Budgets Don't Work, Automation Makes You Rich | David Bach

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Welcome everyone to the School of Greatness podcast. We've got the inspirational David Bach in the house. I've heard your name for many years. You've written how many? 9, 10, 10 New York Times bestselling books back to back to back. You've been on the New York Times bestseller list for 40, 50, 60 weeks. I don't know, something crazy. You've been on Oprah 6 times, Today Show 100 times. You've been on every other media outlet there is. So I've heard about you. I've seen your work. The Automatic Millionaire is something that a lot of people talk about in the money finance space. So you're here now and—

I'm here now and by the way, 'cause I'm a fan of yours, right? So like it's a mutual love fest. You're like, I, I've, I've watched all of this, by the way, it's as cool as you would imagine it is.

It's fun.

Um, so it's really neat to be here with you live in LA because, like, West Hollywood, where this all happens, is pretty, pretty special.

And you live in Florence now in Italy, right?

Going to. I'm going to leave after July 22nd and go live in Florence, Italy for a year.

Which is amazing.

You got to come over to Italy.

I'm going to come and visit. I'm going to come and visit. And you got this new book out. I mean, you've written a number of books. You've got a new book out called The Latte Factor. And why you don't have to be rich to live rich. Now, we were just talking before this started, and you were saying that there's— you've got some controversial things that you do with money that other influencers or thought leaders do differently.

Totally.

For example, you said that there's 2 things that everyone needs to be doing at a young age if you want to generate more wealth.

Completely.

2 things are investing in stocks and real estate. Is that right?

Yeah, it's the 2 primary escalators to wealth.

Escalators. Where you can grow your, your money, your investment, your money can work for you as opposed to just sitting in the bank.

Completely. It's, it's like the game of Monopoly. I was just literally explaining this to my kids yesterday. I said, you know, when you— on the game of Monopoly, you go past Go and you get a paycheck. And if you just go around the properties and you land on them, you pay rent.

Right.

And you can't win the game of Monopoly unless you buy 1 green home, then 2 green homes, then 3 green homes, then 4, then a hotel, right? Like, you have to be an owner in the game of Monopoly. The ironic thing is that the game of Monopoly is a great lesson for all of us for life.

Yeah.

You have to own assets that make you money while you sleep, that grow while you sleep. And the challenge for most of America is that this stuff is not taught in school. Like, this little book, The Latte Factor, I wrote it as a parable to reach the 98% of people who will not normally read a financial book. You've got my other stack over here. But like, most people won't ever read a financial book, so I thought if I write it as a story that you can read in less than 90 minutes, and I can teach you these life lessons. The importance of paying yourself first. Why you don't need a budget. Like, we'll talk about that a little bit. Like, for instance, budgeting. Everybody says you need a budget, and budgets totally don't work. People hate them.

Hate them?

They hate them. It's like dieting, right? Like, you try to go on a budget and you're married, you will fight about those budgets. People go on them, it's totally frustrating.

So do you believe in budgets or no?

I don't. No. What I believe is you need to have a system that doesn't require discipline, does not take time. See, this is the part that's different. The secret to everything I've taught, like you've got my other book here, The Automatic Millionaire, is that the real secret to building wealth, how ordinary people in this country have built real wealth, is automation. They're saving money automatically.

They're not even thinking about it.

They're not thinking about it.

They're not stressing about it.

They're not stressing about it. They're not writing checks.

They're not putting cash in little buckets and envelopes and carrying these envelopes in their thing and being like, okay, I've only got a little bit left.

Look, my grandmother, when she started at 30, she had nothing. And she used to literally save $0.50 a week and put it in a coffee can. And at the end of the year, she took that coffee can down to a brokerage firm and started investing in stocks. That's what changed the entire destiny of my family.

Wow.

Was that my grandmother at 30 with no college education, working at Gimbel's Department Store in Milwaukee, Wisconsin, got tired of being poor. There's some people watching today that are there, right? They're listening, they're watching this, or they're listening to this, and they're tired of being poor. My grandmother was frustrated, and she came home and said to my grandfather on her 30th birthday, Jack, this is not working. Like, and when you're the guy and you hear that, you're like, what do you mean this isn't working? And my grandfather said, what's not working? And she said, We're broke. We don't have any money. And, you know, to my grandmother's credit, she decided to do something about it. And so she literally brown-bagged her lunch every day. She brown-bagged her lunch so she could save that money and go invest. And the way the story turns out, Lewis, is my grandma— that my first book, Smart Women Finish Rich, was dedicated to her. She didn't become rich overnight. She built wealth over her lifetime.

Yeah.

I always say it's decades, not days. People who try to get rich quick stay broke long. Mm.

It's true.

Show me those banner ads on how to get rich quick, and I'll show you a way to stay poor forever.

Right.

So my grandmother realized, like, you invest in great American companies, and you just keep investing, and you leave it, and you leave it, and you leave it. And she helped me buy my first stock at age 7 in McDonald's.

Wow.

And that was 7 years old. It was like she taught me— she taught me 3 lessons about money at 7 that to this day I still teach, which I can share with you. So at 7, we're sitting at McDonald's and she says, you know, David, you can get rich at McDonald's. And I looked at her, I'm like, Grandma, I'm eating my, you know, my cheeseburger and my french fries and I have my apple pie. I said, what are you talking about? And she's like, I'm not talking about getting a job here. She's like, see those people over there? They're working for what's called minimum wage. And I think back then minimum wage was like a dollar.

Nothing.

And she said, it's very hard to make a living on minimum wage. She said, then there's people like you right now. Like, all these people are coming here and they're eating and they're spending money. That's called a spender. And she said, then there's some people who own this place, and owners get rich. And she said— and I loved to play Monopoly at 7. That was my thing. I'd go to my grandmother and she'd play Monopoly with me. And she said, I'm gonna teach you how to play Monopoly for real. And she took me home that day. She opened up the Wall Street Journal. She circled MCD. That's the symbol still to this day for McDonald's. And she said, here's how much McDonald's is. She put me in front of a television screen and said, watch the ticker tape. She taught me how to read that ticker tape. And she said, just call out the price on MCD. That's the price of McDonald's. And she said, tomorrow I'll take you down to a brokerage firm and we'll open up an account and you'll, you'll buy one share of that stock. And then every time you go there, you'll know you're making money from yourself.

Wow.

That is a wow, right? And it's funny because I'm here in LA with you, but I just went to Disneyland I was at Disneyland 2 days ago with my son, who's not— my son who's 9. And Disneyland—

Did you buy Disney?

I bought Disney. That was my second stock.

That's amazing.

So, like, literally at 9, I'm at Disney with Grandma, and I'm like, hey, Mickey, are you guys public? Like, you know, because she taught me to think as a child like an investor. Now I'm doing the same thing with my kids. Now my kids don't want to own McDonald's. They want to own Shake Shack.

Right.

So my son owns Shake Shack.

Right down the street.

A brand new one, right? son after Disneyland is like, I want to own Disney. His older brother owns Disney. It's doubled. He's like, well, I want to own Disney. My kids own Amazon. So, you know, they're, they're learning like I learned. Now, this stuff should be taught in school. Today, this is the school, right?

Yeah.

Like, today what we do is another way to teach people. So, but those are simple lessons I just gave you.

Yeah.

That, that were passed to me, and we just did that in a matter of minutes. Like this book, The Latte Factor, everybody thinks I'm trying to take away their coffee, and I'm not. But there's a— we'll talk about the story inside this book. It's about a, you know, 20-something young woman who learns that she's richer than she thinks, and she actually learns it from somebody who works at a coffee shop.

Wow.

And one of the lessons that the person teaches her is, ironically, it happens in Starbucks. He says to her, you know, the $5 that you're spending on Starbucks, you could also be buying Starbucks stock. And we have the numbers in the book over how like $1,000 invested in Starbucks would be worth over a quarter million dollars today when it went public.

Wow.

So I always say like, look, if, if you don't want to give something up like that $5 at Starbucks for your coffee, then buy the company stock, right? Invest in where you spend money.

That's interesting. If you go there every day, you put $5 a day into buying the coffee, put $5 a day into owning the company as well.

And now there's so many companies that make this easy, right? Like, I'm an investor in a company called Acorns, fastest-growing financial service company in, really, in America today. It's covered 5 million accounts for millennials.

Wow.

You can open up an app on your phone and in less than 10 minutes have an account, go click, click, click, and be saving change, right, into a diversified portfolio. And it costs like a dollar a month. Wow. So technology is making it all much easier for everybody.

With a few clicks, you can be investing in stocks.

There's so many great resources. Like, 20 years ago, this was complicated. You would have come into my office at Morgan Stanley and I would— Fill out paperwork.

