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The Psychology of Making Money — Transcript

by Leila Hormozi · 4,310 words · 611 segments · language en · Watch on YouTube

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0:00The single greatest skill that separates
0:02broke people from wealthy people is not
0:04intelligence or luck. Okay? It is
0:06mastering the psychology of money. I
0:08went from being 100 pounds overweight,
0:10broke, arrested six times to building
0:12companies worth hundreds of billions of
0:13dollars. And it is not because I'm
0:14special. I am no different from you. Is
0:16because [music] I stopped letting my
0:18broke mindset run my actual life. So if
0:21you want to build real wealth, you need
0:23to break free from these six limiting
0:24beliefs that are keeping you broke. The
0:26first limiting belief or system of
0:29beliefs that is keeping you poor is what
0:30I call the money script. Every financial
0:33decision that you make, what job you
0:34take, how much you charge, how guilty
0:36you feel spending a certain amount of
0:38money, is all controlled by this
0:40subconscious script that you probably
0:42didn't even write yourself. And this is
0:44actual science. There's research by
0:46financial psychologists that talk about
0:48the four types of money scripts that
0:50predict financial behavior. And these
0:52scripts are actually formed in childhood
0:54before you're even conscious enough to
0:55understand what money is. As I go
0:57through each of these, I want you to
0:59think about which one you unconsciously
1:02follow yourself. I will tell you what I
1:03am at the end or at least how I grew up.
1:06Okay, the first one is a money avoider.
1:08These people believe that [music] money
1:09is bad and that they don't deserve it.
1:11Okay, they will sabotage their own
1:13success. They often work in helping
1:16professions that have very low pay and
1:18they feel guilty about wanting to have
1:20money. So if you grew up hearing people
1:22say rich people are greedy, money is the
1:24root of all evil, that's probably the
1:26script that you have in your head. Now
1:27on the other hand, we also have money
1:29worshippers. Okay? So if you're a money
1:30worshipper, you believe that money will
1:33solve all your problems and [music]
1:34bring you happiness. Okay? So a money
1:36worshipper, they chase money
1:38obsessively, but they never feel like
1:40they have enough. They hoard. They
1:41prioritize [music] work over
1:42relationships, always believing that a
1:45certain amount of more money is going to
1:47bring them happiness. Oh, I just haven't
1:49made enough yet. I need to make a
1:51million dollars. Now it's 10 million.
1:53Now it's a hundred million in order to
1:54be happy. Now there's the money status
1:57script. People who suffer from the money
1:59status script tie their self-worth to
2:02their net worth. They overspend because
2:05they want to keep up appearances, hide
2:06their finances even from like spouses if
2:09it's not what they think it should be,
2:10and they feel anxious when other people
2:12are wealthier than them. So it's like
2:13the typical keeping up the Joneses. It's
2:14like you're looking in the the yard of
2:16your neighbor and you're like, "Dude, I
2:17need to have a better yard than him."
2:18Research shows that this script is
2:20actually linked to lower well-being and
2:22increased unhappiness. Now, [music] why
2:23is that? Because you're constantly
2:24comparing yourself. Right? The last one
2:26is money vigilant people. Okay, these
2:29are people who are chronic savers who
2:31live below their means, but they
2:33experience constant anxiety about their
2:35financial future. They're usually
2:36secretive about money. They never feel
2:38secure even when they have plenty. So, I
2:40want you to think about of those four,
2:42you might be a mix of a couple of them,
2:43but think about the one that you
2:44identify with the most. Think about how
2:46it affected you growing up. So, when I
2:48went through these, I was like, I
2:50definitely identify the most with money
2:53vigilant, [music] which probably sounds
2:54weird cuz you're looking at me and
2:56you're like, I see jewelry and I see
2:57makeup and hair and all. I'm going to be
2:59really honest with you guys. I spend
3:01nothing compared to how much money I
3:03have. to the degree that when I had $100
3:05million net worth, I didn't even want to
3:07spend over a couple million dollars on
3:09the house. In fact, I rented for three
3:11years at that point in my life and
3:13didn't even own a home. And that is
3:14because it's the constant anxiety of
3:17like never feeling secure even when you
3:18have plenty. So, Alex actually knows
3:20this about me, which is a terrible
3:22habit. But when I feel like I'm not
3:25making as much money or less profit for
3:27a couple months, even though it affects
3:29nothing about my personal life, cuz I
3:30don't even take money from my business,
3:31I just start to spend less money. I
3:33don't look at things. I don't buy stuff.
