3 Levels of Building Wealth – What Level Are You On? | Chat With Jesse Borst

Yasi: Welcome to a Fast Track podcast, Jesse.

Jesse: Thank you. Thank you for having me always a pleasure to meet all the influences.

Yasi: Yeah. And, um, for, just for the information of the audience, if you are listening to this podcast that you saw the title chat with Jesse, actually in Dutch, uh, his name is pronounced as “Yes sir.”

Right?

Jesse: Indeed.

Yasi: So just let you know, it’s still the same person. So today we’re going to talk about, um, a lot of things related to personal finance and, from my intro, you guys, you already know that, uh, Jesse had a YouTube channel teaching people about investing money management. But today let’s start with the first question.

Maybe, can you tell us a little bit about yourself? What’s your background? How did you get started into, you know, producing content about personal finance?

Jesse: Yes, sure, but maybe indeed, let’s start how I started my career and what my background is. So when I was about 16 years old, I wanted to become a businessman.

I hadn’t really had a clue what that meant, but I wanted it to be a businessman. So I started. Let’s say, um, my, uh, bachelor’s I started in business economics. I wanted to learn about business. Um, and I got the opportunity to work at two big our companies, PWC and Ernst & Young as a tax consultant, and in accountancy, and has helped me to get some work experience, but also was, let’s say the first experience in let’s say finance.

Um, I liked it, but it was not really the thing that I wanted to pursue. So I also continued my studies and I got a master’s degree in finance and that gave me also the opportunity to, yeah, to still be broad, not to focus on one specific specialty within finance, but to have multiple opportunities. And one opportunity that presented was a traineeship at an insurance company, production insurance company.

And I was able to rotate and do different assignments within the insurance company. And one of them was, uh, mergers and acquisitions, which is one of the more prestigious let’s say, assignments. Um, and that was, I was very valuable. It was the first time that I thought of at this start, this let’s say line of business is something that I’m really interested in.

And that led to, to eventually getting into a permanent role at the asset manager of the company. Um, and the asset manager, I was responsible for valuations, valuations of financial instruments, uh, for instance, a complex derivatives, uh, but also, uh, private loans and also calculating the performance of what the portfolio managers were doing, uh, for their client.

So it was quite a diverse role. Uh, but in the end I got a opportunity to get, let’s say some sort of promotion, but I was able to become a portfolio manager and a portfolio manager is an investor professional investor, which is responsible for a certain part of the portfolio. I was focusing on corporate corporate bones.

Particularly what we call investment grades. So high quality corporate bones with a particular research focus of technology, media and telecommunication. So I became a specialist. Um, I also eventually moved into a more specific area called multi-asset investing, and I’m still a multi-asset investor. And if you’re a multi-asset investor, you’re primarily goals

would be called asset allocation. So you look at different asset classes, so equities, real estate, but also commodities, gold, oil, um, and bonds, government bonds, corporate bonds, and where are the opportunities? And can you let’s say efficiently allocate to that, uh, create diversification of your portfolio. But also look at, okay, there are certain parts of the portfolio where, how can you, let’s say direct to portfolio is such a way that you can optimize your return and lower your risk.

So that’s what I’m also currently doing. But during my let’s say, uh, during, let’s say my journey as a professional, I got quite some questions from friends and family about investing about, uh, what should I do? Should I buy a house? Is it time to buy a house? Um, our price is too high, too low. And of course I wanted to help.

Let’s say my natural gift is teaching. So I wanted to teach people about that, but it was quite difficult to just give somebody advice on a random question. So I thought about, okay, is there a way that I uh, create a vehicle for the knowledge that I have to help other people. And I thought about writing a book started with debts, but I thought, okay, maybe, yeah, that will be for a particular group, but not every, not everybody will have read it.

So maybe to do videos, maybe podcasts or something like that. And eventually I started my YouTube channel. My YouTube channel is called Money Principles. And the goal for the channel is to share timeless principles about money and investing and to give people let’s say the opportunity, and also let’s say lower the thresholds to start investing, because there are many, um, reasons why people don’t invest or why people take too much risk in investing.

And I wanted to give, let’s say people the tools to make better financial decisions. So that was, that’s an in short, my, my story. I have my YouTube channel now for about a year. Um, I’ve been able to get a, some following, but I think the, the main goal is just to also as a creative person to express yourself and also to create something that I think adds value to, friends, family, and anybody who wants to, wants to learn something about money.

