5 Rules Every Rich Person Uses to Make Money

Stop idolizing rich people. Start learning from what they actually do. You all need to realize rich people are not gods. They may have slightly different habits than you do. They might have privileges you don't have, and they might be lucky. Well, listen, I can't help you with privilege and I can't help you with luck. But I can show you the habits that rich people have. Why I know them because I'm a multimillionaire myself. Plus, my job is literally showing everyday people how they can become rich as well. So in this video, I'm going to break down five rules that rich people live by and explain why you maybe should be following them too. Starting with rule number one. Do an X ray on your finances. You can't manage something you don't deeply understand. And often our money mistakes come from not understanding the basic language of personal finance. Every month you're spending money, you're feeling guilty about not saving. And at the end of the month you look at the bills and you go, I guess I spent that much. On the other hand, rich people who are savvy with money have a clear understanding of their finances. They know exactly where their money is going. Now, I want to be clear. I'm not talking about tracking the price of broccoli. That's irrelevant. And that's what I call a $3 question. I'm talking about the $30,000 questions. Here are seven questions you should be able to answer right now about your money. First, how much do I make? 50% of the people I talk to don't even know their own household income. Second, how much do I owe and when will it be paid off? I mean, the exact month and year. Third, what percent of my income am I saving every month? Four, what percent of my income am I investing every month? Four. Five, what percent of my income am we paying for total housing? Six, what are the things I want to spend more on and less on? 7, what are my invisible scripts or deeply held beliefs about money? This is really important to understand. Rich people who are savvy with money can tell you how much they'll have next month, next year, even five years from now. They know where their money is going and and they are often putting it to work so they can live a rich life today and an even richer life tomorrow. So how do you put your money to work like the rich? Well, that brings me to rule number two. Make systems for everything. A lot of you manual labor doing freaks are trying to do the same old things every single day, all the time. Not sure when Oh, I don't know. I'll do it ad hoc. I'll figure it out tomorrow. Stop doing it. You need systems. In fact, the motto for your life from now on should be SOP, standard operating procedure. Just like McDonald's has SOPs for somebody they just hired. They're making fries in 45 minutes. Just like airline pilots follow an SOP in case there's too much wind. You should have an SOP for when your freaking dishwasher is empty. That is the level I'm talking about. I've helped millions of people improve their finances, and this is what I've learned. Willpower comes and willpower goes. Much like the people who go to an Arby's with horrifically poor palates. They come, they go. Preferably go, never to come again. Systems help you avoid relying on willpower. Or am I depressed because the Bachelor wasn't a good episode yesterday? No, all that. You need consistency. So if you're sick, if you're happy, if your kids are causing havoc, your money is still automatically flowing where it needs to go. Think of managing your finances like building a personal productivity system. It's a little ironic talking about productivity while a bunch of people are literally at work watching this video, not being productive at work, but whatever. You set goals, you break them down into achievable tasks, and then you track your progress. It's not about obsessing over every individual minute. It's about picking the important things and then making sure you are devoting time and resources to them. Systems are the backbone. If you don't have a system for your money, you're lost. That's the people who get to the end of the month and go, oh, where? I guess I spent that much. Oh, I should try to save. Try nothing. I don't try to brush my teeth. You shouldn't be trying to save. Your money should be automatically saved for you. It's the easiest thing in the world. It's actually easier than brushing your teeth. Rich people set up automatic savings, automatic investments, and automatic bill pay. Why are you paying bills manually? Makes no sense. Ho ho. Let me log into my app and. And make sure that the payment went through. The payment went through. It's literally a computer. It works 100% of the time. This is not about saving a few dollars here, a few dollars there. It's about ensuring that your money is going where it needs to go. And if I can be very candid with you for a second, a lot of people believe that managing money is doing things like logging into your app once a week or once a day. Let me be direct with you. That is very low value. Logging into an app to check on something is beneath you. That is something that should be automated and a robot should handle it. They can handle it way better than you ever can. Managing money means you need to elevate yourself to focus on the important things. I'll give you an example. I automatically transfer a percentage of my earnings into different accounts. It happens every month. Retirement, emergency fund, savings for a vacation, all that stuff. I don't have to think about it. It's already done for me. I created a rule years ago. I set it into play, and now it happens. And what's even better is I know the exact date that I will hit each goal, which gives me something to look forward to. And this isn't just about money. It's about automating as many decisions as possible to free up mental space. We've all heard examples of people who wear the same clothes every day. If that's what you want to do, fantastic. For other people, they don't want to think about what to make, so they have a meal plan every single Monday. It's the same thing. Broccoli B. All right, you live in the Midwest. We know it's spicy for you. Fine. The point is, you should have systems for so many things in life. Money is just one of them. But it is a relief to make a decision once and then simply be able to follow it. The less you have to think about the small decisions, the more you can focus on the big ones. Which brings me to the next rule 3. Plan before you need to plan. One of the key differences between rich people and everyone else is that rich rich people plan for something before they need to think about it. A lot of people spend hours cutting coupons or agonizing over generic brands at the grocery store, or even buying a coffee and then feeling guilty about it all day. What if you save $5 at the grocery store but you lose your job and you don't have an emergency fund? What if you save $50 not buying coffee, but you don't actually take that money and invest it? It's pointless. It will literally just get spent anyway. Does agonizing over feeling guilty about should I buy cheesecake matter? If you don't actually know how much money you need to live a rich life? How are you going to get rich if you don't even know what rich means? Most people do not know how much they should be saving or investing. They just pluck a random Number out of the air and then feel guilty for the next 45 years of their life. No wonder they fail to stick to their plan. They don't even have a plan. Rich