3 Lies About Money

This is Shoran Tribat, so welcome back to Business School Podcast. And in this episode, I'm going to tell you about how most of us learned about money from people who were also figuring it out as they went along. That means most of us are using the rules that were never actually true, that somebody who was not actually wealthy actually told us what it was. And today I'm going to break down three things about money that took way too long to learn. And as soon as I realized it was extremely liberating. And I'm going to break them all down step by step starting right now. One thing is for certain. Just because it's tried and true doesn't mean it's working right now. So the big question is this, where can you learn what is working right now? The strategies, the tactics, the psychology and the exact how to. How to go your business. How to blow up your personal brand and supercharge your personal growth. That is the question. And this podcast will give you the answer. I'm Danny Misharan, Trivata, and welcome to Business School. So do you know someone who makes really good money? And they genuinely have no idea who aired all those. Meaning they earn, well, you know it, they own world. Their lifestyle, for example, looks great from the outside. They have a nice car and they go on good vacations. They post dinners on Instagram. They never skip dessert and all that. But yet if you sat down with them and you looked at the actual numbers, maybe their savings or their investments or whatever they're building towards, can you guess that they don't match? And by the way, I didn't know that this existed. I've known a lot of people like, you know, in Los Angeles, especially in Los Angeles, real estate, you call them, you call them the $10,000 millionaire, right? They have $10,000 in their bank account, but they actually seem like millionaires. And I know a lot of people like this and I never thought about this at all that I didn't think it was systemic. So I won't tell you about three things, but money that most of us were never actually taught. And I actually mean the real stuff. Not like, oh, yeah, you got to spend less than you earn. I know we've heard all of that, but I'm talking about the things that shifted for me and I think they will help you too. So here is kind of lesson number one. Income and wealth are not the same thing. So the first thing is earning money and building what wealth are two completely different activities. And the reason I'm sharing that with you is that most of us, the society has focused on just one of them because we look, we actually wake up and look ourselves in the mirror. More often than we wake up and actually look at our investment accounts or bank accounts or our net worth statements. And then at the end of the day, we say, well, we're working on all of this to get more money to do what, right? And I'll give you a tell you a story. Early on in my real estate career, I read Rich Dad Poor Dad and people are like, hey, you just got to own houses. Well, I didn't have money to own a bunch of homes. So I was like, man, I can just figure out a way to get that financing with hard money loans and do flipping. So I got really good at flipping houses. And I got, and because we ran a brokerage at that time, I got access to a lot of off-market deals. And I will tell the agents that, hey, bring me your deals first and worst case scenario. If I, I'll either buy it and make sure you get all the commissions or if I don't buy it, I'll hold sell it for you so you still make the money. And I built the insane system around it. I actually made more money like a bonkers money on that activity than I did on any other part of the business. And so you, I would get the deal, I would put money in, I would fix it up and I would sell it and I would collect the check and I would repeat and I would run that loop for five plus years. And I literally ran this as a shadow economy because I got access to so much deal flow. But at the end of five years, I had flipped something like a hundred homes, a hundred homes. And I had, I had cash to show for it, but by no measure did I not have any assets. But like, I'll tell you a different story. When I told that story to my friend, a friend of mine around the same time, he's like, dude, I can't believe you're doing all this. I don't have access to your deal flow. And he took, because of that, he took a completely different approach. He bought one single family home and then a couple of years later, he took some money out of it, refied it, anybody fourplex. And then he didn't flip anything. He just bought and held that. Well, crazy. If you, if you think about it, he took that fourplex, refied out of it and then he bought a twelve unit. And when we compared notes, like a few years later, his net worth from real estate was several multiples of mine, like five times. And I remember sitting there and I'm like, man, this is insane. I worked so much harder than him. I've done so many more deals and he just held a bunch of things. He didn't even do that much work. His properties are managed by a property management company. He didn't get called at 2 a.m. or anything like that. He didn't have to deal with the stress of hard money landing. He didn't have to actually do the deals. He didn't have to be completely distracted all the time. And the point is that I was actually flipping by generating this income and he was building an asset and the difference is insane because the income stops the moment you stop. If I wasn't doing a deal, the money stopped. But his properties were collecting rent whether he was there or not. So the question I'm asking you and I should ask him myself is what percentage of your time right now are you spending towards generating income and what percentage of that is going towards building things that work without you? Now you may say, well, Sean, I'm not there yet. Well, you at least have to start thinking about it. And the reason you're not thinking about it because all we have thought been