15 Signs You Control Your Money
Yesterday we talked about people who are controlled by money. Go watch it if you haven't already. Then come back.
Today we're talking about those who have complete control over their money: how they use it, how they think about it, and how they plan for it. So let's dive in!
Welcome to alux.com, the place where future billionaires come to get inspired.
Number one, you use it as a tool. You see money as the equivalent of gold in video games; it's something you use to acquire things you need and nothing more. You know the game isn't won when you reach a certain money number. When you start seeing money as a tool, your reality changes, and that's because you understand that money comes and goes. But who you are and what you're capable of only grows.
People who are controlled by money, when they pay for something, it feels like they pay with a part of their soul, like they'll never get that part of them back. But when you have control over your money, spending it is more like a trade of value. You give something that someone needs, and you get something that you need in return, and everyone's happy. This way of thinking applies to anyone, regardless of their financial situation.
Number two, you know how much your life subscription costs. By "life subscription," we mean all the things you need to pay for in a month in order to maintain your current lifestyle. From utility bills, food, and Netflix subscriptions, plus miscellaneous stuff. You know how much you make, what everything costs, and how to position yourself accordingly. The process of paying bills has no emotions attached to it. Many dread the day those utility bills come in, but for you, it's just another Monday.
All your payments are automatic. Everything's taken care of. You don't lose sleep over it, and it doesn't stress you out. Knowing how much it costs to stay alive will give you a headspace to plan your next steps. It's impossible to take control over your money if you have no idea when it's coming in and how it's going out.
Number three, your financial future is predictable. You have a Holy Trinity of budgeting, saving, and investing. Everything's got a budget, and everything's accounted for. There is no money waste slipping away between the cracks. You know exactly how much money you have in your bank account and what everything is for. After the budgets are done, the extra is split into savings and investing: savings for the little things we'll talk about later and investing the money that works for you and guards it from inflation.
These three things make your financial future predictable, and there are no surprises. It gives you peace and mental space to focus on other important things. So far, we haven't met anybody who has complete control over their money and doesn't do all of these three things. But it all needs to start with knowing how much your life costs, hence why we mentioned life subscriptions earlier.
Now, on the topic of budgeting, the real reason people fail to budget is because they know that if they take a closer look at their money data, they're not going to like what they see. They know budgeting will force them to make some sacrifices, and they're not willing to make them. They want subscriptions to every streaming platform, avocados, and Frappuccinos every day.
And yes, we know that not buying Starbucks isn't going to make you rich, but knowing how many times you bought the little things that don't matter will 100% make your finances unpredictable. The thing is, the little things add up quickly when you have a macro perspective. If you buy an expensive cup of coffee every day you go to work, that's on average $150 in a month. Just saying, you can't have a predictable financial future if you have unpredictable spending.
Number four, you know what you get for your money. You can differentiate what's important from what's nice to have. You look to get a higher value than the price you're paying. You stretch your money by using it on things that make you smarter or more peaceful. You know it cannot bring you happiness, but it can get you comfort and peace of mind. You use it to protect yourself and those closest to you.
Number five, you know your net worth. You know how to track, maintain, and increase your net worth, or your financial health. Net worth simply means the difference between your assets and your liabilities: everything you own minus everything you owe. Many people think their paycheck is a part of their net worth, but here's the thing: if you make one million dollars a month and you need to pay 1.5 million in liabilities, you've got a negative net worth.
Your paycheck is your cash flow, how much money goes in and out every month, but you don't own the thing that drives the cash flow. If you stop working, that cash flow stops too. If a baker sells a thousand loaves of bread a day, they're not getting richer, but the bakery owner is. So, when you start calculating your net worth, countering your paycheck, you realize you don't own [ __ ]. This should be an eye-opener into assets versus liabilities.
Number six, you have no bad debt. The only reason you borrow money is to make more of it. You understand how banks work and how to use good debt to position yourself better. The only debt you use is to acquire assets that will pay off the debt plus profit. This is a big trap that people who have no control over their money fall into. The buy-now-pay-later phenomenon is making poor people even poorer. They overspend and get trapped by hidden fees and high interest rates.
If you want to know how good someone is with money, look into how they manage financial instruments like debt.
Number seven, you know how to budget. We mentioned earlier that people avoid budgeting because it reveals the sacrifices they need to make. They look at budgeting as something bad they have to do because they don't have enough money. People with a poor financial situation give budgeting a bad reputation, but in reality, everyone who is responsible with their money has budgets and they live by them, from rich people to big corporations.
Budgeting, in essence, is a way to distribute your resources in the most efficient way. Having a budget is like having a meal plan: if you want to be fit and healthy, you need to pay attention to what you eat and how much. It's the same with money. You want to be secure and in control; you need to know where and when that money is coming in and where it's going. Only then can you start to make some smart financial moves.
