Notes from Tony Robbins’ “Money: Master the Game” book (Chapter 3)

Welcome to the second entry on the summary series for Tony Robbins’ “Money: Master the Game”.

Source: Pexels

After an introduction to common investment terminology and a debunking of nine myths, Tony now walks us through two milestones:

• Come up with an actual figure that represents your financial freedom
• Understand strategies that accelerate your accumulation of that money

On a personal note, this chapter ends up being 50% financial advice and 50% self-help. A lot of the topics discussed here are directly applicable to other facets of life, such as habit formation and letting go of things that do not fulfil you.

As you read through this summary take notes of how you can start to get your financial life on track but also think how the points raised can be applicable to others areas of life to make you a little happier. Enjoy!

Financial Freedom

How much money will you need to be financially secure, independent, or free?

Turns out there isn’t a magic number to the answer — there are five levels of financial freedom.

But for starters, Tony wants to make something clear: as you dream that magic number, it’s likely that you will exaggerate. We tend to overestimate how much money we actually need to achieve that freedom and support our desired lifestyle. And, ultimately, life is about emotion, not the things we owned.

Okay so, what are the five financial freedoms. In brief, they are:

• Financial security
• Financial vitality
• Financial independence
• Financial freedom
• Absolute financial freedom

As you can tell these are progressively heavier and carry a larger monetary sum to achieve. Hence Tony invites you to pick three: short, medium, and long term freedoms.

Dream 1: Financial Security

We start off at the simplest level: what is the cost to have your basic day to day expenses covered for the rest of your life? That includes

• Housing/home mortgage/rent
• Utilities
• Food
• Transportation
• Insurance

Calculate how much you spend for each item on an average month. Then multiply it by 12 for a yearly cost.

With these figures in mind, you now have a concrete goal of how much it takes to have financial security.

And something very important to have aside of the security fund: an emergency fund. This is an amount that will tide you over for 3 up to 12 months in case something goes wrong. Plan your security fund by all means, but but very mindful of this money specific for emergencies.

Dream 2: Financial Vitality

Dream 2 is a middle ground between essential needs and achieving independence or even freedom. The second step is about little luxuries, like clothing and gym memberships.

For these, Tony asks you to account for half the monthly cost of each of the following categories:

• Clothing
• Dining
• Entertainment
• Little luxuries (manicure, massage, etc.)

Now sum the above for the monthly cost and multiple by 12 months. Add the result to the final figure from dream 1 and you will have a great estimation of how much it costs you to sustain basic needs and a little luxury every once in a while.

Dream 3: Financial Independence

At this level you are truly financial independent — living off of the annual interest on your savings and return on investments covers your basic needs AND the little luxuries. Money works for you and you only work a job if you want to.

At this point you want to understand:

1. how much you need per year for basic needs
2. how much you need per year for your luxuries

While financial vitality assumes a half cost of the luxuries, financial independence is about the full figure for you to maintain the current lifestyle while still paying for it based on annual interest of your financial investments.

Dream 4: Financial Freedom

At this point you’re financial independent AND you get to have two to three significant luxuries without having to work for them!

So the value for this level is the total for financial independence summed with the three luxury items (monthly cost and then aggregated to the annual cost). And for reference, these luxuries might be a boat, frequent travels, a second house, etc.

Dream 5: Absolute Financial Freedom

The final piece of the puzzle: a number that guarantees you and your family have financial resources for anything you want without having to work.

Again, put your dreams to words, attach real numbers to them and the result will be a firm number that you can work towards to achieve this freedom!

A formula to materialise ideas

Now that we’ve gone through financial dreams, think about times where you’ve achieved things previously thought impossible. Write down a handful and use them as reminders of how you can materialise your success. Don’t let ideas be forever ideas in your mind!

Now take one of those moments and revisit them through three steps to find your success formula predicated on previous success you’ve proven you can surpass:

Step 1 — Unleash your hunger and desire and awaken laser-like focus

Are you willing to laser-focus on getting where you want to be? Or will you be chained down by insecurity, negativity, and be stopped by a wall?

You make a decision to never go back and keep moving forward without letting anyone stop you! Your subconscious starts to work in favour of moving towards the goal and ignoring what doesn’t help.

Step 2 — You take massive and effective action

With obsession in hand and the subconscious guiding you in the desired direction, you do need to keep your head up and look where you’re going. If the subconscious gets you in motion without effort, then the conscious mind can be used to ensure movement goes in the right direction.

Obsession works as fuel, subconscious burns the fuel without effort, and the conscious mind can gauge and adapt the movement direction.

Step 3 — Grace!

Finally there’s the magic element which we can’t put into words but we can sense it there. Some call it luck, others call it divine intervention, but at some point we’ve all felt “the stars align” in favour of our desires.

Obviously there’s an extent to which we don’t control this factor, but you can’t deny that when moving forward there is a good chance that things will line up to propel you further.

Most people overestimate what they can do in a year, and they massively underestimate what they can achieve in a decade or two.

Five Strategies to Speed Up Savings

The remainder of chapter 3 describes five strategies to speed up savings and arrive at those numbers you’ve calculated earlier. Tony also points that you don’t need to follow all five, one by itself will already have a big impact on the time required to grasp the figure.

Strategy 1: Save More and Invest the Difference

This strategy is mostly around mortgages and saving money on the interest. The idea is that when you pay your monthly mortgage bill, you chose to pay for the principal of next month’s as well.