3:35I tell people, I'm like, "Don't buy
3:36that. What are we doing?" I tell my
3:37whole assistant team, I'm like, "Ah, we
3:38don't [music] need that. No, let's cut
3:39here. Let's go through our our finances
3:41and cut stuff that we don't need." I
3:42realized it was a pattern that I had in
3:44my past that I was bringing into my
3:45current day life that wasn't serving me.
3:47And so something I tried to start doing
3:50the last few times that's happened where
3:52I've just felt that urge to spend less
3:53money. I go spend more money. It's
3:55probably a worse behavior, but it's
3:57telling my brain like, listen, you're
3:59going to listen to me. This is
4:00irrational. I'm not going to listen to
4:02you. And so I will spend money even when
4:04I have that impulse not to to teach
4:07myself it's okay because the evidence
4:09shows it is. And whatever's happening in
4:11my brain has nothing to do with what's
4:13happening on the outside. So here's what
4:14I want you to do. I want you to think
4:16about the phrases that you heard growing
4:17up. Maybe it's, you know, one, money
4:19doesn't grow on trees, be grateful for
4:20what you have, rich people are greedy.
4:22Okay? Those things are not lessons.
4:24They're other people's thoughts that you
4:26took on. And so once they get written
4:28into your subconscious, then they start
4:30dictating everything about your life.
4:31What jobs you take, how much money you
4:33charge, what you believe you deserve,
4:34how much money you spend, when you
4:36should be anxious versus excited about
4:37spending money. So, here's how we want
4:39to rewire our brains to think about
4:40money differently. Write down your
4:43earliest memory about money. What did
4:45your parents say [music] about it? How
4:46did they behave with it? That's probably
4:47your money script. And once you see it,
4:49you can rewrite it. And so your new
4:51script, for example, could be money is a
4:53tool that lets [music] me create freedom
4:54and help more people. Once you change
4:56that internal script, your external
4:58results will start to update. It takes a
5:00lot of the emotion out of it. And once
5:01you associate positive feelings with
5:03that new narrative, you start to
5:05actually see that your behaviors align
5:06with it more. The next limiting belief
5:08keeping you poor is what we call a
5:10wealth ceiling. Here's the truth about
5:12it. you will sabotage. Say it's a
5:15$200,000 opportunity if you still see
5:17yourself as somebody who only pursues a
5:19$50,000 [music] opportunity. Now, why is
5:21that? The amount of money that you have
5:23is capped by how you see yourself. Just
5:25[music] like the partner yet you have,
5:27just like the job that you have, just
5:29like the house that you live in, the
5:30research on this is very clear. Your
5:31self-concept acts as a [music]
5:33thermostat. If you see yourself as
5:35somebody who earns $100,000, you'll
5:36unconsciously strive to [music] maintain
5:38that level, right? And you will not
5:39pursue a level above it. That's the
5:41really important piece. Now, if you make
5:43$150,000, you'll probably spend an
5:46additional $50,000. [music] If you make
5:48$80,000, you'll stress and work until
5:51you're back at the $100,000. See what
5:52I'm saying? [music] So, for me, for
5:54years, I was I'm scrappy. I'm surviving.
5:58I'm getting by. And I remember because I
6:01got stuck [music] when I was in my first
6:02job making around $85,000 a year. It was
6:06like I created this identity around it.
