In this episode of MarieTV, we do have some adult language. So if you do have little ones around, grab your headphones now.
Marie: Hey, it’s Marie Forleo, and you are watching MarieTV, the place to be if you want to create a business and life you love. Now, if money is an area of your life that you want to get better at, today’s show is a must watch. David Bach is one of the most trusted financial experts, and bestselling financial authors of our time. He’s written nine consecutive, New York Times Bestsellers, with over seven million copies in print. Including the titles, Smart Women Finish Rich, The Automatic Millionaire, and Start Late, Finish Rich. In addition to his books, David has helped millions through his seminars, speeches, and media appearances. He’s the co-founder of AE Wealth Management, one of America’s fastest growing financial planning firms, and the founder of Finish Rich Media, a website dedicated to revolutionizing how people learn about money. David, thank you so much for coming back. You know how much I adore you.
David: I’m so excited to be back with you. Thank you for having me back.
Marie: First of all, The Latte Factor. The Latte Factor. This book is amazing. I texted David after I read an advance copy and it made me cry at the end. We’re going to talk about that. I highly, highly recommend this book for you, and for everyone you know. David’s been on the show before. We’ve talked about money before. It’s one of my favorite topics in the world. And, this book is perfect. Especially, I feel like, for people who are intimidated by money, or they’re afraid to dive in, or everything just feels so overwhelming. Books that are 600 pages, which again, I’ve read a lot of them. Even thicker books of yours, that are full and comprehensive. This one, you can read in basically an hour, an hour and a half, and it is life changing. Before we dive into money, I actually want to talk more about the book itself, and books themselves. As you know, I’m at the tail end, my book will be out September 10th. Everything is Figureoutable. My goodness people, lessons––
David: Great title, by the way.
Marie: Thank you.
David: I’m so excited for you.
Marie: Thank you. Lessons upon lessons upon lessons. And I wanted to highlight this, because I don’t think people understand. You had… How long have you wanted to write this book?
David: 14 years. 14 years. Literally from the moment I did a show with Oprah, on the Automatic Millionaire, in which we talked about on a previous show with you. We did an entire segment on the Latte Factor. Together, Oprah and I. We did a review of a young woman, who didn’t believe she could save any money. Showed what her latte factor, and showed, on stage, what it could be worth. That reveal was where we pulled back a sheet that was covering over a quarter of a million dollars in cash. And the audience did exactly that. It was real money. I really said, I’m saying sober, I’m like, “This is real money.” It was that aha moment. And I basically came home and I was like, “I need to figure out a way to write a story that’s shorter. That’s simpler. That’s easier. A parable.” I literally said to my publisher, “I want to write the who moved my cheese of money. I want to write a book that… 98% of people won’t read a book on money, I want to write a tiny story.” They were like, “Yeah, yeah. No. No. Not so much.”
David: I kept having this idea, and it kept, year after year, throwing it back out there. They’d say, “No, not so much.” That’s what happens sometimes, by the way. People think, “Oh you’re an artist. You’ve created a certain amount of success, and then people just say yes to you.” But, it’s not always what happens. I wrote seven more books before I finally did this one.
Marie: Again, guys, like David Bach, nine consecutive New York Times Bestsellers. Millions and millions of copies that he’s sold. And his publisher still said, “No, I don’t think so.” You actually took a different approach with this, right? You said, “This is the first book that you wrote first, before selling it.”
David: That’s exactly right. I finally, I reached that point. Sometimes you have a dream, and after you keep hearing no and you keep hearing no, that dream sort of dies off. What I always tell people, “If it keeps coming back, that’s your soul talking to you.” If there’s something that you really want to do, it’s almost like you can’t let it go. That’s your soul saying, “You have to do this.” I finally hit this point where I’m like, “If 10 years from now I haven’t done this book, I’m going to have serious regrets.”
David: John Mann and I, my co-author of this book, I never had a co-author. He wrote a great book called The Go Giver.
Marie: Loved it.
David: I had done a testimonial for that book, well over a decade ago. I had said to John, “I have this idea for this book called The Latte Factor. Where we can teach people all over the world that they’re richer than they think. That they’re more powerful than they know. That small amounts of money can change their life. I don’t have the whole idea, yet. When I have the whole idea I’m gonna call you.” I finally called him and I’m like, “I have the idea. You gotta come to New York. I’m going to walk you through the story.” Literally, I walked him through the story. The story starts in the oculus. And I said, “Here’s the thing. I don’t want to sell the book first. I don’t want to do the typical book proposal, sell it, write it.” I go, “I want to work with you on this book, like a piece of art work. Until I tell you it’s ready, it’s not ready.” It’s literally like a piece of artwork.
