This Simple 5 Step Program Builds Lasting Financial Freedom
In this episode of The School of Greatness, Jaspreet Singh and Lewis Howes examine how personal beliefs about money, often formed in childhood, can affect wealth-building potential. Singh explains current economic challenges, including how U.S. national debt and inflation impact everyday Americans, and introduces his 75-15-10 plan for allocating money between spending, investing, and saving.
The conversation covers practical strategies for building long-term wealth, emphasizing the value of consistent saving and investing over quick financial gains. Singh and Howes discuss how to overcome psychological barriers to wealth-building, address the role of social media in financial decision-making, and explore the importance of developing financial resilience through education and proper money management techniques.
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1-Page Summary
Changing Your Money Mindset and Belief Systems
In a discussion between Jaspreet Singh and Lewis Howes, Singh explains how subconscious beliefs about money, often formed during childhood, can block wealth accumulation. He challenges the notion that money is evil, instead encouraging viewers to see it as a neutral tool that can be used to improve lives and help others. Singh emphasizes the importance of adopting an empowering mindset and making conscious affirmations about wealth-building.
How Economic and Political Systems Sustain Wealth Inequality
Singh details how government policies and banking systems contribute to wealth inequality. He points out that with U.S. national debt approaching $35 trillion, interest payments now exceed military spending for the first time in American history. The economic system favors consumption over saving, with corporations benefiting from increased spending while wages fail to keep pace with inflation. Singh notes that from 2019 to 2024, inflation reached 22% while wage growth only hit 20%.
Steps and Strategies For Building Long-Term Wealth
Singh introduces the 75-15-10 plan for wealth building: allocating 75% to spending, 15% to investing, and 10% to saving. He advocates for investing in assets like stocks, real estate, and businesses, emphasizing the importance of what he calls a "decade of sacrifice" - temporarily forgoing luxuries to build a strong financial foundation. Singh stresses that wealth-building is a gradual process of compounding returns rather than a get-rich-quick scheme.
Importance of Financial Education and Overcoming Psychological Barriers
Both Howes and Singh discuss the crucial role of financial education, recommending resources like books, podcasts, and online communities. Singh emphasizes the importance of building financial resilience through consistent saving and investing, particularly during market downturns. They warn against letting ego and social influences, particularly social media's "Instagram flex," sabotage financial goals, encouraging listeners to focus on genuine financial well-being rather than keeping up appearances.
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Counterarguments
- While money can be seen as a neutral tool, it's important to acknowledge that the pursuit of wealth can sometimes lead to unethical behavior if not tempered by strong moral principles.
- Affirmations and mindset shifts are helpful, but they must be accompanied by actionable steps and opportunities, which not everyone may have equal access to.
- Government policies and banking systems may contribute to wealth inequality, but it's also worth considering how individual choices and market forces play a role.
- The focus on national debt might overlook the complexity of fiscal policy and the potential benefits of strategic government spending for economic growth.
- The economic system does often favor consumption, but consumer spending is also a key driver of economic growth and job creation.
- The 75-15-10 plan is a one-size-fits-all approach that may not be suitable for everyone, depending on their income level, financial obligations, and personal goals.
- Investing in stocks, real estate, and businesses carries risks, and not everyone may have the risk tolerance or the initial capital to do so effectively.
- The concept of a "decade of sacrifice" may not be feasible or healthy for everyone, as it could lead to burnout or neglect of other important life aspects.
- While wealth-building is often a gradual process, there are systemic barriers that can prevent some individuals from achieving financial success, regardless of their efforts.
- Financial education is important, but it must be accessible and relevant to diverse populations with different educational backgrounds and learning styles.
- Consistent saving and investing are good practices, but they may not be possible for individuals living paycheck to paycheck or those with significant debt.
- Social influences can impact financial decisions, but it's also important to consider the role of cultural and societal expectations in shaping our views on wealth and success.
- Focusing on genuine financial well-being is important, but definitions of well-being can vary greatly among individuals, and some may value experiences or purchases that could be perceived as frivolous by others.
Actionables
- You can reframe your perspective on money by journaling daily about how financial resources have positively impacted your life or the lives of others. This practice can help shift your view of money from a source of evil to a tool for good. For example, write about a time when financial means allowed you to help a friend in need or donate to a cause you care about.
- Create a visual representation of your financial goals and the steps needed to achieve them, such as a roadmap or flowchart. This can serve as a constant reminder and motivator for your wealth-building journey. For instance, draw a path leading to a house to symbolize the goal of homeownership, with milestones along the way representing saving a certain amount or learning about mortgages.
