What is the best financial advice I have ever received on saving money and building wealth?

In this blog I will list some of my top Quora answers for the last few days. 

If you want me to answer any questions on Quora or Youtube, don’t hesitate to contact me.

What is the best financial advice you have ever received on saving money and building wealth?

Source: Quora

Almost all the best advice I have received has been simple, and not complex.

The best 25 examples include

  1. Spend less than you earn. Invest the surplus properly.
  2. Invest money, don’t save it. If saving money was such a good idea how come the bank can make money from your savings?
  3. Take calculated risks. There is no such thing as no risk in life, business or investing.
  4. Get a job first, get good at it, then start your own thing. Not the other way around.
  5. Even if you have a job, don’t just focus on selling your time for money. How you use your time from 18:00-midnight is key.
  6. Read as much as possible, and educate yourself as much as possible. University isn’t the end of the learning process. It is the start.
  7. Always adapt to changing market conditions in business
  8. Invest for decades in the stock and bond markets, without market timing.
  9. Ideas don’t count. Execution does.
  10. You can’t scale face-to-face in business. The internet is a golden opportunity and more business will go online (said after 2010).
  11. Get out of your comfort zone. Seldom does anything good come from it.
  12. Don’t be complacent if you achieve success
  13. Break norms. Norms stand for normal. Normal behaviour in business will result in normal results. Extraordinary behaviours will lead to extradorinaiy results if you are persistent
  14. Play the numbers game. In the same way you are more likely to meet the love of your life if you go on 1,000 dates and get Tinder unlimited and put on auto like, you are more likely to get traction in business and any domain if you know this concept. Money follows attention.
  15. Don’t care about what the vast majority of people think.
  16. Don’t box yourself in too soon with kids, family, mortgages etc. The time to take the most risks is in your 20s or before you have kids. You won’t regret losing 2k when you are 80. Don’t be afraid of losing when you have so little to begin with as a 21 year old (I was told this many times but older people many years ago).
  17. Being middle of the road in business can be dangerous. The quote below has been said in different contexts:

18. The path of least resistance is one of the most important things in business. The easier you make your products to buy = the more people will do it. Whereas, if you have the best solution in the world, but it isn’t convenient and a hassle to buy, less people will do it.

19. Who you marry is one of the most important aspects of long-term wealth management. Divorce kills wealth.

20. Investing 30% of an $80,000 income is more useful than 1% of $1m. So focus on your income, spending habits and investment habits.

21. Focus on scaling. You can’t scale certain things (say face to face meetings) but you can scale buying online in an unlimited way.

22. Focus on leverage. Leveraging time (investing for decades in markets rather than for 5 years due to compound returns), money, other people’s time etc.

23. Live overseas at least once in your life to understand other cultures and ways of doing business.

24. Focus is more key to success than natural talent alone

25. Don’t just spend more as you earn more (lifestyle inflation). As you earn more, invest more back.

What is the best financial advice you could give a 21-year-old female?

Source: Quora

Most of the best financial advice is applicable for males and females.

Perhaps the only thing is that some of the advice applies slightly more to women than men.

For the vast majority of people these days, it makes sense to delay children and marriage.

That is true for the majority of both men and women. The only difference, perhaps, is that women are more likely to marry young in some cultures.

The rest of the things are identical

  1. Spend less than you earn.
  2. Invest the surplus well
  3. Time in the market beats timing the market
  4. Invest for decades in both stock and bond indexes, rebalancing every year or so.
  5. Increase your allocation to bonds as you age
  6. Don’t assume volatility is something to fear when you are young or relatively young
  7. Focus on your income, + spending habits and investing habits. In other words, focus on a holistic financial solution. If you just focus on one aspect, like your income, your financial situation might resemble a broken clock. In other words, the clock is telling the wrong time, because one aspect of the clock is wrong. It is far better to be earning 50k, and investing 8k a year, than earning 150k and being in debt because you spend 160k!

8. Don’t care about “status” and fake things like Instagram showing off. At 20 you think everybody cares about you. Later on, you might realise they don’t

9. Get a job first. Get good at it and then focus on not just selling your time for money.

10. if you want a more aggressive wealth management strategy than “get rich slow”, then focus on getting paid on results and not on time.

What is your investment diversification categories? How much percentage in each category?