taught is you know, get work really hard, get good grades, get a job. You know, graduate from high school. If you're really interested, go to college or grad school and then get the degree and then maybe get a job and then move up in the job so you can make more income. That's all we've been taught. We don't know anything else. But then we're like, wait a minute, how am I going to break out of this rat race? And that's the problem. That is the treadmill. That sucks, right? And so we have to find a way to somehow transfer our income into assets. If not, we have to learn how to become investors because the only game in all of this is the game that no one has taught us. And that is becoming an investor. The being investor is the only game. And you may say, well, Sean, that's not true. I've not been trained on it. I will tell you when someone, let's just assume that you got $10 million today. Let's just assume you've kicked the lottery today. What are you going to do? That is it. That's what everyone wants, right? But if that is the case, if you got a $10 million win on a lottery today, you are now instantly forced to become an investor. And why do people who win the lottery lose all their money within the first 18 months? Why? Because they have not learned how to be an investor. That is the problem. All we've done is to figure out ways on how you can make a quick buck, how you can get rich quick. They don't think about how you can get rich guaranteed, right? And being getting rich guaranteed, of course, is not a financial promise. I don't know what you're going to do. But getting rich guaranteed is not generating more income. Do you know how many people exist on the Forbes 400 list that made it on income? Zero, right? Because the job is to take the income and turn it into assets. And the only way you can do that is by becoming an investor. Now let me tell you part two. Did you know the average American household only saves about 3.6% of their income? 3.6%. That's from the Federal Reserve, by the way, right? That's three and a half cents out of every dollar that people make. Now you may say that's inflation, how are people supposed to live, etc. Well, in China, the average savings are on 45%. That's crazy. It is the same planet, by the way, and wildly different philosophical ideas about what money is for. I don't know if you know my main man, the late great Charlie Munger. He spent what 60 plus years studying all these businesses and people and how wealth actually gets built. And he made this observation that I really like. He said that he watched people with these really high incomes, these really high earners. And at the end of the careers, they had nothing. And it wasn't because they were not good with their money or bad luck and it wasn't a market crash. It was that every dollar that came in is the same dollar that went out because we are only talked to things to make more money and spend more money. And then if we don't know those things, we don't know anything else. So we only do what we know. And the other time you feel red, this book called a millionaire extor, you realize that people with pre-ordinary incomes build much better wealth. Why? Well, it was not because of how much they made. It was this interesting kind of buffer, the gap between what they made and what they spent. And if that gap doesn't exist, that is the wealth gap. And so the more gap you have, the more you can do with it, the more you can become investor. So if there is no gap, essentially you have $100 coming in, $100 going out, you can't really invest in anything. If you can't really invest in anything, you're going to wake up to the moral and try to make that $100 again. And honestly, this has not got anything to do with being cheap. I'm not saying don't enjoy your life, go drink the boba and find the lambo and go to mecanos. What I'm saying is that if you get a raise and every time you got a raise, you now went and had a bigger car payment or a bigger house and nicer trips, your income went up, but you're any your wealth actually did it. And the component, the thing, there's a name for that. It's called lifestyle creep. That is every time you turn up your income, you also turn up your expenses. It's really, really hard. And so my question for you is here is, you may say, well, what do you want me to do? It's really simple. You want to decide a percentage that you're going to invest before you decide a percentage that you're going to do with anything else. What does that mean? There is this big theory of profit first. If you've heard of it, I love the idea of profit first, but I actually think the guy who came up with profit first got it wrong. He talked about making profit as to what you take home first. I actually think profit first needs to be what you're going to invest first because if you don't actually take that amount of money and say, this is what I'm going to invest first, you don't learn how to become investor. If you don't learn how to become investor, you're going to work until you die. And that's what's important. That's why I think I don't subscribe to profit first because it then puts more income in your pocket and then you just build everything around more income and then you take that income and you spend it into more money. That's the problem. So, okay, idea number three. And this is an interesting one. There's this guy Morgan Howsle. If you have an alternative, he actually wrote this book called The Psychology of Money and he hasn't really written anything good after that. But that's the best part. You can write one and never have to write anything good after that, but he did a good job with that. And I don't think he had any experience running a business. I just think he had figured out with research how to write this book on the psychology of money, which I actually appreciate. He was a research based reporter and Kudos to him. He spent a part of his college years working as a valet in a pretty nice hotel in L.A. So as a valet, he got to drive everything. Ferrari's