opposite of that person.
Check out these videos to your left.
The top one will take you to a play list that has all
of my financial independence, retire early videos
to help you reach it faster.
The bottom one will take you to a video that I made on how
I save and invest 70% of my income every single month.
Don't forget to Hulk smash that thumbs up button.
Thanks for watchin'.
I'll see ya in the next one, friends.
Adios.