Graham Stephan - 7 Highly Effective Habits of Making Money

Short Summary

Main recommendation: Build wealth by tracking spending, paying yourself first, avoiding lifestyle inflation, investing long-term, investing time before money, earning based on results, and making investments pay for your purchases, with the bonus habit of working on things you enjoy. The video presents these as habits Graham Stephan says he learned over about ten years and that he believes will help viewers make more money. The seven-habit framing is inspired by Stephen Covey's book The 7 Habits of Highly Effective People.

Key Points

• The promised list of 7 habits of making money:
  1. Start tracking your spending immediately.
  2. Pay yourself first.
  3. Be aware of lifestyle inflation and the hedonic treadmill.
  4. Have a long-term outlook when investing.
  5. Invest your time first, then your money.
  6. Make money based on results, not time.
  7. Make your investments pay for what you want to buy.
• Lifestyle inflation is the gradual increase in spending as income rises; the hedonic treadmill is the tendency to get used to things so you need more to feel the same boost. Stephan's advice is to invest the difference instead of spending it.
• Stephan says market timing rarely works for most people, and claims studies show even top hedge fund managers struggle to beat the S&P 500's average return consistently over ten years.
• Holding investments for over a year generally qualifies for lower long-term capital gains tax than short-term gains taxed at normal income rates.
• Bonus habit: work on things you enjoy, since high-earning work requires long hours and burnout is otherwise likely.

Details Worth Noting

• Concrete instructions:
  • Track every dollar you spend so you can spot overspending and know your exact monthly expenses.
  • As soon as you get paid, move a set percentage (Stephan uses 20%) into an investment account before budgeting the rest. Save more if you can.
  • If your income varies, Stephan's method is to know your fixed monthly expenses, transfer that amount from savings to checking as your only spending budget, and send all extra income to savings, then investments.
  • When your income rises, consciously invest the difference rather than increasing spending.
  • For investing, choose a diversified, broad index fund and hold it long term rather than panic selling or trying to time the market.
  • Before spending money on a new career or venture, invest time first: learn it, test it for free (Stephan filmed on an iPhone before buying equipment, and worked under another agent before spending on signs and cards), then commit money.
  • Prefer income tied to results, such as commission, and control earnings by taking on more clients or producing more output.
  • For large purchases, ask whether the item can pay for itself or make a profit. Stephan cites his Lotus Exige, which he says has paid for itself about twice over through client meetings, and says he tries to make big purchases pay for themselves.
• Stephan's own examples include buying rental properties and living only on the income they generate, and keeping overhead low.
• He notes that this approach takes years and is not an overnight process.

Bottom Line

Wealth-building here comes from disciplined spending awareness, automatic saving, resisting lifestyle inflation, and patient long-term investing, supported by earning on results and choosing work you enjoy.