“If it takes a year, it takes a year. If it takes two years, it takes two years. Once it’s ready, then we’ll go sell it.” That’s what we did. That was the most beautiful experience I’ve had as a writer so far in 20 years, because it didn’t have a deadline. And I had a partner that heard me. When I said, “We’re not turning this in until it’s perfect.” We just kept redoing it and redoing it and redoing it. There are sentences in this book that we finessed for weeks.
David: People think these little books are easy. That you just boom, boom. We spent over a year and a half writing this book.
Marie: Yeah. I think sometimes, because I’m someone who pays so much attention to quality over quantity, and we had a similar experience. I’d just gone through the copyediting process for Everything is Figureoutable, and the time that we spent on three sentences, coming back to it. To get it just right because it’s so important. It’s probably true for you guys too, to get that message right. To make sure that it lands in someone’s heart and in their mind, so hopefully there’s a transformation in a way that no other words could accomplish.
Marie: It’s so exciting. I just wanted to share that with you guys, because sometimes you don’t get to hear the behind the scenes. It’s just like, “Oh my goodness. Millions and millions of copies, and all these bestsellers.” And you never get to hear about what happens on the back side, that there’s a struggle.
David: And also, with seven million books out, I took my son Jack, who’s 15, with me on the book pitch process. And he’s like, “Dad, is this scary for you?” I’m like, “Yeah, because at the end of the day, I still have to sell it again.” I have to sell the vision. And I think, what I tell people who are entrepreneurs, all these people who are watching you, wanting to build their own business, “The sales process never ends. You have to believe in your dream, more than anyone else. If you don’t believe in your dream, nobody else is going to believe in your dream. And the fact that people will say no to you, doesn’t mean that no is right, it just means it’s not right for them.”
David: As I took Jack on this pitching process and he watched me, he’s like, “Wow, Dad. That was just amazing seeing you share this message so passionately.” I’m like, “That’s what I do, Jack. I love this.”
Marie: I feel like it applies too, to people that aren’t entrepreneurs. When you have a dream, if you want to sell your dream to your family, or you want to sell your dream to your community, or you want to sell your dream––
Marie: To other people in whatever way you’re bringing a dream to life, you do have to keep on it. Even in our partnership, selling your partner on the vision. We’ll talk about where you guys… Not that that’s too hard of a sell. David’s gonna spend some time in Italy, which is amazing. We’ll talk about that later. Okay. Now, getting into the book itself, why is it a parable? You felt like it would be the easiest and most digestible, and people wouldn’t resist it?
David: Well, stories transforms people’s lives.
Marie: Facts tell, stories sell.
David: Stories transform people’s lives. And I’ve always had stories throughout my books. Even with all the books that I’ve sold, the reality is that I believe, Marie, that 98% of people will never read a financial book. They need a financial book. We’re going to talk about the reason why people need this so much, but most people won’t read a book on personal finance. I kept asking myself, “How can I package something up that somebody can read in an hour? That can completely change their whole life when it comes to their money? That could free them to go for their dreams?” And then also selfishly, “How can I write a book that my 15 year old son would read?” And this is the first book that Jack’s read.
Marie: That’s amazing. Zane, my stepson, I introduced him to your book when he was about 13. He rolled his eyes, understandably, and I was trying to show him the table, some of which we’ll go in later. I’m like, “Zane,” he had just had this first job, and there was this check of money. And I was like, “Zane, look. If we invest this…” He was, again 13 at the time––
David: What Marie’s talking about right now, you’ll cut this in, this is the chart.
David: That shows saving $2000.00 a year, starting at the age of 19, only saving it until the age of 26. That’s $5.41 a day. By the time the person reaches 65, they have a million dollars. And here’s the thing, Marie, your 13 year old?
David: This chart at the end of… Jack read this book in two hours and turned to me on a plane flight. I’ll show you the picture of this later. He turns to me, and he goes, “Dad, is this real?” I go, “Yeah, it is real.” And he goes, “How do I get one of these accounts?” He goes, “I could do this.” He goes, “It’s $5.41 a day.” He goes, “You started this at 19. What happens if it’s 15? You should rerun the numbers.” I go, “I actually have that chart too.” He goes, “Let’s open up… ” I said … We’re gonna do a Roth IRA for him. Here’s the thing. This little chart is going to change his life, but it changes anybody’s life. It happens to be this little chart was shown to me at 26, at Morgan Stanley, by a financial advisor, retiring at 61, who told our training class, “At a minimum guys, this is what you need to do.” Something as simple as that little chart can change anybody’s life who’s watching this. When you look at the math––
David: It’s the math that people don’t understand. I put all my best charts in this book. There’s a chart that shows somebody starting at 25. And they save $300.00 a month. By the time they reach 65, they’ve got $1,913,000.00. Another person waits until 35, they’ve got $684,000.00. It’s only 10 years later.
