Why Financial Freedom Is Not a Fairytale w/ The 7 Dollar Millionaire

Financial literacy is something that is often lacking from our education systems. Kids often learn about saving and investing later in life, wasting precious investment potential.  That is why The 7 Dollar Millionaire wrote Happy Ever After: Financial Freedom Isn't a Fairytale, a book written to teach youth how to get ahead on their path to financial freedom as early as possible to live the lives they want to live. The 7 Dollar Millionaire joins us to talk about the lessons in his book and share sound investment knowledge! https://www.sevendollarmillionaire.com/ ---   Transcript Michael: Hey, everybody, welcome to another episode of The Remote Real Estate Investor. I'm Michael album, and today I'm joined by my co host, Tom Schneider. And with us, we have a very special guest, Michael, better known as the $7. Millionaire is with us today, he's going to be talking to us today about personal finance, how to talk to your kids about finance, and some things you can do to be getting ahead and be proactive with your finances. So let's get into it.   Michael, thank you so much for joining us this evening this morning, today really appreciate you taking the time.   7 Dollar Millionaire: Excellent. Thank you for having me here. It's good to be here in your evening. My early morning sons just come up here in Singapore. So it's great to join you.   Michael: Yeah. And so you're out in Singapore. How did you end up there? Just just briefly.   7 Dollar Millionaire: Oh, no, that's a long story. I've been here 18 years now, I studied Southeast Asian economics. And now I work in the finance industry for more than 20 years out here. And this this is like the center of Southeast Asian finance. So it's the place to be.   Michael: Okay. Very cool. And so today, we're gonna be talking about financial literacy, financial independence, growing wealth. And you wrote a book, right? Happily Ever After?   7 Dollar Millionaire: Yeah, so I've wrote that book. Actually, five years ago, I read it very specifically for a target market of one. And this was fun when I was talking to my publisher has now just been published by Wiley. And they're like, the who's the target market, I was like, my daughter, who else was originally no one else, I just wrote it for my daughter.   Because I went through a similar thing, I, before I worked in finance, I'd actually been a journalist. And I got into finance and got into finance really kind of by accident. And I had to get up to speed very, very fast. And like, within like a month or two, I kind of realized, actually, I can I can do this. And I felt two emotions at the same time. One, I was like, this is actually quite simple. You know, and it's really important. And one of those two things hit me together as I was kind of angry is, how are we not being taught this really simple, really important stuff? You know, this is I knew immediately it was life changing for me.   And I said, this is could be life changing for everyone. And yeah, I've not learned anything. Like literally, it was kind of two months in, it didn't take a very long time. And I you know, it's not because I'm super clever. It's actually really some simple stuff. I don't use anything particularly clever today. It's a lot of really simple stuff. So I went through that. And I was like, in my mid to late 20s. When I went through that. And now, like five years ago, I'm looking at my 17 year old daughter, she's about to go off to college. And I realize she's not learned any of this stuff, either. And she's an arty kid. She's writing plays, poems and stuff like that. And she doesn't want to learn math, she doesn't want to revise one. Look, I think she knows none of this stuff. She could get into her 30s and 40s. Without investments without savings. With debt, she can make a lot of mistakes. I need to get this through to her. But she's gonna head off to college. So I've got a year do I want every single weekend to be filled with a lecture from dad is that, is that's a such a such a bad idea. So as I get younger, it's going to get up and I'm going to write her book.   And I was thinking, and then it just kind of evolved into a fairy tale for a lot of reasons. And one of the big ones is because what were fairy tales, originally, originally, fairy tales were how you want your kids to do the right thing and not do the wrong thing before Disney got their hands on it. This was all about don't go into the woods. You know, it's all that kind of stuff. And that really evolved very quickly. It's like how to get out of the woods. Right? And, you know, it's been in modern language, right?   So it's like, this works. And so that kind of got me on a roll. And I was all about, okay, how do you get from that kid? Not knowing anything about the numbers finance, to Okay, what's in it? And the fire movement was a bit of an inspiration for this. So financially independent, retire early? How could she be financially independent? How can I get her in one book from knowing nothing all the way through to? Okay, she can actually get all the way through to retiring were in one book. And that was the goal. And so that's, I think I've done that. There's not a huge amount of specifics. I don't get into the weeds on like how to do derivative trading, but I don't think she should.   But that's where we kind of got to by the end of the book.   Tom: I'd love to know, I think probably in the process of writing the book. I didn't change at all of like the content of or did you have a pretty well fleshed out idea in your head before pen to paper, I love the concept to of applying it as a, as you know, the fairytale aspect of learning lessons. But I'd love to learn if you know, did it evolve at all over the process of writing it?   7 Dollar Millionaire: It evolved a lot in as much as I took a look at the first draft maybe about a year ago, and I barely recognize that. But the structure was all there. I mean, even before I did this when my daughter, maybe five years before that, I volunteered with a group here in Singapore that teaches migrant workers there's a lot of migrant workers in Singapore. It's a small island is really developed crazy expensive. So there's only maybe five and a half 6 million people on the island but maybe a million of them are migrant workers.   And So they come from Bangladesh, Indonesia, Philippines, and you know, really poor countries and they're coming to make more money. But a lot of them are thinking also, they'll save money, but no one's ever taught them how to do. And so I saw a survey once that said that only 5% save as much as they intend to when they get home. So they don't change their lives, they they kind of put their kids through school, but a lot of them spend 20 years here and don't even see their kids when they're young. And all of it kind of goes on spending, spending, spending, money home and all this stuff. So there's a number of groups that train them.   