I think you and I could hop in a time machine and hop back decade after decade
after generation after generation and we're going to find that most people are
short-term thinkers and you know what? There's lousy consequences that comes
with being short-term, today I'm going to share with you 3 ways that you can
become a long-term thinker and the blessings and benefits that it can
produce for you. There is such a danger in thinking short-term. So I decided you
know what, money is a game, life is a game, how do you win the game of life? Well,
today, we're going to play Wheel of Fortune. I am Vanna White's knot and what
I want to do is I want to talk about three core principles to get you out of
the short-term thinking because learning how to think long-term is really going
to be the game changer. We all share the same commodity of time. It's the most
valuable asset. When you're young you don't think it. When you're old, you know
it and I always thought that it was important to not have to stick my head
in a garbage can to find out if it's stunk and right now young people are not
thinking long-term. They're only thinking short-term. I want to give you 3 core
reasons to start becoming a long-term planner. Doesn't mean you can't do really
well in the short run, but you got to play your short game and you have to
have a long game if you want to be successful in life. So the first one here
is a C and an I. These are 2 words and dadada! Oh, you're so smart. I heard you.
It's compound interest. You need your money working for you and putting money
into an investment is one way to get it toward for you. But the way to get it to
work for you two times is to actually have it compound inside of itself. Now
some of you don't know what that means. But what it means is that as the
investment grows, instead of paying you simple interest, like "Here's $10,000,
it pays you 3% a year. Here's $300". If it compounds,
maybe the next year pays 340, maybe the next year pays 380, maybe the next year
pays 490, maybe the next year it pays 640, maybe the next year pays a thousand,
maybe the next year it pays 12,000. Like what it does is compound
interest means that with time, the same performs better. You should only put your
money in things that compound. Real estate, it's a great example of something
that compounds. There's other investments that compound but there's a lot of
things that do not compound. Let's talk about the power of compound interest.
We're going to talk about Mark. Okay, now here's what Mark does. Mark gets super
smart. At the age of 19, he starts putting $300 a month aside. And that $300 a month
is earning him a 10% compound interest. That means that over time, it's not 10%
it grows and gets bigger and bigger because the principal keeps getting
reinvested. But we're going to also say that mark only does this till the age of
27 when he stops. So mark is starting at 19 and he's only going to do it for eight
years. $300 a month and he's going to be earning 10% compounding. Now we're going
to guess how much he has at the age of 65 years old but we want to compare that
to his friend that actually does something very different. This is George.
George was a very... is a little bit different than Mark because he looked at
Mark, he's like, "Dude, I wish I had started in 19 but you know what? It's
not too late. He's 27 years old and he says I'm going to put $300 a month to the
side. So he's got $300 a month going in and he's going to do that till the age of
65 years old where he will have put in a total of a $140,000.
Meanwhile, our friend over here put in a lot less money. So if they're
both growing at 10% and Mark just has the benefit of a little bit more time, do
you want to know how the story ends? At the end of the day, guess how much Mark
has? Mark has $1.8 million. Now George by the way, he's investing way
longer, starting from the age of 27. He puts in a $140,000
versus Mark's $28,000 and guess what she has?
He has just shy of $1.6 million. Dude in other words, Mark only invested
for 8 years. George invested his entire life almost.
And the difference is compound interest with time.
Friends I cannot emphasize enough how important compound interest is. You need
to get your money working for you. I'm going to just... I wasn't planning on sharing
this but I'm going to drop it in right now. The most important financial decision of
your life is how much money you're willing to save every month to put
towards your investments. It can go into safety and security. It needs to go on
investments. If you don't do this one thing, there's a good chance you'll never
get where you want to go. Now, by the way you want to get to a point where you can
eventually save 20% of what you make. But in the beginning, no less than
3%. You got to save 3% of what you got coming in. Make it 10% in time and
eventually get it to 20%. If you can, dude, look at what $300 a
month can do in real estate. Dude, you could be retired long before real estate
can outperform 10% tons more and this doesn't mean that if you're older that
you can't catch up. In fact, I show people how to invest in real estate with no
money down. You can do that right on my website. It's awesome. So there's always a
cheat to save on time but the point is, compound interest is the principle that
once you start, you need to be playing with. Alright, Vanna White is back and
Vanna White asks you, "Alright, what's number 2?" Some of you have figured out
because there's a 2 in there, right? It's this. It's what I call the rule of 72. Here's
what it means. Take whatever interest rate your
investment is earning and if you divide 72 by that number, it will tell you how
long it will take to actually double your money. I got my calculator here and
what I'm going to do is let's say that I'm actually having my money earning at 10%.
I'm going to take that figure of 72. It's a magical number. You use this one
every time. You divide it by 10% and it says 7.2. You'll double your money
in 7.2 years. Similarly, and this math is by the way it works with compound
interest that's what the coefficient is based on. Let's say that I'm earning 20%.
I take 72. I divide it by 20%. I'm going to double my money in 3.6 years,
right? So this is just a little magical way that gets you thinking long term.
Because short term people, they fail. You have a short plan and a long plan. I get it.
I need something immediately in my life now but you also need something in your
life 10 years from now, 20 years from now, 5 years from now and that leads
us to the third and final rule. Which is something absolutely worth
writing down and meditating on. We need to learn to what? Vanna White says, "We
need to learn how to think in decades."
Anything you ever invest in at one point in your life, 70% of the value will get
lost in that asset class. Real estate will lose value, commercial will lose
value, stocks will lose value and people that learn how to stop thinking in terms
of paycheck in two weeks or where do I want to be in one year. You need to ask
yourself, where do I want to be in a decade? Where do I want to be in 3
decades? This helps cultivate when you can think in decades. Guess what you can
do? You can prepare for when the market goes down. Friends, I already went through
that negative cycle and it wasn't negative. We came out on top and I'm
coming out on top again in a few years the markets going to turn and when it does,
everyone's going to run and they're going to scream and they're going to say blood in
the streets and we're all losing everything. But guess what the smart
people like Warren Buffett are doing? Guess what the wealthy are doing? Guess
what I'm doing? We're running the other way at what everyone is running from
because that's where all the money is. We're counter-cyclical and we can do
that because we've learned to think far advanced and ahead. We've learned to
think in terms of decades. So friends might my 3 bits of advice that I
really wanted to share with you today is that to get yourself thinking long term
instead of short term, is compound interest, rule of 72, it's a simple skill
that you can utilize. I got another video on that if you really want to break that
math down and then learn how to think in terms of decades. If you do this, then you
can have both a short game like everyone has but you can also have a long game
you'll make better decisions. If you want to figure out your short game and your
long game, hop on over to the website where I can actually share with you the
best ways to master the financial game. You can join me at one of my live events,
you can get my book for free. All sorts of resources. Go check them out right now
and least of all make sure that you are currently a subscriber. Click that button
right below and we'll see you on the next video.