MONEY Master the Game: 7 Simple Steps to Financial Freedom – Tony Robbins

3 tips to become a SMARTER investor today:

How can you start now to master the game of money to obtain financial freedom? To Tony Robbins, American businessman, author, and philanthropist, there are 7 simple steps to creating financial freedom. Step 1: Allocate and save a portion of your income and invest it. Step 2: Learn the rules of money before you get in the game. Step 3: Set realistic financial goals for yourself. Step 4: Allocate your assets well for success. Step 5: Create lifetime income with little downside and huge upside. Step 6: Invest like the .001%. Step 7: Create an action plan to a more joyful life. For his book, Robbins seeked out and consulted with numerous money masters and asked them how they’ve were able to grow their wealth significantly. There’s a chapter dedicated to interviews with Warren Buffett, Jack Bogle, David Swensen, Ray Dalio, and many others. Here are some of the points to the book:

 

1. I don’t think anyone else has said it better than Elon Musk has who stated that you get paid in direct proportion to the level of difficutly of the problems that you’re solving. If you want to create more wealth, find a way to solve more of people’s problems. The more value you’re providing others, the more you’ll get in return. For the most part, the world is pretty fair on who gets renumerated for their work. “The secret to wealth is simple: Find a way to do more for others than anyone else does. Become more valuable. Do more. Give more. Be more. Serve more. And you will have the opportunity to earn more—whether you own the best food truck in Austin, Texas, or you’re the top salesperson at your company or even the founder of Instagram. But this book isn’t just about adding value—it’s really about how to go from where you are today to where you truly want to be, whether that’s financially secure, independent, or free. It’s about increasing the quality of your life today by developing the one fundamental skill that the vast majority of Americans have never developed: the mastery of money. In fact, 77% of Americans—three of every four people—say they have financial worries, but only 40% report having any kind of spending or investment plan. One in three baby boomers have less than $1,000 saved!

 

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2. If you’re serious about becoming wealthy, then get serious with cutting back on the unnecessary spending. Start by controling your urges to buy those $5 coffees or $10 lunches daily and learn to master that emotion. Also, understand that every little bit counts, especially since that money could be worth 15X in the future through compounding.  The first is cognitive understanding. It’s your ability to understand the concept. Any of us can get it. And many of us already have a cognitive understanding of personal finance and investing. But that and $3 will almost buy you a cup of coffee at Starbucks! What I mean is that information by itself is not valuable. It’s only the first step. You start getting real value when you reach the second step: emotional mastery. That’s where you have heard something with enough repetition, and it’s stimulated enough feelings inside you—desires, hungers, fears, concerns—that now you become conscious and capable of consistently using what you’ve learned. But the ultimate mastery is physical mastery. That means you don’t have to think about what you do; your actions are second nature. And the only way to get it is through consistent repetition. My great teacher, Jim Rohn, taught me that repetition is the mother of skill.

 

3. Start investing as much as you can as soon as possible. Time, along with rate of return, plays a huge difference in the outcome of your investment. The earlier you invest, the more money you’ll come out with. This just shows the wonderful power of compounding just as Albert Einstein has said. “In sum, William, the early starter, invested a total of $80,000 ($4,000 per year × 20 years at 10%), while James, the late bloomer, invested $100,000 ($4,000 per year × 25 years at 10%). So which brother had more money in his account at the age of retirement? I knew where Malkiel was going with this, but he told the story with such joy and passion that it’s like he was sharing it for the very first time. The answer, of course, was the brother who’d started sooner and invested the least money. How much more did he have in his account? Get this: 600% more! Now, step back for a moment and put these numbers in context. If you’re a millennial, a Gen Xer, or even a baby boomer, pay close attention to this message—and know that this advice applies to you, no matter where you are on your personal timeline. If you’re 35 years old and you suddenly grasp the power of compounding, you’ll wish you got started on it at 25. If you’re 45, you’ll wish you were 35. If you’re in your 60s or 70s, you’ll think back to the pile of money you could have built and saved if only you’d gotten started on all that building and saving when you were in your 50s and 60s. And on and on. In Malkiel’s example, it was William, the brother who’d gotten the early start and stopped saving before his brother had even begun, who ended up with almost $2.5 million. And it was James, who’d saved all the way until the age of 65, who had less than $400,000. That’s a gap of over $2 million!

