How to Work at McDonald’s and Become a Millionaire

Brad Klontz was attracted to financial psychology after the tech bubble burst in the early 2000s.

Klontz had tried his hand at stock trading after seeing a friend make more than $100,000 in a year. But he felt immense shame after the market collapsed and his investments evaporated.

He sought to discover why he took such risks and how he might behave differently in the future.

Today, Klontz is a psychologist, certified financial planner, and behavioral finance expert. He is a member of CNBC Council of Financial Advisors and CNBC Global Advisory Council on Financial Wellbeing.

According to him, psychology is perhaps the biggest barrier to people’s financial success.

Klontz’s new book, “Start Thinking Rich: 21 Harsh Truths to Take You from Broke to Financial Freedom” – co-written with entrepreneur and social media influencer Adrian Brambila – aims to break down the mental barriers that hinder financial freedom .

CNBC spoke with Klontz about these “hard truths” and why he believes people who earn a McDonald’s salary can still become millionaires by changing their mindset.

The conversation has been edited and condensed for clarity.

Greg Iacurci: Why is psychology important when it comes to personal finance?

Brad Klontz: The basics of personal finance are actually quite simple. Financial literacy has its place, but I think it’s mostly about psychology.

Here’s my argument: For the average American, the two biggest problems we have are that we spend more than we earn, and that we fail to save and invest for the future. And I literally have yet to meet an adult who doesn’t know they shouldn’t do both of those things. So everyone knows it. No one stays broke because they don’t know the difference between a Roth IRA and a traditional IRA. That’s not the problem we have.

It’s not really a lack of knowledge. I think it’s all about psychology.

GI: So how do people’s psychology tend to get in the way?

BK: The biggest obstacle: currency scripts. Most people are unaware of their beliefs about money. And there’s a whole process to find out what it is. Part of this is looking at your financial hotspots: those early experiences you have around money or that your parents or grandparents had. People tend to repeat the pattern in their family, or go to the opposite extreme.

GI: You write very early in the book that there is a difference between being broke and being poor. Can you explain the difference?

BK: We are talking about a bad mindset.

Being broke means you have no money. I was broke, my co-author was broke, our families were broke, a lot of people were broke. We differentiate between being broke, which is hopefully a temporary condition, and a bad mindset, which will keep you broke forever.

It’s not really about money, because I know people who make six figures and many six figures, and they have a bad mindset. We all know stories of people winning the lottery, or winning a big sports or music contract, and then all of a sudden (the money is) gone. Why did he leave? They have a bad mindset. This is the distinction we make.

GI: Does this suggest that people, regardless of their socioeconomic status, can lift themselves out of poverty if they adopt a wealthy mindset?

BK: Yes.

GI: Is this one of your “hard truths”?

BK: Yeah. We frame it in different ways depending on the chapter titles (of the book). For example: “It’s not your fault if you were born poor, but it’s your fault if you die poor.” It’s a pretty harsh reality that we throw in people’s faces.

GI: What is a rich mindset?

BK: It’s an approach to life and an approach to money.

Some of this goes against our natural wiring. There is a future direction. You have to have a vision of the future. A bad mindset is really focused on the here and now, without really thinking about the future. And if you don’t have a clear vision of your future, you won’t save, you won’t invest, you won’t live below your means.

A rich mindset emphasizes owning your time rather than owning a bunch of things. A bad mindset, as we describe it, is very willing to trade time for things.

GI: What do you mean by that?

BK: A bad mindset is like I want that luxury car. And I’m more than willing to work 10 extra hours a week to be able to drive this car. And the problem is that this mindset is pervasive: “I’m going to buy the biggest house I can have, I’m going to buy the nicest clothes I can have, a big watch.” And then people have no net worth. They don’t save any equity.

Meanwhile, a rich mindset is like: How can I own as much time as possible? You could think of this as retirement, where I no longer need to work to finance my life. They have a future orientation and think, “Every dollar I get, I’m taking a portion of it and I’m going to put it here so I can own my time and eventually have that money fund my whole life.” » “.

GI: I thought that was a great line. You write: “The belief that the rich spend a lot may be one of the most destructive beliefs when it comes to money. »

BK: I did some research on this. In one study, we looked at a group of people who (each) had a net worth of around $11 million and compared them to a group of people who (each) had a net worth of around $500,000 . These people had almost 18 times more money. And what we found was that they only spent twice as much, on their house, their vacation, their watch and their car.

They had the money to spend 18 times as much, right? People who are the richest, when it comes to financial scenarios, (they) are vigilant when it comes to money. money scriptswhich is the belief that it is important to save.

Those who spend the most (have) “monetary status beliefs.” They had lower income and net worth. They are more likely to come from poorer homes. It’s like, “I’m going to show the world that I made it.” But it keeps you broke.

And I had it, by the way. All these insults about this poor state of mind, I got it all.

GI: So what’s the first thing people can do to save themselves?

BK: The first part is to embrace some of these harsh realities: Your political party is not going to save you. Your company doesn’t care about you. Your beliefs about money keep you poor.

All of this is meant, in different ways, simply to help you move from an external to an internal locus of control: The results I have achieved in my life are because of me. It’s because of what I did, what I didn’t do, what I didn’t know. It’s a difficult mindset to understand.

You need to realize that it doesn’t matter who the president is in terms of financial freedom. None of them will make you financially free. They won’t send you a check. Your business? They don’t want you to be financially free. The replacement cost for you is really high. Your teachers can’t teach you how to do that. They can teach you history and English. But they themselves are not financially free.

Ultimately, you have to do it yourself.

Then the next question is: what am I supposed to do? And that’s where we want to attract people, because it’s a much simpler answer.

GI: And what is the answer?

BK: The answer is really very simple.

This is the mindset of the rich: $1 comes into your life; you’re going to dedicate a percentage of it to your financial freedom before doing anything else.

You can work at McDonald’s all your life and become a millionaire if you have this mindset.

GI: What percentage should people aim for?

BK: It just depends on how rich you want to get and how quickly you want to get rich. This determines the percentage. You’ll hear personal finance experts say that you should save and invest at least 10% of everything you earn. I recommend 30%; that’s what I shot for, just because I think it helps you get there faster.

And people say, “Oh my God, 30%.” Well, it’s very easy before you get your first job if you have this mindset. It’s really difficult if you’ve designed your entire life around 100% of your salary. This is where cuts need to be made.

We have a chapter on reducing expenses. It’s called “Find a roommate, get on the bus, get sober, go bald and do a side hustle or shut up about your poverty.”

We (hear) this all the time: “I can’t afford to invest.” We call bulls—on that. Yes, you can.

We looked at the average amount Americans spend on rent, cars, salons, and alcohol. Two thousand dollars a month is an average rent; if you have a roommate, this reduces the amount to $1,000. That alone, if you invested the difference, in 25 years you would have $1.3 million. Now, if you had three roommates, that would go up to $2 million. Think about it. You are now a multi-millionaire just from this, and you do nothing else. And by the way, these are market average returns.

But when we add: take the bus, stop drinking alcohol, shave your head? (That’s) $2.8 million over 25 years.

GI: What if you did all these things?

BK: If you do all these things. It’s just a roommate, riding the bus, not drinking alcohol and not going to the salon – watch YouTube (or) ask your friend to cut your hair. The richest people I know, that’s the kind of thing they do. And yes, $2.8 million.

I will tell you all: this sounds terrible.

OK, so why not just invest 30% of every dollar you earn? So you don’t have to do any of that. If this is your mindset, it is impossible for you not to become a millionaire. Unless you do something stupid, like take your investments and do something crazy.