February 2, 2023

JF3073: The Psychology of Money | Passive Investor Tips ft. Travis Watts

Passive Investor Tips is a weekly series hosted by full-time passive investor and Best Ever Show host, Travis Watts. In each bite-sized episode, Travis breaks down passive investor topics, simplifying the philosophy and mindset while providing tactical, valuable information on how to be a passive investor.

In this episode, Travis discusses how to change the way you think about money and use it as a tool to better your life.



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Travis Watts: Welcome back, Best Ever listeners, to another episode of Passive Investor Tips. I'm your host, Travis Watts. In today's episode what we're talking about is the psychology of money. Disclaimers as always, never financial advice. I'm not a financial advisor, an attorney, a CPA, so please always seek licensed advice when it comes to your own investing decisions.

What we're talking about - and by the way, apologies for my voice this morning; a little bit raspy, I might be getting a cold, I don't know. But we're talking about how to think about money, how to use money as a tool to inevitably better your life. Now, depending on your upbringing, you may have been taught some rather interesting things. One that comes to mind is that money is the root of all evil. What's interesting about this is if you actually look up the facts, and you really dig into this a level two or a level three further, and you look at countries around the world, where there's more wealth, where there's more money per household, you see that there's less crime, there's less violence, right? There's less poverty, obviously; there's just less hardship. In fact, according to worldpopulationreview.com, you can pull this up yourself, they claim that Venezuela as a country has the highest crime rate worldwide. In conjunction with that, the average monthly income in Venezuela is only $25 USD. Now, obviously, prices are cheaper there, of course, but they're not that cheap. The average household in Venezuela today cannot make ends meet; even buying just simple groceries, and paying bottom line rents, they still can't make ends meet. So that correlates to the violence and the crime that you see in that country.

Now also, according to the same site, Iceland happens to have the lowest crime rate of any country worldwide, and in conjunction, the average income in Iceland is $5,500 USD. Now, I've already ran those conversions for you, but you can clearly see that with a lot more money and wealth in a country, that the crime as statistics can go down. Now, those are just two examples of two different countries, but if you get on the site, you can pull up dozens of countries, and you can see there is a clear correlation between the average incomes of those countries and the crime rates statistics, past and present.

In addition to just looking at average incomes and crime rates in different countries at large, I want to point out that a lot of wealthy individuals and affluent people give the most back to society, and we can see that through modern examples like Bill Gates, and Melinda Gates, his ex-wife - they formed the Bill and Melinda Gates Foundation, and the point of this foundation is to eradicate disease and world poverty, and they've vowed to basically give up almost entirely their net worth upon death. But even to date, to the end of 2022, they've given over $39 billion of their own money to this foundation. They've got other wealthy people donating to this; Warren Buffett has made a pledge and has put billions of dollars to date into this... Or we could pivot and talk about Elon Musk, who gave $5.7 billion to charity in 2021. And these kinds of trends date as far back as you want to research.

I remember reading the John D. Rockefellers back in the late 1800s gave over 500 million to dollars to different scientific and educational and religious charities. And $500 million in the 1800s was the equivalent of what's being given with today's billionaires. And to bring this point home, interestingly enough, Lending Tree conducted a survey and found that the average American in 2021 gave $574 to charity.

And that, my friends, brings me to point number one - we have to re think the psychology of money. It's not money that's the root of all evil, it's the people behind the money. You can look at other people examples, like what is Vladimir Putin doing with money and resources today? What did Bernie Madoff do with the money that he made during his career? So it's the people, it's not the money. And there's a great quote by Bob Proctor; he says, "Money will make you more of who you already are." I love that quote.

Number two, I want to point out that money can actually create win/win situations. And I'll give you a quick example - my wife and I, we just hired a house cleaner. But here's how we look at that. When we hire a house cleaner, it gives income to somebody that otherwise wouldn't have had that income if we had chosen to clean our house ourselves. Also, we benefit by freeing up our time to spend on other activities that we enjoy more. So rather than having the mindset of being a little self-centered, and saying, "Hey, we've got some money in the bank account; maybe we should go out and have a fancy dinner, maybe we should buy some fancy clothes, maybe we should buy a new car." These are all things that generally just help ourselves. We try to create these win/wins to improve not only our lifestyle, but the lifestyle of other people.

Break: [00:06:58.14]

Travis Watts: Second example - maybe you're a business owner; you could hire an assistant and give somebody the opportunity for employment while allowing you to branch out from some of the mundane activities in the business, and focus on growing and expanding your business. So win/win can be possible; the choice is in your hands.

Number three is what I call the 1% rule. Taking 1% of your gross earnings per month and reinvesting that in your own knowledge, or experimenting, or education. And I'll explain that. So a simple math example - if you make $10,000 per month, just take $100, a very marginal amount, and read a couple books. Buy an online course or training program to help you improve on one of your weaknesses; or invest in experiment in something that you've been wanting to try but you just haven't done it yet.

Some examples include if you've been wanting to eat healthier foods, but you've been putting it off because of the holidays or whatever, take $100 and buy some health food for maybe a week or two, however long that lasts you. Try a new diet or something; try veganism, or try being a vegetarian for a week. See if that helps your overall energy and your health. If you've been wanting to get in shape, then join a gym for one month. You don't have to do a long term commitment.

If you've been wanting to reduce stress or tension because of work, get an hour long massage, or a 30 minute massage, whatever you can buy with $100. If you feel overwhelmed at home with activities, hire a landscaper for a month, or hire a house cleaner for a week and just see if that improves your lifestyle.

If you've been wanting to try this passive income investing game, but you've been nervous or you've been procrastinating for whatever reason, take a very small step; try something like - just for example purposes, not financial advice - opening a free brokerage account and buying some dividend-paying stocks or REITs, just with 100 bucks or 200 bucks. Just try something small, because sometimes it's that first step that starts creating that momentum that can snowball into you really taking action and getting the results that you want to get.

That's actually a great point, I'm gonna make this a number four. I was just going to do three in this episode, but here's number four - focus on passive income or cash flow. And the easiest way to think about this is "Does your bank account go up or down at the end of the month, whether or not you work?" Most of us are not taught, ever by anyone to focus on passive income. What we're taught is equity. We're taught, "Buy low, sell high." We're told by the mass media that assets go up over time. And that's generally true, but what happens when they don't? What happens when you say, "I'm going to take 100k, invest it in January 2022", and by December of 2022, your account is 20% or 30% down. It's awfully hard to expand your lifestyle when that's the case.

So passive income is what frees up your time, it's what allows you to expand your lifestyle. It's what creates ultimately financial independence. So we have to unwire our minds from a lot of things that we've been taught for years and years, and what matters is mindset and perspective.

So the bottom line for this episode, the takeaway I want you to have is that we have to rethink the psychology of money. You are the one in control, you are the one that has the power of choice; building financial independence and proving your lifestyle and the lifestyle of others is ultimately up to you. It's not the money, it is you.
Something to think about here for the week... I hope you've found some value in this short episode. You're listening to Passive Investor Tips, right here on Best Ever. I'm Travis Watts. Feel free to connect anytime; happy to be a resource or mentor to you guys. Have a Best Ever week, everybody, and we will see you on the next episode.

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