And so I'd already developed a lot of the concepts like add a very simple level to how to explain how you move from not saving any money at all, how you start tracking. And within that, I built the basic chapter structure for my daughters book.   The basic chapter structure is using the word mission, which is explaining what seven things mean, which is money, income, saving, spending, investing, owning and doing it now, because obviously, that's the only time to invest, right? You don't invest tomorrow. And using that seven chapter structure was is still the same today. And it was right there at the very beginning. So if you've ever written a book, it's really important to kind of have that skeleton, and then you can write around it.   Tom: That's fantastic. And I love that acronym. Yeah, it's just kind of like commentary. I feel like those people finance as an industry love to like throw a bunch of acronyms and like do things kind of more confusing, you confusingly, and this book Happily Ever After, it kind of puts it right on its head instead of this confusing, more convoluted story. It's a fairy tale where it simplifies not only explaining to your 17 year old daughter, but you know, kind of cross cultural. So you talked about some of the migrant workers, I don't know did some of that go in or distribution or, you know?   7 Dollar Millionaire: So I worked with them for quite a few years, just sort of training on Saturdays. But what I was doing and I was kind of seeing what they were already taught retooling it, repurposing, and sing, because I tell a little bit of a joke there. And it's just written not very funny joke. So I shouldn't have introduced it as a joke. Finances like 1%, numeracy, 98%, psychology, and 1% not worrying that it doesn't add up to start with, right, this. It is that's about right. It's really not very many numbers in it. There's not a lot of complex stuff in it.   The reason we we in finance, use a lot of acronyms. It's not to confuse people outside. It's that there are a lot of layers on the things that we do. And we don't want to refer to all those layers every time we talk. CDO is a collateralized debt obligation. It's like, Okay, well, if you want to break that down, every time we explain what we're doing here, what we're trading, you know, this, by the way, not what I do, there are things beneath that. But we don't need to be at that level, when you're starting out, you need to know I need to save before I spend any money I need to take once I've got enough savings as an emergency fund, I need to tuck that away, I need to start putting it into investments. What do I need to invest in? Probably the biggest index funds I can find at the cheapest price.   You know, you get that right. You're kind of 98% of perfection. Now, the next 2% take a lot of effort. But you know what, that's so much better than zero. And that's really where my book stops? In no point do I start getting into the weeds of saying, Oh, you could do this better, you could do this better, you could do this better? What if I get a 1% higher return. That's the stuff that puts people off. And my goal is not to put anyone off it's find them where they're at, and just kind of move them up one level.   Because I think about if you think about like a financial literacy is a pyramid. Most people are at the bottom. It's a very shallow pyramid. Not many people at the top. But if you look at the literature, most of its up the top, it's all about hedge fund guys running about how to invest in hedge funds. It's not about Okay, how do I go from knowing nothing to knowing one. And that's really where we focus just that let's go from zero to one, first timer, right and makes them comfortable because it's the psychology that really matters.   Michael: I think that's so interesting. I know here in the States, we talk so often about talk slash complain about how the financial literacy has not existed in schools. And I don't know if it's comforting or infuriating to hear that it's it's similar in the Southeast Asian culture as well that it's just is not taught in the schools.   7 Dollar Millionaire: We're probably in the two parts of the world that have the best financial literacy, the US has the highest financial literacy rates on the planet. And the second highest are places like Singapore and China. I think that fire number now the 4% rule or 25 times your spending is the perfect description of financial literacy. And the reason I say that is because that's the end goal.   If you can actually explain how do I never have to work again How do I never have to worry about working for money again, that shows you got real financial literacy because you've got an end goal and you kind of know how to get there the goal tends to tells you how to get there. So with that, I think there's like less than one or 2% Financial Literacy on the planet no one ever wants to talk about oh but you should be doing this with your 401k or your Roth or in the UK it's your ICER or your junior ISA cash I see your stuff just over complicates things just get the money away right get it away from you and get it to somewhere where earns more than an interest rate in a bank. They just even yesterday, someone replied to my Twitter's like you can't make 7% interest rate. Like, I'd never set the interest rate that said investment return. Why did you read interest rate? You know, it's those are two totally Why would you lend money to a bank? Why would you do that? It doesn't make any sense. It's like get an investment return. Yeah, totally different thing.   Michael: Yeah.   7 Dollar Millionaire: People overcomplicate with these things and and that stops people from doing it. Just keep it simple. And people will come in, and then they'll learn, right? That's the key. I think I'm sure you know, with what you guys do is that people learn so much as they're doing it rather than before they do it.   Michael: Yes. Yes, the time in the market is so much better than time than trying to time the market. Similar with real estate investing, you know, you're gonna learn so much more from just doing it. Then you could ever learn from a book or a lesson or a speech, you know, what have you.   So I've got to ask kind of question that I feel like is being begged here. Where is your daughter today on her financial journey? How does the book land?   7 Dollar Millionaire: That's brilliant question because she said she went off to college. So she read the book, she helped me edit the book. She worked on it. She told me she understood everything. And actually also one of the key points with the way she edited the book and the way we I worked on the book with even people after her was always Okay, be honest. Where did you stop reading? What got you so bored? You couldn't push forward?   Michael: Right?   