INVESTMENT BANKER EXPLAINS: Money Habits Keeping You Poor

Four out of ten Americans only have 300 bucks in savings. You and I are not going to be one of them. Thought I'd break down the 10 things I did to manage my paychecks so you can do it too. If you want to be poor, do the opposite of these things. Number one, track your money. Negotiate your salary yearly, understand investment terms relentlessly, go after feedback, use debt wisely, and be fluent in taxes. Watch that again. Okay, Warren Buffett has an incredible quote which is someone sitting in the shade today because someone else planted a tree a long time ago. So let's walk through my personal P and L sheet that I use to track and make my money, AKA plant your seeds so that when my money goes out, it brings back friends, right? Now pay attention. Your profit and loss statement. This is really simple. All it's going to show you is how much money you make each month, how much money you spend each month, and then what you should do with your free cash flow. First up here at the top annual base salary, you just plug this in from there. That's the only number that you need to plug in in order to get your net monthly salary. Then we add in any additional income streams you have here. I have some rental incomes as examples. I have some new businesses. This could be your E trade account, it could be your wealthfront account, what ever. Then if you have any bonuses, this gets you to a monthly take home pay number. Then I go to my liabilities, how much money I spend each month. And I have a bunch of different liabilities in there. You can change these to whatever you like. I like kind of thinking about rent and mortgage first fixed bills like you have to do it. Then a bunch of lovelies that I like to have. Then I pick some of my bigger categories. So it looks like I make 17,000 in this one and I spend 14,000. Then I look at how much I make as total occupational comp. So that's my salary plus the bonus. You can see I have that inputted here. And then what's my total income? My salary plus all the other things that I have. This is really nice because it gives me somewhere to start and I know how much money I have to work with. That means if I keep spending like this, I only have $32,000 to invest a year. So I'd want to start thinking about is this money that then I put into a business is this money that I put straight into my bank account. And I want to try to track on a monthly basis how much that's going in there, number three, co analysis. Have you ever had that feeling that you're not sure your card's going to be accepted, not sure where all your money has gone? I remember that vividly, which is why I started a COA analysis. A KOA analysis is a course of action analysis and I'm going to break down exactly what that means. It's how you can make more money. You can see here, I actually have the green listed as current. So let's say right now you make 100k and that makes means you make 7,500amonth and you get a bonus of $1,000 a year. So you make a monthly take home pay of 7,500, a total take home pay of about $101,000. And then I kind of have a difference between each of these scenarios and, and a delta. So you can see what the difference is between them for you to show what would happen if you start making, making some changes. So here, maybe I can't change my income. Maybe you're like, I can't negotiate with my boss or he's not going to give me more money. Okay, fine. So can you figure out a way to have a rental income? Can you figure out a way to manage a property so you can make 100 bucks a month helping somebody? Can you figure out a new business venture to do on the side so you can start stacking it up to go from 7,500 to 17,400? This COA analysis is really nice because then you can see with certain amounts of work how can I scale my pay. Nothing gets done at scale without the right people and the right tech. And I know there's nothing worse than switching between 12 different apps to get one project done and then paying for all of those different apps too. To operate at a high level, a lot comes down to streamlining. To do this, there's a piece of tech I love. Been using for years, Dropbox. They recently launched a new subscription plan for teams of all sizes, Business and Business Plus. It simplified my team's processes by integrating our essential productivity tools into one spot. For my media company, we're doing stuff like, well, this, which racks up a lot of large files which Dropbox can easily handle. But apart from file storage, we also love their E signatures capability to manage the team's contracts, paperwork and other deal info all in one place. There's also mobile sign in where we can quickly do this and check the status of signature requests from the app. If we're on the go and with the send and track Capability, we can view real time data like if the recipient has viewed it, how much time they spent on it, and identify where the gaps or roadblocks are. This is valuable for a more personalized and tailored communication to keep those projects moving. Highly recommend. And if you want to try the Dropbox business plans, click the link in the description to get Dropbox Business or Business Plus. So number four, track it. Because the truth is, money is a cruel mistress. If you don't pay attention to her, she'll leave you for somebody who does. You know, there was a time back when every time I looked at my bank account, I was stressed. Now I actually look forward to it. I think it's fun. But if you want to remain poor, don't track your money just like most people do. Most people put a direction into Google theoretically and then never look at it again. They go to the ramp. It can't mean that there's a lake there, knows where it is going, the machine. And that's what they do with money. They put a direction into a GPS and then never look and see if they're actually following the left and right hand turns. But you're not going to do that because we have a plan from your personal P and L and your COA analysis and now you're going to