Marie: Big difference.
David: Big difference. Next person waits until they’re 45 to save. They’ve got $230,000.00. The next person waits until they’re 55, and they’ve got $62,000.00. That was a lot of math to just show, but what happens when you look at this, you just go, I gotta get going. That’s really the core message of this book. Wherever you are right now, get started.
David: Because small amounts of money can change your whole life.
Marie: Absolutely. It changed my life, too. And again, if you guys didn’t see our first episode together, you will. We’ll link it below. I first read David’s books, it was Smart Women Finish Rich. It totally opened my eyes. I was like, “I’m gonna get my shiz together.”
David: Now, look at her. Look at her.
Marie: You know me, I’m an action taker, right?
David: I know you are.
Marie: I saw those things, and it really opened my eyes. I was like, “I can do this. I will do this.” And I have done this. This is why I get so excited to talk about money, and we’ll dive into some of those scary statistics right now. I watch the news sometimes, and I see these reports about how these incredible, good folks, all across our country, and all across the world, can get taken out. One bad decision. Being ill. An accident. Things that happen. Some of the stats right now, let me see where I had these. I think it’s seven out of 10 people describe themselves as living paycheck to paycheck. And right now, half of the people here in the US could not find an extra $400.00 in the event of an emergency. And I love…
David: You gotta take one breath there for a second. Because what you just said, I’ve talked about this now for four years. It’s actually what led me to write this book. Four out of 10 Americans, almost half of America today, cannot get their hands on $400.00 in case of an emergency. That means the average American has less than six days of expenses set aside. Six out of 10 Americans, Marie, have less than a $1000.00 in savings. Eight out of 10 women today, in this country, are living paycheck to paycheck. When you look at how this country is being torn apart politically right now and how divisive this country’s becoming, it is because people are so struggling financially.
David: That’s why, what happened with this book, as I went to Geneva and had dinner with Paulo Coelho. The author of The Alchemist. Our friend Brendan Burchard and I went over and I’d always wanted to meet Paulo. I had, again, has this dream for this book for a long time, and over dinner and over drinks, Paulo looks at me, because his book was my biggest inspiration, The Alchemist. He looked at me and he said, “David, what is the book that your heart desires to write, that you have not yet done? And why?” How’s that for a question, by the way?
Marie: It’s a great one.
David: I proceed to tell him, “I want to write this book called The Latte Factor, that will translate all over the world, because so many people are living paycheck to paycheck. And they’re struggling. If I can help free people financially, I know I can help them fix their lives.” When you fix your finances, you fix your life. He looked at me, and he goes, puts his hand on me and goes, “Then David, you must write that book.” And literally, we closed that bar out. It was like three o’clock in the morning. I came home, I was on cloud nine. I came home from that trip and my wife, Alicia, you know her. And she said, “What did Paulo say?” I said, “Paulo said I should write The Latte Factor.” She’s like, “I’ve been telling you that for 10 years. You go to Geneva to hear that.” I’m like, “Well, it is Paulo Coelho.”
Marie: Yeah. Absolutely. For everyone thinking about it, The Latte Factor you said is never about coffee. It’s not even about the money. This is what’s so important, you guys, to get. It’s always been a metaphor to motivate and inspire dreamers to go live their dreams. This is huge, because this was so much what I took out of this book of yours, and why it’s so important. Let’s dive in. Because it’s not about necessarily being a penny pincher, is it?
David: It’s not.
David: What The Latte Factor was always designed to do was be a metaphor that was like a light switch, that makes people go, “Oh. I do have enough money to start investing.” The number one reason people don’t invest, is they think, “I’m not rich. I don’t have money. I can’t get started.” I started showing the math of $5.00 a day, if you’re in your 20s, and in this case the main character is Zoey Daniels. She’s 27 years old, she’s a millennial. And I really wrote this book to reach young people. To empower the next generation to save and invest. She’s 27 years old, she’s working. She lives in Brooklyn, she’s working in the Freedom Tower. She’s in publishing. She’s an editor of a travel magazine, but she never gets to travel. And after six years in the city, working super hard, making more money, she’s still living paycheck to paycheck. And she’s giving up hope, which is happening to a lot of millennials, by the way. They’re losing hope.
She starts to meet a series of mentors that teach her, “If you can afford to go have coffee every morning at the coffee shop…” Funnily enough you’ve got this massive coffee shop now down below this building, which wasn’t here last time. “If you can afford to spend $5.00 on coffee, you can afford to change your whole life.” And this mentor starts to show her that. And ultimately, the mentor who happens to work at a coffee shop says, “You don’t actually have to give up your coffee. It could be something else. What you need to realize, is that you have to become financially selfish. You have to put yourself first. It starts with small amounts of money. Like $5.00 a day. $10.00 a day. $15.00 a day. It’s building the muscle financially, that you deserve to keep. You deserve to keep part of your paycheck.”