7 Dollar Millionaire: So I got a lot of heat. And so he was often as the same page like, Okay, I gotta take some numbers out of that and all that kind of stuff. So she got through the book, and she didn't she went off to college. And then she was in her final year at college. Last year when Coronavirus said she had to come home and Yeah, but you know, like everyone that age, it's a bit it's a traumatic time to be a college. Yeah. She came home to Singapore. She got a job three months ago. And she's put, I don't know what percent is. But she's put a percentage of every paycheck into an investment account every month since she called back. So for me, the book has worked, right, like the initial target market of 100% success record.   Tom: Yeah.   7 Dollar Millionaire: That's done. Second customer, I don't know yet. But for her, you know, it worked. It did its job. As she's putting money away. She does not. She's not a finance geek. She doesn't pretend to understand anything. She just knows she's got to put money into an investment account, because she was the person that came up with $7 millionaire in a my pseudonym. Because she, what? We came up with it together, we were talking about compounding, we're talking about the number where you know, whether it's the 4% rule, or 25 times and we're having that discussion.   And she said so. Okay, but so if I think I need a million dollars, right? So that would be 40,000 a year to live on. If I need that. What's the smallest amount I need to save every day to get to a million dollars before I retired, let's say at 70. That's just one of those questions. I was like, Google that first no answer. There. You know, obviously, my second place is okay, spreadsheet, 5 minutes later. He looks at you still working on that. So yeah, I got it done.   I was I know it took me five minutes because I was double checking and triple checking it because I was surprised it was just $7. That's the thing of compounding. We kind of often take it for granted. But when you look at the you know, compounding chart, you forget it kind of goes vertical so quickly, right?   Michael: It's exponential.   7 Dollar Millionaire: Yeah, yeah, it just goes vertical. So quickly. It's like, how did that How did $7 turn to him? And I checked it and checked it and checked against it. It's only $7. And she's like, Are you serious? Say Yep, $7 you'll be a millionaire by you know, by the time you retire. And I think she's like, lots of us think that's not in my it's not in my realm of possibility to become a millionaire because we haven't thought about it. And when you have $7 like, okay, that's possible. And that just flicked a switch. I can see no, right. And that's why I know when she came back, she liked the money when she saved money at college. Now she you know, she actually put money where college she spent below her allowance, and she put some money away college, which you know, that's she was motivated from them.   Michael: Good for her.   7 Dollar Millionaire: She's not a money person. This is just it's really all about just okay, she understood it. She knows it's important. She puts it away.   Michael: So just digging a little deeper on that $7 figure. So what goes into that? So it's $7 a day, at what percent return?   7 Dollar Millionaire: 7 %   Michael: I'd set a percent return for how many years?   7 Dollar Millionaire: Okay, so you start at 20? And at 70.   Michael: So for 50 years? $7 a day at 7%?   7 Dollar Millionaire: Yeah, because she asked me I'm very specific. What's the smallest amount I need to save? And I was I okay, smart question. And then it has to be Yeah, it's like, well, what is the smallest amount has to be over the longest period of time, right? sahn short, and the longest period of time would be okay, she's 17. She leaves college. And I'm not going to do it at 21 and a half. I'm not gonna make my life hard with tough math, right? Let's just do it over 50 years. And so 50 years, it said 7%. So it's not even I didn't even do 7.2 which doubles, it's just 7% in the spreadsheet. And that turns it literally turns into a million dollars at 69 and a half, you get like an extra you get 200 days off, essentially. And you don't have to, but it's funny because you can kind of do it. I do it in my in my on my fingers now. Right? So you do $7 is 2555 a year.   So it's a $200 210 a month 2555. So it's 25 grand every decade right now. If you start investing at the beginning that 25 turns into 35 in the first decade, so and then we're just going to quick proof, right? Just so 35 grand in the first decade. Now, because 7%, it doubles every 10 years. So you got 35 goes to 70 goes to 140, goes to 280 goes to 560, that's just the first 10 years of savings is 560 grand, by the time you're 70, you just do 10 years of saving at $7. And that's half a million dollars by the time, right and then the other 40 years stack up the same way.   So it's you can just do it in your hand on the master, it does actually back out. And it's such a small number. It's like you think about the the average income in the US Now, I'm not saying everyone can go for it immediately. It's very important to not say, Look, everyone can do this. But a lot of people can. And the people who can't, who really, really can't, they can maybe start some of the habits that can lead them towards it. And that's the key and a even those people who can't can look at their kids and just say you can do this because you don't work yet. You don't have all the costs yet you haven't had this sort of lifestyle creep that we all get where we think oh, I've earned this I I earned this. I have to spend this,   Michael: I deserve this.   7 Dollar Millionaire: Oh don’t. Now that won't get to me. Now I'm ready to Yeah, it's like the advertising campaign, because you're worth it. I think I'm worth the money. More than the cheesy advertising line. Yeah,   Michael: That's mind blowing Michael $7 a day, I'm gonna have to go do some restructuring of my life after this conversation.   Tom: So the book has been released. I'm super excited. I'm looking at it on the Amazon right now. How's the reception been? And kind of any ideas on you know, follow up? Or do you think this is just like, like, exactly the kind of piece that you need to put in now and it's good, or I'd love to hear how kind of your your relationship with the $7 Millionaire brand has evolved over time and kind of thoughts on kind of next steps or what are your thoughts?   7 Dollar Millionaire: Yeah, the reception has been very good. It's interesting. There's very rarely any pushback, I feel that everyone just says like, yeah, we need this information. You know, it's kind of pointless us not having this information. I have more pushback in my own head from people than actually happens in real life. Right. I'm so prepared for an argument and it just never comes. People I think are on the side of this more than being against it. In many ways. That's insane. If we assume that there's not very many markets in the world where like, everyone knows they need this. Yeah. And no one is giving it to them. I mean, that's nuts. Right?   Tom: Yeah.   7 Dollar Millionaire: But that's what we're in in financial literacy it. So that's the reception has been strong. My publisher have asked me to do another book. We had a conversation last week. And I'm like, Yeah, no, probably not happening. Yeah, I have a full time job.   