Welcome to the Rich List, a weekly newsletter of 3 ideas to increase your wealth, well-being and wisdom.
I got perfect scores on the S&P Financial Literacy Survey, so…I’m a pretty big deal.
This is a basic test of 4 financial concepts: risk diversification, compound interest, numeracy & inflation.
You have to answer at least 3 out of 4 questions right to be considered “financially literate.”
Across the globe, only 1 out of every 3 people surveyed globally passed.
To be honest, I thought the survey set too low of a bar for financial literacy.
It’s helpful to know the basic concepts, but it’s not enough knowledge to start investing with the right mindset or to build wealth.
That’s why I created a free masterclass on financial literacy:
I’m hosting it on Saturday October 15th from 10:00AM-11:30AM, Pacific Standard Time.
I’ll teach you important concepts like…
- The power of compound interest and why it can make you wealthy – or completely ruin you.
- How to beat inflation and not only keep your wealth – but also grow your wealth.
- Why you should pick diversified funds instead of betting on individual stocks – at least to start with.
You’ll walk away from a “financial operating system” so that with every dollar comes in, you know where to direct it.
Register for the training Zoom: Become Financially Literate in 90 Minutes
Money is not finite.
There’s a measurement called money supply—the total amount of money in circulation in a country.
For most of U.S. history the supply of money has grown.
The big idea? Money is not fixed—it’s abundant and grows.
From 1959 to present time, the supply of money has grown from as little as ~$300 billion in the U.S. to more than 21 trillion today. Check out this chart on Trading View:
The fact that there is not a “fixed” supply of money may be helpful to develop an abundance mindset.
If you think of money as fixed, then wealth feels like a zero sum game.
When someone else gets richer, that can feel like they are eating a slice of your pie.
By understanding money supply, you realize that not only is the pie big enough for everyone – it’s constantly growing.
Ever find yourself admiring the car that someone drives, and automatically thinking wow, they must be so rich?
Blogger Financial Samurai’s 1/10 Car Buying Rule might make you think differently:
Spend no more than 10% of your gross annual income on a vehicle.
Meaning that if you make $50,000, a $5000 car. Make $100,000? A $10,000 car.
(Financial Samurai is definitely on the extreme end using frugality to achieve financial independence.)
Crazy coincidence: when I bought my used car, it was almost exactly 10% of my annual income at that time.
If you flip the script, that means there’s little chance that drivers of luxury cars (which average $50,000+) are clearing $500K or $1 million+ a year. Especially when you’re aware what the median and average incomes are.
It might sound petty, but this is also a good reminder that wealth is largely invisible.
When you see nice things, you’ve only seen what people have spent – not how much actual wealth they have.
Just for fun
This interaction between toddlers made my heart melt.
Are you happy? Why? Want a hug? Just one gentle hug?
The amount of emotional maturity contained in the idea of re-offering a gentler hug blows my mind.