7 Highly Effective Habits of Making Money

What's up guys, it's Graham here.

So the title of the video might seem a little bit familiar because it's inspired by the book The 7 Habits of Highly Effective People. Which, by the way, if you haven't read that book, go and read that book now! Spoiler alert here: basically, the seven habits are:

1. Be proactive.
2. Begin with the end in mind.
3. Put first things first.

Which is odd that that's number three; maybe that should have been first. Anyway, the fourth thing is to think win-win.

5. Seek first to understand, then to be understood.
6. Synergize.
7. (Okay, just kidding, I made that one up) The seventh is actually sharpen the saw.

But on this video, I'm in charge, so I'm coming up with my seven highly effective habits of making money. Some of these are things that I've learned and figured out on my own over the last ten years; some of these are things that I've just learned from other people. But either way, all of these work very, very well, and I recommend going through all of this and copying them down, and then referring back to them from time to time because in terms of making money, I pretty much guarantee it will help you make more money.

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And with that said, let's get into the video!

The first habit of making money is to start tracking your spending immediately. I know I sound like a broken record when I say this because I mention this all the time, but this is something that needs to be hammered in. So don't complain that I keep saying the same thing. If you don't actually use my advice, until you track your spending, I am going to continue to say this.

And yes, I'm talking to you right now. Are you actually tracking your spending? Be honest with me. Yes, you are. You're doing it. Okay, well, if you do track your spending, I'm not talking to you; I'm talking to the person behind you.

But jokes aside, I started tracking my spending about seven years ago, and it has been the best thing in terms of optimizing my finances, saving more money, and having more money left over to invest. Everything really at its core just comes down to this: how much money do you spend? And if you don't track your spending, I guarantee you'll fall behind. Think of it almost like a professional bodybuilder who's not counting calories or not tracking their workouts.

Like, if you want to get serious about being mega-rich one day, this is something you got to do. The whole point of doing this is just to be able to spot inefficiencies of where you're overspending without even realizing it, and then from there, getting an accurate count of how much you spend every single month.

By seeing that firsthand, you'll be able to better optimize your budget, cut back where needed, and by doing so, you'll have more money left over to invest. I have a feeling if you actually go and do this, it's gonna be a really eye-opening experience. I promise you, by doing so, you're going to have extra money left over at the end of the month that you can go and invest with.

Now secondly, I know this one sounds cliché, but pay yourself first. Now this one is more aligned with a budgeting technique, if anything, but let's face it, it works, and people say this for a reason. The second you get paid, take a certain percentage of that money and pay it to yourself. Out of sight, out of mind—then you have the rest of the money left over to budget appropriately.

Now, most people just end up getting a paycheck, go through life spending money, and then whatever is left over from that is theirs to keep. But don't be most people! Literally, just do the opposite of that. As soon as you get paid, take 20% of that, put it in an investment account right off the top. Then whatever is left over could be budgeted within your expenses.

And if you could save more than that, then go ahead and force yourself to do it! This gets you in the habit of prioritizing what's the most important here, and that is smashing the like button! Just kidding. It's YOU. It's getting in the routine habit of treating your investments and your retirement as the number one bill that needs to be paid every single month.

Doing this really just increases the likelihood that you'll save that amount every month. Now when it comes to me, because my income tends to be rather inconsistent and vary from month to month, I took a slightly different approach in terms of paying myself first. Since I know pretty much what I spend every single month as my expenses, all I do is transfer a certain amount of money from my savings account to my checking account every single month, and that's it! That is my budget.

I don't have any more money to spend besides just what I transfer from the saving to the checking. Then literally everything else that I make on top of that goes right into savings, and then from the savings into my investments. So I really recommend getting in the habit of starting this now because I really promise it's going to be an eye-opening experience to prioritize exactly where your money goes and know, no matter what, you have a set amount going into investments and retirement every single month.

Now third, be very aware of what's called lifestyle inflation. This is what happens when you slowly start making more money over time, and you slowly start treating yourself a little bit more. Like maybe you get a promotion and move to a slightly nicer place, or you start eating out at slightly nicer restaurants, or maybe you start shopping a little bit more. Nothing really noticeable overnight, but over time, it adds up.

This is why it's so common to see people making $60,000 a year and living paycheck to paycheck, and then somehow still living paycheck to paycheck once they're eventually making $100,000 a year. This is something that happens so slowly over time without even realizing it, and unless you're saving a proportional amount of your income as you make more money, it's very easy to eventually get carried away.