Source: Quora

It is quite simple:

  1. 90% stocks, 10% bonds. Or 85%-15%, depending on how markets are going. The bonds are mostly short-term government treasuries that don’t pay much but tend to increase in value when markets are down
  2. That composition will change when I am 10 years, and especially 5 years, away from retirement.
  3. The composition merely follows the indexes. So if more tech firms are joining the indexes, then I have more tech in my portfolio
  4. Buy more every month regardless of market conditions. So yes, literally, that means I added more this year in January, February, March, April, May, June, July, August and September .
  5. Rebalance yearly, or when markets fall considerably. So in March, I sold some bonds, and bought more stocks. If stocks rise 30% in the next year, I will do the opposite, like in 2019.
  6. Maximum 10% in “niche” picks like REITS
  7. Never trying to time markets

This way if markets are down for 10 years in any period, I am just buying monthly at cheaper prices.

There is no safer strategy than to buy every month for decades, and be in both stocks and bonds, but increase your allocation to bonds as you age. It is boring but effective.

One of the biggest mistakes people make is overcomplicating things.

Want two incredible statistic?

  1. Dead people’s accounts tend to outperform the living, including professional investors and PHDs in portfolio theory
  2. In my network, many bank and hedge fund employees, and 2–3 professors in finance, have done worst than the average person!

The point being? Keep things simple. Control your emotions when markets are down.

Be long-term. Don’t read, or listen, to the media very often. Every time they say this time is different.

Buffett’s quote on business school is true for most areas of finance and life:

If you look at the vast majority of ordinary people who have gotten rich slowly from the stock market, they often have “only” bought and held for 50 years.

Type in things like “millionaire janitor” or “millionaire secretary” into Google.

The commonalities are all the same. They haven’t been smart. They have just kept things simple for decades.

How have ethical people used a crisis to create wealth?

Source: Quora

It is a really good question. Firstly, people should never assume that those making a lot of money are unethical.

People who have that kind of mentality and mindset are also those that are more likely to be broke, as I wrote about here – Adam Fayed’s answer to How can I change my mindset about money?

Because if you assume that it is much harder to make money ethically, and the majority of wealthy people are thieves or at least highly unethical, then why not just throw in the towel or get behind some kind of populist politician like Sanders?

That is one of the key mistakes many idealistic young people, and some others, make.

But anyway to answer your question, there are numerous ways this can be done.

  1. Through business
  • Businesses that solve other people’s problems have more chances of succeeding
  • In a crisis people’s problems, and needs become bigger.
  • Moreover, in a crisis, people are more likely to be open-minded to change, and even some big businesses might go broke
  • So many of the biggest companies were created during the Great Depression and after 2008/2009, as per the image from mobile monkey below
  • It isn’t just the big boys either. People were so sick and tired of the big banks, and some big names in other industries, that they wanted to deal with individuals in many industries. That gave influencers and other people opportunities
  • The best time to advertise is also during crisis as prices fall and competitors are off the field. In March and April, Facebook and others dropped their prices, and many businesses got scared. That presented an opportunity.

2. Through investing

  • Nobody can time markets, so the best time to invest is always today.
  • However, you should celebrate any market falls if they happen, because you are buying more for your money
  • Think about it. If ice creams were buy 1 get 1 free, you would love that deal if you like ice creams. Same with stocks. If the price is half, that is great, especially given that markets have always hit record highs eventually
  • So just by investing every month through crisis and times of plenty, you can indirect gain from both crisis and the good times. Or let’s put it another way. Somebody who is now old but invested every year from 1970 until now, benefitted more from times like 2008 if they kept buying, than normal times.
  • People can benefit from falling markets by engaging in a strategy called dollar cost averaging. Dollar cost averaging (or just monthly investing) is something which almost everybody needs to do if they have a salary, as few people have just 1–2 lump sums throughout their life. So we need to dollar cost average sometimes.

It wouldn’t surprise me if in 2025 or 2030, the “Next Netflix”, has already been created during 2020 for this very reason.

Moreover, I have seldom seen a crisis where some people have benefitted a lot, with a lot of others suffering as well.

In 2008–2009, almost every industry suffered. This time, due to the online world, those with an online presence grew.

Not all as much as Zoom, but I don’t know one online teacher, online consultant or anybody else who is online, who hasn’t seen demand increase.

Those that pivoted in March didn’t make as much money as those that saw the online trend happening 5–10 years ago.

How can I change my mindset about money?

Source: Quora

Things were easy for you. When you began doing what you did, Google and Facebook ads were cheaper than now, the internet was less competitor than now and there are less influencers.

So will say……the young people in 2040 or 2050 most likely! The point I am making is, when it comes to money, your perspective can change everything.

You can see the times we are living in as an opportunity or a threat.

