Today we’ll look at how we split up our take-home pay to ensure we are building a path to wealth. These simple models will change your relationship with money.
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Immanuel is a property developer and personal finance specialist who authored the book – The 6 Steps to Financial Freedom Download your copy of his book at https://www.the6stepstofinancialfreedom.com
So we’re live welcome guys, welcome Immanuel we’re back with youth personal finance rant so actually we already pre-recorded this and the audio didn’t work out been having a few issues the audio so we’ve actually recorded it so we should be much better the second time actually it’s stuff we deal with in day and day out.
I’m actually really excited about today because I think today for me is whenever you’re starting out and you got yourself in sub perhaps some debt or you really want to change your life, your financial life I think this is the first step. If you’re like I mean the decision is the first step, but actually to make a measurable difference and quite a substantial difference by using one of these models and actually sticking to it you know just changes everything.
I think for me if anyone said you know what’s the most important thing I’d say track your expenses for at least 30 days and then I’d say split up your take-home wage or your income in one of these models. I think you know that for me is, if you did nothing but those two I think you are well on the way, what’re your thoughts on these? I think these are great, models and more importantly because of the time we are in now, with the coronavirus people are actually able to manage their finance in a very different way than they were ever done before.
You’re exactly right putting it in place now because everyone’s cash flow is internal in and with it sorry whether it’s in turmoil or not everyone’s cash flow is changed they’re not going out spending money there so now’s a good time to bed in those disciplines you know absolutely and you know you can make a massive change and this could really be I mean it’s interesting I’m chatting with most of my mates the fitness side of things and you know we’re all getting committed to the fitness you know spending a couple of hours a day and doing that running 10ks and doing these settings but actually if you did the same me finances it’s amazing where you could get to you know but yeah you know I love it.
I think the biggest challenge with this is not actually sitting down and working on the numbers the mathematics of this is really easy it’s the actual discipline of following through and actually not spending money we shouldn’t be and allocating money we should be and I think for the biggest thing here is once you’ve worked out the maths and actually allocated that money and either put it into jars or whatever you know whichever we decide it’s to actually you know you know absolutely commit to it and do it and make sure that you get make it happen and stick to it because you know life is going to present you lots and lots of distractions lots of lots of you know things that need funding and emergencies and friends that offer you to go here and I think that’s one of the big distractions in a lot of this is the friends and the family in that you know the what appear to be emergencies that aren’t they are just tests on your road or on your path to finances.
Yeah and you’re exactly right I mean I you know I love the word discipline and that’s maybe that’s cuz you know the military background and all that sorts of stuff and that’s what I’ve grown up with you know from very young but you but your right discipline routine doesn’t matter what you call it it’s as long as you stick to something you know that you commit to it and stick to it you get the result. It won’t be overnight it won’t be something you know you don’t form a habit by just you know going rather made the decision done once I’ve got the habit now you know you have to create that routine or that discipline you know so yeah a hundred percent so so what the way we’re going to structure.
This is because there are four different models and any actual fact there are not 4 models there are probably hundreds of different models but interestingly is that when we were talking about this and we’re putting the content together you know totally separately you grew up in the UK, I grew up in Australia I’ve you know live in Singapore and I lived in the UK for a decade. But actually the approach and the models were very similar the words we use very similar you know it’s amazing how doesn’t matter where you grew up this is about how you manage your money you know and I’m sure yes you can fine-tune little things and different people have different ideas we’re going to give you four different ideas of different people who have said right let’s try and do it this way I’ll do it this way I do it this way.
We’ll start off with the simplest thing and actually the one that I most use is the simplest and actually it’s a book called The Richest Man in Babylon, that talks about it and what it talks about is simply allocating your take your tight take-home pay and you allocate it using percentages okay and in fact most of them are like this they use percentages as opposed to actual figures all right so if we have a look here what you’re gonna see is this is how the richest man in Babylon it talks about 10% for the future 20% for the past 70 percent for living okay in other words the present. Now what do we mean by the future that means that’s money that you’re not going to spend it’s not your money it’s the future use money or you money.
