Did you know that money is a body of knowledge?
And, as a result, it has its own distinctions and language. When you know what certain words mean you can act differently with them than if you don’t know what those words mean.
For example, act with this word right now: Sphenopalatine Ganglioneuralgia. Can you act with this word? Unless you are a medical doctor, probably not. But, any MD can. Why? Because they studied under the same body of knowledge consisting of its own set of words and distinctions that we as laymen can’t understand. Therefore can’t act with .. even in a life and death situation.
The same truth applies to money. If you don’t know the anatomy of money, how do you think you can act intelligently to produce the results you want? Do you know the difference between income and wealth? Capital and Savings? Can you spout off the definition of an asset and liability? Do you understand a cost of sale and why they are an important part of your business?
*PS: I had no clue what Sphenopalatine Ganglioneuralgia means… it simply means headache. If you’re a doctor, please shoot me a message and let me know why there is a word this long for headache… !
Anyway, not understanding the science (and art) of money is what keeps people in the month-to-month cycle (what I call a high income broke person) – Otherwise known (and felt as) “ on the “hamster wheel.” It’s where you realize that you are working harder than ever but at the end of each month still think, “WTF… when am I ever going to feel like I’m getting ahead?”
You see, when you get stuck in this pattern it’s important to realize (and admit) that you will be stuck here forever (regardless of how hard you work or how much money you make) until you LEARN money – it’s language, it’s laws, it’s mechanics and it’s truths.
It’s the “Don’t-Know/Don’t Know” that is the (financial) death of a 1000 cuts that has you self-sabotaging despite your best mindset, intentions and efforts. An “abundance mindset” is not enough. If only it were that easy.
If you feel like you are on the financial hamster wheel and as a result feel anxiety, fear, lack of confidence, confused, and stuck …. Well, your next action is to move from don’t know/don’t know to a place where you can say: “Wow, I now know what I don’t know and can see that continuing to do what I’ve been doing is going to take me to a place I do not want to go.
And that’s why I’m here. To give you more KNOW that will ultimately lead to you more KNOW HOW.
How do I do this for you? If you’re new here or just need a little reminder:
The Wealthy Wellthy Podcast: If you haven’t done this already, please follow, subscribe, rate, and review the podcast. This will keep it front and center for you and it helps me in my desire to get the money word out to more people :).
Instagram: Every Friday, I offer a LIVE training on IG Live. I teach a money concept on the whiteboard. Last week I talked about the Wealth Spectrum.
Wise Money Campus Membership: I offer webinars and longer training events – mostly on Investing – to my members
Workshops/events: I’ll be bringing live in-person workshops back this year. So, be on the lookout for the next event.
Wise Money School: I offer transformational online courses on the topics of wealth, business, and investing
Email: Scroll down to subscribe if you haven’t already. Each week I hit your inbox with content just like this! In fact, I already sent this blog out to my tribe… and receive wealth, business and investing tips, tools and rules every week.
Like, the Rule of 72.
The Rule of 72:
Have you ever heard of the rule of 72? If not, this is a very important financial term that I teach in my Wise Money School.
The rule of 72 is very simple and is a rule of thumb.
Rules like these serve as guidance when plugging in your own numbers to give you some direction and clarity when it comes to discovering your missing numbers. ← Here is one of those money laws: You HAVE to know your numbers and have to do some simple math to derive them.
Did I say have to?
Yes, I did.
It’s a Wealth Rule. So, if this is a financial truth and you don’t know your numbers – how likely do you think you’ll create wealth and freedom for yourself?
Okay, back to the “Rule” of 72.
- First question: Have you heard of the Rule of 72?
- Second question: Can you tell a friend what it is?
- Third question: Have you ever worked the formula for yourself?
Hmmmm. Did you just have a moment of moving from Don’t know-Don’t know to Know-Don’t know???
The Rule of 72 answers the question, “How long will it take to double my money?” (assuming a certain fixed interest rate).
In the real world, we aren’t guaranteed fixed interest rates, but again, by understanding a rule of thumb like this, it will give you direction and aid in plotting some future financial goals.
To apply this rule, you take 72 and divide it by an interest rate. This simple algebra formula tells you how much time it will take to double your money.
For example, if you wanted to know how long it would take to double your 1MIL dollar net worth at a 10% compounded interest rate you’d simply divide 72 by 10 = 7.2 years.
Here are a few other examples:
Above you can see what would happen if your investments were performing quite well at an interest rate of 14%. Your money would double in only 5 years!
Let’s now look at it the opposite way… assuming your money is just sitting in a bank account making 4% (clearly hypothetical because the average savings account makes .05%) it would take 18 years to double your money!!
Ok, just for fun let’s see how long it would to double your money at .05%… brb
Ok, drum roll… 1,440 YEARS!
Wow… so I hope you now see by not understanding something as simple as The Rule of 72 and having ample amounts of money sitting in a bank account not doing anything because you are too afraid to invest it has a large opportunity cost.
Can you see how this Don’t Know, Don’t Know is potentially costing you millions!?!
We have to have savings but savings is a mistaken security. We think that having a bunch of cash sitting in a bank is really safe and secure. But it’s actually a misnomer. It’s a myth. The money sitting there where it feels secure is actually costing you the opportunity to double your money and build your wealth.
I teach in my money school that you can’t save your way to wealth – and this is why. You also can’t “income or earn” your way to wealth. Because it’s the compounding that doubles your money. Not your hard work. You typically can’t double the net amount you pay yourself every few years. There is a ceiling to your earnings. And that’s only one reason you can’t “income your way to wealth”…
Most people are in the income game NOT the wealth game. Where the focus is always trying to make more money one way or another. To go from six figures to seven figures or whatever the latest dogma is. It’s about making more money, working hard, or taking more risks as though that’s the wealth game.
It’s not. It’s the income and expense game. And the only way to kind of win at that game is to get really good at this shitty thing called budgeting. Like a calorie-restricted diet…
The wealth game is about putting your money to work –on overtime – so it can compound over a period of time (work while you are asleep) instead of it sitting doing nothing…
But here’s the catch, you need to know how long your money needs to work and how much money needs to be working. In other words, “how much is enough?”
That question is 1 of 10 of the most important questions business owners can’t answer – but need to be able to.
Lucky for you, I have a quiz that’ll quiz you on how many of these crucial questions you know the answer to. And after I’ll shoot you a bonus worksheet to help you answer “how much is enough” and “where do I invest?”