Psychology of People With Extremely High Financial IQ

You did everything right. You had good income, hard work, maybe a great year, maybe a few of them. And yet you still find yourself checking the bank account with a little bit of dread, you know, wondering where it went, wondering when the math is going to just start working in your favor. See, that's not a cash flow problem. That's a financial IQ problem. And I don't mean that as an insult. I really don't. I mean it as the most freeing thing I can tell you because Here's what I've seen after 30+ years as a CPA, an entrepreneur, a money mentor, and what it's really taught me. Financial IQ is not something you're born with. It's something you build. And people who build it, they don't just make more money, they stop trading their time for it. They build systems, they build assets, they build something that works whether they show up or not. And today I'm gonna give you 7 traits of people with extremely high financial IQs. 7 things that separate the ones who are actually getting free from the ones who stay on the treadmill no matter how fast they run. And every single one of them is learnable starting today. All right, this is Building Your Money Machine, where we help you master your money, eliminate financial stress, so you can live a life of choice. Because earning more doesn't make you free, a money machine does. And I'm your host, Mel Abraham, and I've been through this journey a lot of different ways, and I've screwed it up and I got it right, but I want to make sure that you get it right. So let's do this. Picture two people, same dinner table, same city, same general income, and one is talking about stress, the treadmill, what happens if, if the big client walks, how they need another good quarter just to feel okay. The other one though is talking about a trip they just took, an investment that's compounding while she's on vacation. The fact that, that she took 3 weeks off last summer and the money kept moving without her. Same income, completely different financial life. Now, the difference though isn't luck, it isn't background, it isn't even how hard they work. It's their financial IQ. And today we're going to break down what that exactly is and what it means. We're going to talk about the 7 traits of those that have extremely high financial IQs. But the most important thing to understand is trait 1. They know that financial IQ is learnable. It's not hardwired, no matter what people say out there. Let's start with this one because this unlocks everything else. Because if this doesn't land, the other 6 won't stick. People with high financial IQ know at their core that this is a skill, just like tying your shoes. It's not a gift. It's not a personality type, not something that you're either born with or you're not. It's learnable. And now I know, just like tying my shoes, I know how to tie my shoes. I don't even have to think about it. And it felt impossible at age 3, 4, 5, whenever it was that I learned. But you figured it out. And the same principle applies here. Slightly higher stakes, less Velcro involved. But here's what the data actually shows. Ramsey Solutions did a study of 10,000 millionaires and they looked at it and, and found out that 8 out of 10, almost 8 out of 10 millionaires were first-generation millionaires. In other words, that they didn't inherit it, they didn't get it gifted, they didn't win it in the lottery. They created it. Themselves. And so you look at that, and then you look at the second statistic that they had—31% of those never made much more than $100,000 a year, and only 2% of them came from upper, upper-income families. So if they didn't inherit the money, if they didn't— they didn't inherit the wiring, then how did they do it? They built the habits. See, here's my version, because I have an accounting degree. A CPA license, 30+ years of financial work. And you know what? They actually taught me nothing about wealth, nothing about money. They taught me how to count the money. They didn't teach me how to keep the money. They didn't teach me how to build the money. They didn't teach me how to create freedom. It was something I had to learn. So how to count it, what's already there, great. But it turns out that that's not the same thing as building wealth. So I had to learn the rest on my own through doing it, through getting it wrong, through a Ponzi scheme that wiped out one-third of everything I own. I built it. It forced me to rebuild it again from scratch. So here's the thing about all of this. And I want you to think about this as we go through it. Most of our lessons about money are caught, not taught. Why? Well, because we don't talk about it. It's taboo. We're not supposed to talk about money. It's impolite. In fact, in some areas it's demonized. So where do we get our lessons? We get it by observation. We see our parents, what they do with money. Maybe they're arguing. Maybe you hear the things like money doesn't grow on trees, or, or we can't afford that. Some of the things that I grew up with, and you absorb that in, or the social media, the media, the movies, all the things that you hear are giving you these messages but these messages are just playing out. What the problem is, is that we give it then an interpretation. And those interpretations are usually without the right context and without, certainly without the right money principles and without anyone sitting down with us to say, here's what actually builds wealth. We're left to our own devices to come up with it. And then we don't understand why money doesn't work for us. Because we don't talk about them. We don't question the patterns. We just run them on autopilot and wonder why we're spinning. See, you're not behind because you're not smart enough. You may be behind because no one handed you the map. So, Trait 1 is simple, and it's as simple as this: people with high financial IQs decided to go get the map. They decided it was learnable, and that one decision changed the trajectory of everything. The fact that you're here means that you want to get the map. Stay here, we'll give you the map. Okay, that's the game that I want you to play. Now, trait number 2: they also realized that the real currency is time and not money. Here's the question most people never actually stop to ask themselves: What are you actually trying to buy with all this money? Is it just collecting the money as if it's trophies? See, most people, if they slow down long enough to answer that, they say freedom, options, the ability to choose. And those are all real. But underneath every single one of them is the same thing. 