MONEY EXPERT: How To Think Like The 1%

TLDR;

This Jay Shetty podcast features Nisha Sha, who shares her journey from investment banking to becoming a financial expert. She emphasises that financial freedom isn't just about earning more, but about managing what you have, aligning spending with your values, and investing in yourself. Nisha provides practical advice on budgeting, saving, investing, and shifting your mindset to achieve financial happiness rather than just financial success.

• Financial freedom is more about managing your money than earning a high income.
• Building a financial cushion provides peace of mind and allows for more freedom in life choices.
• Investing in your skills and knowledge is the best investment you can make.
• Financial happiness comes from aligning your spending with your values and life goals.

Intro [0:00]

Jay Shetty introduces Nisha Sha, an ex-investment banker and accountant, who transitioned to helping people rethink their approach to money, success, and freedom. The conversation aims to explore how to manage money anxiety and understand the mindset needed to achieve financial independence.

Questioning the Traditional Path [0:59]

Nisha explains her decision to leave a well-paying job in banking, highlighting the importance of looking inwards and questioning whether you're living a life you truly want or one that's expected of you. She felt a growing disconnect between her actions and desires, leading her to seek a more aligned path. The pivotal question for her was whether she'd be happy living the same life in 5 or 10 years, which spurred her to leave her job and identity in search of something more fulfilling.

The Courage to Walk Away [2:58]

Nisha discusses the courage needed to deviate from a traditional career path, emphasising the importance of having a financial cushion to provide the safety to make such a change. She suggests starting small experiments alongside a stable job to explore passions without financial pressure. This approach allows for creativity and reduces the feeling that your dream must immediately pay the bills.

Calculating Your Financial Runway [5:30]

Nisha recommends calculating a financial cushion of three to six months of living expenses to provide peace of mind when considering a career change. She personally opted for a nine-month cushion to feel more secure.

Separating Your Self-Worth from Your Title [6:01]

Nisha reveals that the biggest sacrifice in changing careers was letting go of the identity she had built around her job. She stresses the importance of finding validation from within rather than relying on external factors like job title or status.

What is the Ostrich Effect? [7:54]

Nisha identifies avoiding looking at finances as a major mistake people make in their 20s. She introduces the "ostrich effect," a psychological bias where people avoid information that makes them uncomfortable, such as checking bank accounts after overspending. She stresses that in your 20s, habits are formed that can either compound for or against you, so it's crucial to address small financial issues early.

Fighting Instant Gratification [10:51]

Nisha and Jay discuss how easy it is to spend money now due to online transactions and the lack of physical exchange. Nisha suggests creating friction between yourself and a purchase, such as waiting 48 hours before making an impulse buy, to combat instant gratification.

Ask Yourself These Three Questions Before Buying Anything [11:34]

Nisha provides a 20-minute plan for reviewing finances, suggesting two approaches: a simple "back of a napkin" method for those who dislike budgeting, and a more detailed method for those who want to optimise their finances. For the latter, she recommends splitting take-home pay into three buckets: fundamentals (65%), fun (25%), and future you (10%). When reviewing spending, she advises asking three questions: "Do I need it?", "Can I live with less of it?", and "Can I get the same thing for cheaper?".

Micro-Habits That Build Real Wealth [15:13]

Nisha emphasises that consistent action is key to building wealth. She shares an anecdote about helping someone make their first investment and highlights the importance of turning financial knowledge into action. She also advises setting concrete goals with follow-up plans, such as saving a specific amount over a set period and outlining the steps to achieve it.

Spending With Intention [19:37]

Nisha advocates for intentional spending, focusing on what brings you joy and aligning your purchases with your values rather than blindly cutting expenses. She suggests evaluating the purpose of each pound or dollar spent to ensure it aligns with your goals.

Why More Money Doesn’t Always Fix Money Problems [21:32]

Nisha dispels the misconception that a higher salary automatically leads to financial freedom. She argues that managing your income effectively is more important than the amount you earn. She stresses the importance of saving and investing consistently, leveraging time to allow small contributions to compound over the long term.

Financial Success vs. Financial Happiness [26:58]

Nisha distinguishes between financial success (society's definition) and financial happiness (your personal definition). She asserts that those in the top 1% of financial happiness have a clear understanding of what they want out of life and make money decisions that align with their values.