Number eight, you know how to live below your means. People confuse living below your means with living like a medieval peasant. Living below your means simply refers to the fact of spending less than you earn, which sounds painfully obvious when you say it like that. But as we mentioned earlier, when we talk about the whole buy now, pay later, people always find ways to overspend their cash flow.
When a person who controls their money increases their earning, their lifestyle remains pretty much the same. They avoid lifestyle inflation, which is the act of always increasing your life subscription in direct proportion to what you make. People will say, "Well, I worked for all that money, so I'm going to use all of that money. I have one life." Well, they're the ones who will never escape the rat race.
Number nine, you're not afraid to negotiate. When you're in control of your money, you're comfortable talking about it. You understand what's best for you. You know what to ask for, and you know what you can afford to give. For you, making a deal means finding mutual benefit for both parties.
People who are emotional about money avoid negotiations because they have a skewed perception of money and their own value. They're afraid not to get screwed over, so they end up trying to fool others so they don't get fooled themselves.
Number ten, you can trade with the future. When you're in control of your money, you can afford to play the long game. You do things so that in the future you'll have a better life. You invest in your education, your health, and your net worth.
Others spend all of their money on the present version of themselves, but when it's time for their future self to play the game, they've got no resources.
Number eleven, you guard your money from inflation. People who take control over their money also make sure to protect it from outside factors. They invest in their financial education and learn how to use financial instruments to make their money last longer. They know how inflation works and what assets to buy to protect themselves from it.
They look at raw data, they analyze, they diversify, and they make sure to guard their resources.
Number twelve, you have a healthy risk tolerance. You don't buy into FOMO or financial trends. When an investment opportunity arises, you analyze it using your own risk tolerance. You know how much you're willing to invest, how much you're willing to lose, and how asymmetric risk works.
By the way, if you don't know what asymmetric risk is, we made a great video on the topic which you can check out by clicking in the top corner. The truth is, the world is volatile, and this will always be the case. Nobody can predict anything with 100% certainty. There will always be some risk involved, from financial investments to who you date. People who have control over their money can understand the risk and take advantage of it.
Number thirteen, you have enough money saved to live for a year. If everything goes to [ __ ] and something catches fire, you've got a financial cushion to fall back on and recover. How many of you can live for an entire year if you get fired tomorrow?
People who control their money always have a financial cushion. You start small, with one to three months' worth of life subscription money, then you gradually go up to six months and eventually a year. This is such an important strategy because it allows you to buy time, which you normally can't do if you're forced to start from scratch.
You're pressured by life responsibilities. If your cash flow suddenly stops, you can't afford the luxury of trying things out; you need to figure something out fast. You've got bills to pay, a roof to maintain, and food to eat. This is where that money cushion comes into play.
You can buy yourself a whole year's worth of figuring it out if the worst-case scenario comes to be. This gives you tremendous peace of mind, even if you don't ever end up needing to spend that money.
And on a similar note, number fourteen, you've got "oh crap" money. People who have control over their money also have a thing called "oh crap" money. Sometimes [ __ ] happens. You don't foresee it; you didn't plan for it, and you don't have a budget for it. It came out of nowhere, and it needs to be fixed fast.
Something breaks down, you have a medical emergency, someone close to you needs immediate help. A report from the National Bureau of Economic Research found that almost half of Americans would struggle to pay an unexpected expense of $400 or more. We're talking about 150 million people here. For them, a financial emergency could turn into a life emergency real quick.
Number fifteen, you have a retirement plan. Every person who's in control of their money also is in control over their long-term game. The reality is retirement is not what it used to be anymore. The cost of living is growing, and the average lifespan is also growing. Who's going to pay for your 30 or 40 years of chilling when you're old?
Taking control of your money is a lifelong process, and you better start preparing for it now.
So, a-loxers, are you in control of your money? How do you do it? Let us know in the comments. And as a thank you for sticking with us until the end, of course, we've got a bonus for you: you know there is no limit to money.
Now this is a realization that comes after you've made some money. The truth is, there is no money limit in the world. As a matter of fact, governments can print money whenever they please; banks do it too. Do you even know what happens when you take a loan from a bank?
The point is, there will never be a shortage of money to be made, but there will always be a shortage of people who can create value for others. As long as you can build something that others are willing to pay for, you will never have to worry about money ever again.
And speaking of never worrying about money, tomorrow we're doing a video just about that: people who have no control over their money and no emotional attachment to it. We'll see you back here again tomorrow for that video.
Thank you for watching this video, a-loxers. If you found it valuable, consider subscribing to our channel and joining our awesome community. And if you're still hungry for more, we hand-picked this video for you to watch next, or head over to our website for more amazing content. See you tomorrow!