It's also really important to be aware of what's called the hedonic treadmill. Basically, this is the psychological occurrence where you become accustomed to something over time, and it no longer has the same appeal it once did. So you end up just setting the bar even higher to get the same boost as you did before.

It's kind of like your body building up a tolerance to a certain stimulus where it no longer gives you the same excitement. This is why lifestyle inflation is so common; you just naturally get used to something over time, and then you want more. Just understand that this will happen to you, and anytime you make more money, make a very conscious effort to go and invest the difference instead.

Do not spend it! Doing this is vital if you want to build your wealth over time and will give you a huge advantage over pretty much anybody else.

Now the fourth thing is that anytime you invest, have a long-term outlook. This is really the foundation of investing and making money. Way too many people invest their money and then panic-sell as soon as they see it drop in price, or they look at two very specific moments in time and think to themselves: "Well, if I just bought here and then sold here, I would make a hundred percent return in a few months. Easy!"

Here's the thing though: for the majority of people, market timing does not work. There have been study after study after study which proved that even the best hedge fund managers in the world cannot beat the average return of the S&P 500. And let's be real here: if they can't do it consistently over a ten-year period, what makes you think that you or I would be able to beat that?

No, I'm not talking about going and buying a few stocks and making fifty percent in a year. I'm talking about doing that consistently every single year over a decade. I would venture to say that your overall average return would be a lot lower over ten or twenty years than if you had just bought a diversified, broad index fund and done absolutely nothing from the very beginning.

Yes, I'm sure you all have years that you do much better than the average, but I'm also sure that you'll have years that you do worse—unless you're Warren Buffett. Now, having a long-term outlook also lends itself to having better tax advantages. You see, when you buy and sell an asset within a year, it's almost always taxed as short-term capital gains and taxed at your normal income tax rate.

However, when you invest for over a year, it's treated as long-term capital gains, which means you'll pay significantly less in tax. Remember, the whole point of this is to continue making money and invest over a period of decades, not to do this just for a few years and then quit. So I recommend investing in such a way that's going to be consistent over time and that's proven to work.

The fifth thing is that any time it comes to investing, always invest your time first and then money second. This is pretty much the strategy I've done for everything. Even when I got my real estate license, I basically did the bare minimum just to get the license, and then I worked under someone else in the very beginning to make sure I liked it enough before I then spent money on real estate signs, business cards, and everything else that goes along with that career.

The same thing also applies with investing in real estate. I spent four years helping other people find homes before I bought one for myself, so I knew exactly what I was getting into and I was prepared for everything I was about to sink a lot of money into. I also invested months of my time getting to know everything in the market before I plunked down cash and made a commitment on something. That way, I knew I was going to be prepared.

The same thing also applies with YouTube. Before I spent a single dollar on any camera equipment or lighting equipment or everything, I filmed all my videos from my iPhone. I first wanted to see if I enjoyed making videos; I wanted to make sure that people enjoyed watching them. And then once that was confirmed, then I just went off! Basically, I went ham and I bought all the camera equipment, and then I built the studio that you see today.

Jumping in right off the bat with a huge cash investment isn't always the best decision to make. Like, oftentimes, it's really best to invest your time upfront and really learn about it or go and try it firsthand for free before you really jump in. And there's always a chance that your time and money might just be better spent elsewhere once you start learning about something.

Plus, even if you have no money right now to invest, chances are if you're here watching YouTube videos, you've got your time to invest. Even if you spend your time working for someone for free, chances are that's going to be an invaluable experience later on. So definitely invest your time in learning as much about something as possible or trying it out firsthand before spending any money on it.

Okay, now number six: the biggest piece of advice that I can give you if you want to make a lot of money is just this: make sure you make your money based off your results and not off your time. The reality is that any time you get paid by the hour, there is always going to be a limit to how much money you can make. You can only physically work so many hours of the day before your income plateaus, and you're out of hours.

You're just stuck getting paid on results—however, that has no limit! Which means that you can make a lot of money very quickly. This is why I'm so fond of jobs that are paid on commission, because it really teaches you that working efficiently is so much more important than working hard. Like, you could pretty much fill up your entire day with 14 hours of busy work and accomplish absolutely nothing if you don't focus on what's actually effective.

I really think we should get away from working harder or working more hours and really start to think about where our time is best spent to get the highest ROI possible. If this is how you have some people making $100,000 a month working no more than someone who's making $3,000 a month, how you work has no correlation with how much you're paid.

