Charlie Munger: How to Make Your First $1 Million (5 Steps)

Charlie Munger is currently a billionaire with an estimated net worth of $2.4 billion as of 2022, however that wasn't always the case, although Charlie didn't grow up poor by any means, he wasn't lucky enough to be born into a rich family. and Prominent family born in Omaha, Nebraska, one of his

first

jobs was actually working at a grocery store that was owned by Warren Buffett's grandfather for 20 cents an hour. This is a far cry from his current fortune. In this video we will review the lessons. about Charlie Munger's life and what he has shared in his interviews and writings that will help him progress towards his

first

million

dollars.

I have been studying Charlie for years and have probably listened to every interview he has given and read every word he has written. This video will be full of practical

steps

you can start taking today to get closer to that first

million

dollar goal. A ton of research went into making this video for you and all I ask in return is that you hit the like button. It really helps the channel a lot and encourages me to continue making these videos for you, now let's get started. I think studying Munger's actions before he became super rich would be the most relevant for us, watching this video who are not yet billionaires relatively early.

In life, Charlie learned the importance of owning capital or in other words, having a stake in a company. Owning equity is just a fancy way of saying you own a small part of a business. The number one lesson in studying Charlie is to

make

sure you own it. Equity before Monger was one of the most respected and accomplished investors in the world. He began in the business world as a lawyer after graduating from Harvard Law School. He worked as a lawyer. Many of Charlie's clients were local businesses. Lawyers typically bill their clients by the hour. and those customers paid that bill in cash, however, over time, the dealer realized how wealthy many of his customers were as a direct result of owning a business, Charlie began to change his fee structure and, rather than simply receiving cash payment for

your

legal services. services, he also started accepting shares in his clients' businesses as payment, such a brilliant idea and let me explain why let's say that as a lawyer, Charlie did ten thousand dollars of work and billed his client for that ten thousand dollars if they pay Charlie. in cash, ten thousand dollars is all he will earn from his work;

However, if Charlie received ten thousand dollars in equity in his client's business, he would

make

money for years to come because Charlie is now part owner of his client's business. He is entitled to a share of the profits that the company makes each year, let's say that Charlie owns three percent of the business, which means that each year Charlie makes three percent of the company's profits and he doesn't have to do more work, in theory, Charlie gets that. three percent each year forever or until the business is sold and, if that is the case, the selling merchant would receive three percent of the price the business was sold for because again he owns three percent of the business, so in effect, Charlie is having his The money worked for him, he worked once by providing the company with its legal services, and he will make that money from that job forever.

Now having this deal with one company is great, but imagine if over the years Charlie could make this deal with 5, 10, or even 20 companies throughout the area, you can see why this would make him pretty rich pretty quickly. . This example from Munger's life demonstrates the importance of possessing capital. I think it should be a goal for all of us to own capital if we want to generate wealth. This can present itself in many different ways. One way to receive capital is through his work. Personally, I work for a large financial services company as an investment analyst. I'm only 24 years old and still a junior employee.

However, I am in a couple. In years I will begin receiving stock in the company I work for as part of my compensation package. This is very similar to the agreement Charlie made with his clients by receiving shares of the company as part of my salary. I am making money forever with my work. I've done it in the past, assuming I keep the stock, it's not a bad deal to keep getting paid for work you did years ago, getting capital through

your

work is a great way to build wealth, but it's not the only way to get capital in a company.

There is another way to get capital in a business besides simply through your work or purchasing it that way is to start your own business. Charlie Munger started several businesses over the course of his career, a law firm, a real estate investment group, and an investment company, if that's what it is. If you're looking for a business idea to start working on and get that ownership stake in a business like the one we're talking about, start with Trends.co, the sponsor of today's video. It's worth noting that Trends founder Sam Parr also runs a podcast titled My First Million Very.