- Develop a habit of comparing prices and quality before making purchases to foster a balance between consumption and saving. Use a simple spreadsheet to track the cost and longevity of items you buy over a month. This can help you make more informed decisions and potentially redirect funds towards saving and investing. For example, if you notice you're spending a lot on coffee each week, consider investing in a quality coffee maker to save money in the long run.
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Changing Your Money Mindset and Belief Systems
Jaspreet Singh and Lewis Howes discuss the crucial role that mindset plays when it comes to financial outcomes, stressing the need for a shift to a more empowering belief system regarding wealth.
Subconscious Money Beliefs Determine Financial Outcomes
Jaspreet Singh illustrates that subconscious beliefs are often hidden blockers to wealth. Even when trying to consciously adopt a mindset for abundance, subconscious views may still lead to self-sabotaging behavior.
Limiting Money Beliefs Form Early Based On Upbringing and Environment
These deep-seated beliefs can develop early in life, rooted in upbringing and environment. An example Singh gives is seen in how students handle money — cashing checks at liquor stores and losing a significant portion to fees, which indicates underlying attitudes towards money that are not conducive to building wealth. Singh points out that environments fostering such behaviors create "money wounds," a term agreed upon by both him and Lewis Howes.
Question the Notion That Money Is Evil
Singh challenges the notion that money is inherently bad, advocating for a perspective of money as a neutral tool. It's an instrument for improving one's life and aiding others rather than being evil.
View Money As a Neutral Tool; Use Your Power to Improve Life and Help Others
Singh explains that money is neither inherently good nor evil; it amplifies personal characteristics. He also elaborates on the principles of the Sikh religion, highlighting the duty to earn an honest living and serve others, which both support the idea of using wealth positively.
Adopt an Empowering Mindset For Abundance and Financial Freedom
Singh encourages adopting an empowering mindset, affirming both the duty and the will to achieve wealth. Believing that wealth is within one's reach is crucial, as is the understanding of the abundant nature of money.
Affirm You ...
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Changing Your Money Mindset and Belief Systems
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Counterarguments
- While subconscious beliefs may influence financial outcomes, it's also important to acknowledge structural and systemic factors that can impact one's financial situation, such as economic inequality, discrimination, and access to education.
- The idea that early upbringing and environment shape limiting money beliefs doesn't account for individuals who overcome challenging backgrounds to achieve financial success, suggesting that personal agency and resilience can also play significant roles.
- The concept of "money wounds" could be seen as oversimplifying complex financial behaviors and ignoring the socioeconomic context that often dictates such choices.
- Viewing money as a neutral tool doesn't fully address the ethical considerations of how money is earned and spent, which can have moral implications.
- The statement that money amplifies personal characteristics may not always hold true, as individuals' behaviors can change with different levels of wealth due to various pressures and expectations.
- While Sikh principles may support using wealth positively, not all individuals subscribe to these or any religious beliefs, and thus may have different ethical frameworks guiding their financial decisions.
- The encouragement to adopt an empowering mindset for abundance and financial freedom may not be practical for everyone, especially those facing immediate financial hardships or living in poverty.
- Affirming a duty and will to become wealthy could be criticized for promoting materialism and overlooking the value of non-material aspects of life.
- Recognizing the abundance of m ...
Actionables
- Create a 'money mantra' that aligns with your values and repeat it daily to reshape your financial mindset. By crafting a personal mantra that reflects your desire for abundance and positive financial outcomes, you can begin to reprogram any limiting beliefs you may have about money. For example, if you value generosity, your mantra could be "My wealth constantly expands as I use it to help myself and others."
- Start a 'gratitude ledger' to shift your focus to the abundance around you. Each day, write down three financial or resource-related things you're grateful for. This could be as simple as having a stable internet connection, which allows you to access financial education, or acknowledging a friend who shared a money-saving tip. This practice can help you recognize the abundance you already have and attract more of it.
- Implement a 'conscious ...
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How Economic and Political Systems Sustain Wealth Inequality
Jaspreet Singh addresses the intricate relationship between government policies, the banking system, corporate interests, and the lack of financial literacy among individuals which together contribute to wealth inequality.