The idea is that you’re going to turn that into initially savings up to a certain point then you’re gonna convert that to being an investment and then that is what’s going to grow your wealth. But more than that and I’ll explain the second one so the second one is that 20% of the past oftentimes a lot of us have got into debt and that debt weighs us down. And effectively so what we want to look at doing is with this 10% ,20% 70% here’s 10 percent goes to the future that’s our investment 20% is the that’s the dead side and then the other side is the 70% which is what we live on now so we allocate 70% to live on now most people when they first you know hear this they go hold on a sec there’s no way I can possibly do that because my debts are already more than 20% and there’s no way I can survive on 70% and you know see this credit card will you know every month that balance goes up rather than comes down you know but the reality is you’ve got to work through this.
And there’s a number of different things we can do and we’ve talked about how to make more money you know and increase your income side we’ve also talked about how to pay down your debts quicker as well so you can check out other videos on that but that. So the 10 is a future 20 is the past and the 70% is the present and if you do that it takes about you know one to three months and it just becomes routine you know it becomes that you know that that thing you just do all the time you do it naturally it becomes part of you and the great thing I love about this is with straight away when you’re that 20% that 20% passed once that’s looked after and you’ve got the exhilarated debt spending plan or debt debt plan you know they’re great but what it does if you’ve got lots of debt and no assets and no wealth or no savings you’re constantly focus on debt but what this does if you earn 2,000 bucks a month you know and you put aside 10% that’s 200 bucks a month go into a savings account you now have something to focus on the 200 and then the 400 and then there’s 600 and then the 800 and then a thousand and a thousand and that’s that’s the point at which I start saying start thinking about investment yeah so it’s very you know for me it’s very simple it’s it’s a great for me a great way to start out.
It doesn’t necessarily and this book is from years and years ago it’s often early nineteen hundreds of written but the reality is there are the modern takes on it will go through a sort of as we go through now so make any thoughts on that any comments. Amazing yeah yeah 100% yeah.
We’ll go to the next one and so next one you’ll see is slightly different it’s actually well probably the granddaddy of all personal development Jim Rohn is the guy who actually was the mentor to Tony Robbins who is you know if you like our generations most prevalent and well known personal violent person and you know and so what he talks about is he talks about 70% of living yet very similar mind and then he talks about 10% active investing emergency and opportunity, in other words, emergency things pop up that’s what the 10% for but also an opportunity and investing 10% for passive investing okay putting away and not worrying about it and 10% for the community in the world which my education things like that so you’ll see it’s a very similar split so you know in some ways it’s not hard to go from the richest man in Babylon to Jim Rohn and then you’ll see the next ones have it’s sort of an evolution a bit more you know technical if you like.
This one you know realistically 70% you live on and then you’ve got if you look you know active investing passive investing and then you’re the community the community might be hiding it might be you know doing good deeds you know that’s there again and but I think that’s the key to any model is you know you’re gonna have to grow to change you know definition of stupidity is doing the same thing over and over again expecting a different result well the only way you know what it’s a child our way to change is to go out and learn and educate yourself.
I think you know the basis of any of this is to go out and become a reader is to go out and you know question the things you’re doing and see if there are better ways of doing it you know that sort of things so yeah so that’s the Jim Rohn model okay so we’ve got really simple you know a little bit more technical and then what we’ll do we’ll jump straight in to the we’ll jump straight into the next one
T Harv Eker another personal don’t let personal and so basically he talks about Jars okay and and literally when he pitches this they are jars like jam jars and what you do is back in the day that I’m sure Imanuel remembers and I remember to some of you youngsters might not remember but we used to get paid in cash you know in literally what was called a pay packet a yellow envelope you know and on the front of it had your payslip kind of thing and basically what you would do is you would as soon as you got that money you’d put it break it up into jars okay or into you know you know put money aside for this money so this is cash you know and so that’s where I imagined it come from. Nowadays you probably have different bank accounts you know you probably have a revolute with multiple cards or who knows what you’ve got these days with the amount of Technology and SSL but the principle remains the same is you’re going to split up as soon as that money comes in you’re gonna split it up into in this case 50% necessities, 10% financial freedom, 10% long-term savings, 10% play, 10% education and 10% giving so you’ll start to see that this splits that up in a little bit more but actually it’s pretty much again for the same things or similar things.
On these given things like night over there but the nice thing about this it had something between you something make yourself happy education learning new skills technology with the high GPA that’s important that you can do and again so you can see the changing my style and with having a better quality of mind move our loved ones in the making connections living on that so you have always yeah.