Tom; You hit your target market.   7 Dollar Millionaire: Yeah. She's already doing what she's supposed to do.   Michael: Yeah. Quit while you're ahead.   7 Dollar Millionaire: There are a couple of other concepts that aren't in the book that I would like to communicate, but honestly, they're not a book. Yeah, this is a very unpopular opinion. I'm a bit critical of Malcolm Gladwell. I feel like he turns the tiniest idea into the longest book possible.   When I've read a Malcolm Gladwell book, I kind of get that should have been a magazine article. I got that, like, 200 pages ago.   Michael: Why are we still talking about it?   7 Dollar Millionaire: Yeah, if I, if I practice a lot, I get good at stuff. Okay. Yeah, I got one other idea that but it's, it's really the only other idea I have that I think is is missing from this book is actually how to invest is that the best way of doing it is, once you've bought the index fund, use the index fund as your education.   So you know, a lot of people think just index fund index fund forever. And a lot of people find that dissatisfying. So they buy stocks before they buy an index fund, because what they kind of think they're cleverer than other people. So they buy stocks, and an index fund is the objective. Now, it's a ready made portfolio, we run up a value and we look at it and we assess it and we work out how, what's worked, what didn't work, what, what was in the portfolio that worked and didn't work, what was outside the portfolio, that work that we didn't have, and we could have had. And we use that as our starting point.   Now, that's a really good exercise for like the next stage up from what I have in the book currently. I'm just not sure I could write a book about it. So I'm not sure well, yeah, and there's like, what I tend to do is sort of talk about it and blog posts and tweets and stuff, which I figure you know, same thing. People get the information anyway.   Michael: People read it. Yeah,   Tom: I think so. Like the opposite of of apathy, like being really close to it sometimes, like lay awake at night thinking like, man, why don't I put a little money in Bitcoin? Like I knew about it in college, like I knew about it back then. This sort of, I don't know, I guess, second guessing yourself, or, you know, I don't know. What would you say to me who's laying awake at night thinking about Bitcoin? I guess on this kind of more speculative stuff that you don't know a whole ton about.   7 Dollar Millionaire: I will do two things right. We'll get back to the people that want to buy stocks immediately. They want to be more speculative rather than the reason they want to do that is they've got this phrase in their head of I want to beat the market. Right and 90% of people who say they want to be the market don't even know what the market is.   Tom: Yeah,   7 Dollar Millionaire: How's that number calculated this thing that did 13.6%. Last year? How was that calculated? If you can't tell me how that's calculated? Why would you want to try and beat it? How would you even know how to beat it? If you don't know what it is? Right,   Tom: You’re sitting at the poker table, not knowing who's playing poker with you?   7 Dollar Millionaire: Yeah, want to beat them?   Tom: Right?   Michael: Yeah, every single one of them?   7 Dollar Millionaire: Yeah, it's like, This is madness. And people don't know, it's madness. So number one is that understand your own rationale? Why you're trying to do this for things where you and but you asked a different question. You asked about something like Bitcoin? You know, you missed it? Or?   Tom: I don't know. GameStop? I don't know.   7 Dollar Millionaire: Anyways, that's a whole different bag of words. Yeah. But it's, it's, it's actually about learning and learning properly, it's fine to look backwards a little bit. And actually, okay, why did I make this mistake? So just within my day job, we missed an investment, we missed them. At times, they're in your space, and you get it wrong. And literally, I go see people at the company, people who've worked there, do my analysis, go and say, Why did I miss you? Why didn't I get your stock? Right? Why did I make that mistake, and I write it down, I write the report as to why I didn't do this correctly.   And it's if you can have to make sure that you don't learn the wrong lesson. The wrong lesson is Oh, bitcoins gone up, I need to jump into bitcoin. It's like, why didn't I make this decision? What is there about this decision that I'm not making correctly? Do I need to do something else? Do I have a different mandate internally, this is actually getting very complicated way, way, way away from the book. But that's, it's it's all about learning. And so much of the learning is actually about psychology is like, do I'd like punting? Do I really love chasing those returns? Or do I need to understand that, you know, I don't know what the market is, so I shouldn't be chasing it. You know, I should actually, do I need to have a little bit of money into bitcoin, just so I can forget about it. You know, just like, maybe put like, 2% of my portfolio into bitcoin. And you know, now I don't have to worry if it goes up 100 times, yay. If it goes down, no, no big deal, right. And so it's about understanding what you need to take care of psychologically, rather than thinking any of us know about the future, which none of us do.   Michael: That's so good. Love it. It's a bit of a digression from the book, but I'm glad to have heard that.   Michael: Yeah, that one's on the house.   7 Dollar Millionaire: Yeah, we'll do it. Everyone. None of us can predict the future. But it's so important to actually just know, what is the mistake I made. Don't just assume you know, the mistake. You know, this is what the mistake was, kind of go back and learn about yourself. Yeah. This is why people like Charlie Munger and Warren Buffett is so interesting. You know, it's not that they're so successful. It's because they show they're working. They actually very, very open about their thought process. And these are really smart guys. But the smartest thing is about how open they are about their thought process.   Michael: That's so good. I'm curious, Michael, you mentioned a little bit ago about, you know, some of the folks that maybe aren't able to put aside that $7 a day, but they can teach their kids great habits, what are some things tips, tricks, tidbits, pieces of advice that you would recommend to folks who are just getting started, and who really maybe want to make their first investment in real estate, but haven't quite aren't able to get up to that point yet? They're just starting out with their financial journey. What what are some things they should be thinking about doing?   