What has gotten harder to do? Go to university, get a job for life and a final salary pension at 60.

What has gotten easier? Making money online. Starting your own business. Investing more effectively than before with online solutions.

You now don’t need to pay for expensive billboards to get exposure in business, or be relatively wealthy to start investing monthly.

However, positive people tend to hang out with other positive people.

Negatives people tend to hang around with other negative people.

I was reminded about this fact a few years ago when I went out with some expats living in Asia.

Most of the people at the table were saying how much easier it is to emigrate these days (pre Covid!) compared to when their parents were young, and how much cheaper it is to run your own business.

You can now target people from your laptop, living anywhere in the world, said one person.

Very true as well. When I came back to the hotel I watched a political debate:

The topic? How things are so much harder for “young people” these days.

House prices might have been sluggish in real terms since 2008 in the UK, but they are higher than in the 1950s and 1960s.

It is harder both for those that leave school at 16, and those that graduate.

How we are glad that we don’t need to start again, said one panellist!

Compare that to the mentality on show amongst the expats, some of who had traveled thousands of miles to take jobs and then took big risks to start their own business.

The point is you can always look at things negatively or positively.

Globalisation means that it is harder to have a job for life (negative for most people), but it also means that it is easier for the small guy to become an international business success story from their laptop and bedroom.

That is just one example of many, but you get my point. I, for one, would be earning far less if I was the same age but in the 1970s or 1980s, and I know people who say the same from all ages, backgrounds, ethnicities etc.

I also know plenty of people who spend all day moaning and complaining, and instead of taking big actions like the aforementioned expats did, they are on their asses waiting for a magic solution from a politician.

So the key things about changing mindsets about money are:

  1. Spending more time with positive people. Those people that are positive about making money, and less time with those that have toxic attitudes to money. When I look back at the people I spent time with at college and university, it is amazing how those with negative attitudes to money making (socialists and the like) ended up with less. Those that had a positive attitude to the process, made more on average.
  2. Think in terms of abundance and not scarcity. A simple example. Let’s say you are a management consultant, or lawyer, in the UK. You just spend time on local projects. Now go online and target clients globally. That will completely change your attitude to money. There is more than enough business out there for people and your local economy doesn’t need to change your circumstances.
  3. Switch the news off and other negative influences which are speaking in terms of doom and gloom
  4. Read more investing books as many people assume wrong things about money, such as stock markets are dangerous even if you buy and hold for decades.

Often who you associate with is the most important first step. That subconsciously changes people’s behaviour.

I remember one of my ex bosses’ was once a half billionaire before he lost almost all of it apart from his house (long story which I won’t go into here).

I met his daughter. Despite the fact he was now broke, she was very positive that she could make a lot of money.

There is a simple reason for that. She saw her dad make it for 15+ years.

So even though he lost most of the money due to over-leveraging himself in the property development in the pre-Lehman Brothers era, she knew that wealthy and money wasn’t some sort of conspiracy.

If her dad, from a council estate, and many of his rich friends who came from normal background, could make a lot of money, why can’t I?

That was rightly her way of thinking. In comparison, if nobody in your network has made it even relatively big, it changes people’s mindset a lot.

Hence why it is useful to reach out beyond your immediate network.

Isn’t is amazing that Mark Zuckerberg is richer than Warren Buffet?

Source: Quora

I presume you mean amazing in a surprising way. In some ways, yes, as he is much younger.

In other ways no, because Buffett has given far more money to charity.

If he would have reinvested all that money, and only given his money to charity upon death, he would now be much wealthier than Zuckerberg.

There are lessons to be learned though, even for the average or middle successful business owner.

In the world we live in today, people in tech can scale more quickly.

So in the same way Bezos came up very quickly in the rich lists, we might see more people on the world’s rich lists in 2025 who nobody has heard of.

Even if I look at my own network, there are some small and medium sized business owners who are getting bigger by a factor of 2, 5 or even 10 every year, and other traditional businesses that are suffering.

Lockdown only made that process more obvious. Restaurants and bars going bust left, right and centre, but those who are selling cooking courses online, or have another online solution, are benefitting.

I expect this process to speed up in the next 10 years, where tech and e-commerce gets bigger and bigger.

That doesn’t mean that every tech business will get bigger of course.

Merely, the long-term trend is clearly pointing towards a certain path.

The people benefiting the most are those that pivoted years ago, and became online teachers, consultants etc even before lockdown, as they saw the general trend.

Most people wait until they are forced to make a change to pivot.

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