Yasi: Yeah,

It’s what you talk about earlier is so important that, you know, some people, they think it’s so difficult to start to invest. Something is like super scary for them, right. Or some people take unnecessary risk, then it becomes like a gambling. And it’s very important to educate oneself before, uh, just put all your money into a stock market or in some high risky, uh, financial vehicles.

And now from your experience, you have such wide range of let’s say financial experience. I can say that like experience in financial market now it was a multi-asset portfolio manager. Uh, so from your personal point of view, how would you manage your money? So now we know that, you know, so many things, how would you, um, you know, to manage your own money?

Jesse: And it’s a very good question. The first thing that I’ve learned, and I’m also with, when you want to educate people about money, you start reading, I read about 30 books about personal finance. I also learn from that because personal finance is somewhat different than let’s say academic knowledge about finance.

It’s great to know how-to, let’s say value in derivative, but that’s not something that you’re going to use in your personal life. If you’re not, let’s say in the business. So when I was learning about personal finance, you all, I’ve learned to, let’s say, combine the two worlds and to, to make, let’s say, uh, make it, make the complex issue to understand.

So if you want to be financially successful, there are two things that you need to have. You need to have an income strategy, and definite wealth strategy. And income strategies all about, okay, how do you get your money? Do you start your own business? Do you want to build a career, uh, negotiating salaries, but also how to build a skillset that is valuable for the marketplace.

When you people talk about getting rich, sometimes they also talk about, oh, you need to start your own business, get wealthy via debt, but that’s more about creating a income strategy and not so much about creating a wealth strategy because of wealth strategy is more about what you do with your money.

So how do you keep your money and how do you multiply your money? And of course, multiplication you do via investing. Um, but the question is, is what do you do with your money? And one of the key things with financial success is that you have very, let’s say, you’re very goal-oriented. You need to make sure that the steps that you take and the extras that you take contribute to the thing that you want to achieve.

And not everybody has the same financial goals. Some people don’t have financial goals. But the first thing that I would encourage people is to start thinking about them. What do you want to do? You want to become debt-free? Do you want to have financial security, have an emergency fund in place. Do you want to retire?

Do you want to retire early? Do you want to, and maybe save to buy a house? So what are your financial goals? And if I look at my financial goals, that’s related to your question is, uh, my financial goal is to build generational wealth. And the only way to build generational wealth is to create an investment vehicle that can live on its own shorter

say it’s that. It’s not that say the risk of going to zero as to show that you have a loss of capital and loss of principle needs to be very, very low. So, but what I’ve done, I’ve created, let’s say an investment vehicle. It’s a very simple investment vehicle. Uh, but it allows me to achieve my goal.

And my goal is to build wealth via that vehicle and be able to help future generations. So my children, I have two young children have my grandchildren, uh, but also it allows me to, uh, to be generous with my money and to help other people with it. So that’s my, let’s say one of my financial goals. But generational wealth can only be obtained if you also have, let’s say other levels of wealth in place. And because of course, if you’re still struggling to pay your bills, then, uh, let’s say generational wealth feels a bit out of reach. So I also think that when you create your, let’s say financial goals and you need to understand the three levels of wealth.

Yasi: So I have two questions on behalf of our audience. Maybe they have this question in minds as well. Um, so question number one, if you don’t mind sharing, for example, for other families who also have children now, they have extra cash for investment. How can they learn from your example?

Just as a reference, okay, here we don’t do financial consultancy or financial advice purely for reference. Then how, what would you do to create this, you know, generational wealth investment vehicle? So that’s question number one. And question number two is, uh, where you mentioned earlier, what are the financial goals?

So what other typical financial goals that you know, on average person might have and please elaborate little bit on that, how they can, uh, set up, let’s say a plan to achieve those. So those two questions.

Jesse: Yeah. Let me first start with the investment question. So when people let’s say, decide to invest, I see let’s say two kinds of people.

Either people don’t invest because they’re scared of it. Or either people are so excited about investing. They go all in and they lose their shirt and they get discouraged and you want to be in the middle. And one of the key things is, is that you need to understand your investments before you invest.