100% you know and I you know I think with this model this is sort of a more modern day take on the original model you know because we’ve sort of broken and up in but I think you know the play there I mean the problem with most of us is that we actually don’t have any structure to it and so the play tends to go you know up and up and up and that actually is what keeps us poor because you know and I’ve seen this many times with many of my mates who are financially you know free they’re free and you know and and what I would say wealthy and and live a lifestyle that of their choosing you know and if you look at them in your speak to them they’re very disciplined about how they deal with money but most of them have enough money that you know if we go out and we go to dinner they’re not worried about you know the right-hand side of the menu where the prices are they’re worried about the left-hand side of the menu they’re not worried about when they go out with the boys about having to shout out a second round of you know drinks for the boys and and that’s also you know and they go on holidays they go to nice places and things like and a lot of people think that they’re lucky in my experience has never been luck it’s been getting a program like this and actually adhering to it for long enough so it becomes part of you and then you get the results and then the results lead to the lifestyle.
I think the problem is with a lot of society today is with a credit card we can have the lifestyle now but the problem is we’re not paying for it so you can yeah and. I think one of the other points that I’ll make to is the guys I know with money and the guys that I know that have largely you know got this the the money situation sorted and is never sorted and that’s the point I make is that society tells us that there is this elusive passive income that we can just sit around on a beach for our whole lives and and not have to do anything and not be responsible in that I’ve never met a guy like that and you know I’ve never met a successful person like that most successful person they continue to do the things that got them to that situation even after they probably don’t have to so could they sit on a beach yeah they could but in my experience personally I can sit on a beach for about three or four days before I’m going stir-crazy you know and and then I need to go do something you know so for me a holiday is not about sitting on a beach you know and actually after about two weeks doesn’t matter where I am, I am sick of the place I want to go back to my businesses and I wanna go back to my relationships and you know that sort of stuff you know and so you know you’ll probably find that too.
This is not about you know this elusive you know passive income sit on the beach so I think this is about creating a lifestyle yeah where you have choices you know whatever those choices are it may be that you want to sit on a beach for two months you know in cope any angle you know Samui or wherever in the world you know but yeah so
Let’s have a look at the next one which is, funnily enough, Immanuel’s one and so this is straight out of this book so actually in both my book and also Immanuel’s book we deal with debt and the allocation of this so we talk about this sort of stuff and obviously your books more you know much more focused in on that it’s you probably explain this one.
Just picking up on that point about the travel side of things and the 10% play one of the things I do is I start the year and generally I do this is in December when I’m normally back in Australia I’m with family you know it’s a bit settled down there are no phone calls there are no email few emails but am and what I do is I have a big it’s a big arm whiteboard with all the dates on it for the year and I go and plan every single school holidays holiday that I’m going on where I’m going all this stuff and then I have a number of friends of group or groups of friends so you know my Aussie mates and my Aussie mates may go in Australia you know we went with Sunday’s last year sailing you know, I’ve got my Grand Prix crew which every year I have a Grand Prix I’ve got my Spain boys weekend so I plan out these holidays and by doing that what it does automatically is I already have things to look forward to through the whole year.
Obviously coronavirus has put a bit of a up a dampener on that this year but we’ll see we’ll probably have to back load the last six months of the year but but the point is is when you know you’ve got that ten percent you can plan these things out and by planning them out actually you get the enjoyment of looking forward to them when I first got over to the UK, I met up with Aussie mates and and so what we started doing is well every six weeks we would go somewhere in the world and what we do is we would actually as soon as we come back on the last day as we’re flying home we decide where we’re going next and then we go on booked at all so we had the six weeks before we went again to actually think about it and really look forward to it and then we do it and we did that for probably two or three or four years you know and sometimes it didn’t mean you went every six weeks but it might have been you know skipped one and then we had another one or maybe there were no we didn’t go for twelve weeks one time you know or whatever because you know Christmas you generally don’t go. Doing that makes such a difference to this because it makes the perceived pain initially of Jesus I’m having to survive unless I can’t do what I want all of a sudden it gives you something to look forward to you’re just refocusing your you know your focus onto something like that rather than oh no I can’t go out with my mates and drink 15 beers and not remember the next morning you know I’ve only got a budget to drink three beers you know or whatever it is you know so yeah so I think it’s really important.