You have to—

11 pages of paperwork to save $50 a month automatically.

Oh my gosh.

Today, again, you open up an app, you go click, click, click, and it's done. And it's all automated, right? That's the— going back to this idea of like, you don't have to do it manually. Like, you've got your pad of paper, and I always tell people, you know, in the back of this book, we've got a little sheet and you track where your money goes for a day manually. But there's also a lot of great Right? Websites and apps can help you do that too. Yeah.

I love these lessons about your grandmother early on of investing in the places you're spending money at already. And I think of 2 influencers. So you say there's 2 things to really generate wealth, and that's real estate and stocks, the fastest way.

And we haven't gone into the real estate part yet.

Right. And it's funny because my friend Ramit Sethi always says, like, don't give up your lattes. And I know you're not saying that.

Yeah.

You're not saying that, but he's like, don't give up your lattes, but invest in things, you know, automatically as well.

Well, it's funny, we're meeting our buddies.

Yeah, yeah, he's great.

So I go, I'm like, buddy, I know you're always making fun of my latte thing, but it's not about the lattes. It could be bottled water, it could be cigarettes, right? It could just be eating out lunch every day, right? Right. Like, we put out a little meme yesterday saying like, you know, make it— you say you don't have enough money to go on a trip, but if you just made your lunch at home for the next 90 days, you'd have enough money, right, to go on a trip, right? Like, the way you get your freedom And your dreams is you buy them.

Mm-hmm. Right?

Right, exactly. You buy them. You don't borrow for them. You buy them. What too many people do is they actually borrow for them. They want to go on a trip and then they just put it on their credit card.

Yeah.

And then instead of that trip being a $1,500 trip, by the time they pay interest, it's a $3,000 trip.

Oh my gosh, yeah. This is the, uh, Dave Ramsey model of like never putting anything on your credit card. It's like— so we've got the latte. And we've got for stocks, and we've got real estate as well. And I've heard, uh, I've seen so many studies online of like the pros and cons of buying real estate. For people that own real estate and they're getting checks every month from renters, great. But what if those renters leave and you have to fix it up and all these costs and taxes and fees and these, these things that you have to pay on real estate that you're not really aware of until after the fact or some type of disaster?

Right.

Then you're like, this is stressful. So we got the Grant Cardone model, which he says you never live where you own. What does he say? He says rent where you live and own what you rent, and rent what you own or something, right? So it's never live where you actually own something is his model.

Yeah.

But he's like, you need to be in real estate and own lots of other things that you're renting out, but don't own your own home that you live in because you're not paying yourself, right? You're not getting paid from that investment. So what's your thoughts on that?

So we'll leave Grant out of this for a second. Let's just go to the core concept of I'll go back to the Latte Factor book. What happens is I wrote this book as a parable, again, because like my 15-year-old just read this book cover to cover in 2 hours and was like, wow, Dad, you know what? I actually need to do this. I need to open up an IRA account. We've got this chart that shows a young person how if they save $2,000 a year at the age of 19— $2,000 a year at the age of 19.

By 65.

They only do it till 26. They do it from 19 to 26.

Yeah, I saw that.

By 65, they have over $1 million in savings.

It's crazy right here.

It's crazy. I don't know if you can even show that later on in camera shop, but—

And if you started at 27, $2,000 a year—

Does it all the way till 65, that person— so they've saved way more money, right? They've saved their basically their entire lifetime. They end up with $805,000.

That's crazy.

Still a lot of money, right? But my 15-year-old son looked at this chart and goes, Dad, I'm 15. If I do this at 15, I'll have more than $1 million, right? By the way, pretty smart, right? I'm like, yeah, actually you'll have more like $2 million. He's like, well— and then he takes his calculator out on his phone and goes, that's $5.41 a day. I go, exactly. That's why I didn't want you to buy the bottled water when we were Alta skiing yesterday. That's why your dad had the free water and you went and bought the stupid water.

Right.

Because that's enough money to do every day to have an IRA account. And he's like, well, then we need to do that.

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You know, these lessons are so critical. So what I did with this book, and I'll get to the real estate here, is that I wanted to teach these core lessons that there's 3 secrets to financial freedom in this book, which are pay yourself first. First person who gets paid is you. The math—

So don't pay the bills first.

Don't pay the bills first. Don't pay taxes first. Don't— so most people, they pay taxes first. They go to work at 9, they work until 12 o'clock to pay taxes. I mean, here in California for sure.

Yeah.

Right? Then they go— then from 12:30 to 1, it's lunchtime. And then from 1 to 3, 3:30, it's housing costs, car costs. And then from 3:30 to 5, it's everything else. And what, what most people hope through budgeting is that somehow they're gonna have a little money left over at the end of the day to save. Completely wrong philosophy. You carve out the first hour a day for yourself. You become financially selfish. So in this book, Zoe Daniels, who's the main character, a 20-something millennial, she's living paycheck to paycheck. She lives in Brooklyn. She's traveling to New York City on the subway. She's working in the Freedom Tower. She's a pub— she's an editor of a travel magazine, but she never travels. And so after—

She makes no money. She's working 70 hours a week.

Exactly. And what happens to her is what happens to so many young people in big cities. She's making a little more money each year, but she's not saving more. Her expenses just keep going up. So 6 years in, she's totally depressed, and she goes through this building called the Oculus, and she sees this LCD screen. This is all real, this is all a real place. And she sees this LCD screen that's a football field long, and it says on the LCD screen, if you don't know where you're going, you might not like where you end up. And this is all underground. And she takes this escalator up to her office, which is the Freedom Tower, and she's thinking about this. And as she comes up, she's by the 9/11 Memorial, because that's what's next to her office.

I know this place very well, yeah.

And I live across the street from there.

Yeah.

And so I walk through this every day. And so she comes up, and for the first time in 6 years, she actually sits down and looks at the memorial, because she's always normally just turned right and gone into her office. You know, she's busy. She's a New Yorker rushing to work. Today she stops, sits on a mobile bench, looks at the 9/11 Memorial, sees people crying, thinks about the people who've died here, and says, says to herself, where am I going with my life? And goes into the office depressed, and then proceeds to tell her boss that she's— she's like, she can't afford anything. And then through the book, she gets these mentors. And she learns about paying herself first and the magic and the miracle of compound interest, how $5 to $10 a day could start to free her. And then later in the book, she learns about the importance of owning real estate because she's renting.

Mm-hmm.

And she thinks she could never own. And one of the mentors, Henry, teaches her, you know, the amount of money that you're spending on rent, you can make a mortgage payment.

Mm-hmm.

And you could own an asset. And she has critics in her life who are like, oh, none of this stuff would ever work for you, right? It's, you know, You can't make 10% rates of return. You don't want to own real estate. But then she's surrounded by some people who are older and wealthier and wiser, and they show her how to get there. So when I go to homeownership, which I took a way to get to your question—

Yeah, yeah.

The bulk of wealth that's built in America is built in real estate. So Grant's not wrong. You should buy real estate. But guess what the easiest real estate to buy first is?

Your own home.

Your own home.

Yeah.

First of all, it's the easiest thing to qualify for a loan for because you're living in it.

It's your— yeah, right.

So the bank will loan you money to buy a home. Second thing is it's tax deductible, right? You get tax deductions on your interest. Third thing is you have to live somewhere as long as you're alive so you can own it eventually free and clear and have very low overhead, next to nothing besides taxes and maintenance fees. Or you can rent for the rest of your life and never have your expenses go lower. The myth is that you want to rent because you don't want to have to pay maintenance and insurance and taxes. Guess what? They're all passed on to you, right? The landlord passes those fees on. The landlord doesn't say, "Oh, you're a renter. I don't want you to pay those things." No, the landlord charges you by escalating the rents. I used to live in LA in 1985 to 1990.

Much cheaper then.

I went to USC. All the real estate here was like. Probably one fifth what it is today, right? And so I'm in a friend's house in the Hollywood Hills. She bought it in 1994, right? Out of out of college. She did all the things you have to do to save. She bought the home as a total fixer upper. I'm sitting in this home overlooking all of Hollywood last night with this beautiful pool that she's put in. One of those edge pools. I I don't know what her home's worth today, but I bet it's worth five million.

Wow.

And I bet it's gone up $3 to $4 million since she bought it.

Wow.

And you only have to do that once in a lifetime to build wealth forever.

Right.