people plan for the future and they look forward to it because typically in their experience, they have realized they can exert control over the world. Meaning they can create a plan and they can fulfill that plan. So here's my question. What do you want your rich life to look like? Does financial security matter to you? If so, that means you should probably have a three to six month emergency fund. What goals do you want to achieve? You want to buy a house? How will you save for it? How long will that take? Exactly how much will that house cost? These are things that can be projected. You can do it. Do you want to earn more? How much? What are you going to do with the extra money? If it's $1,000 a month, how are you going to use that money? What's the timeline for that? What about taking a vacation? What about a leisurely retirement? In order to do that, you should be starting to invest now and doing it consistently. So you got to ask yourself, where do you want to be in November of this year, five years from now, ten years from now? Create a timeline and make a plan. This might seem really scary if you've never thought at this level before, but this is exactly what I cover in all my material. When you want to live a rich life, the best option is to plan ahead and build a system so your back is never against the wall. Next up, rule four, follow the 8020 principle. You know, it's interesting that rich people who are savvy with money don't obsess about the minutia, okay? They're not focused on small, insignificant details of life. I will say there is one exception. That's typically people from the fire community who will spend 40 minutes at length discussing the difference between this shredded beef burrito and the bean and cheese burrito. If you get the bean and cheese burrito, you actually get the same amount of caloric intake, but it actually saves you $4 compound $4 over the next 75 years. That's enough to go get a car. I'm like, you can't drive in 75 years from now. Doesn't matter. It's all about compounding. And if I can't use it myself, then there's the next best thing, which is give it to my kids. Bean and cheese burrito discussion for 45 minutes. I don't want to be on this earth anymore. What am I even talking about in this video? I'm getting so mad. You know what? This is my cardio for the week. Every week I come here, I do these videos. I don't need to work out anymore. I just come here and talk. I talk about the crazy things people see. My heart rate goes up to 160. No need for treadmill Rich people. What are we talking about? Rich people who are savvy with money. They follow the 8020 principle. In other words, the 8020 principle shows we can achieve a lot with much less effort, time, and resources if we focus on the 20% that really counts. You've heard me say, don't focus on the $3 questions. Focus on the $30,000 questions, the big ones that can transform your finances. These are the financial questions that have the biggest impact on your wealth. All right, now, a lot of people going, hey, Ramit, $3 questions add up. Isn't that what everybody talks about? Start with the little things that the big things work themselves out. Compound interest. Okay, to some extent, $3 questions can add up over time. However, let's say you were to cut back on your morning coffee every day. Okay? Every time I talk about coffee, I get 600 comments from people saying, in what city can you get $3 coffee? This is irrelevant. This is impossible. Ramit is so dated. I. I go, you're literally making my point for me. Agonizing over whether it's $3 or $5 is in itself a $3 question. Okay? Do you not understand the principle? No, they don't. Let's say you have a $3 or $5 coffee. You decide to skip it every day, the soul morning joy that you have, you go, oh, okay, I'm going to save $5. That's good. Fine. What are you doing with the money you saved if you're not actually investing it? You're just depriving yourself of something and then doing nothing. Most people don't go that final step and close the loop or so. $3 decisions can add up, but you actually have to put the numbers into practice. Just putting the money in your checking account is not an effective way to grow wealth. Instead, you got to focus on the bigger picture. You got to learn the basics of personal finance. You got to invest early and automatically find a good job and get paid well. That's a skill you can learn. Have an affordable and stable place to live. The number one area people overspend is their housing costs and finally cultivate positive relationships. You know, a lot of folks who spend hours and hours on their spreadsheet. The best thing they could possibly do with their life is close. Microsoft Excel. Go out with one of your friends and go have lunch. Do that once a week. You have a better life than sitting and agonizing over your freaking macros. All right, before I get to the last rule that rich people live by, do me a favor. Rich people hit subscribe. They follow this channel so they can learn about money psychology. They can learn what really matters and what doesn't. AKA 3 versus $5 coffee. Rule number five, consider value over cost. Rich people who are savvy with money don't just care about the cost of something. They are also looking at the value of something. For example, if I'm in New York, I could get 99 cents slices of pizza. There's lots of them out there. They're not particularly good. I would rather pay $3 or $4 for a slice and get one that is absolutely delicious. I'm talking about Joe's Pizza on Carmine Scars in the Lower east side. We can go on and on. The point is, it's not just about cost, but also about value. We want to be able to play with these different notes almost like we're in a symphony. Not using only one note, but playing multiple notes. Here's a personal example. I started to use money to kickstart my health journey. Now, I could have done it on my own. I could have done it basically for free. I. I could have watched YouTube videos, et cetera. What I did was I hired a personal trainer to learn how to actually lift correctly. Showed me form, showed me how progressive overload works. I eventually hired someone who taught me about macros, helped prepare meals, and even a posture coach because I noticed that I wasn't having the best posture when I was standing up. Now, spending money helped me not only improve my health, but it also helped me feel better. And it freed up one precious resource of mine, which is time. Time to grow my business, to be involved in writing project like my new book Money for Couples, which you can pre order now. And to go after bigger goals in my career also just to sit and watch tv. The point is, this isn't just about splurging blindly. Of course I had to be able to afford it. But I also wanted to ask myself, what are the important parts of my life? For me, it was health. If that is important, am I devoting the right amount of time and resources to it? That means show me your CSP and show me your calendar and I can tell you what your priorities are A rich life is about using money to solve problems. If you hate laundry, if you have two kids, you're always running around and you have enough money to be able to afford help, maybe you're sending that laundry out, for example. There you have it. Five rules that separate the rich who are savvy with money from everyone else. And if you are serious about getting rich, I'll give you the brutally honest advice you now need to hear about becoming financially free right here. Click that link.