Or in other words, you need to invest your time first, before you start investing. So let’s say you think real estate is interesting. Um, then read some books about it. Start learning about real estate. Start learning about how, how it is to buy. Let’s say residential real estate, how to create rental income, how to do maintenance, how to do the taxes, and then go into that because the answer of what should you buy depends all about what do you want to learn?

Do you want to learn to invest in real estate? You can also buy, let’s say a bestseller real estate fund, so reads. And so that’s, a real estate interest, uh, a real estate investment trust. If you, you can also buy that, you can do the invest, roughly buy an ETF on that. Um, but that doesn’t still, that still requires you to learn about it and to understand what you’re buying and what you can expect from it.

Because if you let’s say invest you also want to know what kind of return can you expect from it. And only way to do that is to invest your time in that and my preferred way to do it because I’m a liquid markets guy, because that’s my, let’s say my trade. I’ve decided to invest my money or at least my generational fund.

It’s a equity fund for equity fund in a way that is investment invested in a sustainable manner. So it’s, let’s say the focuses it’s investments on industries that will probably be here for the next, uh, let’s say 10, uh, 10, 20, 30, 50 to a hundred years. So it avoids the staff, especially the more dirty industry it’s that in industries that are, that might go extinct in a, in a few years’ time, given the green transitions that we’re now seeing. So I’ve decided to do it, do it via equities in a fund that is more sustainable. Um, however, also with sustainable investing you also need to know, need to know what the implications are, because it can also have some implications if you don’t own certain industries and what will happen to your portfolio, into the diversification of your portfolio.

So it’s not a clear cut answer, but what we generally see, or my general advises is that if you don’t want to stand uh, significant amounts of time and start with equities because that’s the, the, the easiest and the most let’s say, uh, understandable investment. You buy a piece of a big company. Uh, you will own part of that company.

That company generates profits. Part of the profits they reinvest in that company, that revenue will shelter into price, increases, price appreciation, and all the, a part of their profits they pay out in dividends and you will get that. And then what you can do is reinvest your dividends to buy more stock and overtime your

nest egg or your fund will, will grow and grow. You use the power of compound interest to build wealth.

Yasi: Are you using dollar-cost averaging? Um, just to found the investment every single month, or, um, how are you going to pass it to your children in the future or when you brought certain scale? Uh, well, when they reached an age as and hey, kids here are those lump sum of money just take it.

Jesse: Yeah. The thing and that’s with generational wealth, there are a few things it’s not just investing. It’s not that you have a pile of money because that can also just ruin your kids. So you need to have also specific goals attached to that funds of what will that fund do for you? What will that fund do for your kids?

And one of the things that. What you see with wealthy people say for instance, I have a family bank. So if the, if your kid wants to buy a house, they can go to the family bank, they get a loan, um, and that’s, they will still pay interest on that loan. They still need to repay that loan, but. But they will know is that all the money that they will pay goes towards that children.

So that’s the repayment of the loan and the interest will be reinvested and will grow over time. And that will allow their children to also buy a house, uh, and the great thing, and then you think, okay, what’s the difference between getting a loan from a bank and getting a loan from a family bank, right. Uh, mathematically, it doesn’t make a difference, but from a text point of view, there are some benefits. For instance, you can still give some money back so you can, uh, you pay a certain interest and you get, let’s say tax deduction on it, and then you can get, for instance, part of the money backfire gift. Um, so you have a high tax-deductible.

You, uh, you don’t pay net a net interest that is still, let’s say the market that effectively lowers the amount that you need to pay. So, first of all, there’s a tax advantage, but more importantly, you’re not in the bank system. I know that my children, if they pay, they also of course pay for their own future.

So, you know, that the, all the money that I will put in is for my, for my children. And that also it creates, let’s say a peace of mind and something that you can get, you will be happy to pay our mortgage bill because it’s, it does it, it will be something positive. Yeah, it’s just, oh, I need to pay the bank.

Yasi: Is it something viable to, like, let’s say majority of people are the, say affluent investors or it’s very exclusive for like all ultra-high net worth families.

Jesse: No, you can because the, of course, if you have, let’s say, if you are, uh, let’s say 35 and you have, your children are still young. Maybe they have five years old and you know that they will need to buy a house when they’re 25 or something. So you have 20 years to invest for that goal. Um, let’s say you invest, you invest and you will be able to over the 20, let’s say a hundred K or maybe 50 K or even 20 K.