So if you don't own real estate, you don't get in the game building wealth. There was somebody who was on CNBC the other day comparing how— well, they actually used Brooklyn as an example, which is ironic because Zoe lives in Brooklyn. They said, you know, if you rent in Brooklyn, it's $2,500 a month. It's not, by the way, it's more than that. But if you did, If you rent for $2,500 a month, he said it would cost you— could cost you $4,500 to own. And he said, and you know, so if you didn't do that, you could save the extra $2,000 and you could put it in a diversified portfolio and you could make a better rate of return. And I'm watching this and I'm thinking, no, that's wrong. And here's why it's wrong. I believe in the stock market. I give examples of earning 7, 8, 9, 10%. And I know, I know stat-wise, meaning like statistically, the rates of return in the stock market have been higher than real estate, but it's misleading. The reason it's misleading is if you give me $100,000 and you put it in mutual funds and I earn 10%, my $100,000 grew to $110,000. Follow me so far?

Yeah.

And the next year, and the next year, right? So, but if I put $100,000 into real estate, I didn't put $100,000 in real estate. I put in probably $20,000. The bank loaned me $80,000. So when that $100,000 grows to $110,000, I just made $10,000 profit on a $20,000 investment.

Right.

That's a 50% rate of return.

Right.

And if I bought it as a personal residence, which is what most people do first, I can sell it. And if I'm single, I can make up to a quarter of a million dollars tax-free. Wow. After 2 years, it is wow. It's the only thing I can buy and sell and get tax-free money.

If I'm married, you don't have to pay taxes on the money from selling a home on the first quarter million dollars if I'm single. Why the first quarter million?

That's just government law right now. Wow. The first quarter million in profit, in profit, you don't have to pay no taxes.

Wow. That's interesting.

I didn't know that. If I'm married, if I'm married, then what? Half a million. Wow.

Seriously, you don't pay taxes on any of that.

See the hair on my sleeve? You don't pay taxes on any of that on the first half a million dollars.

This is all across the US.

All across the US.

Wow.

So like my home in Manhattan that we just sold because now we're moving to Florence and I'm not going back to New York. Bye, New York.

So the first, the first half a million, you don't pay any taxes.

You can keep half a million tax-free legally, and I can do it over and over again.

Wow.

So I've now done this 3 times.

How much of a tax you pay on the other Profit.

Then you pay long-term capital gains.

Yeah.

So I had a home in San Francisco, same thing, moved to New York, sold it, got all that money tax-free, bought my first home in New York, sold it, bought a bigger home in New York, got that money tax-free. Third home I've just sold, got that money tax-free. I can never do that in mutual funds unless it's in an IRA account, but that's a different game. And again, I want people to use retirement accounts.

Yeah.

And then I want them to own real estate. If you have those 2 vehicles, You pay yourself first. You save money automatically. And you own real estate. And by the way, I'm not against— I want people to own rental properties too. I own rental properties with my wife. She's got a rental property in our building.

Wow.

But the way you get usually your first rental property, you buy your first home. Then you rent that home out. Then you buy a second home. Live in that for a while.

It's like Monopoly.

It's like Monopoly. Then you rent that home out. In The Automatic Millionaire, I say 3 homes over a lifetime and you're done financially. You don't need to worry.

Yeah.

2 of them you've rented out, you've got rental income. The 3rd one you've paid down, you have no debt, and now you're in your 50s or 60s and you're not dependent on Social Security. Yeah.

And those 2 homes should be paid off by then, and then they're just paying you every month.

And we get people, you know, posting on our website all the time. We had one the other day go, you know, 10 years ago I had nothing and now I've got 5 rental homes because I did exactly what you talked about.

Wow.

So it's— these are not pie-in-the-sky ideas. I'm not telling people to go buy homes and flip them like I was listening to some radio ad on the way over here, and I thought, those are the things that don't usually work. You go to one of those seminars and they're free, and then next thing you know, they're putting you into a $30,000 coaching program to flip homes. I'm just talking about basic, simple stuff. Pay yourself first, 1 hour a day of your income. Don't budget, save money automatically, and get yourself into a piece of property and then pay the debt down.

So buy a home as early as you can.

As early as you can. And the thing is, when you're young, what happens is you think you're— a lot of times you'll come to a place like LA. Or San Francisco.

You're like, I can't afford this.

And you go, I can't afford it. So you know what you do is you buy something and then you get 2 or 3 of your friends to be the ones that rent from you. And they help you make mortgage payments. My first home I bought with my best friend from growing up. It was a complete dump. It needed— we needed sweat equity. We put every dollar that we had into it. I had less than 6 months of expenses set aside. And I was in real estate. I was in commercial real estate, commission only. I remember calling my dad and going, you know what, I don't have enough money after 6 months to pay mortgage payments. What am I going to do if I don't make money in, in my job? He's like, well, son, nothing will motivate you like that.

Yeah, it's true.

And as I'm cold calling, he was right.

Yeah.

And we rented bedrooms to friends to help us make mortgage payments. Crazy.

So do what you got to do.

You gotta do what you gotta do. That's how you get started.

That's it, man. So how much should someone put down on a home? Should they put as much as they can down first, or should they put the minimum amount down?

The most important thing when you buy a home is make sure you can afford to buy the home. And so whatever the bank— I always start with whatever the bank will loan you, borrow less.

Borrow less.

Yeah. So if the bank says I'll loan you $200,000, borrow less than $200,000 because they don't really care as much as you need to care. So borrow less than you think you can afford. You know, people always try to get the next level house Get the house you can afford or lower. Your first home is rarely your dream home. My mom actually cried when she came to see my first house because she couldn't— she's like, oh God, you don't know what you've done. I'm like, we didn't actually know what we had done. There's a lot to be said for being young and stupid, right? But we thought it would be fun to fix all this stuff up. It was a lot of work. Um, but I think you want to— you want to buy less than the bank will loan you. I, I kind of Scribe to Warren Buffett, right? Like a good old-fashioned down payment, 10 to 20%. More is better because your payments are lower.

Yeah.

But one thing is you need to have 6 months to a year worth of mortgage payments set aside. I would not recommend somebody do what I did, which was only have like a little window of—

Right, right, right.

Um, I think if you can have a year's worth of expenses set aside, you're better off to put— you know, you're more prepared to buy your home.

Mm-hmm.

But I will say one thing is that people think buying a home is risky. So is renting.

Right.

Right? Like, if I buy a home, I've got to pay the bank. If I rent, I've got to pay my lease. If I don't pay my lease, my landlord can evict me.

Right.

If I buy a home and I don't pay my mortgage payment, it's a lot harder for the bank to get me out of that home.

Mm, really?

Yeah. So, um, I'm not suggesting people buy homes and not make bank payments. What I'm suggesting is the same discipline it takes to pay rent is the discipline it takes to make a mortgage payment. But owning real estate long-term frees you, especially if you're lucky enough to be in markets that are going up. Wow.

Now, I feel like I've been doing everything I can. Maybe not yet, 'cause I don't own real estate. But I've invested at a young age in maxing out my whole life insurance policies for the tax-deferred and all those things. I've got 401s, Roth IRAs, defined benefit plans all maxed out every year for many years. I invest in my own business. I invest in my personal brand.

Yeah.

I invest in learning new skills. I invest in people, my team. I invest in new projects that we own, assets within my business. I'm investing in real estate funds. I'm investing in all these things. And what would you say is missing for me that, that I could be doing? I mean, I put a lot away every month.

Well, I mean, first of all, listening to you, I'm like, you're doing everything right, right? And a lot of things you just said so quickly that people don't know what you're talking about. But like a defined benefit plan, it's the single greatest vehicle ever.

Is it?

For a self-employed person.

Okay.

Who doesn't have a bunch of employees. Right, right. Because you can put up to over $200,000. Yeah. Tax deductible. Into that retirement vehicle. Now, most people don't set this up until they're in their 50s.

Wow.

And, and a lot of people say, oh, you can't do this, and you really don't want to do it until your 50s because of all these different requirements. Totally wrong. You can go and max out a defined benefit plan for 2 or 3 or 4 or 5 years, then just shut the plan down. Then roll— if your income doesn't stay the same, then roll that into an IRA account, and you can get a fortune put away tax-deferred. It's all about taxes. I don't want to pay taxes if I don't have to.

Right.

Legally.

Not being smart.

Yeah, not being smart. But, well, but that's what people who become wealthy do. They focus on not paying taxes legally. So when you put $100,000 or $200,000 into a defined benefit plan—

For the last 4 years.

Yeah, you didn't pay taxes on that money.

Right.

Now critics will go, oh yeah, but you'll have to pay taxes later. Fine. I'll have my money grow for the next 2, 3 decades and I'll pay taxes later. I like that.