4-letter word: time. People with high financial IQ understand something that most people spend their entire careers missing. Money is not the goal. Money is the tool that buys back your time. I call it the paintbrush that paints the masterpiece called your life. See, my father came to this country with virtually nothing at 17 years old. Immigration isn't a financial plan. It's a leap of faith into the unknown. And he started from zero in every sense of the word. But his philosophy was always this: Life drives money. You don't live for money. Money is supposed to serve the life. That's the game. Think about how people actually operate though. They build the income because we've been indoctrinated and make money, make money, make money, get a good profession, a good career, a good, good job. And then you protect the income and they grow the income, but in the process they sacrifice the time to do it. The missed dinners, the missed recitals, the missed ballgames, the trips they didn't take because the timing wasn't right. Moments don't have a makeup date. All in the service of an income that was supposed to eventually give them the freedom to enjoy those things. See, the income becomes the leash, not the key. High income is just a shinier leash. It looks better in the photos, but it feels worse. On your neck, quite frankly. So, people with high financial IQ flip the whole frame. They're not asking how to make more money. They're asking, "How do I buy back more of my time?" And the money is just the instrument they use to answer the second question. It's so important because this is why the Money Machine matters. It's everything I do. When the machine is running, when the assets are generating income without your direct effort, Your time becomes yours again. You work because you choose to, not because you have to. See, that's not a financial goal. That's actually a life goal. And the money is just what makes it possible. So before we go any further, I want you to sit with this for a second. If money wasn't the reason you had to show up tomorrow, what would you do with that day? Hold that answer because that's the whole point of everything we're building. All right. Trait number 3, they think in terms of ownership and not effort. All right. Trait 3, this is, this is where I see the biggest split between people who build real wealth and people who stay stuck despite doing everything right. See, most of us have been trained and taught and indoctrinated into the earnings machine. Good education, good career, like I said. But the assumption underneath all of that is that the income is the answer, as if you just made enough, everything else would work out. It doesn't. We've all seen it. The athlete making $50 million broke within 2 years of retirement. The high-earning professional that's living paycheck to paycheck at $200,000 a year. The entrepreneur who built a great business but has nothing outside of it. See, those aren't money problems. Those are money symptoms. And if you treat the symptom without addressing the cause, oops, you're right back where you started with a nicer car, maybe, but you're still stressed. See, people with a high financial IQ ask a completely different question. Not, how do I learn more but more about what can I own that creates cash flow without my direct effort? See, they think in terms of ownership, real estate that generates rent, a portfolio of index funds, ETFs, and stocks that compounds, grows, and pays dividends. A business that doesn't require them to be there every single day. The earnings machine is important, but it's only the fuel and it gives you the cash flow. But the money machine is what gives you freedom. And that's the question we need to ask ourselves. Am I building a money machine or am I just stuck on the earnings machine? I had a client, a good friend that was making well into the 7 figures running his business smart. He was hardworking, reinvesting everything back into a growing company. And we were at dinner one night and I asked him a simple question. What's that money doing for you? And he said, well, I'm reinvesting it in my business. I said, okay, but what's it doing for you? He said, the business is going to grow. I said, for how long? He said, as long as I can. And I said, well, what happens when you don't want to anymore or when you can't? And he got quiet. He said, he said, "I haven't thought that far ahead." That's the treadmill in real time. He had an incredible earnings machine, but he had zero money machine. Once we reframed it, once he understood the business was the fuel and the machine was that the thing that he needed to get built, not just the business, everything changed. He focused on real estate as one of the other 5 incomes, real estate, a portfolio that created something. Now he, through consistent, patient, and disciplined action, 5 years later, his money machine generates cash flow. Cash flow that matches what his business produces, that he still runs. But now he does it by choice, not by need, because he knows if he stopped, the machine will take care of it. From effort to ownership, from Income race to wealth race. That's the game. It doesn't require a different income. It requires a different question. Now, real quick before we keep going, if you're watching this and thinking, okay, okay, I need to figure out though where I'm going. I don't even know how big of a machine I need. Well, then we just need to find out what your freedom number is. And I have a freedom number calculator. It's totally free that I want to give you. It'll at least give you a ballpark. It's not going to be precise, but it's going to get you in the right direction. So you go to melabraham.com/number, download it, put some information, play with the numbers. It'll give you a trajectory and a direction. All