7 Dollar Millionaire: Yeah, okay. So in terms of the very, very selling points, it's about finding habits, you know, it's really about working out the habit that you can develop, that's going to have the biggest change, because so much of this is habit, not actual, you know, science or knowledge as habit. The most important one is is we have it's the order of mission, right? The the acronym in the book. Yeah, the first S is saving. The second S is spending, it's for a reason, it's like saving comes before spending.   People who think I have this conversation, and sometimes I've even said that three or four times, and people come back to me and say, so what I have left at the end of the month, no, that's money you accidentally didn't spend. That's the same thing as say, saving his money you intentionally save at the beginning of the month.   Tom: Yeah,   7 Dollar Millionaire: It's on the top of your budget, the stuff at the end of the month, nice, put it into the savings account, but it's not saving this accidentally not spent. So if you can develop that habit of any amount of money, any amount, this goes away at the beginning of the month, and you put yourself on that slightly tighten that belt a little bit right the beginning of the month by putting some money away. That is step number one. Step number two is is target that emergency fund. And this the basic emergency fund, some people took about three months savings on top of the spending rather something about six months of spending. I just think if you've got a grand, that's a you've got a base, you know, you can start building up from there. $1,000 there was a statistic at the end of 2019 that said that, I think it was 61% of Americans didn't have $1,000 of savings in their bank account for an emergency and the irony of that being at the end of 2019 whereas everyone had an emergency in 2020. I mean $1,000 How far is that gonna go? It goes $1,000 further than zero, right? It's a this is just avoid something that's a starting point. But if you get to 1000 you can get to two because you know the path, right? And you can get to three and you can get through it…   Michael: Again and again.   7 Dollar Millionaire: Yeah, yeah, exactly. And I think that's the first side, then it comes a question of where you want to go. Next I, my belief is everyone should be investing in growth assets. So whether it's I tend to talk about equities and indices, but properties also it real estate. The other most important growth asset, but the thing I would say, again, I am a private real estate investor. But I think the the thing I think is so important about real estate is to lose the two words, dream home. Too many people think that's the only kind of property you can buy, they have to fall in love with the thing, right?   So if you can afford a garage that rents out at 20%, do it. I mean, just buy, buy that thing, buy the property that gives you a good return. That's how property should be viewed. One day, if you can afford a dream home, by all means, but until you can afford it, it belongs in your dreams, not in reality, if you want to invest in something physical, tangible, where you and you can collect a yield, then then small simple properties. I mean, particularly for people, I think you have a skill set, you know, someone who can actually renovate stuff, it's I think it's one of the intriguing things about real estate, I don't know a huge amount about it. But one things I know is that big corporations don't do small real estate, well, it just it's so the little bite sizes are hard. So there's it's actually kind of a it's a market, which is inefficient, which people outside the industry always think that's a bad thing. But no, inefficient is a good thing. Right?   Michael: It means opportunity,   7 Dollar Millionaire: It means opportunity. And it's like so very often, you can get very high yields good returns as a small guy, which in the equity side and other investment sides, you know, scale works, right, you get better returns on the scale. So that's one of the reasons why I think everyone should have a mix of those things, but emergency fund first, then into enough to get yourself out of that deposit down payment on your first property, to have that low target for that first property, treat it as an asset class rather than the dream home.   Michael: That makes so much sense.   Tom: This is so fantastic. So many of these episodes that we do end up being like, kind of self serving. So the way that you think about saving, as you know, it's not just look at what's leftover after the end of the month, it is at the beginning of the month, you move in. And then you know if there's a little extra money after that great, but you're not, you know, it's that first initial savings is so important. I had never thought about that way. And I'm just reading some notes for my my bank account, I'm gonna be doing some changes and moving money across.   7 Dollar Millionaire: It is the first thing on your budget, if you put it as the first thing on your budget, right? It's like, you know, it's not enough of us actually have a proper budget. And you know, in a proper budget, I mean, something that you didn't write in month one, because a lot of us, right, okay, I want to do this, and then we don't even track it. So we don't even know if we're close, but track it know what you actually do.   And like, I spent 25% of my money eating out, right, then all of a sudden that the next month when you budget and go, No, that's going to be 10 tops, all sudden, you just freed up 15% to save money, right? And you actually when you know what you do, because you've tracked it and you've analyzed it, and you budget it, then you found that for you, because if you do the beginning the month, you have to find it from somewhere else. Right, they say it and you find it from the things you think you were overspending on. And this is the step the you know, the guy who talked about avocado toast five years ago, which was current when I wrote the book, and my daughter is not so current anymore, but that guy, man, he I think he pissed off enough people we can still talk about and five years later, yeah,   Michael: Easily, easily.   7 Dollar Millionaire: And the people that wrote about lattes five years before that, you know, it's not the latter, it's not the avocado texture, it is the thing you're spending your money on that you don't want to write. And you only know that if you track it, and you can improve it, if…   Tom: Tou can't measure it,   7 Dollar Millionaire: Yeah, but it won't happen accidentally, you won't just not buy, let's have the opposite of an avocado toast, right? Let's say, I know it's a meat pie, or whatever it is the thing that you add that you spend money on that you didn't need to spend money on. You'll only know that if you only know you're doing that if you track it, and then you can plan it, and you take it out the beginning of the month and put it into your savings. And now you know you're not allowed to do it. Right, because you're going to get short at the end of the month.   