And I also really like that when you get paid for results, you have direct control of how much money you make. Like, if I decide I want to make more money this month, I can take on a few extra clients as a real estate agent, or I can try to pump out a few extra videos, and I could reasonably control, within a certain degree, how much money I can make every month.

As an employee or someone working on salary or hourly, deciding you want to make more money one month becomes incredibly difficult to do.

The seventh one is my personal favorite from all of this, and it's just this: if there's something you want to buy, find a way to make your investments pay for it. If you follow this one piece of advice, you'll basically never run out of money. This is pretty much how I built my entire lifestyle.

When I first started saving and investing money, I would pretty much do anything just for the sake of saving more money so I would have more money left over to then invest. Then after about four years of doing that, I had enough to invest in rental properties. And then once I bought a few rental properties, I decided I was only going to spend what those rental properties generate.

That way, I could save and invest everything I made as a real estate agent, and that way I would have more money left over to then invest again, and I kept my overhead very low. The same thing also applies: if there's any large purchase I want to make, I always think to myself, "How can this make me more money?"

Like the Lotus Exige is really a perfect example of this because number one, I knew the car was not going to depreciate. Number two, I knew from a branding perspective the car is pretty recognizable. And number three, I knew it was a really good way to meet clients. Like, I knew I could justify dropping all the money on a car if I could make it pay for itself.

And it did! Like, in terms of ROI, this car has been incredible; it's paid for itself easily two times over just from the clients I've met by going to car meets. I apply this technique with pretty much everything. Even though I live pretty frugally and I don't spend a lot of money on things that don't matter, when I do spend money on something, I make sure it at least pays for itself, if not turns a profit.

That applies to everything from watches to business expenses to even going and buying a Tesla. Find a way for that item to make its money back plus profit. Then suddenly, it's like everything you buy just basically turns into its own investment! The same thing also applies if you want to do something that's not an investment. Let's just say you want to go to Vegas and spend $10,000 lighting it on fire.

Well, if that's the case, I would hold off on buying that until your investments can generate enough money to pay for it. That way, you're not spending any of your own money to do it; you're spending the money your money makes you. And just remember, all of this takes a long time to do. None of this happens overnight.

But if you begin planning this mindset now and follow everything that I mentioned so far, this is absolutely something that you can do and achieve later if you stay consistent with everything.

And really quick, I have to apologize for this because I did lie—because now we're on number 8. I know I said 7, but there's a bonus one. And that is: when it comes to making more money, ideally, do something that you enjoy doing.

If there's any secret to making money that I've learned, it's that the work that pays the best should never feel like work. You should really be so enthusiastic about what you're doing to the point where the work just becomes so much fun and just happens to make money at the same time!

Now, the reason I say this is because to scale up to the point where you're making a lot of money, it requires a lot of work and a lot of time to get to that point. There's no easy way around it. And because of that, unless you really enjoy what you're doing, you're going to get burnt out very quick.

The only reason why I'm able to pull these crazy hours on YouTube while also working as a real estate agent while also investing in property is because everything I do doesn't feel like work. Staying up until 3 or 4 o'clock in the morning to edit a video that I've been researching all night is fun to me. Going out and showing some properties to a client of mine is fun to me.

Buying a property and then spending every single day renovating it over two months is fun to me. If I spent 12 hours a day doing anything else that I didn't thoroughly enjoy, I wouldn't be able to sustain it. I would get burnt out and I would be miserable.

Finding the work that you really enjoy means that you can pretty much work indefinitely without feeling burnt out or feeling deprived of anything. And by doing so, of course, the chances of you making a lot more money just increase exponentially from there.

So with that said, you guys, thank you so much for watching! I really appreciate it. As always, if you enjoy videos like this, make sure to always destroy the like button for the YouTube algorithm; it helps out tremendously! Also, make sure to subscribe if you're not already because that is free. You want to make more money? That's step number nine: subscribe!

Also, feel free to add me on Instagram; I post there pretty much daily. So if you want to add me there, feel free to add me there. Thank you again for watching. Oh, really quick—second channel: The Graham Stephan Show. Go right now, go and add yourself to that! The goal is to post there daily. Believe it or not, we're gonna do daily videos there. It's gonna happen; gonna make that happen.

So make sure to go and subscribe to that if you want to be a part of it. Thank you again for watching and until next time!