6:08I knew [music] logically that I could
6:09make more, but one I remember the moment
6:12I started making more, I started to
6:13compete and then all my money started
6:14going to competition fees. The second
6:16piece is that I remember so many times
6:18when I knew I was about to start making
6:20more. It's like I would almost sabotage
6:22myself by getting wound up in it. I was
6:24like, "Oh my god, what if I up? What if
6:25I mess up? What if I don't actually make
6:27more?" And I didn't realize at the time
6:28that that was like me regulating my
6:30internal temperature. And so if your
6:32identity is I'm somebody who struggles
6:34with money, you find ways to keep
6:35struggling. But if it's [music] I'm
6:38someone who creates and manages my
6:39wealth and can make more money if I
6:41choose to, then you're going to find a
6:43way to live that out. So here's how you
6:45[music] change this. Okay? I want you to
6:46write this down. I'm the kind of person
6:49who. And then finish the sentence
6:50honestly. Whatever your current
6:52financial identity is. I overspend. I
6:55underspend. I save [music] too much. I
6:56save nothing. Then I want you to put a a
6:59line down that piece of paper. On the
7:00other side, write, I'm the kind of
7:02person who builds and manages wealth
7:04with ease. You don't need to feel like
7:07[music] that person yet. You don't need
7:08to act like them just yet. I just want
7:10you to actually write it down and not be
7:11repulsed by what you see on the piece of
7:13paper. I'm serious. Every time you now
7:16make a decision for money, I want you to
7:18pull up that piece of paper. That's all
7:19I want you to do right now. [music] And
7:21the thing is is that the moment that
7:22your self-image expands because you're
7:24constantly reading that, reminding
7:26yourself of it, writing a new sentence
7:28to put in your brain, your income is
7:29going to follow that. The next limiting
7:31[music] belief people have is thinking
7:33that they should buy liabilities instead
7:35of assets. Maybe just not even knowing
7:36the difference. [music] You were
7:38programmed to consume, not to build
7:40things. And that's why a lot of people
7:42stay broke. Okay, Robert Kiosaki, he
7:44wrote Rich Dad Poor Dad. One of the
7:45first books I read on money, he put it
7:46very simply. He said, "The rich buy
7:48assets, the middle class buys
7:49liabilities thinking they are assets."
7:52Wealth is actually fairly simple. There
7:53are two categories: assets, liabilities.
7:56An asset puts money in your pocket. A
7:58liability takes money out of your
8:00pocket. And a lot of people spend their
8:02entire lives buying liabilities and
8:04wondering why they can't get ahead. They
8:07ask, "Can I afford this?" Instead of,
8:09"Will this pay me back? What's my return
8:11on this?" Now, how do you know the
8:14difference between an asset and
8:15liability? I'll break it down in the
8:16most common cases that you probably can
8:18relate to. Your car, liability, okay,
8:20loses value immediately. Has insurance,
8:23which is Gas, maintenance,
8:26happens to it all the time. your house
8:27you live in. Liability. I know this is
8:30very controversial, but it's true. You
8:31have a mortgage, property tax,
8:33insurance, repairs. It doesn't generate
8:35income. The next one, a course that
8:37teaches you a skill, asset. Now, how
8:39does that an asset? Because it pays you
8:40back through increased income because
8:42you've invested in your skills. A rental
8:44property. An asset. It generates monthly
8:47income. A designer handbag, sadly, a
8:49liability. Okay. Loses value over time.
8:52Doesn't, you know, generate any income.
8:53I've had that discussion with Alex
8:55before. equipment for your business.
8:57That is an asset if it helps you
8:59generate more revenue. It's a liability
9:01if you don't use it and just sits there.
9:02So, when I started filtering all my
9:04purchases through that, is this an asset
9:06or a liability? My wealth compounded
9:09because I realized I was like, my money,
9:10if I don't put into either of these
9:12things actually is just a liability.
9:13Money sitting in the bank, it's just
9:15deteriorating over time. So, my money
9:17actually can become a liability if I
9:18don't do something with it. And that's
9:20when I really started learning how to
9:21invest in things that create money, in
9:23skills that create money, in learning
9:25that creates money, and in assets for my
9:28business that create money. Here's how
9:30you can start spending on what matters.