You can also do it. Uh, they can also do, let’s say a dual version that they get a mortgage from the bank partly and partly mortgage from you that still gives them the same benefits of course, to a lesser extent than if you can give them a full loan, but there the general generational wealth is all about mindset.

It’s all about how you want to, let’s say, uh, let your money help other people, help your children create a legacy, um, and also help help people let’s say outside of your family. So. Um, it’s not just that some people just say, okay, I have a lot of money. I retire early. That’s also an option that you have, but that’s more selfish option.

Okay. This is just for me, but what if you can extend that and what can you do with your money and create a legacy, but that doesn’t exactly return, uh, which require a high net worth, but a high net worth helps. Yeah, it’s all financial

goals.

Yasi: This is a brilliant way of looking at creating generational wealth. I have to say because in the other interviews I’ve mentioned, you know, we joke around; what are the mistakes people made?

Is the parents save a lot of money or the invest money in fund. And then the fund matured over 20 years. So 25 years, and then they pass this money to their adult children. Like, here you go. This is the money we invest for you. And then the other children bought a brand new BMW.

Jesse: Yeah, that’s kind of a waste to be honest, but then they can, of course, but what’s more important is that you educate your children along the way. So what we, what goals that we have. So the family bank is one goal for the generation of funds. Another, let’s say go off the fund could also be just education is that you pay for education of your children.

And one of the key things there is, is that, uh, particularly, that’s also the reason why I started my YouTube channel. I have now something that I can show my children. Okay. How do you look at your spending? How do you look? I’ll be already invest and when do, will I start teaching them about investing?

It’s probably when they’re 10 years old, they start to, they will need to learn about investing because they have a very long time horizon then if they then start investing. But it’s very important that they will learn also the basics or how do they manage, how can they manage money? And they need to learn about generosity because generosity is kind of the, uh, the missing link.

Because if you only learn to use the money for yourself, Then indeed all your financial choices will be either buying stuff for yourself that will go down in value over time. Um, and it will lead to a lot of ways. Well, if you can also teach your children about generosity, okay, you can help people. You can help yourself, your family, your children, but also strangers. How can you be good with money and be a blessing to your family and to your, to your surroundings, to your community?

Yasi: Um, I would like to give you a lot of thumbs up here, but this is audio podcast or audience is just let you know I give a lot of thumbs up. I really love, um, the, the philosophy that you have towards money.

And now we talk about generational wealth, right. And also, uh, think about when you create wealth like giving, uh, let’s press back. Let’s say someone, uh, who has not, you know, had any children or is still very young. How would that person start to prepare for the financial future? Let’s say, what are the few levels of wealth they can plan for their life?

Jesse: Yeah, that’s a very good question. So there are three levels of wealth. You have financial peace, financial independence, and generational wealth. Financial peace is all about being able to pay your bills. So being debt-free, not having payments and having an emergency fund in place in case an emergency happens.

So your rainy day funds, um, it’s, it’s also about retirement because you don’t want to, let’s say work 40 years, then don’t have any income fall into a gap and be poor when you old. So it’s all also about saving for retirement. If you’re living in Europe, you’re lucky because retirement investing is something that’s mainly down fire corporate plan, and that’s been done for you for, so some people don’t have to think about it, but I would encourage people to start thinking about it because it does matter if you, for instance, switch jobs and your country, let’s say your company,

uh, first contributed to, let’s say, 10% to your retirement, and then you switched the job and your new company would do 5%, then that is significantly less. So I also encourage people in that stage to think about it. Um, and also maybe look into ways to, um, yeah. Find additional or do, do something additional to fill that gap.

Uh, but also to start thinking about giving, normally people think that being rich, you need to be generous, but the misconception is if you’re not willing to give $10 out of a hundred dollars, you will never be able to give 10 million out of a hundred million. So you need to learn also the benefits of generosity and, uh, so you can start small.

And the good thing is because the amount is low and anybody can do it. And also if your income is low, anybody can do it. And the great thing about giving is it detaches you from your money. So you don’t fall into the trap of becoming too greedy or becoming too cheap and not being able to enjoy your life in the process of becoming wealthy.

So that’s also, uh, an important too. And then, so that’s the first, let’s say a level of wealth is that you make sure that you have to things in order you get out of the debt. You create emergency funds, make sure that you save for retirement and that you have, um, you, that you start learning how to be generous with your money, but with financial independence, the second level of wealth, it goes much deeper.