right. Trait number 4, they flip the order of what they do. This is something that I wrote about in my book called The Wealth Priority Ladder. See, most people, they live their life by earning income and then they pay for their lifestyle and then they see what's left. And then based on what's left, that's what they use to build their future, to build their machine, to invest for retirement. But the fact of the matter is what's left is just the scraps. So they're building a future on the scraps. But what we need to do is flip that. Those that are truly wealthy, that have a high financial IQ, they flip it and they say, I'm gonna earn income. I'm going to invest first. That becomes the priority. And whatever's left creates my lifestyle today. Now, you might be looking at me saying, but Mel, if I did that, I couldn't afford anything today. Well, great. Now, what happens is now we go back to the drawing board and we say, okay, if I need to invest first and I still want this lifestyle, how do I drive my income up? And that's, That's how they look at this in, in Trade 4. And I knew this, but I wasn't doing it, which is honestly the most expensive sentence in personal finance, is that if you know it but you're not doing it, then you do— don't really know it. See, most people follow the same sequence. They make it, they spend it. Make, spend, invest. But that's like I said, it doesn't work. So when you don't switch it, life has a way of expanding to fill whatever income you have. But when we make it a priority, it goes into our investing first. We give every dollar a job description before it's ever earned. Now, all of a sudden, the math changes and the psychology changes. When, when you don't do it that way and you invest less, you never feel the pain of not investing. Why? Because your lifestyle now is comfortable. You don't feel the necessity until all of a sudden you're hitting 50, 60 years old and you go, wait a second, I didn't do this. See, there's no urgency. Tomorrow is easy to defer. But when you invest first, the machine becomes non-negotiable. It gets funded before your lifestyle gets inflated. And if you don't love what's left, like I said, you start to change the things that you're doing. Investing last keeps you comfortable and stuck. Investing first keeps you building and moving. So in practice, I want you targeting 20 to 25% of your income to go towards your financial future. And I can hear it now. 20 to 25%, there's no way. Then just start. Start with 3%, start with 5%, start with 10%, and every quarter push it up a percent or 2% into retirement accounts, into your brokerage accounts, into your 401s. Get the match, follow the wealth priority ladder, whatever's right for you, wherever you are in the journey. But I want you to get in the game because one thing's for certain, if you're not on the field playing the wealth game, you'll never win the game because you're not playing it. It's not a spectator sport. Work. The fastest financial transformations I've seen weren't always the highest incomes. They were the people who made investing a non-negotiable before anything else got a dollar. All right, trait number 5: they're ruthless about debt. This one has nuance that most people miss, and hear me out on this before you roll your eyes. People with a high financial IQ They don't hate all debt. I don't think all debt's the devil, but they have zero tolerance for one specific kind of debt— destructive debt. It's totally gone. Credit card balances carried month to month, lifestyle funding like the big screen TVs, the lavish vacations, the cars you have to finance over 7 years. That's all lifestyle choices put on a credit card at high interest, spreading payments over time because you can't afford it. Going into debt to impress people, buying today's moments with tomorrow's freedom doesn't work. That's not a financial strategy. That's a payment plan for life that you just can't afford. And the interest is the price you pay for pretending, honestly. So, the mental model is simple. If I can't afford it with cash, I don't buy it. Not because I'm cheap. But because I understand that every dollar of interest that I pay is a dollar that never makes it to the money machine. So, when it comes to your lifestyle stuff, except for things like homes and long-term assets, you can't build your future when your income is too busy paying for your past. Now, productive debt's a different game. That's a mortgage on a rental property that's cash flowing, or a loan to a business that's growing income. That debt builds cash flow and net worth over time. Use that strategically, that's fine. That's not what I'm talking about. But the question that they always ask is the same one: is this debt gonna build wealth or fund lifestyle? That's the difference with someone that has a high financial IQ. You want it to build wealth. All right, funding lifestyle Not a chance. Buy things at the speed of cash. And if you want something you can't afford, let that desire become the fuel to build a machine faster, not to borrow faster, to build a sinking fund to maybe go get it with cash. All right, trait number 6. They know consistency beats amount every single time. This gives people the most hope when they hear it. Because the number one reason people don't start investing that I hear is that they think they don't have enough to make it matter. That's not a wealth problem. That's a misunderstanding of how wealth actually is built. It's not the amount you invest that determines the outcome. It's the fact that you're consistently investing over time. Someone investing $500 a month consistently for 30 years will dramatically outperform someone who's investing $5,000 a month for 3 years and then stops. That's compounding. Compounded growth doesn't reward big moves. It rewards those that stay in the game. That's the game I want you to play. See, the math will always math out, but only if you stay in long enough for it to work. Yeah, I said math out. That's intentional. The math will math. Trust the math. It doesn't care about your feelings about the market. And it's why people with high financial IQ, they're not chasing the hot tips. They're not trying to hit it out of the park on some speculative