Yeah, yeah, yeah. Because eventually you've got to pay taxes on something, whether it grows tax-deferred or—

Eventually, when you go to, when you go to take the money out of these retirement accounts, you'll pay taxes on it. So what? I'd rather pay taxes later than now. Now, you mentioned a Roth IRA. I love Roth IRAs for people who can fund them because the money, you pay taxes going in, but it grows tax-free forever coming out. So they're both great vehicles. I like insurance for the right person. Um, you don't have any, but you're not married, you don't have any kids. So the ironic thing about insurance, usually insurance is designed to be a death benefit.

Absolutely.

It can also be an investment vehicle, which is how you're using it as a sophisticated investor.

Yes.

So with everything that you just said to me, and you're probably invested privately in companies too, right? Like startup companies? Oh yeah, of course.

Which that doesn't make me any money, but those are just risky.

We call that the hopeful someday pile. Yeah, exactly.

I've never made any money on the last 8 years of all like 8 startups that I've invested in, but—

It's a hard way to get wealthy. Nobody really talks about that. It looks super sexy, but usually you're putting your money in and you're lucky if you see it back in 10 years.

Yeah.

Um, what I would say, not knowing how you organize everything, because it seems to me like you're doing everything right.

Yeah.

It's all about having this on a dashboard.

Mm-hmm.

Because as you see it all, as you start to have all this stuff, what happens is we're all busy, and if you're not tracking everything, that's the big thing.

I just started doing that like 7, 8 months ago because I was like, I don't even know where all these accounts are. They're all in different portfolios and plans and companies, and like Where's all my money?

So whether you use, you know, there's all kinds of tools you can use, but even just a simple spreadsheet which lays it all out. So also, if God forbid something happened to you, your family would know where everything is. They'd know where everything is, yeah. Because, you know, if you, if you die and your family doesn't know where the stuff is, they may never get it.

Really?

Yeah, because like, let's use an example of investing in a startup. Okay, you know, God forbid something happens to you tomorrow. And your family doesn't know that you have, you have private equity in a startup.

Yeah.

They're not coming looking for you.

Mm.

You know, if you have money in an old 401 plan, there are billions of dollars in old 401 plans that people have died that the family doesn't know it's there and it's just sitting there in an unclaimed asset. All the time this happens.

Wow.

So having it like it's all sitting there, it's all organized, you know, you have a sister, right?

Yeah, I've got 2 sisters and a brother.

2 sisters and a brother. Like somebody in your family that you trust is like, you're like, here's where all the stuff is if something happens to me.

Yeah, yeah. Okay, so how would it organize? And would you recommend me investing in real estate? See, I invest in real estate funds because I'm like, I don't want to manage a property. I don't want to deal with it. But I know I'm investing in real estate.

Like, first of all, you're renting this apartment?

Yes.

I mean, so you gotta buy a place here in LA. Are you gonna stay in LA?

Yeah.

So I'd buy a place, and then by the way, I'd rent part of this. Like, this is an office here.

Yeah, yeah.

I'd have your company, your LLC, rent. Or, you know, the other thing I'd do I buy a condo in a separate LLC, and then I have your business rent the condo.

And pay my— pay the business?

Yeah.

That's legal?

Totally.

Interesting.

You still have to pay taxes somewhere on it, but the point is your business— your business is paying the rent to another piece of property that you own. Ultimately, how business owners get rich who don't do what you're doing— because you're doing things that are the exception— Most business owners don't have defined benefit plans, don't save money automatically, aren't actually investing like you are. I give you all the credit in the world. Like, a lot of influencers are broke.

Yeah, they are.

I mean, you know this, right? Like, you see all the bling-bling.

They make a lot of cash and they spend it all. They have nothing to show for it. It's like pro athletes too.

It's really sad. I spent 9 years at Morgan Stanley, and what my wealth— my clients who became wealthiest, I always said they became wealthiest by accident. They owned a business and they bought real estate that the business was in. And 20, 30 years later, that building was worth millions, sometimes tens of millions of dollars. The business wasn't worth anything.

The building, the asset.

Building was. So, and then if the business is worth something and you can sell the business, you can make the buyer turn around and have to do a 10-year lease with a building that you own, and you're collecting rent. You don't even sell the building, you just stole the asset, right? So you should totally buy something.

Okay. It's always been like the The peace of mind and the freedom of like, I don't want to deal with the logistics, so I'd rather pay a premium to have freedom.

Yeah.

Peace of mind and like, someone can fix this and take care of this. I just want to do what I do best, focus on that.

But I like— I find a condo in down— like in this area, there's no logistics. I've had a condo for, well, most of my time in New York, right? Like, I don't do anything. I don't know how to do anything. My wife says, you know, you're totally useless, right? Like, I'm like, that's why we have the guy downstairs. You just call him and he does it, right? Exactly.

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So there's 2 things that you need to be doing: real estate, stocks. And I have been doing index funds for everything that I've been doing because I tried doing like individual stocks and betting and guessing and I'm like clueless to this stuff. So I'm just like Warren Buffett model, just put my money in. If it grows 7 to 10% a year on average or whatever, just like It's not sexy. That's what I've been doing. Is that what you recommend as well?

It's a great way to go. By the way, I invest in Warren Buffett too.

Yeah.

I own— you own Berkshire Hathaway.

Okay.

So I invest in Warren Buffett. I own Berkshire Hathaway. I also own index funds. I run a registered investment advisory firm. I think I was telling you that earlier, that I'm a co-founder of a firm that literally today we just went over $7 billion on the platform.

Amazing.

Um, so I sit on our investment committee. So I've got a lot of different things, right? I've got mutual funds and and ETFs, index funds, and individual stocks. But if you're not somebody that's excited by individual stocks— like, you heard me talking about how excited I was when I bought McDonald's.

Yeah.

Or Disney. If that doesn't excite you, then put it in an index fund. Warren Buffett told his wife, when I die, take the money and put it in this Vanguard index fund. That was his advice to her. And I'm like, you know why? Because you can't really go wrong owning an index fund. If you don't want to spend a lot of time on it, I think the real key to managing money is diversification. You shouldn't have all your money in the S&P 500. It shouldn't be all stocks. Even though I say you need to own stocks and real estate, I own bonds.

Mm-hmm.

I've got a diversified portfolio. Our clients have diversified portfolios because I actually am shooting to get the return that you just said earlier. My goal for my money is somewhere between 7%, 8%, 9% annually.

Yeah.

And the reason that is, is that I'm not looking for home runs. I'm looking to double my money every 10 years. There's a rule called the Rule of 72. It's a great formula to learn. The Rule of 72, you take the number 72, you divide it by the rate of return that you're earning, and it will tell you how long it takes to double your money.

So if you're getting 7% or 10% rate of return, you divide that by 72 and it'll give you the number.

So 72 divided by 7, it's going to come out right at like 10 years. 72 divided by 10, gonna come out right at 7 years.

So that's doubling your money.

Doubling.

Yeah.

If you're in a bank account earning 1%, you're gonna double your money in 72 years.

Oh my gosh. So get your money out of a bank account, savings account.

Only, only your emergency money should be in a bank account, and even then it needs to be at least earning today 2%, right? There's all kinds of online savings vehicles today that are earning 2%, and so don't be earning zero at the How much should you have in—

what's an emergency fund? You know, it's like if you got a lot of cash, how much should you have in savings, checking, and then the rest in stocks or real estate?

Okay, so if you and I were having this conversation and nobody was watching right now, all right, like I'd say, I'd say, well, I would say to you, Lewis, how much money do you need to have in terms of expenses set aside to feel safe, to sleep well?

For how long?

Expenses for just in general, for like 6 months or something?

Or— but so I would, I would ask you personally, what's the, what's the amount of money?

Oh, probably like $100 grand.

Oh, I wasn't even asking the dollar amount.

Oh.

I would just ask you like in terms of how much months, how many months?

Yeah, 6, 6 months or something. Yeah, maybe. I don't know.

Okay, so, so, so that's your answer. So for you, and then I'd probably go, are you sure? 6 months? I would probably go like, if I was your advisor, I'd probably like beat your butt, like, no, maybe have more than that.

Like if I lost everything and this is all I had left type of thing.

See, everybody's different in terms of how they sleep at night. Like, for me, I want 2 years of expenses set aside in cash.

Okay.

I sleep better.

Peace of mind.

Peace of mind.

Yeah.

Most Americans don't even have 3 months of expenses set aside. In fact, what led me to write The Latte Factor was about 3 years ago, the Federal Reserve came out and said that 4, 4 out of 10 Americans can't get their hands on $400 In case of an emergency. 6 out of 10 Americans can't get their hands on $1,000 in case of emergency. 7 out of 10 are living paycheck to paycheck. They're men. And 8 out of 10 women are living paycheck to paycheck.

Wow.

So when I say, oh, I need 2 years, that's really extreme, right? Like, I would love to get the average American to get $1,000 in savings set aside.

Wow.