Uh, first of all, what you want to do is that you want to, because you need to be intentional with your money. You also need to be very intentional with your spending, um, in the financial piece part. You’re spending you sometimes you need to be, yeah, if you’re, especially, if you’re in-depth, you need to be ruthless and you need to be, uh, yeah, you need to make sure that every dollar goes to the, to the right thing.

Uh, so you need to track your spending. You need to have a budget. Um, however, In the financial independence step. It’s also about making sure that you fully use the function of spending because spending is not only making sure that you cover your cost of living. It’s also about enjoying yourself and especially, uh, people have different what we call money, doubts, the things that I like spending money on. And in that stage also want to direct money towards that, that you’ve more proactively budget fund money, and that you’ve proactively budgets, uh, things that you, that you, that you value, for instance, personal development.

The things that, that the ticks you, or that, that makes you happy and that you get excited, about, um, also in financial independence, it’s of course, about saving. You need to not have just an emergency fund, but you also want to create more flexibility. So an emergency fund is about if there, if something bad happens, you have money available.

But if you’re if you want to be financially independent, let’s say something bad happens. You kind of, you fall back and you need to start working on your emergency funds. Again, that’s the problem. So you want to create some additional. So we call it extra savings and that extra savings incentive has two purposes.

First of all, it’s creates, uh, creates room peace in case something worse happens, then just your refrigerator breaks. Let’s say you lose your job. What if you lose your job? Can you live for a few months? Um, but also it will give you, and this, this is super important. This is the reason why, uh, most people who, for instance, follow fire get stressed.

When for instance, the market goes down is that, uh, you need to also have money available. To chase effort, investment opportunities, because let’s say the market goes down 50% and your nest egg and your, uh, let’s say your, uh, your wealth-building vehicle comes on the pressure. Why don’t, why don’t you have money available to buy something.

And then you think, okay, but if you just leave it in the market, it will return give you a high return. So it has a higher, let’s say benefit financial benefit, but yes. Financial success is only 20% knowledge. It’s 80% psychology. So you need to account for your own psychological, let’s say, uh, challenges.

And one of the financial challenges that you will encounter is that you will be under stress when markets go down. Uh, whether you understand markets, uh, yes or no. The reality is if the market goes down, you do feel it, you, it does have pain, but what if you can get a medicine for the pain and that extra saving is, um, yeah, it’s, it’s a tool that gives you medicine for the pain, because if you know that if the markets go down, you can buy more.

Then you’ve, you’re happy that the market goes down. So you be first the psychology on, let’s say a negative event.

Yasi: Yeah. And

question on this one, uh, extra savings, how much extra, extra savings would you recommend someone to have? Let’s say this, this person already achieved financial independence and have extra savings or have extra savings in order to be on the way to achieving financial independence.

Jesse: This is a very good question, because if I look at wealthy families, what you see is that a have a golden rule for this. They have about 75% in liquid investments and 25% in savings. And you see that billionaires, you see that let’s say with people who have 10 million or 1 million, they have about 75% in either equity, real estate or whatever.

And they have 25% and that’s a lot.

Yasi: So cash, you mean?

Jesse: Cash, cash on the bank account? Maybe you can put it in a high-interest rate, uh, investment account or high-interest savings account, but it’s doing nothing.

Yasi: That exists nowadays high interest

rates.

Jesse: Uh, in Europe doesn’t really, it’s not the right word for it. But, um, no, but the cash does nothing, but the reality is, is that, um, the risk of let’s say, the let’s say you have, let’s say a formula, let’s say an easy example, that you 3 million invested

so you already get a very serious, uh, return on that on a yearly basis. And you can easily live off that. So money is at that point, not let’s say the issue. What you want to do is create a system that is unbeatable. And you need to create layers of safety and those extra savings you want to be. And that’s the reason why you always see the headline when there’s a crisis.

The risk got richer during the crisis. Why? Because they have this pile of cash. They can just move it in, let it generate money for a while, and then move it out again. And they can just enhance their returns massively on the back of that. Um, so what I propose for people to do, because I think that that twenty-five percent, especially if you’re just started is maybe too much, but what you want to do is already created the system.

