Track These 3 Numbers To Become A Multi Millionaire

today I want to share with you the three personal finance numbers that everyone needs to know in order to build wealth and become a millionaire I'm looking for a man in finance trust fun 65 blue eyes I actually live in Las Vegas and it's EDC weekend right now and I've never been but that's as close as I'll ever get crazy old Maurice he was in here tonight raving now these three personal Finance numbers really are numbers that I've kept track of since I was 19 years old when I first started saving and investing money and by the age of 32 I was really lucky to become a millionaire and when I say lucky I mean it because it had nothing to do with my investing skills and it had everything to do with getting extremely lucky with social media and with YouTube so don't listen to me I'm not even a real person I'm just a figment of your imagination on a computer screen this is an AI takeover but I do want to add that saving and investing at an early age is what allowed me to build a port pfolio of roughly $200,000 in my stock account at the time and that's what gave me the courage to quit my job and try something else that I was much more passionate about and that was the hardest decision of my life and if I didn't track those numbers I don't think I would have had the courage to do it so I Promise by the end of this video once I share these numbers with you and what to do with them you will also become a millionaire now that's not true but it could be true if you put your mind to it anything is possible so let's get into it hi my name is Andre J hope you're doing well come for the fin an and stay for the super random Final Fantasy 7 references I'm almost done with part two the Remake and it's so good this video was inspired by ramit set's video which talks about four numbers that you need to know but I think you really only need to know three of them my next video is the 7 minute ab workout hey gang welcome be your 8 Minute Abs workout because just like Fitness the reason why I think these numbers are so important is why people are tracking how long they're working out for their calories and their reps because in order to see progress you have to know where you are today and and where you should be going that's just as true for Fitness as it is for finance unfortunately a lot of people neglect these numbers which is also why they feel like they'll never be able to retire so let's start with the first number which is your net worth your net worth is sort of like your HP the goal is to get your HP to 99,999 think of your net worth as sort of like your overall status your overall report card and the way to calculate your net worth is by adding up all your assets and subtracting liabilities which is just a fancy word for debt liabilities is like the poison material because the moment you become an adult you just get poisoned you get frog status and you're just bleeding HP the whole time that's adulthood in a nutshell you become a lonely poisoned green frog now according to the Census Data from the government most people's assets are made up of these categories roughly onethird of their wealth is in retirement accounts these are mutual funds inside of the 401ks and IRAs another 28 1/2% is equity on their house only 12 % of most people's net worth is made up of their stocks and then you have smaller things like other assets rental properties business assets vehicles and bonds Now using my own net worth as an example roughly 20 to 25% of my net worth is in my stock portfolio another 25% is in real estate another 25% is in alternative Investments and another 25% is roughly cash now once you've added up all your assets the next step is to subtract your liability or your debt examples of the most popular debt according to the government is student loans credit cards medical debt and other unsecured debt for me personally it's my real estate because I have a loan on a rental property and I have an auto loan on my car so now I have to take all that debt and subtract it from my assets and that will give me my net worth number so the question now is what should your net worth number be and that really depends on how old you are now according to data from Fidelity you want to aim to have at least one time times your yearly savings by age 30 and roughly every 5 years after that increase it by 1X just remember here the more you save the more you invest and the longer you think about all of this the faster that compound interest will happen really the main takeaway from all of this is that your net worth is not your selfworth money isn't everything it comes and goes if you clicked on this video and you're watching this chances are it's important to you which is good but if you're feeling like you're behind you can still get way ahead if you make this one of your goals and the goal here is just to start now the second number I want to share with you is your savings rate the best analogy I could come up for the savings rate is you know how sometimes you're playing a game and you're not sure if you want to spend the next 40 hours of your life grinding here doing Chocobo side quest playing Queen blood or if it's better to progress the main story line and farm somewhere else that's how I like to think about the savings rate it's your XP and your AP points and it's how you choose to play your game and ideally you want to pick the level that gives you the the best experience possible that's where you want to grind now that means there is no right or wrong answer here and everyone's going to be different some people like to take their time and play the game until they get 100% completion rate and collect all the trophies the people that can work the jobs they're in forever because they love them and on the other side of the spectrum there's people who maybe want to rush through the game or they stop playing completely and the thing that never made any sense to me is watching those same people work the jobs they hate being surrounded by the people that they don't like while also driving fancy cars and living in nice houses while complaining how much they hate it and that's because for most of those people I have found the stuff they have in their life is far more important to them than the sacrifice they might have to pay in order to obtain their freedom of not needing to be there in the first place now ultimately what your personal savings rate says about you is how long you have chosen to grind and spend at work now what's really interesting about the savings number is that it's a universal number that applies to everyone regardless of how much money you will make so if you're making a million a year or $50,000 a year the math is still the same because if you make a million and you spend a million you're never going to retire and the same applies at any other income level because it's all relative so here's the only cheat code to your savings number that you'll ever need to see pause it screenshot it love it worship it optimistically try to aim for a 50% savings rate because if you can do that every single year you can buy your freedom and retire in just 7 short years which is time that's going to happen to you anyway and in 2014 I was making 50k a year and I was saving roughly 53% of my income it was super hard and I know it's much much harder to do that now with all of this inflation but I know it's possible at the time it was really hard I was living with roommates I didn't go out to eat because I prioritized setting myself up for retirement rather than spending money and having any friends but look at me now I have over 2 million friends on online now you don't actually have to be crazy like me and aim for a 50% savings rate but you should try to be better than the average