implement it. You're going to use something like Intuit's Credit Karma used to be called Mint or some tracking app. I'll show you exactly how I do it. This is Intuit Mint, which has now become Credit Karma. But basically why I like this is you can see over time how you spent. I stopped using Mint when they switched over to Credit Karma. But I wanted to show you some historicals. You can see Holy hell, Cody spent a lot of money in April. That's $731,000. Why? And then we can dive into that. We can see like how much did I spend by merchant. We could see how much did I spend by category. We could set goals in here. You could also see trends overall. Like what is the total spending that I did inside of a period? Looks like I spent about a million bucks. And why I really like this is remember when I was showing you before on the Cohen P L all your different categories where you have them here over the side. Oh, look at that big tax bill that came through here. So anyway, not all of these are cataloged properly each time, but I like that you can catalog them individually. I do think the budgets is one of the most powerful things that you can do. And you can set these individual Goals overall on the budgets that you have. That's why I like this. I'm not at all related to these guys. I just think you need some sort of platform like this. And this is the one that I happened to use. Tracking money super important. Also making it important, because the average millionaire has seven income streams. How many do you have? I put together a list of 29 different income stream ideas to help you identify which ones are right for you to get started and try. I'm not saying you should do 29 of them. You absolutely should not. What I am saying is you should figure out and experiment with a few of them and then find the one that you like best. Double down on that bad boy. Number five, binge spending and decision fatigue. You used to have to drive to the store, you had to get parking, you had to brave crowds. Comb through the racks, try some stuff on. Now you scroll in your phone and you double tap. So because of that, I was overspending on stupid things often made in China clothing that was garbage because I was tired. This is what's called decision fatigue. You have to stop making decisions and start learning how to auto set them for you. So what did I do? I went into Instagram and I took out my credit card so I couldn't auto spend anymore. If I wanted to buy something, I'd have to input my credit card and then go do it. And then I flipped the friction. Instead of having friction on investing, I had friction that I added on spending. Then my friction for investing went away because I connected my bank account to an app like Wealthfront and basically made sure that every single time I got paid, I invested. You have to invest in yourself first before you spend on others. The idea is don't rely on willpower. Fall back on structures. That way you don't have to have the willpower to not eat the cookie. Just remove the cookie from the house altogether. I use this app called Wealthfront. You can see here. I don't know, I've 36k in it. You can see how much money I am in and up over time. Estimate amount of taxes saved. Because they do tax loss harvesting, you can set up a deposit to automatically go into your account on certain days of the month. So I have one set up. It's like for a hundred bucks on the 1st and February 15th, you do not have to have the decision fatigue to try to remember to invest. The money just disappears from your bank account, goes into Wealthfront and starts over time accumulating money, which everybody likes. Number six, bad money. Habits. That's what my childhood was built on. But it's a bummer because habits or what you do daily becomes who you are annually. I use the Streaks app to set six day things I obsess on. Three of those were money based back when I didn't have much of it. Number one would be do one thing a day to make money. Make that a habit. Two would be do one thing a day to save money. Have fun getting creative with that. And then number three, check your bank account daily because where your energy goes, your attention flows. So watch your money and watch it grow. And it's cool because you can double click on it like this and you can basically see how is she done with no processed foods? Well, it looks like she's actually done pretty well. In fact, I did well yesterday too. I just forgot to fill it out in the beginning. You're going to use this for every single task where you want to make money, you want to save money, or you want to get more creative with money. And it also shows you your best streak ever. Like how many times did you do this in a row? Continuously. You can have them for as many different subjects as you want. I have more than just these two because mine right now are mostly fitness and trying to get healthy and get ripped. Number seven, income to output ratio. Which means find your hourly rate. So if you really want to make more money, you need to spend some hard to understand really important. The best way to do that is to outsource with assistance in the beginning in my opinion. How do you determine hourly rate? First determine the total number of hours worked multiplied by the hours per week by the number of weeks in a year. Next, divide this number from the annual salary. So let's break this down. If you make 50k and you work 40 hours per week, the hourly rate is 50,000 divided by 20, 80 or 40 x 52. That means you make 24 bucks an hour. If you can hire a VA to take things off your plate for about 800 bucks a month or 20 hours a week for ten dollars an hour, anything that costs you less than your 24 rate and is worth more than their ten dollar rate, you should outsource. If you want to use the people that I use, you can use Atlas assistance code Cody. And what I would tell you to do is there's so many things that you can outsource to assistants. I want you to think about this for a second. I outsourced travel. I outsourced getting on the phone with like providers like