He runs her through the math of that. He’s like, “You’re going to work 90,000 hours over your lifetime, you need to decide today to keep one hour a day of your income.” He starts to walk there through that. Again, The Latte Factor is a metaphor. I’m not trying to take your coffee away, I’m trying to get you to think consciously. Are you spending money in a way that’s going to get you closer to your dreams? If you’re not, you’re trapped.
Marie: Big time.
David: You’re trapped. And many people today feel trapped.
Marie: Yes. That’s one of the scariest places to feel. I felt that in my life. So many people can relate to that feeling now, where you can’t breathe, and you don’t know which way to turn. And you don’t know how to get help. That’s why this book is so genius, because it empowers you to help yourself. One thing that I love that Zoey, the main character, she first sees this sign. It’s a message she sees. It says, “If you don’t know where you’re going, you might not like where you end up.” I just want to settle for folks, that are watching right now, you just heard David say, this book he wrote this to empower young people. If you’re in your 50s or 60s, know David’s got another book that’s called Start Late, Finish Rich. We’ll get there, too. This is really for everyone. But, there’s never a bad time to take a pause and say, “Wait. Have I been intentional about where I’m going?”
David: That’s the core message of this book. The core message of The Latte Factor is, waking up to where you want to go with your life. Are you actually present right now in your life. The book starts with Zoey Daniels coming out the Fulton Center. For people who don’t know, that’s the center right downtown in New York City. She comes out in the Oculus. Underground, on the way to the Freedom Tower, there’s an LCD screen that’s the size of a football field. We’re going to do a book signing event there.
Marie: Oh, good.
David: On the LCD screen she sees, “If you don’t know where you’re going, you might not like where you end up.” And she takes the escalator up, above ground, and she comes out the 9/11 memorial, which is right next to the Freedom Tower, where she works. For six years she’s never really taken in the 9/11 memorial. She’s just come up, gone into the office. And on this morning, she looks at the 9/11 memorial, and she sees people crying. She sits down on a bench and she asks herself, where is she going with her life. And that’s the first chapter of the book. That’s a question we all need to be asking ourself, at any age.
Marie: That’s right.
David: At any age. Where are you going with your life? Because things can change like that in a moment. And this is a book about not living life with any regrets, which we’ll talk later about. My grandmother’s story, how I weave that in there. I want people to not live a life of regrets.
David: And I want you to be conscious in your life. And so the money is just a tool to start to free you up, to become more present in your life, so you can think about these bigger things.
Marie: Yes. I love that her first mentor, Henry, replies, when she says she can’t afford a painting. When she’s in the coffee shop and she’s looking at this beautiful travel photograph, actually not a painting. Henry replies, “You’re richer than you think.” And he says, “For most people, more income wouldn’t help their situation at all.” Talk to us about how we need to get out of this mentality, “If I just had more money.”
David: Well, it’s really the American trap. We are trained pretty much from birth here, go make more money, go make more money, go make more money. And as we make more money we’re then marketed to, to spend more. What happens when you make more money, is you have what’s called lifestyle creep. It’s not intentional. It’s that you’ve been marketed to. As you’ve been marketed to, you’re supposed to have a nicer car. You’re supposed to have a bigger home, you’re supposed to have fancier clothes, you’re supposed to have these brands. As we make more… We’re all guilty of doing this. I’ve done this myself. As we make more money, we increase our expenses. New York City, where we are right now, is the classic example. It’s where people make a whole lot of money, and you see these articles where people are making a lot of money, and they’re still living paycheck to paycheck. Their stress level is even higher, and their unhappiness level is even higher. If you work really, really hard and you keep making more money and making more money, and you’re not saving anything, you start to go, “Is it worth it?”
David: The secret to actually being happier and living rich, again, the message of this book is to live rich now. The secret is, and it’s not going to sound fancy here, it’s to actually live below your means.
David: As you grow your income, if you can keep your lifestyle the same, you start to really have freedom.
David: It’s funny. We’re going, as you know, we’re going to Florence. And as we were going… My wife’s in real estate. As we were about ready to go to Florence, my wife is looking at apartments that cost the same thing as what they cost in New York. And I said, “No, honey. We’re going to Florence. We can reduce our cost of living. I am sure in half.” And she’s like, “Oh, I didn’t know you wanted to reduce our cost of living.” I’m like, “Yeah. I do. We’re going to Italy. Save us some money.” Our apartment’s costing one-third what our apartment here in New York costs.
David: It was by changing the paradigm, right. We could have just kept spending the same amount of money. “Let’s go to Florence, and let’s focus on experience, not on stuff.”
