I answered a question on Quora the other week. 

I was intrigued, not so much about the question itself, but rather, the answers that others were providing.

The question is: Do the wealthiest 1% workout at the same gyms as the rest of us?

What surprised me was that, of the 16 answers, most of them said NO, the wealthiest 1% DO NOT work out at the same gyms as the rest of us.

Here’s a snippet from one of the answers to give you an idea. David, who purports to be from “The Trillionaire Studies Department,” said the following:

“No. Definitely not. There are no real advantages to going to a public gym. They often have a funky smell, and sticky sweaty surfaces… who needs that?”

My Money Script Answer

I wrote the following response on Quora:

YES. The wealthiest 1% (in wealth, not income) absolutely do work out at the same gyms, and that’s why they’re part of the 1%.

Thomas Stanley, the author of one of my favorite business books, The Millionaire Next Door, highlighted something very interesting about the wealthy.

In many cases, the wealthiest aren’t who you think they are.

The person driving around in the large Mercedes Benz, in many cases, is driving their car on borrowed money.

The parents who send their kids to the best and most expensive schools and camps are, in many cases, what Stanley calls, UAWs, otherwise known as under accumulators of wealth.

Many high-income professionals, who make salaries that are in the 1% of incomes, spend their dollars on luxury items, like high-end home gyms, cars, and other status goods, and completely neglect their investments and wealth building. They have large incomes and little wealth, or as Stanley calls them, “big hat, no cattle.”

When something happens to the economy, their job, or their income, they have little to fall back on.

Conversely, Stanley calls those who have large wealth relative to their incomes PAWs, otherwise known as prodigious accumulators of wealth.

You see, you make it into the top 1% of wealth by watching your pennies, and as a wise person told me very early in my working career, “When you look after your pennies, the dollars will look after themselves.”

And that’s exactly what I did.

I saved a large percentage of my business’s profits and invested wisely. I applied the laws of compounding. I sold my business (the one I started in 1991) in late 2017 and retired at the age of 49.

This morning I worked out at the local $50-a-month gym, and when I was finished at the gym, I went to the Dollar Tree Store (where every item is $1) and bought a few gift bags (for an upcoming birthday celebration), a bag of chips, and some cleaning supplies.

Yes. I can afford a more expensive gym. I also live by the axiom that a fool and his money are soon parted.

Philosophical Thinking About Your Money Script

My answer to this question got me thinking about my own philosophy about money, otherwise known as my money script.

Your money script is your belief about money that is rooted in the way you spend, save, and treat money.

Your money script will help define your financial outcome and overall financial health.

For example, if you have a few spare dollars, will you spend those dollars on a more expensive car or gym?

In my case, I can definitely afford to go to a more expensive gym, or for that matter, I have room to spare in my home to install a home gym. I’ve elected not to do either. The reason for not installing a home gym isn’t so much financial, because I can equip a home gym quite affordably, but more because I’m motivated by seeing others push themselves through some of the same exercises and weights that I do.

On the other hand, I have a difficult time paying $5 for a gift bag or card at a higher-end gift shop when I can get the same or very similar gift bag at the Dollar Tree Store for a fraction of the price. While the gift bag is a small example, the same example can extend to any item, especially cars and homes.

In the Quora answer, I said the following: “The person driving around in the large Mercedes Benz, in many cases, is driving their car on borrowed money.”

It’s the debt that I’ve always had a strong aversion to, and that aversion is rooted since childhood as my grandfather constantly drove home the point about debt being bad. His beliefs about debt formed his money script and clearly influenced mine. Fortunately, he did teach me other good money scripts which you can read about here:  14 Wealth Building Secrets You Need To Know

I’ve always viewed debt as bad. Unfortunately, I never really understood the difference between good debt and bad debt, and consequently, I didn’t take some of the business risks I could have taken over the years as a result.

It’s only in the last few years I came to understand that you could borrow money from the bank at 5% to acquire a competitor and make a 30% or greater ROI. I understood the concept instinctively, but never thought to put that concept into practice.

My Three Core Money Script Philosophies

1. Debt Is Bad

Debt, in my mind, was always bad, and that was one of my primary wealth-building philosophies. In fact, it’s probably number one on my money philosophy list. Whenever I’ve had debt, I’ve viewed getting rid of that debt as a money emergency.

I have two other core money philosophies that I’ve lived by for many years.

2. Cash Is King

I was listening to a podcast the other day, and the announcer was speaking about investing. He believed otherwise from me in terms of cash. He said, “Cash is trash.” He was repeating a phrase spoken by Ray Dalio, the most successful hedge fund manager in the world.

He believes that any money you have on the side, not invested in the markets or making a return of some sort, is a wasted opportunity to earn more elsewhere.

I hold the opposite perspective, and anyone who has read my book, The Kickass Entrepreneur’s Guide to Investing, will know I believe that every entrepreneur should hold a large position of their wealth—a third to be precise—in liquid fixed income bonds or cash. You should be able to access that cash very quickly in order to take advantage of opportunities whenever they might arise.

You have to look for those opportunities of course, but if you do, and the timing is right, you need to be able to act quickly. And I’m not speaking about buying a stock necessarily, although that’s always a possibility.

But I am speaking about buying real estate, a competitor, or some other investment that’s just gone on sale or where there might be a dislocation in the asset or asset class that you’ve found. If you’re fully invested, you won’t be able to take advantage of those opportunities.

I still continue, to this day, to hold a large percentage of my wealth in fixed-income investments. You can read about my 2019 returns and asset allocation here: My 2019 Portfolio Performance and 2020 Asset Allocation Strategy.

I’m not worried about earning a lower return on my overall portfolio. I know I will find an opportunity in the next year or two that will pay outsized returns, significantly higher than the few extra percent that I lost by not being invested in the stock markets.

And that leads me to my last important money philosophy.

3. Understand and Play the Laws of Compounding

I’m sure you’ve heard this countless times before. Albert Einstein called compound interest the eighth wonder of the world.

When I refer to the “law of compounding,” I’m not referring to investing your money in the stock market and earning a compound 8% return over time. Yes, that’s always a possibility, but the real wealth is made by taking calculated outsized risks and earning a 25%, 30%, or even 35% year-on-year compound return.

How can you do that?

You can invest in your own business. You can buy real estate. You can acquire a competitor. And the list goes on.

It is possible to invest $100,000 and come out with $1 million, or more, in five years.

You can read this blog post as an example: Here’s How to Buy an Apartment Building and Make a Whopping 110% in Three Years.

I could list out many more money and wealth-building strategies. In fact, I wrote this blog post a few months ago: 14 Wealth-Building Secrets You Need to Know.

The three money philosophies and my personal money script aren’t wealth-building strategies. These three I listed are my core money philosophies.

What are your own philosophies towards money? Have you asked yourself that question? Do you know what your money script is?

If you liked this post, you might also like this one: Here’s How To Buy An Apartment Building And Make A Whopping 110% In Three Years.  You should also consider subscribing to my blog. I publish one article a week on small business and wealth creation.  You can subscribe here.

Also, I published a book during the summer of 2018, “The Kickass Entrepreneur’s Guide to Investing, Three Simple Steps to Create Massive Wealth with Your Business’s Profits.” It was number 1 on Amazon in both the business and non-fiction sections. You can get a free copy here.