9:32Okay? I want you to look at the last 10
9:34purchases that you made. And then next
9:36to each one, simply write asset or
9:38liability and be honest with yourself.
9:40And then all I want you to do is just
9:42commit the next time that you buy
9:44something to just ask yourself, is this
9:47a liability or an asset? Does it put
9:49money in my pocket eventually, or does
9:51it take money out of my pocket? The next
9:53limiting belief is one of the hardest
9:55ones to break. I know this because I
9:57still find myself breaking it on a
9:58continuous basis in the weirdest ways,
10:00but that is the scarcity mindset. Okay,
10:02this sounds crazy, but having a scarcity
10:04mindset actually can make you dumber.
10:06Here's the truth. You either operate
10:08from scarcity or abundance. And I don't
10:10want you to feel bad here because
10:12[music] as humans, we are supposed to
10:14operate from scarcity. Which one you
10:16choose to lean [music] towards and train
10:18yourself into will determine how much
10:20money you make. The scarcity brain
10:22really just says there's never enough. I
10:24need to protect what I have. I need
10:25more. [music] You know, if that person
10:26has more, it means less for me. Think
10:28about what that meant like a thousand
10:30years ago. It meant like somebody else
10:31has all the berries. And you're like, I
10:34need more berries because I need berries
10:35to feed my children and my pack. And
10:37like you're trying to get their berries
10:39because you're like, oh, you can't.
10:40There's only a certain number of berries
10:41and I need to make sure I get them and
10:43not you cuz what if my family dies?
10:45That's how your brain's working, except
10:46it's working and thinking those thoughts
10:48about something that is not finite. It's
10:50something that's infinite. There is
10:51money being made every day. Scarcity
10:54actually changes your brain the more
10:55that you give into it. When you perceive
10:57resources as scarce that are not like
11:00money, your cognitive bandwidth shrinks,
11:02okay? You make worse decisions. You
11:04can't plan longterm and you only focus
11:06on immediate value. So, we need to
11:07reprogram these thoughts. People with a
11:09scarcity mindset, they hoard money. They
11:11don't invest their money, right? Right?
11:12They're only thinking short-term, got to
11:13survive, right? And they see every
11:15opportunity as a threat. If you can tap
11:18into training yourself to have an
11:20abundant mindset, everything will change
11:21for you. Okay? Abundance [music]
11:23mindsets. They say there's always more
11:25to create. I can afford to invest. I can
11:28afford to give some berries to my
11:29neighbor. [music] I can take calculated
11:31risks because there are opportunities
11:32everywhere. And it is not a finite
11:34resource. It is seeing the world and all
11:37the things it has to offer as an
11:38infinite pie rather than a finite one.
11:40So for me, for example, when I operated
11:42from scarcity, I was terrified to spend
11:45money on things that made my life
11:47better, made me better, [music] made my
11:49business better because I felt like what
11:51if what if I never make money again?
11:52What if it [music] stops coming? What if
11:54something changes? Especially in the
11:55first few years of business, I want to
11:56say the first three, it was really hard
11:58for me to get out of that habit. And
11:59then the shift actually really happened
12:01when I realized money is almost infinite
12:04nowadays, okay, but is renewable.
12:06Skills, relationships, opportunities,
12:08those things compound. And so the more
12:10that I invest into myself and the more
12:12and I invest in my business and the more
12:14and I invest in my life, the more I get
12:16back 10fold. And I realized that I
12:18needed to train myself out of that
12:20habit. So I'll tell you the first thing
12:21I did. I hired a coach that was $40,000
12:24a month when we were literally making
12:26$50,000 a month, right? And my scarcity
12:28brain was like, "Oh my god, you just
12:30started making this money. Like you're
12:31going to go broke. What if it stops
12:32tomorrow?" My abundant brain was like,
12:34"Well, you made 10,000 a month, then
12:3630,000 a month. Now 40. Like next month
12:38you're probably going to make a h
12:39100red." and this skill is going to help
12:41you make even more. And so I said, you
12:42know what? I have to just ignore that
12:44voice. I'm not going to listen to it. I
12:45can have those thoughts. I don't need to
12:46listen to them and follow their
12:47directions. I can go with this one
12:48instead. And the cool thing is that that
12:51coach that I hired that was $40,000 a
12:53month was the reason I was able to scale
12:55one of my companies to the degree I did,
12:57which then I was able to sell the
12:58company for tens of millions of dollars.