Lambo's Porsche is like the whole shebang. And one day he had this realization, when a really nice car pulled in, he never once looked at the driver and thought, "Wow, that person's cool." What he did every single time was imagine himself as the driver. He pictured himself in the car. He was admiring the owner. He was projecting himself onto this fantasy of driving that fancy Lambo. And he realized that that's what everybody does. Nobody is watching the person in the expensive car and thinking highly of them. No one saw you in your brand new Lambo and said, "Man, look at him, he's so cool." Nobody did that. Right? They're imagining what it would feel like for them to be in that car. So what does this mean? Well, it means a lot of what we spend is to signal success that doesn't actually show signal success to anyone. The person watching you pull up in that fancy car is not thinking about how successful you are. They're thinking about how successful it would feel if it were them. That's the crazy part. Instead of wearing the pitake fillup or instead wearing the Rolex or the Apple Watch, the people do that because they think that other rich people do that. But you'd be amazed at the absolutely wealthy people that live in normal neighborhoods that drive a Honda Civic. And they're trying to. They don't care about anything because they've figured out one thing, which is they're content with who they are. They don't feel like they have to keep up with the Joneses. And the $100,000 to $132,000, $400,000, $500,000 car is not proof of your wealth. It is just $100,200, $300, $400, $300,000 if you don't have it anymore. That's all it is. Now please, please, please, I'm not saying don't buy nice things. If you genuinely love cars and you like watches and you can afford it, then go get the car by the watch. But buy it because you love it. Don't say, "Hey, I want a Lambo because." You say, "I want a Lambo." Don't say, "I want a Rolex because Blank P." You say, "No, I want a Rolex. You got to want what you want." If you want it, work on it, get it? That's cool because now intrinsically having this makes you happy that you actually have it. And if you are doing it for someone else, I will tell you right now, they do not care. No one is impressed by you. They don't think about you. They don't, nobody thinks about me. The only reason you're, as I'm telling you this, you don't even think about me. You're not thinking about me. You don't care about me. It's just, I am a podcast on that I maybe end up talking fast and have some decent ideas from time to time on your way to work on when you're at the gym. You do not care because everybody is taking the idea and trying to figure out how to implement it in their own life. So big three things. Number one, income and wealth are not the same. You can win it with income but lose it wealth and that's really, really terrible because then you're going to work until you die. Number two, there has to be some kind of gap between what you earn and what you spend. And if you don't actually do that, you're never going to have any, like, rob, dry powder to be and become an investor or learn the thing. And the third is that a huge portion of what we spend on to look successful isn't being seen the way we think, actually think it's being seen, which is kind of liberating by the way when you sit with it. You should be so excited. You're like, wait a minute. I actually love my house. I don't need a $30 million house. Nobody cares. I need more security. People are going to like, I need like 23 dogs. I need armed guards. I need a brink struck. I need, like, I need, you know, I need four pools. I need three basketball courts. I need like more landscaping. Like you don't need to any of that. If you don't want it, you don't, you don't need it because nobody cares, which honestly was the most liberating thing to me. Like I do not care. And I realized, and I thought about it for a while. I was like, man. So by the way, sometimes I do, sometimes I do feel like, oh man, if I had, if I had this or I had that, I would feel better than I realized I'm like, well, there's R.O.H. Return on hassle. The more stuff you have, the more painful it is, the more hassle there is. Life is really simple. Like think about this. Think about, like, I travel a bunch of work. When I travel, I have one suitcase, right? Like my carry on. When I go to a hotel room, I have one suitcase to like manage and pack. I live my entire life in a hotel room with one suitcase. I don't need anything. My entire life is in that one suitcase, like one carry on. That's when I realized my entire life is in this one suitcase in my laptop. That's all I care about. And if I could do this for two or days or three days or four days, everything else is just extra. You could take that extra stuff and create a significantly better life for yourself. You don't have to figure this all out today, by the way. But I just wanted to start this thing because honestly, this should be extra fun. It's extremely liberating for you. Because when you realize that no one else cares, it's a lot easier to build some insane wealth. Hey, remember, how are these slices of greatness as a choice? And I hope this was helpful to you. If this was helpful, can you do me a favor? Can you screenshot this episode and just tag me that way I can make more like this for you? So please do me a favor. Screenshot this episode tag me and I can make more like this for you. Hey, this is Sharan. I have an awesome free gift for you just for listening to the podcast. As you may know, I've got a chance to build two billion dollar companies the hard way. So if you liked this episode, you will love getting the exact playbooks from those wins. It's on my sub stack called My Next Billion. It has the exact frameworks I wish someone had given me when I was figuring it all out. Now you get the real lessons from the trenches as I go for a three-peat and build the next billion. Everything's free at MyNextBillion.com. Please check it out. MyNextBillion.com.