Profit From Public Debt and Financial Ignorance
Government Spending, Taxes, Fed Policies on Inflation and Wealth Disparity
The U.S. government's economic practices have a significant impact on public debt and financial ignorance, leading to wealth discrepancies. As the government nears $35 trillion in national debt, the top three expenses have shifted; for the first time in American history, interest payments have surpassed military spending. The national debt increases rapidly in conjunction with the high interest rates—the highest seen in over two decades. The government indulges in borrowing, often from the Federal Reserve Bank, instead of raising taxes, which Singh views as a hidden tax through created inflation that affects everyone but disproportionately impacts the poor and the financially uneducated.
Taxation furthers government operations and Singh points out that the disparity is exacerbated by the fact that inflated wages do not keep up with the actual inflation rates. For instance, from 2019 to 2024, inflation was about 22% while wage growth lagged behind at approximately 20%. On the other hand, investments like stocks, with the S&P 500 growing around 80%, further the wealth gap as the rich get richer through accelerated wealth growth and the poor struggle to keep up with the rising cost of living.
U.S. Economy Favors Consumption Over Wealth Building
How Corporations Benefit From Increased Spending
The U.S. economic system essentially encourages consumption over saving and investing—indicative of a consumer nation where people are conditioned to think about spending more as they earn. Singh illustrates this by saying Americans often "make a dollar to spend two dollars," underscoring this cultural leaning toward consumption. He also emphasizes the role of the 'buy now, pay later' industry in driving increased spending, as the majority of users end up paying interest due to not repaying their purchases on time.
Singh sheds light on how high levels of consumption are maintained by banks like Wells Fargo, which encourage individuals to extract equity from th ...
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How Economic and Political Systems Sustain Wealth Inequality
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Clarifications
- The relationship between government policies, the banking system, corporate interests, and financial literacy in contributing to wealth inequality is interconnected. Government policies, such as taxation and borrowing practices, can impact wealth distribution. The banking system's lending practices and corporate interests in profit-making can exacerbate wealth gaps. Additionally, individuals' level of financial literacy influences their ability to navigate and benefit from these systems, affecting their wealth accumulation.
- The U.S. government's economic practices, such as high national debt and borrowing from entities like the Federal Reserve Bank, impact public debt. This borrowing can lead to increased interest payments, affecting the overall economy. Additionally, disparities in wage growth compared to inflation rates can exacerbate financial challenges for individuals. These factors contribute to financial ignorance and wealth inequality within the population.
- Hidden inflation taxes occur when the government resorts to borrowing money and increasing the money supply, leading to inflation. This inflation erodes the purchasing power of money, effectively reducing the value of savings and fixed incomes. Individuals with lower incomes or financial literacy may struggle more as their wages may not keep up with the rising cost of living caused by inflation. Essentially, hidden inflation taxes act as a regressive tax, impacting the less affluent disproportionately compared to the wealthier segments of society.
- Wage growth lagging behind inflation rates means that the increase in wages workers receive is not keeping up with the rise in prices of goods and services. This leads to a situation where people's purchasing power decreases over time as their wages do not stretch as far due to inflation. In essence, even though people may be earning more money, the real value of their income diminishes because prices are rising faster than their wages. This can result in a situation where individuals find it harder to afford the same standard of living despite earning more money.
- Investments like stocks contribute to widening the wealth gap because they offer the potential for significant returns over time, allowing those who can afford to invest to grow their wealth faster than those who do not participate in the stock market. As stock prices increase, individuals who own stocks benefit from capital appreciation, leading to an increase in their overall wealth. This means that individuals with more disposable income to invest in stocks have the opportunity to accumulate wealth at a faster rate compared to those who do not have the financial means to invest in such assets. Consequently, the wealth gap widens as those who are already wealthy can leverage their resources to generate more wealth through stock investments, while those with fewer financial resources may not have access to these opportunities for wealth accumulation.
- The 'buy now, pay later' industry allows consumers to make purchases and pay for them in installments over time, often without interest. This payment method can lead to increased spending as it provides immediate gratification without the need for upfront payment. However, if consumers do not manage their payments effectively, they may incur interest charges, potentially leading to financial strain and debt accumulation. Overall, this industry can influence consumer behavior by promoting more spending than traditional payment methods.
- Banks like Wells Fargo encourage individuals to extract equity from their homes by offering home equity loans or lines of credit. This allows homeowners to borrow against the value of their homes, using the equity as collateral. By tapping into this equity, individuals can access funds for various purposes such as home improvements, debt consolidation, or other financial needs. However, it's important to note that borrowing against home equity comes with risks, including the potential of losing one's home if the loan is not repaid as agreed.