 

4. The real masters of money are investors, not the consumers of high end luxury items that the media portrays them to be. In the book The Millionaire Nextdoor, the authors state that, surprisingly, most millionaires don’t live the lavish lifestyle everyone believes they do; that’s only the 1% of them. Rather than spending your money, invest it. It’s time for you to decide to become an investor, not just a consumer. To do this, you simply have to decide what percentage of your income you will set aside for you and your family and no one else. Once again, this money is for you. For your family. For your future. It doesn’t go to the Gap or to Kate Spade. It doesn’t go to expensive restaurants or a new car to replace the one that’s still got 50,000 miles to go on the odometer. Try not to think of it in terms of the purchases you’re not making today. Focus instead on the returns you’ll reap tomorrow. Instead of going out for dinner with friends—at a cost, say, of $50—why not order in a couple pizzas and beers and split the cost among your group? Trade one good time for another, save yourself about $40 each time out, and you’ll be way ahead of the game. What’s that, you say? Forty dollars doesn’t sound like much? Well, you’re right about that, but do this once a week, and put those savings to work, and you could take years off your retirement time horizon. Do the math: you’re not just saving $40 a week, but this one small shift in your spending can save you approximately $2,000 each year—and with what you now know, that $2,000 can help to harness the power of compounding and help you to realize big, big gains over time. How big? How about $500,000 big? That’s right: a half million dollars! How? If you had Benjamin Franklin’s advisors, they’d tell you to put your money in the market, and if you too generate an 8% compounded return over 40 years, that $40 weekly savings ($2,080 per year) will net you $581,944! More than enough to order an extra pizza—with everything on it!

 

5. Avoid mutual funds if possible as a lot of them have really high fees that are stripping you away from financial freedom. Mutual funds, on average, have a mangement fee of between 1% and 3% annually. Historically, the average gain/year is 7% in the stock market which means that your money will double in about 10 years. However, if you’re investing in something with fees of 3%, your real growth is 4% which means that’ll take about 18 years to double your money. A much cheaper and better alternative are ETFs as they have a lower annual management fee and you essentially get the same thing (depending on which one you pick). The only difference is that it trades like stocks so you’ll have to pay a transaction fee up front. Not convinced? Warren Buffett himself said that for the average person, the best thing to do is to put 90% of your money in a very low-cost index fund that mimics the S&P 500 and the other 10% in short-term government bonds as he believes that portfolio will outperform any actively managed fund. The average cost of owning a mutual fund is 3.17% per year! If 3.17% doesn’t sound like a big number to you, think of it in light of what we just learned about becoming or owning the market. For example, you can ‘own’ the entire market (let’s say all 500 stocks in the S&P 500) for as little as 0.14%—or as the investment world calls it, 14 basis points (bps). That’s just 14 cents for every $100 you invest. (Just a quick FYI for you insiders: there are 100 basis points in 1%, so 50 basis points is 0.5% and so on.) Owning the entire market is accomplished through a low-cost index fund such as those offered through Vanguard or Dimensional Fund Advisors. And we already know that owning the market beats 96% of all the mutual fund ‘stock pickers’ over a sustained period. Sure, you might be willing to pay 3% to an extraordinary hedge fund manager like Ray Dalio, who has a 21% annualized return (before fees) since launching his fund! But with most mutual funds, we are paying nearly 30 times, or 3,000%, more in fees, and for what? Inferior performance!!! Can you imagine paying 30 times more for the same type of car your neighbor owns, and it goes only 25 mph to boot! This is exactly what is happening today. Two neighbors are both invested in the market, but one is shelling out fistfuls of cash each year, while the other is paying pennies on the dollar.

 

By Ryan Timothy Lee

 

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