But what it also does is as a psychologically, again, I use that word all the time, because that's what finance is personal finance is all psychology, 99% psychology. And the what you've done is you've just given yourself a thing you want to achieve, you're no longer in denial, right? So if you've got no goal you're aiming for with the money, not having that thing that you're saving money on is denial. But if you're actually not having it to achieve the savings target, it's a positive.   And I think of it like smoking. No one ever gives up smoking that wants to be a smoker. They carry on smoking, the people that give up smoking and people that want to become non smokers. They want to be healthy. They're actually the smoking is taking them away from the goal that they really want and that's how you achieve the achieve things and the same with savings. If you're like denial, I mustn't do this, I mustn't do this, I mustn't do this, it won't happen, it will all feel really painful. But at the beginning of $200 is going away. And I know it's coming from these items that I spent too much money on normally, all of a sudden down the month, I know that that's going to, I'm gonna have to take money out of my savings at the end of the month. If I do that. I'm not doing it because it takes you away from your goal.   Michael: Yeah, I guess reframing it as an investment, that savings goal and budgeting as opposed to a sacrifice, I think can help be much easier. And that's Oh, you know, people love investing. People hate sacrificing.   7 Dollar Millionaire: Yeah, exactly. And it just, it's not sustainable. You can maybe do it once or twice, right sacrifices on something you can do every single month has to be something you want to achieve.   Tom: Yeah, it seems like the psychology seems to be like a recurring theme. And you know, getting to happy ever after, I'd love to hear any, you know, other books or kind of like other inspirations that you think are kind of other core fundamentals that to read along with happy ever after that you think are kind of along similar themes.   7 Dollar Millionaire: The most important one is is your money or your life, the author of which I forget the name, but he was the guy that basically developed all the math behind the fire movement. But I'm actually I'm going to be really self serving and say, there isn't one. Honestly,  I wouldn't have woken up at six o'clock in the morning to write a book for my daughter, if I could have bought one in terms of just like really starting out with something that can explain things to like, to a 1718 year old. Okay, someone who's really good at maths thinks they know, well, this already. It's the wrong book for that. But for those people who are just like, I don't even want to think about this, I had to take that attitude. It's like, I had to write for someone who is my daughter.   She's sad the age where it's like, oh, yeah, good. She's gonna roll her eyes every time I say anything that she doesn't want to hear. Right? So it's a tough audience, not an easy audience. So with that approach, I looked around number one, I work in the industry, I know most of the books, and that would be in the right space. But I did look around talking to my teens, and it's like, they're either too young, or they're too old, or they're too difficult, or they don't do the whole thing, or they get into too many specifics. I didn't want to teach my kids about 401 K's because she's not American.   And, you know, I wanted it to have that sort of universal appeal. And you can't teach kids about how to do tax structures, right? Because tax structures change every year. There's no keeping up with this stuff. Once you got the money and it's gonna go in then you learn the tax structure, but not until right so I would say your money or your life because it's the bedrock of the financial independence retire early movement.   I still love the guy mister money mustache, his website, I think, you know, I don't think he's done a book done a book even but that he just starts with the right approach. There's like one of his blog posts is you know how to give up your stupid big  habit. You know, he says it right. You know, it's so many things we do is stupid. And we don't think about them. And it's just you say as it is, right?   Tom: Just don't sugarcoat it. Yeah, yeah, it's stupid. Yeah. Fantastic. I have a couple of nephews that I taking early advantage of by Christmas list buying for nephews and nieces. So   7 Dollar Millionaire: Excellent. Perfect. Yeah, I'm not saying it's all about the sales. But yeah, good like to hear.     Tom: Spreading the gospel, spreading the gospel.   7 Dollar Millionaire: Exactly. I have another book, if you go to the website, the $7 millionaire.com. Somewhere on there, you'll find there's a thing called the $1,000 Journal. And he just to sort of make the point, that's mine, I self published it. And the reason I self published it is because I give it away. You know, I would give this one away, if I could, cuz he says this is my It is about spreading the gospel. But it's I get it through a publisher because they can hit all the markets everywhere in the world without me having to worry about making sure that there's deliveries and all that kind of stuff.   For me, the big problem is, is actually it's solved by the $1,000. Journal, I you know, the big problem in the world of financial literacy is not people that buy books, or have people buy books for them. The big problem in the world is people who don't have books, you don't get books bought for them. That's like, you know, of a, let's say, a billion dollar market that can really benefit from financial literacy, probably somewhere in the region, and 900,000 900 million of them aren't getting bought books, hey, if I sell 100 million books, I'm happy, don't get me wrong.   That is the bigger problem. And that's why I keep that self published. And I just give that journal away whenever I can. Because it's, it's simpler. And it's more basic. So go on there and have a look at that one as well. And download that. And you'll see it's that's about the mission, but the this one, we feel comfortable giving that to migrant workers, you know, it's with low education levels, whereas the happy ever after you sort of someone who's finishing school is just about right, beautiful. Yeah.   