David: And that’s another thing, too. We’ve been in this whole downsizing mode. You start to realize, we accumulate so much stuff that we don’t need. As we’ve downsized to get ready to move, and all the stuff has gone off to storage, three or four months ago we sent all this stuff to storage. I don’t even know what’s in storage anymore. Why did we need all this stuff.
Marie: Then paying for the storage to pay for the stuff that you forget is even there. I loved the one line in the book. It says, “Everyone spends money every day. And as they do, they’re building wealth. Everyone builds wealth. The only question is, for whom?” I was like, “Bam.” That is a question. What does that mean?
David: Well, where that example comes from is actually my grandmother teaching me about money starting at the age of seven. I learned about money from my grandmother Rose Bach. She was broke at 30. Didn’t have a college education, worked at Gimble’s Department Store, sold wigs. Poor. And at 30 made the decision she was tired of being poor. She was tired of being trapped. Made a decision to start brown bagging her lunch, all of her friends teased her. “Why are you brown bagging your lunch? Come out to lunch with us.” She said, “I’m going to start saving and investing.” And she saved $1.00 a week. Through that effort, started investing, and over her lifetime, I always tell that, over her lifetime, decades, she became a self-made millionaire.
And then she taught myself, and my sister, my father, how to invest. She helped me buy my first stock at seven. At seven years old, at McDonald’s, she taught me this lesson. The lesson was, you go to McDonalds and she’s like, “David, you can be a kid who comes and eats here. You can be somebody who works here for minimum wage. Or you can be somebody who owns this place. Minimum wage, that person whose working for minimum wage, very hard way to make a living. You’re here as a spender, eating McDonalds, which you love, but you could also make money from every single person that’s here.” She’s like, “I’m going to teach you today how to own McDonalds.” And she did. She took me home, opened up the Wall Street Journal, circled MCD, explained to me how to buy stock, explained to me how to be an owner. Not a buyer.
She’s like, “It’s fine, by the way, if you want to go to McDonalds once you own it, you can make money from yourself.” The example that’s in the book, actually, is Starbucks. Ironically, right? Because the mentor takes her to Starbucks and says, “I started buying…” I don’t want to give the whole story away, but basically says to her, when Starbucks opened, he had a coffee shop. And when Starbucks opened all of his friends were complaining about Starbucks opening. He’s like, “I’m just gonna buy the stock.” By the way, if you bought $1000.00 worth of Starbucks stock when Starbucks started today, you’d have over a quarter of a million dollars in stock. I’m like, “Great. You want to go to Starbucks and have coffee, then buy the stock.”
If you’re going to have a Netflix problem, where you… Then own stock. Own what you use. Because investors get rich. The other example that gets used here is there’s two escalators to wealth in America. Really, the world. The two primary escalators to wealth, its own stocks and owning real estate. Zoey’s mentor Henry teaches her, “You’ve got to be in the game of owning stocks and owning real estate.” What’s happening, Marie, right now, in this world, is everybody is getting… A small percentage of people are getting richer. And everybody else is getting poorer.
The game is rigged. And the game is rigged for rich people. And in order to be one of those rich people, you have to own two asset classes. Real estate and stocks. You have to. If you’re not, you’re not on this escalator. Everything is set up for those two asset classes to go up. The taxes are set up, to go up for those people. And the Trump tax law change, helped the stock market keep going. I’m going off on a tangent here, but it’s like you need to know how to play the game. There’s a game being played that involves money. And if you don’t know the rules, you’re going to lose the game. What I tried to do with The Latte Factor was, here’s a book that anybody can read. My 15 year old read it, you can read it in less than 90 minutes. And you can know the 99% of basic rules you need to know about personal finance to win at the game.
Marie: Yes. I want to talk about the myths that Zoey’s other mentor, Barbara, her boss teaches her. One myth, most people think they have… Basically, the myth is you need to make more money and then you’ll be rich. And I loved this. Most people think they have an income problem. They don’t. They have a spending problem. That was amazing. Myth number two, it takes money to make money. Like we’ve talked about, five, $10.00 a day can absolutely change your life. And then I loved myth number three, someone else will take care of it for you. This I think is so big for so many people. Assuming that whether it’s their boss, or an accountant, or a lawyer, or a husband, or a wife. That someone else is managing it and taking care of it, and just burying your head in the sand.
David: Yeah, two things. Let me just go the math one more time. We were talking about it before we started. The $10.00 a day.
Marie: Let’s go to that, yeah.