12:59I'm sure you're thinking, "Okay, but how
13:01do you build an abundant mindset?" Okay,
13:03here's what I want you to do. One is
13:05just become aware of when you make
13:07decisions from fear versus from
13:09possibility. Okay? When you think I
13:11can't afford this, I want you to reframe
13:13it. How could I afford this? Simplest
13:16thing you can do. The moment you stop
13:18asking yourself, how do I protect what I
13:20have? And you start asking yourself, how
13:22do I create more of what I have? That's
13:24when you start asking, I would say, like
13:26higher level intelligence questions, and
13:27you stop sabotaging your finances. And
13:29that's the thing I realized for myself.
13:31I was like, "Oh, I talk to myself like
13:33I'm poor even when I was had a lot of
13:35money to be honest." And it wasn't until
13:37I realized that that I was like really
13:38able to step into that next realm where
13:40I was like, "I'm giving into like the
13:41survival mechanism that exists in all of
13:43us humans rather than retraining myself
13:46into this abundance mindset. The next
13:48step we have is loss aversion. Okay, I
13:50want to define this for y'all. Loss
13:52aversion is why you keep losing [music]
13:55investments, avoiding risk, and
13:57basically staying stuck where you are."
13:58Because if you want to break this
13:59limiting belief, I want you to listen
14:01closely to what I'm about to explain.
14:02There was a winning research by it was
14:04like Daniel Conman [music] and some guy
14:06named Amos. Okay? And it showed that the
14:09pain of losing $100 [music] is
14:11psychologically twice as powerful as the
14:14pleasure of gaining $100. Losing feels
14:17twice as bad as winning feels. This is
14:20why as humans, we hold losing stocks,
14:23you know, hoping that they're going to
14:24recover instead of just cutting our
14:26losses. We stay in dead-end jobs. We
14:28stay in bad relationships. [music]
14:30We don't negotiate salaries. We avoid
14:33investing because the fear of loss
14:35outweighs the potential gain. So for me,
14:37for example, I stayed in a terrible job
14:39for probably 2 years longer than I
14:41should have because I felt like [music]
14:42if I ended it, I was losing. But the
14:44funny thing is like staying in that job
14:46cost me way more. It was like money,
14:47[music] mental energy, mental health,
14:50who knows how many years off my life
14:52because the fear of loss was bigger than
14:53the logic of leaving. Your brain is
14:56designed to protect what you have, not
14:58to pursue what you could have. And that
15:00is why most people never actually take
15:02risks to build wealth. And then they
15:04say, "Oh, there's something wrong with
15:05me. I feel like what if I lose?" I'm
15:06like, "There's nothing wrong with you.
15:07You're a human. I don't know how many
15:09times I have to say this. Like, we're
15:10all wired this [music] way. I'm wired
15:11this way. You're wired this way. If I
15:13can do it, you could do it. Promise."
15:14Okay. So, here's how you break that
15:16cycle. You need to reframe every loss as
15:19tuition. If you lost $50,000 on a
15:22business venture, abundance is going to
15:24say, "You paid $50,000 for an education
15:26that will make you millions." When I
15:28changed that frame for myself, the loss
15:30stopped controlling me. In fact,
15:31recently I had a business decision and
15:34there was, you know, about a $3 million
15:37delta between what somebody was saying
15:39something was and somebody else was
15:40saying something was. And I ended up
15:42just going and agreeing with this person
15:43because I said I think this is the right
15:45way forward and I think that I actually
15:47should have defined terms earlier in the
15:48relationship to make it more clear and I
15:50hadn't done that. And so, you know, when
15:52I was telling the story about this, it
15:54was just a week ago. I said, "Yeah, I
15:56paid $3 million to learn this lesson."
