Three Money Lessons from Grant Cardone for Building Real Wealth
In the quest for financial freedom, many young Americans find themselves navigating a complex landscape of investment opportunities, economic challenges, and personal finance strategies. To demystify wealth-building, they can look to the insights of successful entrepreneurs who have transformed their lives through smart financial decisions. One such figure is Grant Cardone, a multimillionaire real estate investor and motivational speaker, whose rags-to-riches story offers valuable lessons for anyone looking to achieve financial independence.
In a recent interview on Lewis Howes’ podcast, The School of Greatness, Cardone shared three pivotal money lessons that he believes are essential for building and maintaining real wealth. Let’s delve into these lessons and explore how younger Americans can implement them in their own financial journeys.
1. Money is a People Game
Cardone emphasizes that “money’s a people game,” a principle that underscores the importance of networking and relationships in financial success. This idea aligns with the saying, “your network is your net worth.”
A 2022 study published in Nature analyzed data from billions of friendships on Facebook and found that individuals from lower-income backgrounds who connected with wealthier peers could potentially earn 20% more than those who did not. This highlights the significant impact that social connections can have on financial opportunities.
For young Americans, this means actively seeking to expand their social circles. Engaging with mentors, attending networking events, and participating in community organizations can open doors to new opportunities, partnerships, and insights that can lead to greater financial success. Building relationships with successful individuals can provide not only inspiration but also practical advice and potential collaborations that can enhance one’s financial trajectory.
2. Don’t Lose Money
The second lesson from Cardone is a straightforward yet powerful mantra: “once you get it, don’t lose it.” This principle emphasizes the importance of preserving the wealth you accumulate.
This advice echoes the wisdom of investing legend Warren Buffett, who famously stated, “The first rule of an investment is don’t lose [money]. And the second rule of an investment is don’t forget the first rule.” Losing money can have a compounding effect on your financial health; for instance, a 20% loss on a $1,000 investment requires a 25% gain to return to the original amount.
For young investors, this means being cautious and informed about where they put their money. Avoiding high-risk investments without proper research and understanding is crucial. Instead, focusing on stable, lower-risk investment options can help preserve capital while still allowing for growth.
3. Invest with Risk in Mind
Cardone’s final lesson revolves around the concept of risk management in investing. He states, “If you get 7% or 8% on your money every year, you’ll be so rich when you need it — if you don’t lose it.” This highlights the need for a balanced approach to investing, where potential rewards are weighed against the risks involved.
Research indicates that the likelihood of bankruptcy increases with the frequency of leveraged trades, a common practice among investors seeking higher returns. As of May 2024, investors had accumulated over $809 billion in margin debt, which can lead to significant financial peril if market conditions shift unfavorably.
Instead of chasing high-risk investments, young Americans should consider more stable options, such as low-cost index funds. For example, the Vanguard S&P 500 index fund has delivered a compounded annual growth rate of 15% over the past five years, with significantly less volatility compared to cryptocurrencies or individual stocks. This approach aligns with Buffett’s advocacy for simple, passive investment strategies that focus on long-term growth.
Conclusion
Grant Cardone’s three money lessons — understanding that money is a people game, the importance of preserving wealth, and investing with risk in mind — provide a solid foundation for anyone looking to build real wealth. By expanding their networks, being cautious with investments, and focusing on stable growth strategies, younger Americans can navigate the financial landscape more effectively and work towards achieving their financial goals.
As they embark on their financial journeys, it’s essential to remember that wealth-building is not just about making money; it’s about making informed decisions that will sustain and grow that wealth over time. By adopting these principles, young investors can set themselves on a path toward financial freedom and security.