Summary of "How To Manage Your Money Like The 1%"

How To Manage Your Money Like The 1%

Key Finance-Specific Content

The 75/10/15 Rule for Wealth Building

75% Spending Limit: Use a maximum of 75% of your income for living expenses such as housing, food, vacations, etc. This encourages seeking cheaper alternatives and focusing on value rather than cutting small discretionary expenses like coffee.
- Example: Millionaires splitting bills precisely and seeking value even in social settings.
- If you spend less than 75%, hold onto the difference for savings or investing.
10% Cushion Fund (Emergency Savings): Save at least 10% of your income exclusively for emergencies (e.g., unexpected car repairs, floods).
- Recommended cushion fund size: 5x your monthly expenses (e.g., $2,000 monthly expenses → $10,000 cushion).
- Store cushion fund in High Yield Savings Accounts (HYSA) rather than traditional savings accounts.
  - Traditional savings APY: ~0.5% (e.g., $10,000 → $57 interest/year)
  - HYSA APY: ~4% (e.g., $10,000 → $400 interest/year)
- Stop saving into cushion fund once fully funded; then redirect funds to investing.
15% Investing for Future Wealth: Invest at least 15% of your income to build assets and wealth over time. Focus on tax-advantaged accounts:
- Roth IRA:
  - Contributions are post-tax; earnings grow tax-free.
  - 2024 contribution limits: $7,000/year (<50 years old), $8,000/year (50+ years old).
  - Famous example: Peter Thiel grew Roth IRA to $5 billion tax-free.
  - Steps to open:
    1. Have earned income.
    2. Open Roth IRA at brokerages like Fidelity, Schwab, Vanguard.
    3. Transfer funds from bank account.
    4. Purchase investments within the account (important step often missed).
- 401(k):
  - Employer-sponsored, contributions pre-tax, taxed upon withdrawal.
  - 2024 contribution limit: $23,000/year.
  - Employer matching common (e.g., 100% match on first 3% contributed, 50% match on next 2%).
  - Example: Salary $65,000, max employer match = $2,600 free money, total $5,850/year in 401(k).
  - Employer match is “free money” and a no-brainer to utilize.

Investment Strategy & Portfolio Construction

Index Funds and ETFs: Recommended for most investors due to diversification and low cost. Investing in an S&P 500 index fund means owning small parts of 500 companies, reducing risk.
- Historical average return: ~8-10% annually over 50+ years.
- Examples of ETFs used by presenter: FXA, VO (passively managed index funds).
- Suitable for retirement accounts and long-term growth.
Compounding Example: Investing $100/month for 50 years at 10% return → total contributions $60,000, portfolio value approximately $1.4 million.

Risk Management

Cushion fund as emergency buffer to avoid high-interest loans.
Value-based spending to avoid unnecessary large purchases that don’t add lasting happiness.
Using employer 401(k) match to maximize returns and reduce risk of missing free money.

Explicit Recommendations & Cautions

Don’t overspend beyond 75% of income; seek value in purchases.
Prioritize building a 5-month cushion fund in a HYSA before investing more.
Max out employer 401(k) match contributions.
Invest at least 15% of income into tax-advantaged accounts.
Use diversified index funds or ETFs for investing to reduce risk.
Don’t just save money indefinitely; put it to work once emergency fund is set.
Understand that wealth is built through assets, not just labor income.

Disclosures

The presenter mentions personal use of the Mumu investment app and offers a referral link with free stocks (disclosure of affiliate/referral). The content is implied as educational and not explicitly stated as financial advice.

Presenters / Sources

Unnamed presenter sharing personal finance and investing insights.
References to books: Rich Dad Poor Dad by Robert Kiyosaki, The Psychology of Money, The Intelligent Investor.
Example of Peter Thiel’s Roth IRA growth used as a case study.

Summary

The video outlines a simple but effective money management framework called the 75/10/15 rule, emphasizing disciplined spending, emergency savings, and investing in tax-advantaged accounts with diversified index funds or ETFs. It highlights the importance of maximizing employer 401(k) matches, using high yield savings accounts for emergency funds, and focusing on asset-building rather than labor income for long-term wealth creation.