Appropriate, given the title of this video, trends is an online community where entrepreneurs and ambitious people come together to learn workshops and collaborate on trends. He has a team of business analysts who have already outlined over 1000 vetted business ideas that he can start this weekend and are sending him new ideas. In your email inbox, weekly trends host live virtual business training and QA sessions that feel like MBA lectures and how to start operating and scaling your business. You get instant access to the trending community containing thousands of ambitious business creators who understand the importance of having capital.

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I know this sounds like a cliché self-help phrase or something out of a get-rich-quick scheme, but for the dealer these words take on a very practical meaning. When he was a young lawyer, Charlie saw how much the law firm was taking in from clients for the money. who worked for every hour he worked. Charlie's hourly rate charged to clients was the equivalent of hundreds of dollars per hour in today's money after adjusting for inflation, this led Charlie to realize that it will be useful to you as you move forward in creating wealth. This realization was that he himself needed to start selling his time to his most valuable client.

Let me explain what I mean, every day, Charlie spent between 8 and 8.12 hours working for his clients as a lawyer, then he decided that each day he was going to work on his behalf for at least an hour. . Charlie did this early each morning working on various real estate deals and construction projects in which he was involved. Everyone should do this. Be his own client and bill part of his time each day, in addition to working for other clients. Now I'm sure being a successful lawyer like Charlie would be enough for most people, but if he wants to get ahead and he's not satisfied.

With his current situation, why not work on his own for an hour each day? This can come in many different forms, it could be learning how to invest by doing real estate or maybe even starting some kind of side business, but whatever it is, it is important to spend some of your time working for yourself and making money and not just for the company you work for, for more money. This concept sounds very simple, but almost no one imagines that if you spend an hour every day working for yourself for a month, how about 90 days? for one year, how about for five years?

I'm sure you'll be amazed at what you can accomplish by following this advice from Charlie from a wealth-building standpoint. The reason why turning back time each day is so powerful is because it will allow you to save more money faster, let's say your job can cover all your living expenses, this means that the extra money you earn through this extra job you you do for yourself can go towards building your wealth, think about it this way let's say you earn fifty thousand dollars at your daily job and let's say that every year you save and invest ten percent of those fifty thousand dollars, this means you will have five thousand dollars saved at the end of each year that you can put toward building wealth, but let's say you can work for yourself in the mornings or after work at night and even a little on the weekends and you can generate an additional twenty thousand dollars of income working for yourself. account because your job covers all of your living expenses, the extra twenty thousand dollars you earned can go toward building wealth, meaning you can add this twenty thousand dollars to the five thousand dollars you can normally save and invest each year, which which brings his total annual savings to twenty-five thousand. dollars a year, this means that the amount you were able to save each year increased by a factor of five x five.

By multiplying the amount of money you can save and invest by five each year, this will take you to your first goal of one million dollars. much faster, this brings us to Charlie's next lesson: save and invest your first 100,000 as quickly as possible, as Charlie says, the first 100,000 is a but you have to do it, I don't care what you have to do if It means walking everywhere and not eating anything that wasn't purchased with a coupon. Find a way to get a hundred thousand dollars. After that, you can relieve the gas a little. This quote from Charlie honestly changed the way I think.

Money The math behind this comment from Charlie makes a lot of sense, let's say you can earn 10 on your investment portfolio each year if you have a thousand dollars in your portfolio, that ten percent return is equal to one hundred dollars if you have ten thousand dollars that ten percent return is equivalent to a thousand dollars, but if you have one hundred thousand dollars in your investment portfolio, that ten percent return is equivalent to ten thousand dollars. If that example doesn't convince you enough, think about it this way if you have ten thousand dollars in an account.

If you increase that initial amount to one hundred thousand dollars, instead of holding it for ten years with a ten percent annual return and not contributing another dollar, you would have two hundred and fifty-nine thousand, three hundred and seventy-four dollars in the first example. You will have made about sixteen thousand dollars from your investment profits, but in the second example, starting with one hundred thousand dollars, your portfolio would have produced almost 160 thousand dollars. That's why it's so important to hit that $100k mark as quickly as possible because the example illustrates that the more money you have, the harder it will work for you in terms of the amount of money you can expect to receive from your investment returns.