- Consumer debt, particularly credit card debt, has increased due to wages not keeping pace with inflation, leading individuals to rely on credit to maintain their standard of living. High levels of consumption are encouraged by financial institutions, such as banks, which promote borrowing against assets like home equity. The 'buy now, pay later' industry also contributes to increased spending, with many consumers accruing interest by not repaying their purchases promptly. This cycle of borrowing to sustain lifestyle choices, coupled with stagnant wage growth, results in a rise in consumer debt levels over time.
- Economic growth in the U.S. is tied to increased spending because consumer spending drives business revenue, which in turn leads to higher profits and economic expansion. When people spend more money on goods and services, it boosts demand, prompting companies to produce more, hire more workers, and invest in their operations, ultimately stimulating economic growth. This cycle of spending, production, and investment is a fundamental driver of the U.S. economy, as consumer expe ...
Counterarguments
- The relationship between government debt and wealth inequality is complex, and some economists argue that public debt can be used to fund investments that lead to economic growth and potentially reduce inequality.
- High interest rates can sometimes be a tool to combat inflation, which, if left unchecked, could have more severe consequences for the economy and exacerbate wealth inequality.
- Taxation policy is a contentious issue, and some argue that raising taxes could have negative effects on economic growth and job creation, which could also impact wealth distribution.
- Wage growth not keeping up with inflation is a concern, but some argue that this can be addressed through targeted policies such as education and training programs that increase worker productivity and, consequently, wages.
- The stock market's performance does not necessarily reflect the overall health of the economy, and some individuals can benefit from stock market growth through pension funds and retirement accounts.
- Encouraging consumption is not inherently negative, as consumer spending is a significant driver of economic growth, and some argue that it can lead to job creation and increased prosperity.
- The 'buy now, pay later' industry provides consumers with more options to manage their finances, and responsible use of credit can be a tool for financial management and building credit history.
- Home equity loans can be a legitimate way for homeowners to access capital for ...
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Steps and Strategies For Building Long-Term Wealth
Financial educator Jaspreet Singh outlines effective strategies for building sustainable wealth, stressing the need for sacrifice, consistency and a commitment to a long-term vision.
Savings and Investment Plan (E.G., 75-15-10 Rule)
Singh introduces the 75-15-10 plan which allocates 75% of every dollar to spending, 15% to investing, and 10% to saving. He suggests taking the money not spent and investing it in assets like stocks, real estate, and businesses that can generate more money over time. Singh emphasizes the importance of reinvesting profits back into these investments to grow wealth.
Invest Income in Stocks, Real Estate, and Businesses
Singh shifted his spending priorities from luxuries to investments starting with real estate and acknowledges the societal pressures to display wealth which contrasts with the less visible but meaningful growth of investments like a stock portfolio. He stresses understanding investments rather than gambling on volatility. Singh cites index funds and the S&P 500 as indicators of the economy's health. He expresses that individuals should invest in themselves to become financially free.
Endure Challenges to Build Wealth
Wealth building involves enduring financial and emotional obstacles. Singh speaks about the hardships faced when adhering to his investment strategy, acknowledging that it may be difficult for individuals already struggling financially. He shares a poignant memory illustrating the challenge of changing spending habits for the sake of building wealth.
Embrace a "Decade of Sacrifice" to Build a Strong Financial Foundation, Temporarily Forgoing Luxuries
Singh introduces the concept of a "decade of sacrifice" indicating that people should temporarily forego luxuries and invest in assets to improve their financial situa ...
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Steps and Strategies For Building Long-Term Wealth
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Counterarguments
- The 75-15-10 rule may not be feasible for everyone, especially those with lower incomes or higher necessary expenses, which could require a more tailored approach to budgeting.
- Investing 15% of income might not be enough for some individuals, depending on their financial goals and the time frame they have to achieve them.
- The assumption that everyone has the ability to save and invest may overlook systemic issues that prevent certain groups from doing so.
- The advice to invest in stocks, real estate, and businesses assumes a level of risk tolerance and access to capital that not all individuals may have.
- Reinvesting profits is not always the best strategy, as sometimes it might be more prudent to diversify or secure one's financial position by cashing out.
- The focus on index funds and the S&P 500 may not account for the potential benefits of other investment strategies or asset classes.
- The concept of a "decade of sacrifice" may not be practical or healthy for everyone, as it could lead to burnout or a decreased quality of life.
- The idea that wealth is a gradual process may not acknowledge the sometimes unpredictable and non-linear nature of investment returns.
- Diversification is generally a sound str ...