15:57And you know what? I would pay $3
15:59million again to learn that lesson. The
16:00last limiting belief might be the most
16:02important one to break. And this is what
16:04we call the time trap. Most people spend
16:06their entire lives trying to save money
16:09and that is what keeps them from making
16:10money. Ironically, they forget that
16:12money multiplies. But time doesn't
16:14multiply. Okay? And that is why you want
16:17to save time instead of saving money. So
16:19here's what I mean. If you make $100 an
16:21hour doing anything worth less than $100
16:24an hour is costing you money. So, if you
16:26spent 2 hours cleaning your house,
16:28instead of hiring someone $50, you
16:30didn't save $50, you lost $150 because
16:33[music] 2 hours at $100 minus the 50 you
16:36didn't pay. Wealthy people understand
16:38this. They buy time. They hire
16:40assistants, meal prep services,
16:42housekeepers, not because they're lazy,
16:43but because their time is worth [music]
16:44more. They put it elsewhere. Guess what?
16:46I didn't just do this now when I had a
16:48lot of money. I did this when I first
16:49had barely any money. The first thing I
16:51hired was an assistant. When I was
16:52barely had enough money to hire six
16:54people for my team, I hired an assistant
16:56because I said, "You know what? This is
16:58what rich people do. They hire people to
16:59get their time back. And if I have to
17:01like take care of this and that in the
17:02house, then like I'm not going to be
17:03making money." And it was the best
17:05decision I ever made. Whereas poor and
17:07middle class, they tend to sell time,
17:10right? They're trading hours for dollars
17:12and do everything themselves to save
17:14money and then wonder why they're not
17:15getting ahead. And so when I started
17:17filtering every decision through, does
17:20this buy me time or cost me time,
17:22everything changed. I stopped doing the
17:24$10 an hour tasks, hired help, automated
17:27things, and I focused really on the work
17:29that was, you know, say $1,000 an hour.
17:31And you can calculate how much money you
17:32make per hour by asking yourself how
17:34much money do I make in a year? And
17:35divide it by how many hours a year there
17:37are. That's it. So like right now, I
17:38know how much I make per hours. So then
17:40I'll ask myself, I even have it on one
17:41of my ASA cards for people. I'll say,
17:43"Is this worth, you know, $50,000 for
17:46Lelaya to do this if it's going to take
17:47an hour?" Now, here's the thing. If
17:49you're able to do this, you will make
17:51more money in less time, which then you
17:54reinvest into more leverage. And then
17:56that leverage creates freedom for you
17:58because things that you have leverage
17:59on, they take less of your time and
18:01create money. They're how you get free,
18:03right? So, how do you get out of that
18:04trap? Calculate your hourly rate.
18:06[music] Your annual income, divide it by
18:072,000 work hours. Then, audit your time.
18:09Ask yourself, how many things am I doing
18:11that are not worth this? My favorite
18:13thing that somebody will do in one of my
18:14companies is they'll come to me and tell
18:16me that they're doing tasks that are not
18:17worth how much I'm paying them. My
18:19favorite thing in the world. I had
18:20someone do it recently. They said, "Look
18:21how many hours I'm spending on admin
18:22tasks." And they had actually gone
18:23through their calendar for the last 4
18:25weeks and they calculated it and I was
18:27horrified by how much time. And I
18:28immediately hired them assistant and
18:29they started literally 3 days ago.
18:31That's all because anybody who thinks in
18:33terms of getting a good return, I'm
18:34going to hire that person for somebody
18:36else as well. So here's my challenge for
18:38you. I want you to pick just one of the
18:40shifts from this video and I want you to
18:42say, "This is the one where I think I'm
18:43going to get the most gains. I'm going
18:45to start [music] practicing it this
18:46week." And if you like this video, don't
18:49forget to check out my next one and
18:50subscribe.

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