And I think that last point you made which was you know to automate it all automate as much as possible and I think you know the next slide I was going to show so the challenges we have with this is you know getting a done and so the best way to get it done is to automate everything so standing orders that sort of stuff you know you’re gonna notice the initial drop in your living it and because of that’s where most people give up yeah and I can tell you in my experience most people do give this up because is too hard it’s gonna take too long this doesn’t work I can tell you every single person who has for me do it for 30 days then it creates that habit and continues on what I mean what’s your experience coz you do it for 3 months don’t you.
Yes you get much you know some people yeah depending happy over a period of time and that way you can do an average history tells you what they’ve been doing yeah I’m sane and I think one of the other ones of the big challenges you gonna notice too is when you start on this life is gonna Chuck a few you know curveballs actually you know unplanned expenses, friends that all of a sudden need to borrow money you know family that you know drama, whatever it is you know mates that decide to go on holidays you know last-minute and it’s somewhere you know you really want to go and they want you to come and you can’t miss it because you’re one of the boys all that’s gonna be hit at you you know so the really that is life testing you you know and testing your discipline routine but actually that’s the stuff that you need to avoid. Certainly in the initial phases you need to stick to your discipline as best as possible because you know the more you break it and look breaking it doesn’t mean you know it’s a setback it’s not the end and unfortunately most people see it as you know their first mistake they make oh that’s it can’t do it didn’t work you know any good and it’s like you’re gonna do that I can tell you very few people that and I’m sure you’re the same you know in that 30, 60, 90 days whatever it is I’m gonna religiously stick to it you know and never falter you know we are gonna falter but the trick is to get back on the horse and keep riding.
I understand and you know one of the other things too for this whole thing is you know yeah you may have setbacks get back on the horse you know but the reality is if you can, find a mentor or a coach or you know a group that actually is gonna keep you going and keep you motivated and keep you accountable so you know and that may well be that you send an email to your mates you know that your trust and it may not even be your mates it may be you know whoever someone who’s going to support you and say this is what I’m going to do you know and this is how I’m going to do it. Maybe your family you know but the reality is bringing that mentor group that coaching you know is going to help you stay on you know the straight path and it’s interesting because you know you think I do martial arts we do karate with the kids and I remember with the kids when they first started out they had no idea what they’re doing they had nobody will where ‘no stable aren’t doing you know that they just hadn’t done anything but it was amazing and they kept wanting to give up because I no good at it because they saw everyone who was advanced you know and the high belts now thinking that’s so easy for them you know these guys.
You know I’ve got a four-year-old yeah so I think he started at he started at 4 and 6 and 8 they started you know so but the 4-year-old you know now after doing it for probably 18 months well he’s I think he’s a blue belt and doing like amazing and you know it’s like anything you know you start out you’re gonna be an incompetent bumbling idiot but as you practice it and as you get better at it you know it becomes easier and easier and easier and it becomes effortless in the end and that’s the point you’ve got to get to the unconscious competence you know if you haven’t looked at the window.
Anyway you had me show you around we designed a better version of who we really are yeah yeah and I think you know it’s the thing I love about this is so damn easy it literally is going what is your take-home income and choose one of those models and just multiply by 50% or whatever it is whatever percentage and then put that into a separate bank account or a separate jar or whatever works for you and that’s what we need to do you know make it a game make it fun.
You know because when you do that it’s so damn easy and actually what you realize you know three months down the track if you do this you look back and go bloody hell that just changed my life not for just three months but for my life you know and I’ve seen it happen so many times I’ve seen people go on you know I’ve done this process with people you know 19-year olds that at 21 I’ve gone and bought a house you know most twenty ones are too busy getting into debt not buying houses you know this stuff works and it’s it is actually pretty easy to do the issue is that you would simple to do it’s not easy because you’re changing a lot of programming and you’re confronting a lot of your bad habits and a lot of you know your behaviors that shouldn’t you know that are not serving you and things like that and it may be going against what your parents taught you what just you know it’s cool you know your social group all that sort of stuff taught you which is you know part of the issue but I can tell you it is worth it.
Cool guys so I think that’s it for today and I swerve got you got anything else but I think you know jump on yeah so look guys you’ve got four models there pick one of them have it go and especially now with the lockdown you know it’s like it’s so easy because you’re already you know changed so why not just put some structure around that change and have some real value added to the lockdown you know.
But yeah but I’m guys if you’re interested you’ve got our YouTube sites you know to be sure to subscribe we’re doing these every Thursday live this time and basically join us subscribe if you got any questions if you want to download our books the links are actually in the description and yeah we’ll see you next week alright thanks mate yeah Cheers bye