which shouldn't be that hard because unfortunately the average American today saves roughly 3.2% of their income just remember that your 401k account also counts towards the savings rate so if you set your 401k contribution to just 4% per year you're already doing better than the average but you should aim to get that slider up to 15% as quickly as you can and if you're you're not sure where you are here's how you can tell the formula is you take your monthly income subtract your expenses divide it by the monthly income multiply by 100 easy right so here's an example let's say you make $5,000 a month you subtract from that your monthly expenses let's say $4,000 that leaves you with $11,000 which you are then going to divide by the original monthly income of $5,000 and you'll get2 multiply by 100 and you get 20% now a 20% savings rate also means you'll need to work roughly 37 years before you can retire now for some people 37 years is amazing news cuz they love their job and other people they might think 37 years I I might not live that long so you have to ask yourself where you are in your career how long you plan to stay and then adjust your savings rate accordingly that's how you play the game now the third number we're going to look at is probably my favorite it's also the easiest and arguably most important one and that's the FI F number Financial Independence retire early fire think of this as your limit break preferably the Omni Slash specifically on Emerald weapon this is essentially the money you make from your Investments you can also call it passive income but it's the amount of money that your Investments pay you in order to cover all your bills and let me just show you the spectrum of all the different fires there's traditional fire lean fire Coast fire Barista fire and fat fire now traditional fire is when the passive income you make from your Investments 100% covers all of your expenses one to one nothing more and nothing less that's traditional fire now lean fire is the exact same idea but based around super Frugal Living people that are lean fire like to become expats and move to different countries like the Philippines Thailand Portugal and Russia but in Mother Russia fire retire you so instead of working a full 30 or 40e career a lot of people choose to work 15 to 20 years and then moving to a different country with a lower cost of living where the quality of life is more or less the same that's a really cool option especially for people that feel like they're behind and that's lean fire then there's a really interesting one this is arguably the best one for younger people and that's called coastfire now in 2014 I set myself up on this path without even knowing just by accident by Saving and investing the idea of coastfire is that if a person in their 20s can save a couple $1,000 you've essentially front-loaded all the effort because now that couple hundred grand has 30 to 40 years worth of time for compound interest to take place and make you millions of dollars it's like inevitable retirement just because you did it early so taking my example of $200,000 invested at the average return of 8% which is what the stock market has averaged over the last 100 years and I left it in there for 40 years means that by roughly age 67 I would have over $4 million in my account at that point I wouldn't need to work or if I wanted to I could exercise that option earlier but that's coastfire a really cool option especially for Young finance nerds and then there's something called Barista fire which is also pretty cool Barista fire is the same idea but while you're in retirement you're also working a small job as a barista or any other job that gives you health insurance benefits enough to cover something that you don't have yet or maybe can't afford in your current fire situation but then there's also something called fat fire and fat fire there's no real definition for it other than maybe spending at least $100,000 a year or more while in retirement as you can see as we're spending more money we're getting thicker and thicker here right the way to calculate how much you'll need to get to 100K a year passively is again the rule of 4% so we take 100,000 divide it by 4% move the decimal over two to the left and we get $2.5 million that's how much you need invested working for you at at least 4% to make 100K a year now I can't get to that point just yet unless I took my stock portfolio I shuffled it around I sold some of my crypto Investments sold off my rental property and then I could definitely get there I haven't done it yet because I like to torture myself and make these YouTube videos that you're still watching for some reason but what I really want to get to is obese fire actually I made that up there's no obese fire but some people in the fat fire Community are getting really really thick damn boy damn boy he thick boy that's a thick ass boy damn and I feel like okay Andre I get it but you still haven't explained exactly how to get my fine number I actually have throughout this video this is what I've been preparing you for if you've done number one and number two you already know how to do number three the way to get your fine number is you take your yearly expenses so if you're spending 4,000 a month which is 48,000 a year you take how much you spend per year and divide it by that 4% rule so 04 remember to move the decimal over two to the left and you get $1.2 million that's your fi number your financial Independence retire early number now if you want to do it a slightly easier way you can also take your yearly expenses number which is 48,000 in this case and multip ly it by 25 always 25 again the same rule of 4% and you'll get the same $1.2 million now if you've made it to this point and after doing all this math you're still like1 G just remember that it's a lot easier to decrease how much money you are spending than increase how much money you will need because by lowering your monthly expenses you will drastically reduce how much money you need invested in the market for example instead of spending $48 ,000 a year which requires a $1.2 million portfolio paying at least 4% just by spending $8,000 less per year so lowering it down to 40,000 a year you'll need only a million doll portfolio now I know that's still a lot but that just saved you $200,000 in extra money that you no longer need invested so don't just think about your fine number in terms of needing more but equally think about it in terms of spending less and being a little a bit more frugal now if you want to work your job for the next 40 years that's totally fine too as long as you know these numbers and why you're making the decision that you're making either way I'm just happy that you spent your valuable 10 minutes with me and as always I hope you have a wonderful rest of your day smash the like button subscribe if you haven't already don't forget to grab your free stocks links are down below and then go track them automatically with a spreadsheet link Down Below in my patreon thank you so much for watching this video I'd love to see you back here on Monday and Friday sometimes a Wednesday I'll see you soon bye-bye sh

Channel: Andrei Jikh

Views: 123,521

Keywords: how to invest, bitcoin, million, ethereum, market crash, crypto, stock market, passive income, dividend investing, dividends, dividend stocks, crypto crash, stock market crash, bitcoin crash, NFT, how to buy bitcoin, cryptocurrency, robinhood app, best trading app, stocks, investing, investing for beginners, how to invest in real estate, how to invest in stocks, best stock trading app, credit score, andrei jikh, best investment, dogecoin, robinhood, portfolio, millionaire, recession

Id: VRPsYrTKhkk

Length: 14min 30sec (870 seconds)

Published: Mon May 20 2024