bet. They're also not panicking when the market drops. I remember I was at dinner once with a friend who kept pushing me on a very speculative investment. "Why won't you try it? Why won't you try it? Why won't you try it?" He kept saying. I finally looked at him and I said, "Because I don't need to." And he stopped and he said, "Wow, I never thought about it that way. I just feel compelled to try." I said, "That's it right there." The urge to speculate is driven by impatience. High financial IQ says, "I'm already building. I don't need to risk it. I just need time and consistency to put it away." Patience isn't passive. Patience is strategy. Trait 7, they don't let emotions make their financial decisions. Oh, this one. Oh, this one's a big one. And honestly, this one might be the most honest trait on the list because it applies to me as much as it applies to anyone I've ever worked with. Because with a high financial IQ, they know that their emotions and their financial decisions need to be kept at arm's length. They need to be separated. Fear, impatience, FOMO, the sting of a down market, the excitement of a hot trend that everyone's talking about at dinner party. Those emotions go up, the financial intellect goes down every single time. And here's the important thing. They don't just white-knuckle through it alone. They build a system around it. They have a trusted advisor like I do. A mentor, peers, a peer group, people who have been there, who are there, who don't have a product to sell you. They don't have a bias. They're going to dial it in and help you. When fear hits me, I'm human. When the market drops, I'm looking at the numbers and I'm starting to go, wait, should we change things? And my team is there to keep me sane, keep me focused, and not allow the emotions to run away. Because when they do, I get in trouble. That's how I got in the Ponzi scheme. And like I said, I still have the same human impulses of impatience, uncertainty, 30+ years in, and those things don't go away. But with the right team, the right folks in place, I can pick up the phone and have a frank conversation with someone that I trust and say, hey man, here's what I'm thinking. And they can talk me off the ledge. They can give me a different perspective that maybe I can't give myself in the moment. And yes, there have been ledges. More than a few. And my iAdvisors, they've talked me off so many at this point that I think they deserve hazard pay. See, this is not a weakness. This is human. This is one of the highest IQ moves you can make. The most dangerous investor in the room is the one who thinks they can manage their own emotions without outside help. So the question isn't, can you eliminate the emotions? Because you can't. The question is, do you have the right people around you and the right system around you and the right strategy around you to make sure that the emotions don't get to drive? Because the machine gets built in the calm, disciplined, consistent moments, not the reactive ones. All right, so here's what I want you to sit with before I close this video. At some point today, yesterday, or 100 days ago, You made a decision to keep looking, to keep learning, to keep asking why the conventional approach wasn't working or whether there was something better. That's not a small thing. That's a trait one element in action. And I want you to understand is that every single person I've ever watched build real wealth, real freedom, real choice in their life started exactly where you are right now. Not with more money, not with better circumstances, not with a different brain, but with a decision. The decision that their time was worth more than their income, that ownership was more than effort, that the machine was worth building even when the progress was slow and the results weren't really visible yet. They didn't have the perfect plan. They had the direction and they stayed consistently long enough for the math to do what the math does. You don't have money problems. You don't have those. You have money symptoms. And now you know what the cause actually is. So the only question left is what you're going to do with that. The door's open. The map is in your hands. Go build the machine. That's the game. You now understand some of the top psychological traits of high financial IQ. I want you to have it in your life. They're easy to put in. They're easy to keep in. But if you need a support system, if you need a peer group, if you need a place to go to keep you on, on that path, that's why we have this channel. That's why we do what we do. That's why I'm out there speaking around the world and around the country to make that happen, because I truly believe financial freedom is your birthright. We just have to go claim it because earning more doesn't make you free. The money machine does. All right. I hope that this helps, and I hope that you found this valuable. And if you did, do me a favor, drop me a comment. Tell me what you think. Tell me which one of these hit home for you. And at the same time, while you're there, give me a subscribe and a thumbs up. It helps the algorithm, but also warms my heart. All right. Till I get a chance to see you in the next one or on your path to your financial freedom. As I always say, always, always strive to live a life that outreaches you. See you in the next one. Thank you for listening to the Affluent Entrepreneur Show with me, your host, Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the Affluent Entrepreneur Facebook group now by going to melabraham.com/group, and I'll see you there. And that's it for this episode of Building Your Money Machine, where we help you learn how to master your money, eliminate financial stress, and live a life of choice. If you found this valuable or helpful to you, here's what I'd love for you to do. If you'd do me a favor, go to Apple— Apple Podcasts, or wherever you're listening to this podcast, and rate and review the show. It helps us tremendously to keep us at the top of list so we can continue to get this information and this message out to people, because I truly believe that financial freedom is your birthright, and I want to help each and every one of you claim it. Thanks so much.