Michael: What a great graduation gift for folks. That's perfect. Michael, I'm curious, and I might already know the answer, but I'd love to hear it from you when somebody is putting together their budget. And you know, I know you said that they should kind of work backwards from their goal from their target and then kind of pay themselves first as you put it, and then then whatever's left over that so they can spend Is there a good goal that people should be targeting in terms of savings whether as a percentage of the income or as $1 amount they save till it hurts. You know, if it's too easy, is that not enough? How should people be thinking about that?   7 Dollar Millionaire: You know the answer in there, right? Because that's all about psychology. Because if you do it too hard for you really too hard, you know, you're going to give up after two months, I can do it. Yeah, you're gonna start easy and build up on it and build those muscles, right? I think so. Starting easy is good. I think the second thing is as a, one of my favorite tips in the book is one I was given and totally ignored when I was young, which is every time you get a pay raise, save half, immediately. So like, let's say you're saving 5%, you get a 10% raise, you get another 5% and put that fight because you're not used to the money. Right? So just put away,   Michael: You’re not Gonna feel it.   7 Dollar Millionaire: Yeah, yeah. So it's easy, it's easy to put away, which is a great way of actually adding to your savings rate for most of us. So I'd actually in the book, we discuss what is the percent you need to save to actually target a fire outcome. So assuming 7% returns, if you want to retire by the age of late 30s, early 40s, you have to be saving half or more than half of your income, to be able to like 55-50 55% of your income saved, you can retire before you're 40. If you think that that's just way too much, and you want to say okay, I want to get done by 50, you're gonna work for 30 years, and then have enough money left the rest of your life, you need to be saving around the sort of the 40-35 40% of your income. So the stats are all in the book with all the kinds of different percentage rates.   But that's one of the ways to think, you know, you've got to pay for the rest of your life. And if you want to kind of have that as a target, where can I achieve that? I think the one of the big inspirations I saw when looking at the fire movement is a couple of their teachers in Las Vegas. And I'm not sure if they're in Las Vegas anymore. Their Their names are Joe and Allie Olson, I had a really great email exchange a couple of years back with Joe. And they retired after working as teachers for eight years.   Michael: Wow.   7 Dollar Millionaire: They go off and get us to go into the weeds about all this stuff. They did it this essentially, it was just one rule. And when they left college, they decided they will never spend any more money than they spent when they were in college. Because they just asked himself, did we have a bad time when we're in college? No. So why would we need to spend three times four times that when we're out of college, we'll just do what we did when we're in college, and we'll have a great time.   So they are basically saving three years of spending every year they save 75% of their income. The math there is super easy, right? There's almost no compounding involved, right? You're saving three years, every year, in eight years, you save 24 years of your spending, you're out, you're done. And so if you want to really be aggressive, I was 18. I'd be thinking that's got to be doable, right? That has to be doable. But that's such a great and if you start thinking, Okay, if I double my spending now to 50% of my income, I could be done before 40, when I heard people talk about retiring by 40, I just had in my head, they were gonna be like curing cancer or inventing the computer or this kind of thing, right? They had to be like crazy rich.   And you just realize No, it's about what you spend, if you're used to low spending, this can be done. Right. And, and the beauty of that is like, you can do two things with money, you can save it or you can spend it The less you spend, the less you need to spend when you stop working. So you're financially independent, much faster. But you're also saving more towards it every month. So you're getting towards that goal faster. So it gets hit from both sides, you get to that goal much faster. That would be you know, you're asking me back to your question.   If you asked me what I would say to someone young, that's how I would ask them to think about it. How long do you want to work for? And and wait till you've done your job? to three months? And then answer that question again.   Michael: Right. Life beats you up a little bit.   7 Dollar Millionaire: Yeah. Yeah. When you start feeling the pain, let's say it's like, I have to do this every day. I'm thinking eight years is done sound really good? Right? Right. It's just that to me is is is how are we getting? Think about it?   Michael: That is so good. That is so good. So I'm curious, one final question for you. And then I'll kick it over to Tom. And then we'll let you get out of here. But curious to know how you would think about real estate as part of this whole retiring early asset class and amount you need to retire. So I know that there's the 4% rule and error that are 25 times your spending, you should have in savings to walk away from the job. So if real estate pays you call it 200 bucks a month, $2400 a year? Should that asset be valued at 25x? As in a cash equivalent?   7 Dollar Millionaire: That's good question. It's about whether you're in a high yield or low yield, real estate environment. So number one, if you live in the property, it's not included.   Michael: Right, right. I'm talking pure investment property.   7 Dollar Millionaire: Yeah. So if you live in, it's not included. That's something that a lot of people get wrong, twice really, really hard to do this and a low yield high property cost city, for example, because so much of your asset is the thing you're living in, and you're excluding it. So that's number one. Number two, I would actually so we actually included in the book and it's got the three house investment plan, because essentially, if you've got three properties, and they're all roughly the same, you live in one, you take rent of two. If you go back to the traditional rule that you should be spending a third of your income on your accommodation, then a third of your assets can be an accommodation you live in one, you take the income off to your property good, no matter where you are.   So that kind of as the simplest kind of retirement plan on the planet, and the beauty of it is, of course, with property, you get the income coming in, and the capital gain is the capital gain just takes care of itself. So you're kind of matched with that with asset growth as well. So it's a super simple, nice plan. In terms of the other stuff, it's if you're in a low yield environment, then you kind of have to, you should be looking at 4% as the rule, because you just won't be making enough return on those assets, you're going to have to really, really build up those assets. And you should probably be if you're in a low yield environment, and you're looking to retire on it, you should probably not be in real estate too much, right? This is your money should be making money.   