From: alexhormozi
The financial mindset of wealthy individuals often contrasts sharply with those who have less money, particularly regarding spending habits and risk tolerance [01:01:03]. According to one perspective, individuals who progress financially tend to surround themselves with others who also possess more money [00:54:00]. Ironically, these wealthier individuals often spend less money and have a reduced desire to spend [01:03:00]. They also actively seek ways to acquire things for less money out of pocket [01:09:00].
The Value of Skills Over Assets
A fundamental aspect of achieving financial success is the emphasis on acquiring and utilizing skills [00:30:00]. Skills are considered a unique and powerful asset because they cannot be taken away by governments, individuals in a divorce, revolutions, or financial crises [00:33:00]. This inherent security allows entrepreneurs, even after hitting rock bottom, to often bounce back rapidly [09:13:00]. For example, one individual who lost everything managed to collect $110,000 in cash sales within the next 30 days due to their existing skills [00:20:00].
Strategic Investment and Acquisition
Wealthy individuals exhibit distinct personal finance strategies when it comes to investment, prioritizing stability and controlled growth over high-risk, high-reward ventures.
Risk Aversion
People who are genuinely wealthy tend to be more risk-averse [09:36:00]. This is because the downside risk of losing everything becomes significantly larger once wealth has been accumulated [09:39:00]. Thirty years of sound financial decisions can be reversed by a single bad investment that results in zero [09:42:00]. Therefore, the wealthy often have a lower risk tolerance than those with less money [10:06:00].
Instead of seeking massive returns with guaranteed risk, they prefer guaranteed small returns with no risk [10:58:00]. This mindset contrasts with individuals who might purchase lottery tickets, which are considered the worst possible investment due to their high downside risk and minimal upside [10:15:00].
Acquiring Assets for Zero Out of Pocket
A key smart money management technique involves seeking opportunities to acquire assets for little to no upfront cost. This often involves:
- Agreeing on Price, Then Terms: A powerful negotiation tactic is to first agree on the purchase price of a business or asset, and then negotiate the terms of payment [03:49:00]. This allows for structuring the deal to minimize initial cash outlay.
- Seller Financing: One common term is seller financing, where the seller allows the buyer to pay over time, reducing or eliminating the need for an immediate large payment [04:10:00]. This can involve the seller financing a significant portion of the deal, with a smaller portion potentially financed by a bank loan (e.g., SBA loan) [04:18:00].
- Identifying Motivated Sellers: Opportunities often arise from businesses with motivated sellers who are tired of their business or facing personal crises, making them willing to sell for a lower price or with flexible terms [11:53:00]. These deals are typically not publicly listed and require proactive searching [12:46:00].
Case Study: Acquiring a Gym for No Money Down
An illustrative example involves acquiring a gym for no money down [08:03:00]. After agreeing on a price, the buyer negotiated to pay the full amount over 12 months [07:45:00]. Within the first 30 days, the gym generated enough sales (40,000 or $250,000) was invested to open gyms that did not necessarily yield proportionally higher returns [06:32:00].
Patience and Character Traits
Achieving financial success also requires patience and specific character traits [12:02:00]. Instead of rushing into a deal, successful individuals are willing to wait for months to find the right opportunity [12:12:00]. This long-term perspective allows for securing deals that yield significantly higher returns with minimal risk, even if it means waiting for the opportune moment [12:16:00].
In summary, the financial mindset of wealthy individuals is characterized by:
- Prioritizing skills over material assets [00:30:00].
- A strong aversion to significant financial risk [10:06:00].
- A preference for stable, low-risk returns [10:58:00].
- Strategic acquisition of businesses or assets with minimal or no upfront capital [11:46:00].
- Patience and a long-term perspective in decision-making [12:04:00].
This approach demonstrates how building and maintaining wealth is often more about strategic thinking and a specific mindset than simply having large sums of money to begin with [12:59:00].