Actionables
- You can create a visual roadmap of your financial goals to maintain focus on long-term wealth building. Start by drawing a timeline that spans the next decade, marking milestones you aim to achieve, such as paying off debt, reaching certain investment portfolio values, or buying income-generating assets. This visual aid will serve as a daily reminder of your commitment to a long-term vision and the sacrifices you're making for future financial improvement.
- Develop a habit of monthly financial reflection to ensure consistency in your wealth-building journey. Set aside one evening at the end of each month to review your spending, saving, and investing activities. Use a simple spreadsheet to track progress against the 75-15-10 rule or any other budgeting strategy you've adopted. Adjust your actions for the next month based on your reflections to stay aligned with your long-term financial goals.
- Engage in a "financial book club" with friends ...
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Importance of Financial Education and Overcoming Psychological Barriers
Financial education is crucial for navigating the complexities of money management, investing, and wealth-building. Industry experts Lewis Howes and Jaspreet Singh delve into the various facets of this topic, highlighting the challenges and solutions individuals face in achieving financial literacy and independence.
Educate Yourself On Personal Finance, Investing, and Wealth-Building
Seek Resources Like Books, Podcasts, and Online Communities to Expand Your Financial Knowledge
Lewis Howes discusses the transformative power of self-education in personal finance through his new book "Make Money Easy." He underscores the importance of changing one's relationship with money. Jaspreet Singh, acting as a trusted financial advisor, encourages people to manage and understand money by exploring various educational resources. Singh highlights the revelation that there is enough wealth for all, which can be understood through financial education.
Howes shares his personal journey of financial education by reading influential books like Ramit Sethi's "I Will Teach You to Be Rich," which provided actionable financial strategies. Meanwhile, Singh stresses the importance of understanding investment good practices and market trends. They both discuss the range of resources at one's disposal, including online platforms like YouTube, educational newsletters like Market Briefs, and Singh's own Minority Mindset channel.
Prepare For Downturns and Uncertainty By Building Resilience
Cultivate Consistent Saving and Investing Discipline Despite Market Volatility or Concerning News
The conversation pivots to the importance of resilience amidst economic uncertainty. Singh and Howes discuss the necessity of preparing for market downturns, acknowledging the significant opportunities that arise during such times for the financially educated and prepared. The discussion emphasizes the importance of consistent investing discipline, such as regular contributions to investment accounts and taking action before a downturn occurs rather than during it.
Singh underscores the importance of preemptive saving and investing, advocating for the separation of funds designated for taking advantage of market downturns. The importance of daily, consistent financial actions, particularly in the face of downturns, is also highlighted as a means to build long-term resilience.
Recognize Ego and Social Influences Sabotaging Financial Goals
Focus On Financial Well-Being, Not Keeping Up With The Joneses
Singh addresses the detrimental effects of ego and social influences on an individual's financial goals, pointing out how societal pressure leads to poor financial decisions. He discusses the psychological impact of market news on investment decisions and the necessity of focusing on one's ...
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Counterarguments
- While financial education is important, it is not the only factor in managing money effectively; psychological traits, personal discipline, and economic conditions also play significant roles.
- Not all resources on personal finance provide quality information; some may offer misleading advice or be driven by the interests of those who create them.
- Self-education can be powerful, but it may not replace the need for professional financial advice, especially for complex financial situations.
- Understanding investment practices and market trends is beneficial, but it can also lead to overconfidence and potentially risky financial behavior if not coupled with a healthy respect for market unpredictability.
- Building resilience is key, but the advice to prepare for market downturns may not be practical for individuals living paycheck to paycheck or those without disposable income to invest.
- Consistent saving and investing are important, but this advice may not account for the financial realities of those with low incomes or high debt burdens.
- Recognizing the influence of ego and social pressures is valuable, but this perspective may oversimplify the complex reasons behind financial deci ...
Actionables
- You can create a "Financial Vision Board" to visualize your long-term financial goals and the steps needed to achieve them. Start by gathering images and phrases that represent your financial aspirations, such as a debt-free life, owning a home, or retiring early. Place these on a board or digital collage, and include actionable steps like "set up a monthly budget" or "invest in index funds." This visual tool serves as a daily reminder and motivator to make decisions aligned with your financial future.
- Develop a "Money Mindfulness" practice by setting aside time each week to review and reflect on your spending and saving habits. Use a journal or an app to track where your money goes, how it makes you feel, and where you can improve. This habit not only increases your awareness of your financial behaviors but also helps you identify emotional spending triggers and develop healthier money habits.
- Initiate a "No-Spe ...
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