So make sure that you don’t just have your, let’s say emergency fund in place because maybe that’s too little, but you already let’s say I want to have 5,000 or 10,000 available in case the market moves against, moves against me, and also create a system around it. So one of the systems that I use, if the market goes down 10%, a buy a bit more, if the market goes down 20% from the peak, I do a bit more.

So I have a bit of a system in place that if the market does something, I can react to it and it doesn’t make me smart or doesn’t make me sophisticated. It just gives you peace of mind. That if something happens, you are prepared. And then of course, when you start building wealth and serious wealth, then, of course, you can increase that.

So what I, what I always suggest is that if you manage your money, let’s say you do budget and you have a certain amount that you want to give away every month and a certain amount that you want to spend every month, a certain amount that you want. Invest every month, but also have a certain amount that you want to save every month.

And that just goes to your, to your cash. And yeah, the reality is money attracts money. You will find opportunities to make use of that money. Even if you want to, let’s say, buy a house or maybe remodel your house, you have money available to do that. You don’t need to go into debt. You don’t need to live like, uh, like a student.

So you can also just enjoy it, enjoy it, but you have money available and that already gives you peace of mind.

Yasi: Yeah. Sorry. I have a question related to the, you know, the medicine for the pain when the market dipped, right? How would you counsel someone? For example, if the market dips and then the person buys in

a little bit more and then the market dip again, and then there’s no more cash left over to buy. So it’s very difficult to manage this, you know, the downward trend and keep buying in this, uh, investing pattern.

Jesse: Yeah. So of course, reality is let’s say the market dips 10%. And you put all your money in, let’s say you have that strategy in place.

Every time it dips, you put everything in and then you saves up again and it dips again and you put everything in because the market always eventually recovers and moves higher, especially if you use a diversified portfolio, um, then the 10% you, you bought a 10% cheaper. And you were able to, to get, let’s say a return on that.

So let’s say, um, you’re worried about the dropping another thing, like I didn’t have just do it at one, one piece of a 10%, one-piece, 20%. And of course, if you have more wealth and you can also say, okay, let’s do 20 10%, 20%, 30%. Uh, after 30%, it becomes a bit of a blur because the market doesn’t go down 30% that much.

So, uh, that will be maybe once every five to 10 years. So then be prepared to sit longer on your cash. Um, but yeah, a correction of 10% is something that happens about every year. And so you’ll get an opportunity to invest your money every year. But if you do it’s, let’s say minus 20 minus 30, that also means that you, yeah, you will have longer the time that it will not be used and that you should also be happy with that.

I personally don’t, I’m fine with that. Um, I’m happy to have, let’s say a bit more cash I personally have about, I think 30% in cash about 66% in, uh, invested. Uh, but it also has to do with, yeah, the stage of life that, I mean that I maybe want to remodel my house or I want to buy a car and just have the money available.

Um, but yeah, it depends a bit on your, uh, also on your, your goals and how flexible do you want to be.

Yasi: Right. And this is a very important point that now I thank for clarifying it is that, uh, so for investors who have this investment strategy in place, but in place, I have extra cash on the side, just only when the market dipped at a certain point, according to the strategy they buy-in, and then they filled up this extra cash pot again, right?

Jesse: So 25, 75%. Um, let’s say allocation is, let’s say, it’s not that it’s not static, or let’s say it’s a, let’s say a target ratio, but it’s not, let’s say it could be that you’re when you’re, uh, let’s say she an opportunity that you had 15 or 20%, but then you just fill it up. And that doesn’t mean that you sell your investments, uh, could be, but I would not recommend that.

Just leave that asset and let that grow over time. But you would just save more into it. Yeah. Okay.

Yasi: Now, now it’s very clear because in the personal finance community and a full lot of average investors what’s recommended to do dollar-cost averaging. So that’s like you invest into an ETF or fund, uh, constantly every single month or every quarter, but this strategy can be used to reap the, you know, opportunities in the market when dipped, so you have extra cash at the time.

Jesse: I would always have a part of my budget allocated to investing. So every month indeed invest your money and use dollar-cost averaging. Um, not for the sake of dollar-cost averaging, but more for the sake of having a habit in place and making sure that you invest every month because investing every month will allow you to achieve your financial goals and this extra savings and using these extra savings is more for the psychological part.