Which, by the way, if you just save $10 a day, In 100 days, you've got more than 6 out of 10 Americans. So when I go back to the latte factor metaphor, I'm like, you know what? Yes, $5, $10, $15, $20 a day can change your life. Because in 100 days, you could have more money than the average person walking down the street.

Yeah, in 40 years, you're a million— you got a million bucks.

And again, people go, oh, well, in 40 years, a million dollars won't be worth a lot. Guess what? It'll be worth nothing. A million dollars more than zero.

Exactly.

Which is what the average American's worth So, we're working towards— and I was thinking about one other thing on the way over here because things get me fired up. The dumbest thing Americans spend money on are new cars.

Mm.

So, when you borrow money, you borrow money to buy assets that can go up in value, like a home. You don't borrow money to buy assets that go down in value, like a car. So, the average American buys a new car constantly, right? The car industry is just starting— it was on CNBC yesterday saying that the car industry is getting nervous People are gonna buy less cars.

Good!

People should buy less cars. Millennials are starting to use Uber everywhere. My kid doesn't even want a driver's license. The average American's car payment right now for a new car is $533.

Crazy.

A month. When you factor in insurance, and God forbid you have to pay for parking, gas—

$1,000 a month almost.

It's almost $1,000 a month, and the average American is spending 3 months a year to make their car payments.

Wow.

And when you think about it that way and you're buying an asset that goes down in value the moment you drive it off the lot by 20%, 30%, 40%, it's just the wrong place to put your money. But we're marketed to get the new lifestyle, the new hot car, the new special thing. And we're basically trapped by marketing. We're trapped by, you know, when you succeeded, you should have this. And so what we've done for a lot of young people is we've gotten them— and we haven't talked about student loans yet, but like, you know, Zoe Daniels has got student loans in this book.

And $100 grand, $300 grand, whatever it is.

We're trapping an entire generation, 2 generations now, with student debt that they'll never be able to pay off. And it's, it's sad because if you go to college and you're— first of all, you don't even know better, right? And you take out $100,000 in student loans It could take you 20 years to pay those loans off, if you're lucky. And you can't walk away from those student loans. Literally, the laws are set up that you can't get away from student loans. It's the only thing in life that you can't get away from through a bankruptcy, student loans. That's because the government got into the student loan business. They should have never been in the student loan business. I went to school right down the street here at USC.

Right.

That was a super expensive school to go to when I was going there back in 1985. Today it's a fortune.

It's like $50 grand a year, $60 grand a year, right?

It's crazy. And I just go, you know—

How do you afford to pay that off?

It's just so hard. And I think, you know, I would tell anybody who's young today, don't, don't get trapped by these debts. Like, go to junior college for 2 years. Yeah, actually, like, find it, find an inexpensive way. Go to junior college, transfer to state school, go to state school, transfer into the school you want to ultimately be at when you're a junior or senior. Take on as little debt as possible. We're just not preparing people properly to realize how We're not, we're not explaining correctly that these are handcuffs. And so people are getting out of school with these handcuffs that aren't a year or two long. That's what it used to be. It's now decades long. And so, I don't know. I mean, I guess—

Unless you can learn how to build wealth fast, you're not going to pay that off.

You're not going to pay it off. I mean, imagine if you and I had an online course and we said it's $100,000 to join. We have absolutely no way to guarantee you that you'll ever make money from it. We're not even sure we'll improve your life. But it's— but by the way, we know you don't have $100 grand, so borrow it.

And then pay us massive interest.

We would go to jail, right? Like, like, literally, like— but that's what the university systems are like. So I'm not against college. I want my kids to go to college. I just don't want people to get these, these debts.

It's crazy. It's interesting because my dad never bought new cars. He would have like 10-year-old cars. We had a 1989, uh, Oldsmobile. They would— I don't think Oldsmobile's out of business now, but we would drive— he would drive that thing.

Yeah.

He would, he would run his business and drive that thing, and he would just save his money and invest it. And, um, the challenging thing is, you know, I look at my mom now. She went through divorce, I don't know, 20 years ago with my dad, and she bought some real estate properties and made some money renting them out. But she had a lot of expenses of her own, and she really didn't have a lot of savings, right? She had the money to live off of from the divorce, She was working to pay for stuff. And I look at it now, she, you know, she's gonna have her—

what is it—

Social Security that she can take out now, or if she waits a couple years, it's a little more money that comes out. And then she's got a retirement from working at the company she worked at.

She's got a pension plan.

Yeah, a pension plan. But they're both like, what, one's like $1,000 a month, one's maybe $800 or $1,200 a month. It's $2,000 a month. And she just moved to LA. She's got a little apartment down the street. That doesn't even pay rent for the rest of your life, right? If you got $2,000, $3,000 a month, it doesn't even pay that much. The challenge is, it's like, what do you do then? You know, it's like, you can't save anything. You don't want to go keep working. You know, you're working part-time at that age, maybe.

It's— this is why like 80% of the poverty-stricken elderly are women.

Wow.

What you just described is the single biggest financial challenge. This is what women face. When I wrote Smart Women Finish Rich, it was because I saw all these women being hurt financially.

Yeah.

They had gone through divorce. They had gone through widowhood. 80% of women die widowed. 80% of men die married. So what happens in the real world in marriages is that a lot of times the wife has delegated the financial well-being to the husband.

She's not educated then when he's gone.

She hasn't learned. I tell in this book, Zoe Daniels is basically the mentor, says to her, Prince Charming is not coming. You need to be your own Prince Charming. And in this book, the mentor who's also— I don't want to give it all away, but one of her mentors at work turns out to be extremely wealthy. She had no idea. And she says to Zoe, you need to be in charge of your finances. I don't care who you marry, local bank president. As a woman, you have to take charge of your financial life. Because what you don't want to do is turn— I mean, I hate to say this, but you don't want to turn around at 68 and figure this out. Because at 68, like you just said, She doesn't want to work anymore. A lot of people are having to work in their 60s because they don't have enough money.

Yeah. And unless they have family that can support them and pay for them. But you can't rely on that for everyone. You know, she's got me.

You need to put your mom on the payroll.

She's got—

she is.

She is. Trust me. So she's— I mean, she's fine.

Yeah.

But it's like, if she didn't have me or someone in the family that could help out, it's like, then what?

No. And, and, and, and—

I'm not blaming her or anything. She did what she could. She saved her money in the best way she had retirement, you know. She's still working, but it's like, it's still not that much money, you know?

It's not that much money when you know— I would go back to when you know better, you can do better, right? Like, like this little book, which I hope will go worldwide, um, I was inspired to write it by Paulo Coelho. He's my hero as far as a writer goes. And he's great. And I went to Geneva to meet him and have dinner with him. And I want to meet him someday, you know. I've had him. Brendan is— Brendan and I went over to have dinner with him. Yeah. My wife goes, "You're gonna go to Geneva to have dinner with Paulo Coelho." With Paulo Coelho, he wrote The Alchemist.

I go, "It's the greatest book of all time." Greatest book of all time.

She goes, "You're gonna go to dinner to have—I mean, go to Geneva for dinner." I go, "Yes, I would. Yes, I am." And right, this is also the importance of like you know when you get a chance to be in front of somebody that you respect, admire, and want to learn from. Yeah, you get on a plane and you go. So we we go out. We close this restaurant down. Paulo Coelho is amazing. We go to we have drinks and. And we basically stay out. Paula likes to stay out. So we're— I'm like, I'm staying out with Paula as late as Paula wants to stay out. And around 2 or 3 in the morning, his handler's like, okay, we gotta get going. And he says, and he says, um, let me ask you a question, David, before, before I leave. Like, what's the book that you haven't written yet that your soul desires to write? Right? All right, Paula. And I go, Paula, I want to write this book like you've written, like a parable. I want to write a A little story that will inspire people to realize that they're richer than they think, that they have more strength than they know, and that their dreams can still come true. And I want to package up these financial lessons in a little story that anyone can read that'll translate all over the world. And he goes, then David, you must write this book.

And then he walks away.

And then he leaves. And like, literally, Brandon's like, what did he say? So like, we're leaving this restaurant, you know, pitch black out, we're totally buzzed, and I'm like, he said I should write the book. Right? So I'm like literally on cloud nine, and I get home and I go, you know, I get home, I'm all jet-lagged, and first thing my wife Alicia says is, so what did Paulo say? And I go, he said I should write the book. And she goes, well, I've been telling you to do this for 10 years. And I go, yeah, but it's Paulo.

It's Paulo Coelho, yeah.

So, you know, that was the end of 2012. I've been wanting to do this book for 14 years, and finally, I partnered with John Mann, who wrote this great book, The Go-Giver, and said, let's try to write this parable, but let's write it until it's perfect and then we'll sell it. It's the first time I ever wrote a book without a deadline.