David: The $10.00 a day, if you could just save $10.00 a day, and you invested it. You paid yourself first in a retirement account. In 40 years, we show you at 10% you could have almost two million dollars. It’s like one million…
David: Thank you. Some go, “What? $10.00 a day and in 40 years I could have $1,897,000.00?” Yeah, you could potentially. By the way, 10% is what the stock market has averaged since 1926. People go, “I could never get 10%.” Okay, fine, you can reduce the rate. Maybe it’s… And I give you the numbers. It could be 9% or 8%, or 7% or 5%. Even half, you’d still have almost a million dollars. $10.00 a day. That’s a great place to start for somebody who’s not starting. Now, for a whole lot of people watching, it could be $20.00 a day. Or $30.00 a day. It’s coming up with your daily dollar amount. One thing that I think is so important, is to come up with that daily dollar amount. That’s the daily dollar amount that can change your life.
Marie: Yes. And we want to challenge people right now, right? Should we just do it?
David: Yeah. Let’s do it. What I’d like to see people do, let’s just use $10.00 a day, for example. But you can pick any number. Is come up with… I would give you 100 day challenge. It’d be cool if your community all did this. Pick a number, and challenge each other to save this amount for 100 days. At $10.00 a day, if we could get everybody watching to save $10.00, in 100 days you’d have more than 60% of Americans in savings, which is insane.
Marie: That’s amazing.
David: Right? For some people, they could go, “Well, what’s $20.00 a day or $30.00?” It could be a dollar a day. I think the thing that’s been so cool for us, we did a prelaunch of this book with our community, on our website. It’s thelattefactor.com, and we got a bunch of people on Facebook community. There’s like 1300 people right now on this insider group. And they’re all supporting each other. It’s been so amazing to me, to see everybody cheer each other on. I know your community does this, so I think if you guys could all go do this. Pick a dollar amount, and challenge each other for 100 days-
Marie: 100 days.
David: And then just keep checking in with each other. “Hey, I’m on day 27. Here’s what I’ve got.”
David: “I’m on day 42. Here’s what I’ve got.” “Hey, you know what? I was doing great, and I got off track.” “No worries, you can get back on track.” It is, in a way, exercise or dieting, it’s this daily thing. You can get off track, but you can get back on track.
Marie: That’s right. The thing I love, too, about bringing in that community piece, especially around money, there’s so much shame around the topic of money. And people are so afraid of it. Understandably, and people feel so bad.
Marie: And feel so guilty, and feel that they’ve messed up and maybe they’re beyond, “Oh no, I’ve made so many mistakes in the past.” “No, no, no. Let’s start fresh right now.” And that bit about community. Guys, take the challenge. 100 days. Whatever your number is, we’re throwing out 10, but it could be one, it could be three, it could be 20, it could be 30. Whatever it is, go for it.
David: So we don’t go past this, I want to talk about not depending on somebody else. I very intentionally focus that part on women. I’ve been a crusader for women and money for 26 years. I’ve been teaching women and money seminar programs, and Smart Women Finish Rich has been out for 20 years. I don’t care if you’re married to the local bank president. As a woman, you’ve got to be in charge of your finances. 80% of men die married. 80% of women die widowed. And the bulk of women who end up poverty-stricken, were not poverty-stricken before their husband died. There’s a message in this book for women, also, very intentionally. That you have to be the master of your own money.
Marie: Yes. That gets an amen from me. Every day of the week, yes.
David: It’s not guys that I don’t want you to be in charge of your own money, too, but this has been my core passion for 26 years because of my grandmother. You’ve got to be in charge of your own financial life. And you need to take power over your own financial life. You talked about being intimidated and scared and feeling guilty. Here’s the truth. Everything that’s in The Latte Factor should have been taught in school before you got out of high school.
David: If it was, everybody would do better. Because when you know better, you do better. It’s not your fault if you didn’t know this stuff, but you can fix it.
Marie: Yes. Now, it’s your responsibility.
David: You can fix it.
Marie: As an adult, too, I know I get so passionate about women and money because it’s like for millennia, we weren’t allowed, not allowed to own property. I was just working on my book, and I think it was as recent as in the 1970s, in some states, here in America, a woman couldn’t get bank credit unless she had her husband’s permission. It’s like, “What the… Are you kidding me?”
David: My grandmother when she went to the first brokerage firm, after she saved all the money.
David: The broker said to her, “We don’t open accounts for women. Come back with your husband.” When I tell that story, the audience just goes, “What?” That’s how it was not that long ago.
Marie: Yeah. And so many of us, as women, are still carrying around vestiges of those old ideas. Generational. Generational. Generational. Inner poverty. Based on institutional structures, and we have to change that now. That’s why I get so excited about this book. Thank you for driving that home. What I love, also, about all of your work, is it’s clear, and it’s actionable. Let’s talk about the three secrets to financial freedom. I think what’s great about these secrets is they’re hiding in plain sight. Right? They’re not really secrets. Number one, pay yourself first. What’s that mean?