AT&T or your cable provider. I outsourced buying gifts for family members. I outsourced finding discounts. I even outsourced things I didn't want to negotiate and had my assistants do it for me. And every doctor's appointment for all time. The list is endless. And that means that I can use my time to earn instead of spending on the phone. Number eight. Catalog costs. I do this in four ways. Needs, wants, ROIs and experiences. Clearly, we don't think about what we're going to spend on as we're headed to work in the morning. We just buy things we don't consider should I or should I not? But we're going to change that because you're going to take your expenses for four months and catalog them in each section. It's actually really easy to do with apps like what I told you about previously. Then you can see where your money is really going. Obviously, if I'm you, I want more money going to things that make you more money, AKA rois. Number nine, Spending versus saving seasons. One season provides cash, the other spends it. There are like two humans inside of you, an earner and a spender, and you need to get to know them both and make them become homies. I think this quote's incredible. Your success at being frugal is not measured by your penny pinching, but by your degree of enjoyment of the material world. Sometimes I sort of imagine that minimalism lady picking up a pair of socks or shoes. And then I think to myself, will this bring me joy? And if it doesn't, I'm just not going to buy it. Number 10, last one. This is that 202 level lesson, so grab a pen. It gets technical. This strategy makes 230 times what I make in my Chase account. Our bank rate at chase was like 0.02%. So let's say we had a million dollars at the bank. Veterans is 200 bucks. Yikes. Here's how we did it. Slightly better. Step one, it's called a cash layering strategy. We moved it to Morgan Stanley and a cash layering strategy with preferred savings earning at the time 4.6%. It's always going to be higher than whatever you get in your bank account and it's daily liquid. Then step two, you open what's called an lal, a liquidity access line. A line of credit using your current portfolio as collateral. Portfolio means your money. Any cash alternatives, like a preferred savings account has a 90% factor rate for your credit limit. What does that mean? It means that if you have a million dollars. There, you get up to a $900,000 credit line, aka loan. The bank gives you money, it's easy to put into place, requires no credit checks, et cetera, because it's on the assets, not you. And then step three, you use the LAL to be a cash buyer for. In my instance, we bought an office, we bought a new business, and it gave us better rates than a traditional mortgage did. Now, there are downsides here. More risk, potentially less liquidity. You can't take the money out as easily, and there's no guarantees. Never such a thing as a free lunch. But this is what I'm doing, and I thought it was interesting you guys made it to the end. So you get a bonus that nobody else knows about on this video about how to get really, really rich and definitely how to not be poor. Let's get into this now. Most people, they don't know how to negotiate. Hugely important. You have to learn to negotiate your salary. And I want you to get rich by mastering negotiation. This is good for salary raises, investments, business deals, all of them. Let me give you seven quick secrets so you can finally get what you're worth. First, overarching. Simplify the process. Deep down, humans are not complicated. The only three relevant questions to ask in a negotiation what do they want? Why do they want it? How can I help them get it? Parentheses while still winning myself? Adding unnecessary complexity makes inefficient negotiation, AKA less money. The second is build indebtedness. Ever heard of reciprocity bias? In a nutshell, humans return favors. So how can you leverage this? You know how when you go to a car lot, the used car salesman will give you a drink, it'll give you a coffee, they'll give you a hot dog. When you give a favor, they will make a concession in return and they will likely return the favor. Give and you will get. Next apply loss aversion. People actually are more scared of what they're going to lose than what they will win. So how do you do this? You time to make sure that when they think of loss, it's right about the time you think about your next ask. Leverage Recency bias. Our minds weigh recent information more heavily. That's why you naturally think about things and talk about things that just happened. You use this natural bias to your advantage in negotiations. You use recent successes, bring up recent relevant events because you're only as good as your last project. So when you're negotiating with your boss, you go, hey boss, I just closed this deal here. I'm actually over my performance metrics. Hey boss, remember last week when you asked me to do this and got it to you? Early recency bias will mean that they remember what you're talking about. If you talk about a deal from six or 12 months ago, you're not going to get the increase. Use data. You need to let the numbers do the talking. Words are cool, theories are okay, but numbers actually convince. So you get a list of the core metrics in any negotiation relevant KPIs that your boss cares about or your counterparty cares about. The concrete list of things you've accomplished. Data cells leverage it. If you do not use data, you will not make more money. The last time I went to go increase my salary, I did it very specifically. I went to my boss and I said if I could increase my sales numbers for the division that I ran by 25%, so from X to Y, could I individually have a 10% increase in what I make at the company? I'm allowing the company to make more money. And I'm saying I already understand what you care about and which is more sales. So what if I just insert myself inside that? If you don't understand what data would sell in your negotiations, stop there and try to figure out what are the numbers that