Uh, but also to let’s say, improve your returns. Um, but it’s not, let’s say you both count on extra savings to achieve your financial goal. A goal should be achieved with your monthly investments already. So it’s more a return an answer and also peace of mind an answer instead of a, let’s say the tool that gets you to the, to the goal and the reality, if your financial, let’s say if you want to be the let’s say, financial independent. The reality is that if you look at, for instance, you’re investing and the savings ratio in particular, because that’s the most important driver of, let’s say your, your wealth accumulation returns are important, but not so important as how much money you actually put into the market.

And that savings ratio will determine how much wealth you can build over time. So, whether you invest 10%, 15% or 50% or 80%, maybe a good example is that: if you let’s say earn a 50 K a year, it doesn’t really matter because the savings ratio was doesn’t uh, let’s say it’s income independent. But let’s say you are able to invest 80% of your income.

Then you could potentially retire in five years. That’s the, let’s say the fast track fire, uh, let’s say a solution, uh, but if you do 50%, then it takes you about 15 to 20 years. So you need to figure out your financial, independent goal. So how long do you want to take to become financially independent? Um, and that depends per person on what they wanted to do. Um, my personal goal is not to retire. I don’t think that adds any value. I want to stay productive. I want to add value to my clients,, and create the stuff that I, that I like find my YouTube channel. And I don’t want to. So I don’t have that goal.

I don’t want to retire. I do want to be financially independent. I want to have the funds available to create, let’s say the freedom. Uh, but I don’t have, let’s say, uh, I don’t have to do that in five years. That’s not necessarily the goal. So I personally have, let’s say a saving ratio of 50%, which is still a lot.

Yasi: It’s still very high yeah.

Jesse: It’s still very high, but I do take into account all my retirement investing, and especially in the Netherlands, we have a very solid retirement system. And my company also saves from my retirement. If I take everything together, it’s about 50% and next to that, I have my savings.

So it’s, uh, it’s quite, uh, that that can be quite a lot, but that’s achievable for me at the moment. Uh, And yeah, I think that it depends a bit on what you want to see, want to achieve in that respect. So how. Um, how let’s say, how long do you want to take to become financially independent? But way more important is, is that you understand that a savings ratio is way more important than chasing, uh, Exotech investments that potentially get a very high return.

You see people spending a lot of time and energy on creating very complex portfolios. Adding all kinds of risks, to the portfolios that have no clue about, and if they have a clue about it, then they need to spend a lot of time keeping up with their investments. So their return on their attention.

That’s how I call it. It’s not always that great. So. Uh, but the most important thing they tend to forget is that it’s fine to have a very complex investment, but if you only invest a thousand dollars in it, even if it doubles in value, you have another thousand dollars. And it doesn’t give you anywhere close to what we call financial independence.

That’s all we’re always talking about. Let’s say at least half a million to a million, uh, before you can call yourself financial independence. So I think that savings rate is something that you can focus on and what’s, what’s great is that if you have an income strategy in place, that can be a very good way to help your savings rate.

If you have a certain lifestyle and you were, and you’re able to double your income, then you can potentially save 50%. If you’re a, if you keep your, keep the same lifestyle. So if you, if you have a good income strategy, 50% is not that difficult to, uh, to achieve. Uh, but it does require your attention and you need to be very intentional then.

Yasi: Yeah, I think 50%, you know, sounds a lot, maybe to a lot of people, if they never pay attention to that spending, but if you really list all the items, you know, one by one and you see where you can improve, actually, you can save a lot of money. Do it once, improve it, and the next month you probably have like several hundred even 1000 more, and then you can improve your savings rate slowly.

That’s a very interesting point. Um, because you mentioned like a savings rate is more important than chasing a high return, high-risk investment. Uh, let’s touch on the investment part. What are the other common mistakes or misconceptions people have towards investing well through your questions, your relatives or friends or audience asked you in the past?

Jesse: Yeah. I think the key mistake is that the moment people, um, get familiar with investing and they, that they read the book about Warren Buffet. He makes it let’s say at an average return of about 20% a year, or they read a book about Jim Simmons who had an average return of about 60% a year making it let’s say the best investor.

He is a date trader. So why not, why shouldn’t I get into day trading, but, they take an example of somebody who’s the best of the best in a certain category, and then they’re going to apply it to themselves. And then the reality is, is that it’s very difficult to replicate than say such a strategy. Um, and, there was also a cost of trying to replicate such a strategy.