So I live in Singapore, the place I rent makes, like 1.1% yield. Yeah. And I rent because I'm like, I can beat 1.1% of other investments. And if I can't, I shouldn't be doing this, right. I look around the region. That's one things I talked to when we do work with migrant workers. Places in the Philippines make like a double digit yield. And, you know, people that I work with, you know, would tell me Don't tell them, they can achieve financial freedom, like they can make 12% yield on property, they can achieve financial freedom faster than I can. It's about doing that assessment. And I know in the US, I know very little about real estate in the US, but they know that the markets quite segregated, there is a low yield part like an uptown in big cities, and then there is like a high yield environment as well. And if you can capture that gain, just treated that as your investment base, I like the idea of simple property, they can just live off the yield you get, and then let the capital base take care of itself.   Because in many ways, that's what we've been 25 times does, right? You spend 4%, and you hope you make 7% in your returns. And that takes care of inflation, whereas actually in property investing your your yield is your yield and hopefully the capital gain takes care of the the inflation so inflation, it can be much simpler. I think I got really convoluted there because it is a more complex problem. There is a simpler approach to real estate, just take the yield and let the capital gain work on its own.   Tom: Yeah. And also the whole like, you know, very cheap debt, especially taking advantage of conventional financing loan pay down there's Yeah, so many good deals. Alright, so this will be quick, Michael. So we have with some guests, we bring this out. There's 10 it's kind of an either or type of question. You don't have to overthink it. Okay. And it's, it's I think you'll get the flow of it as soon as we get going. So are you ready for some quickfire questions?   7 Dollar Millionaire: Yeah, I had coffee. We’re good.   Tom: Okay, perfect. All right. consolidation or diversification?   7 Dollar Millionaire: Diversification.   Tom: High property taxes, or high income taxes. So the unique thing about the United States where some places don't have income, income taxes?   7 Dollar Millionaire: Pass   Tom: when you can you're welcome to punt on some of them.   7 Dollar Millionaire:   Yeah, I'm passing that on. I I'll tell you why. It's actually that's a political debate. And I don't get into politics because it's the playing field is a playing field countries are clubs. Everyone gets to vote. Yeah. Right. And I try to be international about what I do. So I have kind of no opinion. Other people set the playing field we play in it, so I don't have an opinion.   Tom: I like that. High rent growth or low vacancy?   7 Dollar Millionaire: Yeah. Not enough of an expert don't have an opinion. Sorry.   Tom: Got it. Cashflow like yield or appreciation?   7 Dollar Millionaire: Cashflow.   Tom: Love it. Debt or equity?   7 Dollar Millionaire: Equity.   Tom: Single family or multifamily?   7 Dollar Millionaire: Oh, that's like you're talking about a property type?   Tom: Yeah.   7 Dollar Millionaire: That's because you guys are experts in that.   Michael: We're split two, I think, amongst us are all over the place.   7 Dollar Millionaire: So you know, I think as a non expert, I've been doing single family.   Tom: Local or remote?   7 Dollar Millionaire: For most people, I'd say, local. However, I'm going to have to cop on that one and say that the property I own is miles away.   Michael: You're on the right show.   Tom: Yeah. You're on the remote real estate investor. So that's alright.   You're almost done. turnkey or massive project?   7 Dollar Millionaire: Oh, man. I've done project.   Tom: And this is your your opinion.   7 Dollar Millionaire: So like, yeah. I have done project. So I'll take turnkey from now on.   Tom: Yeah. All right. final three questions. Non finance real estate related. Midnight Oil or early bird worm?   7 Dollar Millionaire: Okay, I'm gonna give a long answer, because I have a real opinion on it. So there's a reason I wrote the book first thing in the morning. I didn't know this. Until when I wrote this book. I write early in the morning. And the reason I write early in the morning is because I have an internal critic that wakes up about 10 o'clock. So if I start writing at six, I can write four hours before someone in my head tells me it's rubbish, which gives me so much time to actually kind of get stuff done that otherwise I'd be like, mmm, hmm, do that double, triple quadruple thinking it and I can just get like 2000 words done first thing so early morning, and then if I want to edit it later in the day, but not Midnight Oil ever, you know, there's just like that I'm chilled by like eight o'clock. I'm not gonna get anything done.   Tom: Yeah, going back to earlier conversation. It's kind of like paying yourself first and savings. It's like you're you're paying the beginning of your day to yourself for something that you you know, care about and national.   Michael: Nice full circle Tom.   7 Dollar Millionaire: Yeah, very good. We should go now.   Michael: Cut.   7 Dollar Millionaire: Yeah.   Tom: We got it!    Final two text message or email?   7 Dollar Millionaire: Text.   Tom: The last question, most important question, olive oil or butter?   7 Dollar Millionaire: Boats have their place. Yeah. Why are we choosing between northern Italy and southern Italy.   Tom: Fair. Those are the quickfire questions. Michael, this was super fun. Thank you so much for coming on.   Michael: This was great.   7 Dollar Millionaire: Yeah, it's really good. Thanks, guys. And thanks for doing this. I'm guessing that a lot of the shows you do are very similar to this and you get explore a lot of ideas. That's what we need, right. But the most important thing is that people learn finance, and you guys are doing that so well as well. So whether it's in a little one area, like real estate or abroad, just needs to happen. So thanks for doing it.   Tom: Just to confirm the best place to find your book, you would recommend Amazon?   7 Dollar Millionaire: Yeah, go to Amazon. I think that's the best place to go. So happy ever after buy the $7 millionaire on amazon.com. And I would suggest that as a starting place if you know that you've got like like yourself, you've got a niece or nephew wondering that… he may be a little bit young for the book. It's if you've got a niece or nephew just go straight to the book. Because that's it's really is everything in one place. And it's designed to be a little bit more fun and easy to get through than than the website. But if it's that's not the reason Yes. 7dollarmillionaire.com would also be the place to find me.   Michael: Awesome. Well, thank you again. This was so great, Michael. I'm sure we'll catch you catch you soon.   7 Dollar Millionaire: Excellent.   Michael: All righty, everybody. That was our episode a big big, big thank you to Michael for coming on. It was early in the morning in Singapore where he was recording the episode. It was a lot of fun. We hope to have him on again soon. If you liked the episode, feel free to give us a rating or review wherever you listen to your podcast. And also feel free to check out his book happy ever after available on Amazon or a 7dollarmillionaire.com thanks so much for listening. We'll see you on the next one and happy investing