the other person cares about and can you make it so that if X is achieved, that's way more than what you imagined. You can get Y, which is a little bit less, but maybe more than they were offering. And the way that you do this is you really have to put yourself in their shoes. Everyone has motives and the real winners know the other person's and they appeal to them. Link whatever it is you want with what they will get in return. This is often do with revenue. Linking like my role will drive more revenue. This software will save us money. It's not actually about you, it is about them. And if you can figure out how to press your finger on the pulse of their desires, you will get more money. Let me show you how to do this in action really quickly. So back when I used to wait tables, which was a decade ago, I remember having a really hard time asking for a day off and getting it around things like the holidays. It was so annoying. I was always working all the holidays or the worst shifts and making the least money. And I remember one of the other girls that I worked with, I asked her how did she get all the holidays off because like she'd be gallivanting around for Christmas and New Year's and et cetera. And she said it's the smallest thing, but it compounds the small thing was whenever she got a big tip from somebody at her restaurant, she did something different than all the rest of us. She would tip out a portion of it to other people who are in her zone. So she'd be like, you know what? I got this really big tip. You guys helped me a lot. We were like managing tables all together. I actually wanted to give you guys a little bit of a piece of that. Now, over time, this wasn't very much money. Maybe she's given up like 25, 50 bucks at each section. But at some point, because she had given almost everybody at the company 5, 10, 20 bucks every now and then when she had an ask later that was probably worth thousands of dollars to a lot of these people, they gave it to her because she knew what they wanted and she had applied the law of reciprocity. Assume a positive outcome. Have you ever gone into a negotiation and you're automatically scared, upset, angry, and then it doesn't work out for you? Well, how you enter a negotiation creates a self fulfilling prophecy. When you walk in and you feel confidence and you smile, you do the power poses. The result is actually a more persuasive argument. In fact, there's a bunch of studies that show a higher response rate to what you want when you come in with a positive attitude. I had no idea that it turns out rose colored glasses actually work. Overarching idea. Always negotiate. Always. You get rich off your salary to start, then you can compound and invest past that. When I first started out, my first Vanguard offer was like 35k. I negotiated it to 37 and a half. I ended at about 60k by the end. Then Goldman offer for salary came in at like 60, 75K. I think I got it up to like 100 and something K and I ended at 150, 175K in salary. If I hadn't negotiated those specific offers in just two jumps at two companies, I was leaving hundreds of thousands of dollars on the table. Negotiate your salary. Always. This one's important. If you don't understand debt, you'll never be truly wealthy. Here's what you need to know about how the rich use debt. We were taught a bunch of lies about debt, that it's bad, irresponsible, dangerous, even predatory. And all those things can be true. But when you actually understand debt, it's like a lever that can lift the world. So here's an example. One of my wealthiest friends told me this and I've never forgotten it. Most People complain about taxes, then pay them. Rich people study taxes, then outsmart them. You might like this resource to do exactly that. The more you learn about money, the more you realize most of us play with Legos while the really, really rich play chess. Here's a 101 on how the rich avoid taxes. Okay, let's say that you have a W2 right now. That's how you make money. Well, Uncle Sam is coming for his W2. Employment tax is the worst tax scenario you can have. So let me show you a breakdown. Social Security and Medicare taxes are the main problem here. They're like 15.3% of your income. But that 15.3% looks vastly different depending on your employment status. W2 employer. Your employer covers one half. You pay the other half based on your salary. If you're a sole proprietor, like an LLC, you pay both halves. So the full 15.3% LLC owners, you pay both. LLC owner C Corp. S Corp. You pay both with a catch. With a C Corp or S Corp, you can categorize part of your income as distributions rather than wages. This is interesting because it actually reduces the amount of tax that you pay. So you pay 15.3%, but not on your entire income, only on the salary you pay yourself. Clear as. I don't know, mud. Okay, let me compare and contrast this really quickly. Here are three people who each make 100k a year. The one with an S corp makes a 40k salary. The other 60k of their income is distributions from the company. So this S Corp guy only pays Social Security and Medicare tax on that salary. 40k maybe. You have a sharp eye and after you looked at that chart, you kind of thought, if owning a business is so great for taxes, why is the sole proprietorship paying twice as much? Smart. The answer to that question is basically two words. Tax write offs. So here's an updated breakdown accounting for potential write offs in this image, let's say you owned a business that replaced your 9 to 5 income one for one. You could still come out 10k plus richer just from tax savings alone. Not to mention the retirement plans, financing options, and mental freedom of ownership. Last of all, and maybe most important, buy the expensive latte. You're never going to save your way to millions. You are going to have to earn it. The way you earn it is watching entire videos like this, watching entire segments on terms and taxes and all the boring things that actually lead to the billions. So buy the coffee, but maybe not from Starbucks, because guess.