Wow.

And, you know, I just, I spent 2 years working on it. Now we spent a year getting ready to market it. So look, I thank you for having me out because you have such a big community. I hope that this will reach some people. And, you know, I got on a plane to come see you because you've got one of my favorite podcasts in the whole world. I appreciate that. Super cool to be with you. I appreciate it. Puerto Rico, when you turned to me and said, "Hey man, let's have you on the podcast," I'm like, "Okay, I'm gonna plan and come see you." Yeah, yeah.

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I appreciate you coming out. Make sure you guys get The Latte Factor. I've got a few questions left for David. Make sure you get this. Super short. You can get this and read it in a couple hours. Even I can read this quickly and it's, it's super inspiring. Plus it gives you a lot of practical things you can do. at the end to really manage your money. What are 3 steps people should do right now, whether they get this book or not?

Yeah, yeah.

That they can start doing today that it's like, if you did these 3 things right now, it could help you set you up for financial freedom later.

So, number one thing, make a decision today to become financially selfish.

Okay.

And here's what I mean by that. Make a decision today to become financially selfish. Decide today to pay yourself first. So like, if you were gonna have like little chyrons, it would be like, your first thing is become financially selfish, pay yourself first. The formula to paying yourself first is 1 hour a day of your income. If we could get everyone watching to make it a goal to save 1 hour a day of their income, whatever they're earning an hour, you'd be earning minimum wage. Literally, like you could have a $15 an hour job. If you could save 15 hours a day—

$15 a day, yeah.

$15 a day, your first hour a day of your income, your whole— especially in your 20s, you'd have financial security by the time you reach retirement.

So you say $15 a day for 7 years?

Well, 7 years, I mean, like, I'll go back to charts, right? Because it's not— it's always the compound interest over decades, right? So if you look at like— I've got these great charts back here. Like, let's just use $15 a day. In 30 years at 10%, happens to be it's $1,017,000.

So $15 for 30 years.

Yeah. I got— without my glasses on— $2.8 million.

Wow.

In 10 years, it's $92,000. Still a lot, by the way.

It doesn't seem like a lot.

$92,000.

You're like, oh, 10 years of savings.

Doesn't— but here's the thing. These decades go by like this.

And if it's automatic, you don't have to think about it.

You don't have to think about it. So I would say if you've got a 401 plan, just from this podcast, go sign up for it and save 1 hour a day of your income. Happens to be the math on that is 12.5% of your gross income. With your company's match, which you probably will have, you'll be saving 16% of your income, which is like 4 times what the average American saves.

Huge.

It's huge. If you don't have a 401 plan, go open up an IRA account. Fund that. Or if you're self-employed, do a SEP IRA. Second thing I would say is—

OK, so pay yourself first.

Pay yourself first.

1 hour a day.

1 hour a day of your income.

Yeah.

Second thing I would say is track where your money's going, but don't budget. So I would download an app.

Like, what are a couple of them?

So I would use, like, an app that I was an investor in. We sold the company to Goldman Sachs. It's called Clarity Money. Clarity Money is my favorite app. You can— it's like Mint.com on steroids, but Mint's good too.

Yeah. Is it the same as Betterment? Similar stuff? Well, no, because Betterment's for investing. Gotcha. So this is a management dashboard.

You hook up a thing like Clarity Money, and in minutes you'll see where all your money's being spent. You can put your credit cards in there, right?

Wow.

features of an app like Clarity Money is that it'll show you not just where you're spending money, but it'll show you where you're spending money automatically monthly.

On all your things?

All your subscription fees.

So you can start canceling a lot of stuff you don't need.

Yes. And there's a cancellation button in the app. So what happens is, I call this the piss you off factor.

Oh my God. You're like, I've been spending this much for years.

You also, you don't realize Oh my gosh. Because we didn't used to have all these subscription services. And so when they're summarized in your phone, you got 30 of them, and you're like, wow, I'm spending $300, $400, $500 in these and I'm not using a lot of this stuff. And then there's a little— but these companies hate this, right? Because we were talking about how people sign up for things and then they un-sign up. But you go click and then you un-sign up. Well, you take a typical $50 a month box that's being sent to you, right? Like everybody's trying to send you these boxes of stuff. And you turn that off, well, that's $600 a year. It's not $50 a month. It's $600 a year. Fastest way to change your life financially is get rid of some of these fixed expenses. So the way to do it, use an app like Clarity Money.

Wow.

Mint.com. Then I would go back to this idea of saving money automatically, right? Because besides your 401 plan, there's other ways, other things to save for, like your dreams. Like, I want to go take a trip. I want to go start my business. I want you know a lot of people. I want to get married.

I want to do whatever it is.

Whatever it is. So I would use another app like an Acorns. Acorn. Acorns. It's A C O R N acorns dot com. And there's no you know I'll give you multiple ones. So because Acorns I'm also an investor. Okay yeah. So but I got invested in Acorns three years ago. Robinhood. Robin Acorns, Robinhood, Stash. You you talked about Betterment. These are some of the bigger players in automated investing. But, but, but— Go sign up for one of them. Go sign up for one of them. Companies like Acorns or Robinhood or Stash make it so you can put very small amounts of money away.

Put $15 a month.

Pick a number. Whoever you— because everybody's different, right?

Yeah.

But come up with something that you're gonna save automatically.

$100 a month, $200 a month automatically comes out of your money.

In the book, Zoë Daniels— Henry, one of her mentors, says to her, Zoë, you know how you get your dreams? you buy them. So like, having a dream without a payment plan is a wish. Having a dream where you're saving for it automatically, that's how it becomes real.

Yeah.

Like in her case, she wants to take a sabbatical and she wants to travel. She's a travel editor who's never traveled. And he teaches her how to like save for this break. And then later in the story, I don't wanna give it all away, but she like starts to take these Well, she got there because she saved for them.

They didn't just happen magically.

They didn't just happen magically.

It's just like unfold.

You know, people— the thing is, you have such a great audience, and people come here because they want— because they're great and they want to get greater, right?

It's the School of Greatness.

And someone said to me yesterday, is there ever a point in which you feel like you don't need to grow anymore, right? I'm like, no, right? Because what got us to where we are is we're curious And we're growers. Like, we, you know, we were at this mastermind together in Puerto Rico, right? And everybody's hugely successful at that mastermind, and we were all there to grow. We were all there with our journals taking notes on every single word that everybody's saying because we're still learning. So there's no finish line in life. I think that's a big thing that, um, I try to convey in this book is that it's about living rich.

Yeah.

But there's no finish line.

Right.

So whatever age you're at right now, Your mom is 68. Forget the money for a second. I'd be talking to your mom about what is she excited about, because the problem at 68 is that people get depressed. And like, your mom at 68, the next 10 years are the most important of her life. They're going to be the healthiest of her life between 68 and 78. She's not getting healthier from 78 to 88. So I'd be sitting down with your mom and being like, well, Mom, what do you want to do in the next 3 years that you haven't done yet? Let's work on a dream plan for you. I had this guy David Bach on the show, and I came home and thought You know, is there anything that you're not doing that you want to do? Like, is there anywhere you want to go that you haven't gone?

That we can start planning for and saving for?

Yeah, go take a trip with your mom. My mom, my mom told me she wanted to go on a safari. My mom's health's also getting worse because she's 70. My dad's 79, she's 76. Her dream trip was a safari, which we went on last summer. And I'm like, well, then, Mom, let's go. Right, because like, if we don't go now, I don't know when we're going. So yeah.

Yeah, it's good advice. What's missing in your life right now?

Wow, I don't— probably at the very moment, because I'm on tour, is my— is sleep in my routine and exercise. But you know, I actually have a lot of routines. I'm one of those people gets up very early, meditates, does my positive focus, normally exercises. But I'm living a pretty unbelievably blessed life right now. And also, I know, like, when you put out a book, look, I'll do 100 podcasts and I'll be on the road for 2 months almost. We're doing a nationwide tour with this book, but then I'll be done, right? I mean, you do all this work, you want to get the message out, you got to go do the work.

There's a finish line.

There's a finish line. Then I'm gonna go to Florence, Italy and spend a year and, like, eat pasta and drink wine and hang out with friends when you come visit me.

That'd be amazing. You got a guest room You know what?

I will find a guest.

I'll sit down next to me.

My wife's like, don't tell me we have a guest. Seriously, come out to Florence.

I would love to.

Bring your girlfriend.

I would love to. I would love to.