This is why saving your first 100,000 is harder than getting your next 100,000 on the next piece. The advice gleaned from studying Charlie's life definitely contradicts conventional investing wisdom, but hey, it's kind of hard to get as rich as Charlie by following conventional wisdom. This lesson is: don't diversify your investment portfolio too much. Charlie Munger and his business partner Warren Buffett are big believers in having a concentrated investment portfolio. As a side note, there was actually a time when Buffett was younger when he had 70 percent of his total net worth in one action When it comes to diversification, Charlie likes to tell the example of a local businessman.

Let's say in this example that this local entrepreneur resides in Atlanta, Georgia. He owns four different high-quality businesses throughout the city. A 100-unit apartment building. The most popular car dealership in town. A well-known plumbing company with a great reputation and a roofing company that repairs and replaces roofs with those four businesses throughout the city, would you say this guy is pretty well diversified? Well, I know for sure. Charlie says the same logic should apply to the stock market because, after all, stocks are just small pieces of business, but don't take my word for it, listen to what Charlie said when asked if he was comfortable holding just three stocks in your portfolio.

IAm I comfortable with a non-diversified portfolio? Of course, if you think the mongoose I care about the monkeys. moms have three stocks, we have a block of Berkshire, we have a block of Costco, we have a block that loses funds in a blockable way and the rest are grabs and grabs, so am I comfortable? Am I sure I'm rich? You're right, I am though. There is an important disclaimer that needs to be made if you are not willing to put in the effort to identify stocks and businesses to invest in, that is perfectly fine, but in this case you need to be super diversified and that can be achieved by investing. on a sp 500 index fund, for example, no video on wealth creation and

charlie

munger

would be complete without talking about the power of compound interest to demonstrate the power of compound interest let's turn to

charlie

's role model ben franklin franklin had a nice good definition of compound interest money makes money and money that makes money makes money when ben franklin died in 1780, he left the equivalent of 4,400 each to the cities of boston and philadelphia in his will with the condition that the money was lent and invested in young apprentices who proved worthy of a loan, he stipulated that the cities would receive the funds after 200 years when the cities received their balances after 200 years, the combined donation had grown to a staggering 6.5 million of dollars now, of course, this is taking compound interest to the extreme, but it demonstrates a really important point: a dollar saved and invested is worth ten dollars, fifteen dollars, or even twenty dollars in the future.

Once you learn this lesson, it will be much easier to save money. That fancy car you want to buy isn't it. It's not costing you an extra 500 a month, it's costing you thousands of dollars each month once you factor in the impact of lost compound interest, without a doubt we can learn a lot about how to build wealth by studying the life of Charlie Munger. Let's recap the main conclusions of this video. own capital in a business, whether through working it or starting your own business, owning capital is a key part of the wealth creation formula. two work for you at least an hour each day, this can come in the form of learning and improving your skills so that you can earn more money in your day job or it can come in the form of generating additional income, either through investments or some type of secondary business.

Three get your first hundred thousand dollars as quickly as possible, this will allow your investment to return. To start generating a significant amount of money remember that the more money you have in your portfolio, the harder that money can work for you in terms of total dollars of your investment returns four Don't diversify your portfolio too much Remember the story of the entrepreneur in your local city that owns four large businesses throughout the city. Important caveat: If you don't want to do the research and find these great investments then you need to be super diversified and a sp 500 index fund is a great way to achieve this and five allow compounding Interested for you, think of your wealth like rolling a snowball down a hill below.

That snowball starts small and gets bigger and bigger with each roll, so there we have it. I hope you enjoyed this video and learned something new. Make sure you like this video. Subscribe to the investor center because it helps our channel a lot, as always, thank you very much for watching and I hope to talk again soon.