Is there Such a Thing as Passive Income? [29:11]

Nisha clarifies that there's no such thing as completely passive income without significant upfront work. She identifies investing in the stock market as the easiest way to build long-term wealth, recommending index funds as a safer alternative to picking individual stocks.

Mastering Long-Term Investing [32:12]

Nisha advises starting with index funds, which involve buying a small slice of many large companies, like the S&P 500. She recommends only investing money you won't need in the next five years to avoid being forced to sell during market dips.

Should You Buy a Home? [33:24]

Nisha suggests not viewing a home as solely an investment opportunity. She acknowledges the psychological comfort of owning a home but also highlights the freedom that renting provides. She advises considering all costs associated with buying a home, including stamp duty, furnishing, and maintenance, and comparing that to the potential of renting and investing the difference.

Breaking the Scarcity Mindset [35:49]

Nisha outlines a plan to transform finances in six months, starting with saving a £2,000 emergency cushion. She cites research showing that this can significantly increase financial well-being. Next, she advises paying off high-interest debt (above 8%) before considering investments.

Stop Spending to Impress People [40:11]

Nisha identifies three things to stop wasting money on: purchases made to impress others, upgrades that offer diminishing returns, and items bought for the brand name rather than their utility. She encourages introspection to determine whether purchases are for personal enjoyment or external validation.

The Problem With Constantly Upgrading [43:26]

Nisha believes that the happiness derived from initial purchases decreases with each subsequent upgrade. She suggests that investing in experiences and memories has a greater impact on overall life satisfaction than constantly buying new things.

How Can You Be of Value To Others? [44:26]

Nisha shifts the focus from saving to earning, emphasising that saving can only get you so far, while earning potential is unlimited. She suggests increasing your value by becoming indispensable at your job or finding ways to provide value outside of work.

Focus on Earning More, Not Just Cutting Costs [47:26]

Nisha advises viewing saving as the difference between income and spending, and focusing on increasing income to widen that gap. She suggests setting an hourly rate for yourself and outsourcing tasks that cost less than that rate to free up time for higher-value activities.

The Entrepreneurship vs. Employment Trap [53:02]

Nisha and Jay discuss the idealisation of entrepreneurship, noting that it's not for everyone and that success can be achieved within organisations as well. They highlight the importance of financial security and the potential downsides of putting a large amount of capital at risk.

Investing in Your Own Skills [54:56]

Nisha identifies investing in herself as the best investment she's ever made. She recounts spending money to learn new skills related to content creation, which ultimately changed her life. She stresses that skills and knowledge are invaluable assets that cannot be taken away.

Defining Your Personal Freedom [56:56]

Jay and Nisha discuss the balance between short-term enjoyment and long-term security. Nisha references "The Top Five Regrets of the Dying," emphasising that the main regret people have is not living a life true to themselves. She advocates using money to live a life aligned with your values.

Short-Term Joy vs. Long-Term Security [58:47]

Nisha shares that the worst money she ever spent was on a new car early in her career, as it limited her ability to take risks later on. She advises those who wish they had started saving earlier to focus on the advantages they have now, such as a higher income and a clearer sense of purpose.

We All Make Financial Mistakes! [59:42]

Nisha encourages those who feel they started saving too late by reminding them that the best time to plant a tree was 10 years ago, but the second best time is today. She highlights the advantages of being in your 30s and 40s, such as a higher income and a clearer definition of your goals.

This or That: Money Edition [1:01:04]

Jay plays a "This or That" game with Nisha, asking her to choose between financial discipline and financial flexibility (flexibility), investing a £500 bonus or paying off debt (depends on the debt), an expensive wedding or saving for the future (saving), credit cards only or debit only (depends on the user), seeing a high balance in your bank account or knowing your money is working by investing it (investing), and £1,000 online shopping for a dress or £1,000 invested (£1,000 invested).

Nischa on Final Five [1:04:44]

In the "Final Five" segment, Nisha shares her best financial advice ("you can't take money to the grave"), worst financial advice ("save your way to retirement"), what she would do differently ("spend more on things that drive transient happiness"), advice to her younger self ("leap and the net will appear"), and a law she would create ("not to treat people differently based on their perceived wealth").