The reason I'm taking a year to go to Florence right now, even though I'm co-founder of a big business and got a lot of other businesses, I've got a 15-year-old son who's gonna be a sophomore. And what's about to be missing in my life is this kid's gonna go to college in 3 years. So because I wanna live my The principles I teach, I want to live them. I said to my wife, you know what? The last year I can take this kid abroad as a family is his sophomore year. So let's go live abroad for a year and let's take the kids to go see the world and let's have them learn another language. A lot of work to go pull this all off, but we're almost there. We're leaving in 92 days.

Crazy.

It's crazy. And it's exciting. I feel blessed that we've been able to do it, but we didn't just snap our fingers and do this. It was like a 2-year plan. And I, and I just say that to anybody too, like when you see the greatness, right? Like this incredible wall over here with all these people who've done so many amazing things, they worked on it for years. Most people, by the time they end up on a School of Greatness podcast, they've been doing it for decades or longer, right?

Decades.

Like I used to always joke like, yeah, yeah, it was easy. I was a 15-year overnight success story. Right, like, right, stuff takes a long time. You were kind of an over— but you really weren't, right? Like, how many years did you work before you were like, oh my God, people now know who I am?

That's probably about 10 years. Yeah, it's probably close to 10 years of working hard. I mean, depends on the industry I was in. I was playing a sport for my whole life, mastering myself and a craft to be great as an athlete, then transitioned in 2007, got injured playing professional football. You know, I wrote a New York Times bestseller about 10 years after the fact I started in the business. It took a long time.

And it was easy, right?

And this is, you know, 6— we're 6 years now, but it's like 3 times a week every week for 6 years, almost, you know, almost 800 episodes. It's every day showing up, and not every day is fun. You know, you go through weeks and months and years where you're like You know, it started as one episode and one listener, and you're like, oh, is anyone gonna listen to this?

And the one listener was your mom, right?

Exactly. And then it's like, and then it gets 2 listeners, she tells a friend, and then your sister got on to listen to it, right? Exactly. So, and I had never— I didn't know what I was doing. I didn't have any skills as an interviewer or doing a show or anything. I had no clue. I just want to have conversations with smart people and share the wisdom. Yeah. And so I'm curious for you, what's, what's the best What's the best money advice you've ever heard? If you can give one piece of advice you ever heard, because you've heard from all of them.

It's, it's a funny phrase, but it's called benign neglect. And it was given to me by somebody who used to run Dean Witter. And he said to me, um, because I used to ask this question a lot to young— to— I'm the young person. I would, I would be around all these incredibly successful people in their 60s And I asked that question, and he said benign neglect. And I said, "What do you mean?" He's like, "Buy quality investments and leave them alone." He's like, "I can't tell you how many things I've sold over my lifetime that went higher." Oh, buy quality investments. Buy quality and leave it alone. I was like, "Huh, okay." That was super powerful. The second, I'll give you two. The second thing was. Listen, I came to the financial services industry and I had all these successful financial advisors who would— I asked for mentorships, you know, tell me what, tell me what you learned after being in the business for 30 years. And these financial advisors would say to me, if you invest for yourself the way you invest for your clients, you'll be extraordinarily wealthy. He said, the problem— and they were all joking— they're like, the problem is when we got— we, we went— when you're in the business of managing money You think you're so smart that you take a risk with your own money that you wouldn't take for a client. Like, we didn't talk about the issue of being a fiduciary, but like, when you're a fiduciary, you have this massive responsibility. You can't not put the client's interest first. And but a lot of people, when they become wealthier and more sophisticated and the income starts to roll in, you start to take these— you take additional risks with your money.

Mm-hmm.

And so So keeping this, keeping it simple, buying quality, leaving it alone, not going off and doing a bunch of crazy things to try to get rich quick.

Right. That's the startups that you think are gonna blow up 1,000 times your—

Cryptocurrencies that are gonna go nuts.

I've tried all this stuff and I lost all my money. I'm like, luckily I never spent a lot of it in this. I just like play with it with a little bit. I'm like, okay, I'm willing to lose $50 grand or $20 grand. But then you're like, what was I thinking? I could have used that money and put it in here.

So I'll give you one more nugget, which is Because people call it play money.

Yeah.

They go, I put my play money into Bitcoin, my play money into this cryptocurrency. And I go, you know, did you play to make that money? And they go, what do you mean? Like, did you play? Like, did you go outside and kick a ball and somebody gave you money so that you could then go invest it? Because if you didn't, then it's called work money. Never refer to your money as play money.

Oh, interesting.

It's work money. You just talked about you did 3 podcasts a week. You worked for your money. And then we turn it over to somebody else to go and play with it, and it goes away. Right? Like, one of the things you said earlier in the show is that you invested in you.

Mm-hmm.

Which is, by the way, why you've been so successful. You have one of the greatest websites, one of the greatest quality podcasts. You put money into your brand, your business. You invested in you. Smart, right? Because nobody cares about your brand more than you do. The next thing you know, you see a great idea and you're like, oh, here's 50 grand. Well, it doesn't matter until it doesn't come back. And then you do 10 of those and you're like, believe me, we've all been there. I have so many friends, we talk about this now because we're like, we've all put money into 10 or 15 or 20 of these deals. And then you go, $50 grand a pop, it's $1 million. And now it just didn't come back, right? Like, and then we all hope one of them is going to come back, right?

Right. And make all our money back, right?

Right. Equal it out. Yeah. So meanwhile, I would have just rather have been in an index fund. It's liquid. I could sell it tomorrow. Or bought one more condo.

So, uh, this is called the 3 Truths. I ask it at the end. Imagine it's your last day on Earth, uh, as long as you want to live, but at some point you have to die. It could be 200 years from now, right? And you've written, you know, multiple more books. You've done everything you want to do. You've lived your dreams. You've seen your kids do what they want to do, grandkids, whatever you want. You've created it, but it's time to go. And everything you've created, you've got to take with you. So your work, your messages, your videos, audios, virtual reality, whatever you created by then, it's got to go with you.

Okay.

But you get to leave behind a piece of paper, and you can write down 3 things you know to be true about all the lessons you've learned in your life.

Wow.

And this would be kind of your, uh, commandments to the world, and this is all they would have to remember you by. It could be on anything. But your greatest lessons, what would be your 3 truths to the world?

Okay, now that's deep, right?

You're getting there, man.

And I'm thinking about my kids, right? Because ironically, I just— I've been working on a book of life lessons for them, which may just be just for them. My first truth would be to love fully. Don't hold back on love. You know, like, we've all been there when we were guys. Like, you know, you wrote a book about being— I'm gonna blank on your masculine—

Masked Masculinity.

Yeah, but like, you know, a lot of times when especially guys like being vulnerable, being vulnerable, like we're sometimes like when you're young, you're afraid that you might be in love with somebody, but you're afraid to tell them, right? And oh man, I want to make— don't be afraid to tell somebody you love. Yeah, love fully. Love fully in the relationships that you're in. You know, I was unfortunately last week in a hospital with my wife thinking that she's having a stroke.

Wow.

And had 8 doctors around her in the emergency room.

Wow.

And, um, I'm like, wait a minute, we're going to Italy like in 94 days. She can't be having a stroke. Like, this is how life works. And then she had to go have an MRI, and I'm waiting in the waiting room for hours This is Wednesday. And I'm like, oh my God, like my whole life has just changed. Her life has potentially changed. My whole life has changed. That's how life is. And I started thinking about our last 11 years together. And it's amazing because I told my wife I loved her and wanted to marry her and have— I told you this actually a few weeks ago. I told her I loved her, wanted to marry her, and have children with her before I kissed her.

Wow.

Which is insane, but it was true.

Crazy.

And, you know, we've had an amazing 11 years together. I had not fully done that in the past, and I was like, this is the girl I gotta love fully. I like— I gotta not hold back. But sitting in the emergency room, I was like, okay, what have we been focused on that doesn't really matter? Like, I got to keep going back to like, it's the love, love fully. Wow. So that would be number one.

And is she doing okay?

She is doing okay. You know what, she came back with a complete clean bill of health, and I think it Oh my gosh, yeah.

Probably changing your whole life around.

You know, we had just gotten back from Florence. We just got our lease signed, and this has been a lot of stress.

Wow.

Because, by the way, sometimes going for your dreams is stressful.

It can be.

The second thing I would say, it's actually the core of this book, ironically. My grandma— the very back of this book is a lesson from my grandmother that my grandmother shared on her deathbed.

Wow.

At 86, my grandmother had a stroke. And I didn't know she was gonna die, and I was finishing Smart Women Finish Rich, and I asked my grandmother, because she knew I was dedicating the book to her, I said, Grandma, do you have any regrets in life? And she proceeded to go through her regrets going back to being a teenager, and she went through 5 of them.

Oh my gosh.