In case you are not familiar, a principal is the difference between the cost of your house and the down payment. If the house cost € 300,000 and you paid € 60,000 upfront, then the principal would be € 240,000. In the monthly payments, a part of it goes towards paying off this value, while the remainder is purely loan interest.

So if you can pay this principal ever so slightly sooner then you will be able to reduce the amount of interest accrued and reduce the total cost of your mortgage — i.e. the actual cost plus the interest paid throughout the loan’s lifetime.

But more than a mortgage, this is also about other big purchases, like cars. It is not about necessarily living with a budget plan, but rather to think deep whether you can spend a little less on that purchase and still be satisfied.

Sometimes we will spend more to satisfy our egos, or impress someone, but in the end we literally have to pay for those with money that could instead be used for our financial dreams.

At the end of the day, the question to ask yourself is this: do my expenses, big and small, bring me the thrill they once did?

To wrap up strategy 1, Tony leaves us with a six-step exercise to practise this snowball effect of saving money on things we don’t really care about anymore or can perhaps live without for the sake of the dream:

1. Brainstorm all expenses you can cut down- phone bills, lunch money, movie tickets, etc.
2. How much do these cost? Pick the most expensive and think how many times a week you indulge in it for a reality check
3. How much joy do you get from these items and/or activities on a scale of 0 to 10
4. Recall what it would feel like to have Absolute Financial Freedom (dream 5 discussed earlier)
5. Decide what is more important for you: the joy of those recurring items and/or activities, or to have Absolute Financial Freedom
6. Write down at least three of those you are willing to let go of and how much money they will save you per year

Strategy 2: Earn More and Invest the Difference

This second strategy starts off with two intertwining ideas:

• Invest in yourself
• Find a way to do more for others than anyone else

The first thesis led to a story from Tony’s past. He recalls paying to attend a seminar by Jim Rohn with his scarce salary, where he heard:

What’s the key to economic success? The key is to understand how to become more valuable in the marketplace. To have more, you simply have to become more. Don’t wish it was easier; wish you were better. For things to change, you have to change. For things to get better, you have to get better!

And the memory ultimately circles back to the first idea:

How do you truly become more valuable? Learn to work harder on yourself than you do on your job.

By investing in yourself, long term you will be creating someone that represents a valuable contribution to an ever-larger audience in the marketplace. The more valuable you are, the more people you can serve, and in the grand scheme of things the more money you can earn.

To summarise it with one last quote from Jim Rohn’s memory:

All you have to do to earn more money in the same amount of time is simply become more valuable.

Be it books, online courses, seminars, whatever you can, you gotta make sure you keep investing in yourself so you can grow, become more valuable to a wider audience which will lead to an increase in the amount of money you can earn.

By valuing yourself further and further, you will get opportunities to argue for better compensation, come up with new ideas, or maybe even take on an entrepreneurial attitude and start your own business.

And so to wrap up with the motto of earning more to invest the difference, for (some of) the extra money you receive, invest it. Decades down the line you will have made an astronomical profit on the accumulated returns.

Strategy 3: Reduce Fees and Taxes (and Invest the Difference)

Tax efficiency is paramount. If before we discussed saving money on expenses and earning a higher salary, strategy 3 is all about reducing your tax burden — and mind you this is tax efficiency, not tax evasion.

Tony lists three kind of tax to be wary of as an investor (and again I will provide generic terminology as this is another USA-centred example):

• Ordinary income tax which is what it says in the tin
• Long-term capital gains for investments held on for long periods before selling
• Short-term capital gains held for less than a given threshold (Tony’s example was one year)

Tony then adds two ideas about the above:

• Try to pay deferred taxes on the investments to pay at the time of the sale/claim and are able to compound growth tax-free
• When you can’t pay deferred taxes, then hold on the investments beyond the threshold applicable to pay a lower tax on long-term capital gains instead of short-term

And finally, you can turn to a fiduciary to help you optimise your tax strategy on your investment portfolio.

Strategy 4: Get Better Returns and Speed Your Way to Victory

Tony introduces the concept of asynmetric risk/reward, where the upside (reward) is way bigger than the downside (risk).

This of course requires a lot of research to find such a deal and be sure of that low risk — but said risk can also be alleviated with diversification of investments. This will help balance out downsides in one investment by leveraging the upsides of another and help you break even or possibly even still profit.

Strategy 5: Change Your Life — and Lifestyle — for the Better

And Tony wraps up the five strategies to accelerate financial freedom with a big question: what about moving somewhere else? This is still in the vein of being tax-efficient by living somewhere with a lower tax rate, but it is simultaneously a call to adventure and again get you to dream and maybe even materialise a dream of living somewhere else.

Closing thoughts

Tony had a very nice summary at the end of chapter 3 and so I will use it as inspiration to close out this summary as well.

As you followed along this summary, you will have gone through a couple of milestones for your investment endeavours:

• Arrived at a concrete number for how much money you need to save up in order to achieve the financial freedom you want
• And learned five different strategies that can accelerate your journey

Heading into chapter 4, Tony teases that asset allocation will finally be discussed. Even as I write this summary I have yet to start reading the next chapter so I’m quite curious to see where we are headed.

My expectations are conservative because this book turns 10 this year, but I’m sure even with new opportunities in 2024, the core principles taught should still hold true.