David: Pay yourself first means that when you get a paycheck, the first person who gets paid is you. This is the single most important financial lesson that you could ever learn. You have to become… The book, financially selfish. You have to decide that that first hour day of your income, it’s coming right off the top to you. If you have a job, and you go to work at nine, and you work until five, the first hour day of your income, gets taken right off the top, goes into a retirement account before you can touch it. Happens to be the math on that, is 12.5% of your gross income. You start saving one hour a day of your income, when you’re in your 20s, you’ll be financially free for life. Now, as you get older, if you’re behind, you need to save more than that. It can go up to two hours a day.
But it’s a mindset of, “I’m going to get paid first. I’m going to pay myself first before I pay taxes, before I pay my mortgage, before I pay rent. Before I pay my bills.” Most people do everything… They pay all their bills first, they try to save last. It doesn’t work. And what we know is the way people in America who become self made millionaires, specifically in retirement accounts, there’s a formula. It happens to be, it’s 14% of your gross income. The average self made millionaire that’s become a millionaire by the age of 59, according to Fidelity, saved 14% of their gross income. That’s a little over one hour a day of your income. Henry walks Zoey through the math of this, but when you think about it in terms of time, and I know a lot of people who are watching are self employed, so there’s going to be all kinds of questions. How do I do this, I don’t have a salary?
You have to think about it still the same way. Money comes in, you’ve got to pay yourself first. And it’s hard when you’re self-employed, because your income’s not consistent. But, you have to decide, you have to decide. Check comes in, percentage gets taken right off the top, goes into another account that I can’t touch, to pay myself first. I don’t even care if it’s just one or 2%. It is a mindset and a discipline. You do that, you put yourself first, you’ll become financially free.
Marie: Secret number two.
David: I love when you do that.
Marie: Don’t budget. This is a good one. Make it automatic instead. This is secret number two.
David: Don’t budget because budgeting doesn’t work. If it worked, everybody would do it. And everybody would start them, and everybody would stick to them. I’ve spent 26 years in the financial service’s industry. My first nine years were at Morgan Stanley. What I saw first hand, in nine years, I only had one client write a check, discipline wise, from budgeting, for six months or more. Everybody who saved, all my clients that really saved money, it was all automated. The message of budgeting is, instead of budgeting, you need to save automatically. Whatever you’re saving for. Saving for an emergency account, save automatically. Money gets moved automatically into emergency account. Want to save for a dream trip to go to Italy, money gets moved automatically into your Italy account. You’re gonna save for retirement, it gets moved automatically into retirement account. And so, it’s this concept of instead of using discipline, and––
David: Driving yourself crazy because budgets actually do drive couples to fight. If instead you can focus on what you’re going to save automatically, and where, you can eliminate all the fights.
Marie: Love it. How about live rich now? I think this is the big one, because you said the first two secrets, pay yourself first and make it automatic, those are the how. This is the why. Figure out what matters, and follow that.
David: Yes. And it gives me chills because I talked about my sabbatical that I had taken last time I was on your show, which a lot of people actually really resonated with.
David: The idea of living rich now, before I go onto the sabbatical discussion, the idea of living rich now is, what do you really want to do with your life that you’re not doing? And how can you live rich today? Instead of thinking you need a bunch of money to someday live rich, what could you do today to live rich? What’s something that… I wake up in the morning, and I meditate. That’s a live rich moment for me. I write in my journal, and I write down my gratitude in the morning. That’s a moment for 15 minutes I’m very present, and I’m living rich. What can you do today, to live rich. Because the subtitle of this book, “why you don’t have to be rich to live rich,” which I thank you for, because we talked about it on the first show, and it resonated so much with your viewers. Going all over the world.
The message of this is that you don’t actually have to have a whole lot of money to feel rich. What you need to do to feel rich, is not feel trapped. Because the opposite of living rich, is feeling trapped. One thing I tell people to do, think about what in your life right now is making you feel trapped, how could you eliminate that? And what would it feel like to not feel trapped? What does that look like to you? What do you need to add to your life today, that probably doesn’t even take money, that would make you feel better about your life today. That’s living rich.
Marie: I love it. As we get to the end of the book, you start to explain a little bit about your beautiful grandmother, again. Will you share what you talked to her about at the end of her life?
David: I’m always going to get choked up thinking about this. My grandmother was really my role model and my mentor. She lived to be 86. At 86, she had a stroke. We moved her into a nursing care facility, Northern California by my office. I didn’t know… I thought that she was going to live forever. When I was with her at the nursing care facility, I asked her a question, which was, “Did she have any regrets?” The reason I asked her this question, Marie, is because I was finishing Smart Women Finish Rich. Back in 1997. She knew I was writing the book, and it was dedicated to her. I was like, “Do you have anymore lessons for me?” And I said, “Do you have any regrets?” She said, “No.” Then the next day I came in to see her, I’m like, “How are you?” She’s like, “I’m terrible. I was up all night long thinking about my regrets.” I’m like, “Oh my God, Grandma, I’m so sorry.” Then she took me through five of her regrets.