And in those regrets, she said, it's not about the individual things. She goes, my regrets were I came to a fork in the road, and there was one road that had more risk, which is where all the gold was at the end of the road. It was what I really wanted to do. And then there was a safe route. And she said, to every regret, I took the safe road.

Wow.

And she's like, I know. And she's like, I'm sitting here now at 86, and she said to me, and I'm, I'm gonna die and I'm not gonna leave this bed. And I was like, no, Grandma, I'm getting married in 90 days. You're totally getting out of here. You're coming to the wedding. She's like, no, I'm not. And she said to me, I'm here to tell you that you're young. I was in my 20s. She said, if I can give you one last lesson and gift— and she's like, and you should share it with other people. And I do a lot from stage. I said— she said, tell people when they get to a fork in the road, there's going to be the little boy or little girl inside of them wanting to take the risk. Like, you're going to get to these forks in the road and there's gonna be a little boy inside you that wants to go take this risk. risk. And then there's gonna be a big boy inside of you who doesn't. And she's like, let— listen to the little boy and let him come out and play so that you don't turn around at 86 and wonder what you should have done with your life. So that would be lesson number 2, which is like, listen to your little boy or little girl.

Wow.

And, and it's hard to take the extra risk in life, but I go back again to my wife. I'm sitting in the emergency room last Wednesday at Presbyterian Hospital, and I'm thinking to myself, God willing, she's okay. This is why we're going to Florence. This is why we're taking a year moving abroad, because I'm 52 and maybe I'll live 50 more years, but who knows what can happen. So we got to take the risk and go live the life now, which is all about living rich. And yeah, and then the third thing I would say— This is probably the hardest one. Which is forgive the people you're mad at.

Gosh, it's so true.

And if you need to say you're sorry, just say you're sorry. And, and I, and I, and there's so many things below that, but like right now, someone— everybody who watches this, for the most part, there's somebody in your life that you're not talking to. You had a falling out. And it hurts you still. Like, it could have been 10 years ago. A lot of times it's family, which is the saddest thing. And people typically wait until the person's dying, if there's a deathbed part of it, where they show up at the hospital and try to say, I'm sorry, or I love you. And they've lost out on the 10, 20, 30 years of lifetime together.

True story.

I saw this as a financial advisor. The thing that was insane to me being a financial advisor, because you get to know clients better than a therapist knows them, is how many clients we had that weren't talking to their kids. They've got all this money and they've had falling out with their children, and— or the children don't speak to each other way more often than not. And we would try to help these clients make up. You know, I'd say in meetings, are you sure you can't have a conversation with— like, you haven't seen your grandkids in 5 years. Are you sure? How about you just reach out to them? Like, we a lot of times we'd have both generations of the accounts. I'm like, I could call them right now. Like, I just saw them last week. Your grandkids are gorgeous. And people get stubborn, or they're afraid to say they're sorry, or they're just— and then what happens is the person gets sick. Then they— then it's like in the hospital room and dad's dying. So I would just say forgive and say you're sorry. And if you're not gonna actually bring this person back into your life, then figure out a way to forgive them on your own.

Mm-hmm.

So that the pain that it's causing you can go away. Because if we hold on to that resentment, that pain eats at us. That's where disease comes from. Like, we could do a whole segment on health, but like That's where the pain of life comes from, and that's why a lot of people get sick and die, is because there's this spot that they're holding on to where they're so angry with somebody that did them wrong. And you know, we've had— you said you had Tony Robbins on the show 3 times. He does an amazing thing at one of his seminars where he gets you to take that thing that you're so angry about and turn into like, how did that help you? Yeah. And he reframes you, right? I mean, it happened before. Yeah, Dean and I were together. You did— you had Dean here Yeah, yeah. Dean and I were together at a Tony Robbins event and we both had our journals and we were writing out whatever it was. And because everybody's got this, right? And then we wrote our whole big thing of like, well, this is what I gained from it. Like, there's always something positive that can come from the pain. But if you keep holding that person or that business or that thing inside of you and you don't let it go, then the person who— you're making yourself continue to suffer. You don't need to.

Yeah, it's like drinking poison and trying to— it's like trying to poison someone else, but you're drinking the poison. Yeah, you're mad at someone, but you're feeling the pain.

I like these last 3 questions.

Powerful, huh? Yeah, this is gonna be the theme of your next book, so I'm setting you up for one. I'm getting you ready, David. Make sure you guys get this book. This is really gonna be powerful. Get it for your friends, get it for your kids, get it for your parents. Super quick read. The Latte Factor: Why You Don't You don't have to be rich to live rich.

We've also got on our website— we got a website for the book, like, obviously, but it's called thelattefactor.com. And we've got— I don't know when you're gonna air this, but we have a bunch of bonuses on there. So when you buy the book off our website, our class that we did with CreativeLive— because you've done a class with Chase, uh, we've got a 19-video class called Start Late, Finish Rich that's free when you buy the book from us and you send us your receipt. You get that, you get that course. So we've got like $200 worth of bonuses on that website, thelattefactor.com. People are loving the book.

Yeah.

And so I just thank you for having me on.

Excited, man. I wanna— before I ask the final question, I wanna acknowledge you, David, for, for showing up with a lot of energy in your life at 52.

Thank you.

52, right?

Yeah.

You've got a lot— you've got a childlike joy inside of you that radiates. And the fact that you keep showing up and create meaningful— you don't have to be writing these books.

Yeah.

And you don't have to keep serving people to help them heal the pain and the stress and anxiety of, of finances, but you're doing it in such a powerful way, and you're being innovative to reach different people in different ways that will resonate for them.

Thank you.

So I really acknowledge you for taking the time to go on a 2-month book tour even when your wife is going through some health challenges and, and just show up to serve people. I think that's the greatest thing you can do. So I appreciate you, man.

Thank you.

Appreciate you, man. Final question is, what's your definition of Ooh, why is my definition—

so I believe, I believe in God. I believe in a higher power. And I believe that everybody is given God-given gifts, that we're all given— whoever your God is, right? Like, we're given these gifts and they're inside of us. And the, the most important thing we have to do while we're on this planet is listen to what those gifts are and then go use them, like bring the gift out.

Mm-hmm.

So I think greatness is listening to your soul, truly listening to your soul, not your head, and going, okay, I was given this gift, I know I want to go do this, but it's so scary. And getting that gift out into the world, whatever it is— could be the gift of being a mom, could be the gift of being a good dad— like, we're all given these gifts, but When I think about why I've done what I've done for 26 years, I think what my gift was— I was given this talent to try to free people financially to actually use their God-given gifts.

Wow.

It's actually not about the latte. It's not about the million dollars. It's not about the real estate. It's about the financial freedom to use your God-given gifts. And I think what happens is we become trapped financially. When I tell you that 6 or 7 or 8 people out of them in America are living paycheck to paycheck out of every 10, It's very hard to hear your soul and hear a higher power if you're worried about money every day and how you're gonna pay the bills.

Mm-hmm.

And so I think the way you get to your greatness is you free yourself, but you gotta listen. You gotta listen to your soul. And we do a lot to not listen, right? Some of us are working, working, working, working to not listen. Some of us are drinking to not listen. Some of us are taking drugs to not listen. Some of us are cheating on our spouses to not listen. like, you gotta listen to your soul. And if you don't listen to your soul, the thing about the soul conversation is that it doesn't go away.

It keeps coming.

It's just like, it's this weird thing. And I go, that's because it's a higher power that said, I gave you this and you're not listening to it. And so that's— people find like, a lot of times you're like, finally, they're 60 or 70, like, oh, okay, fine, right? Like So, I think greatness is listening to your soul consciously as much as you can throughout your life and making space for that.

That's great. David Bach, my man. Thank you.

My friend, I hope you're enjoying this episode right now because we are on a mission to impact 100 million lives every single week. And every follow here on this podcast helps us reach more people. Make sure to hit the follow at the top of this show's page right now. It's the single biggest thing that you can do to support the show and the impact of us reaching you every single time we have new episodes. I appreciate you, and I can't wait to see you in the next episode. I hope you enjoyed today's episode and it inspired you on your journey towards greatness. Make sure to check out the show notes in the description for a full rundown of today's episode with all the important links. And if you want weekly exclusive bonus episodes with me personally, as well as ad-free listening, then make sure to subscribe to our Greatness Plus channel exclusively on Apple Podcasts. Share this with a friend on social media and leave us a review on Apple Podcasts as well. Let me know what you enjoyed about this episode in that review. I really love hearing feedback from you and it helps us figure out how we can support and serve you better.

of you moving forward.

And I want to remind you, if no one has told you lately, that you are loved, you are worthy, and you matter. And now it's time to go out there and do something great.