One of the costs could be just financial ruin. You try something you’re not good at it. And you’re not. You are, you get discouraged by your own mistakes and that’s the risk, and then you don’t invest anymore and you’re not able to build wealth. Uh, but also the problem is, let’s say you are successful with it.

Let’s say you get a very high return on your investment, but then do you continue to do the thing that you, uh, that you do? So let’s say you were, you found an altcoin that was very successful. Do you continue to invest in it? Altcoin? Do you invest all your money? Do you start to be balanced every month? Um, and adding those complexities requires you to spend more time.

But if you spend more time on it, then the question is, um, where, what is the opportunity cost of that, of you spending less time on something else? So for instance, uh, having a side business, uh, become entrepreneur, if you want to do that, uh, so there is also a cost of your attention.

And do you, are you aware of that, of that? And I think that that’s something that most investors tend to have. Some of them also see investing as a hobby so they try to spend a lot of time on that. But they, yeah, they forget let’s say the also the more rational part is that, is it worth my time?

Is it a good investment? And do I have a system in place that accounts for my own mistakes?

Yasi: Yeah. Uh, that’s what I mean, one of the things you mentioned is like, people think they can be the, how to say stock peaking God, the best trader in the world. Uh, but on the other hand, there are a lot of people who I talked to, who haven’t started investing.

Right. They think about, oh, if I start investing, I have to read financial times every day. I have to analyze the chart and read the, you know, reportings. I don’t have enough time. That’s what prevents people from even starting investing. So what advice would you give it to, uh, average, let’s say professionals who have a full-time job, who don’t want to become, you know, or think they can become the best trader in the world.

How can you encourage them to start investing and building wealth?

Jesse: Yeah. So I would always say, keep it as simple as possible. Um, if you need to look at your investments more than once a year, then you’re doing something wrong, then you’re probably have something that’s either too risky. Um, or that you, yeah, that you don’t understand it completely. And you’re, let’s say, for instance, you invest in a, in a broad index, uh, broad index funds, then the chances of you going bankrupt are close to close to zero. Uh, of course, there’s volatility, but if you understand that, markets yeah, once you, once a year go down, let’s say minus 10%, they won’t get scared.

So you just can leave it be. You don’t have to look at it. So simplicity is king. And even if people want to, let’s say add complexity, start simple. It’s easier to have a system that starts simple and then builds upon it than to create a very complex beast and don’t know how to navigate it and make mistakes that are unnecessary.

So start simple. And especially if you don’t want to look at it every month, then don’t create a system that’s not necessarily. Um, and I think liquid markets are then easiest, especially if, for instance, residential real estate does require you to have bought the house, look at a house bid on it. Uh, do the maintenances, uh stay away from those investments.

If you don’t want to spend the time and energy on it, you won’t be happy. Just keep it simple. Uh, the equity market is, has made many people wealthy. Um, but more importantly, it’s very easy to understand. That’s why it’s, uh, a great way, to get started. Um, so simplicity is king.

Yasi: Yeah. So simplicity is a king and I have one, one line to add to that is to check out Money principles, YouTube channel, and to learn the basics about personal finance and investing.

So thank you so much for being here Jesse. Um, would you like to, um, so I just already mentioned your YouTube channel. Would you like to let the audience know is there anywhere else on the internet, they can follow you and absorb more of your wisdom them and help them to create either financial peace, financial independence, or generational wealth.

Jesse: Yes. You can also follow me on Instagram at Money principles. Um, so you can find me on YouTube, find me on Instagram. You can also reach out via LinkedIn, uh, whatever, too, if you have questions. Always happy to, uh, to help and, um, see if I can, uh, have something, an insight for you. Um, but uh, my YouTube channel is the best way to, uh, to find more content.

Um, yeah, we’ll be, I boast twice a week. Uh, try to keep the videos as Snapchat, and interesting as possible. Um, but, um, yeah, the goal is to create more content from here around.

Yasi: That’s really amazing content. I personally, I, myself, I watch his video, so very easy to understand, uh, great content. Thank you so much for being here.

Thank you so much for creating great content on the YouTube channel and sharing your wisdom with us. I hope to have you again.

Jesse: I hope so too. Yeah. Thank you, Yasi.