She’d had a stroke, so she couldn’t speak very well. She went through what they were. All the way back to being a teenager. And she said to me, “The lesson’s not in what I’m regretting. The lesson’s in why I’m regretting it. That’s what I want you to hear from me right now.” She said, “My regrets are, all those moments I came to a fork in the road, where I had to make a decision. Do I go this way where the gold is, where what I really want to do is this road, but that’s where the risk is. Or do I take the safer road?”
She said, “At every one of those points in time, I made the decision to take the safer road.” She’s like, “I am dying right now. I’m never going to leave this bed. And I’m never going to know what could have been.” She said to me… She said, “I don’t want you to make the same mistake.” She said, “When you come to the fork in the road there’s going to be a little boy inside of you that wants to go do this. And then there’s going to be this big boy that’s scared.” She’s like, “Don’t listen to the big boy.” I went back to my office, and I actually broke down. Like here. I’m so embarrassed.
Marie: No. This is life.
David: I broke down crying. Sitting in my car, crying in my office, and I looked in the rear view mirror. I wanted to leave Morgan Stanley. I wanted to go spend my life making a difference, teaching women, at the time, specifically, to be smarter with money. I felt trapped. I wanted to get out of this corporate box. I had this bigger dream. And I looked in this rear view mirror, and I looked at myself after breaking down crying. I was like, “Okay, David. In three years, we’re going to get you out of here. We’re going to go for your dreams.” That led me to four years. That led me to being in New York… leaving Morgan Stanley, moving to New York, writing 13 more books, and spending the last 18 years doing this. And the most amazing part of this story is that… My son, Jack, read this book on this plane flight, two weeks ago flying home from Utah.
After he talked about the IRA account, I said to him, “What was your biggest takeaway from the book?” He looked at me and said, “You know the story about your grandmother?” I go, “Yeah.” He goes, “The takeaway was to take risk.” And then he said, “You know, Dad…” He was giving me a choice about going to Florence. We’re getting ready to move to Florence with the family for a year. And the whole, one of the big reasons was to take him, as a sophomore, to live in Florence for a year before he goes off to college. We gave him a choice, which is a huge thing to give a 15 year old kid. And he chose, “Yes, I want to go.” And he looked at me and he said, “Dad, if I hadn’t chosen to go to Florence, it would have been my first regret.” He’s like, “I learned from the book I need to take risk in life.” And I was like, “Oh my God. I did everything I wanted to do with this little book. I just impacted my 15-year-old with these two huge life lessons.”
David: If I can go just reach some more people now, besides my 15-year-old son, with this book, it’ll be amazing.
Marie: Millions of people are going to read this book. I loved it. The reason I’m crying now, too, is because I loved it. Just to put a little pin in this, are you listening to the big boy or are you listening to the little boy who wants to play? The little boy inside who wants to play.
David: There’s a little girl inside, or the big girl inside.
Marie: That’s right.
David: One thing my grandmother said to me, too, at the time. She’s like, “It’s not always your own voice.” That big girl can be your mom. Or your boss.
David: Or society.
Marie: That’s right.
David: Or your tribe. We can get caught up listening to other peoples voices and lose sight of our own voice. I go back to, “You’ve got to listen to your soul.”
David: Being present in your life so you can listen to your soul, and let your soul come out. And then go play the game that your soul wants to play.
Marie: That’s right. Thank you so, so much. I am so thrilled that you wrote this book. I’m so thrilled we’re having this conversation again.
David: Thank you.
Marie: You’ve made a huge difference in my life. A huge difference to our audience. And I am really, really excited for all of you guys to get this book, to share it with the people that you love. To share it with your kids, with your friends, with your team, with your employees. It really is important because yes, money is an important topic. It is about freedom. But, it really, underneath it all, it’s about listening to that small voice. Listening to your soul and following your dreams. David, I adore you. I love you. Thank you so much.
David: I love you, too. Thank you.
Marie: Now, David and I would love to hear from you. We talked about so many important things today. I’m curious, what is the biggest insight that you’re taking away from today’s conversation? And most importantly, how can you turn that insight into action starting right now? Leave a comment below, and let us know. As always, the best conversations happen after the episode, over at marieforleo.com. Head on over there, and leave a comment now. When you’re there, be sure to sign up for our email list and become an MF Insider. You’re going to get instant access to an audio I created called How to Get Anything You Want. Plus, some exclusive content, special giveaways, and some personal updates from me, that I just don’t share anywhere else. Stay on your game, and keep going for your dreams, because the world really does need that special gift that only you have. Thank you so much for watching, and we’ll catch you next time on MarieTV.