Podcast Summary: A Book with Legs – Episode Featuring Brad Klontz on "Start Thinking Rich"
Introduction
In this engaging episode of the A Book with Legs podcast, hosted by Cole Smead of Smead Capital Management, Brad Klontz joins as a guest to discuss his insightful book, Start Thinking Rich: 21 Harsh Truths to Take You from Broke to Financial Freedom. Brad Klontz, a clinical psychologist and co-founder of the Financial Psychology Institute, brings a unique perspective on the psychology of money and wealth-building strategies. The conversation delves deep into the mental frameworks that influence financial success, challenging traditional notions of wealth and offering practical advice for listeners aiming to achieve financial freedom.
Understanding Wealth vs. High Income
One of the central themes of the discussion is the distinction between having a high income and truly being wealthy. Brad Klontz emphasizes that wealth is not merely about how much you earn but about how you manage and value your time.
Brad Klontz [07:30]: "We do talk about the difference between rich and wealth. And what's a poor mindset? What's your rich mindset? It comes down to your definition of what is rich. And this is a very personal definition."
Klontz illustrates this by sharing his personal definition of wealth: owning one's time. He contrasts individuals who earn substantial incomes but are trapped in demanding jobs with those who have leveraged their earnings to gain financial independence and time freedom.
The Myth of Money and Happiness
Addressing the common belief that money does not equate to happiness, Klontz provides a nuanced view based on psychological research.
Brad Klontz [03:20]: "The problem with that statement is first and foremost, it's been essentially debunked by better designed research. So the curve actually continues... there’s no association with happiness above [a certain income level]."
He challenges the notion that happiness plateaus after reaching a median income, arguing that while basic financial security is crucial, continued income growth can further enhance life satisfaction when managed wisely.
Delayed Gratification and Long-Term Wealth Building
Klontz underscores the importance of delayed gratification in accumulating wealth, aligning with Charlie Munger's principles of long-term investing.
Brad Klontz [08:46]: "Delaying gratification is very, very important. And by the way, we're just not wired to do that."
He explains that overcoming our innate desire for immediate consumption is essential for financial success. However, he also warns against becoming overly future-focused, advocating for a balanced approach that includes a compelling vision to motivate sustained effort.
Get Rich Slowly vs. Get Rich Quick
A significant portion of the conversation explores the pitfalls of the "get rich quick" mindset versus the benefits of gradual wealth accumulation.
Brad Klontz [11:06]: "The whole concept of getting rich quick is probably one of the most self-destructive mindsets that I've ever seen."
Klontz argues that most wealth is built through consistent, disciplined investing rather than speculative ventures. He cautions against falling for high-risk schemes that promise rapid returns, highlighting the statistics that show steady growth as the more reliable path to wealth.
Social Influences and Confirmation Bias
The discussion delves into how social environments and psychological biases impact financial behavior. Klontz explains the concept of relative deprivation and confirmation bias, emphasizing how comparisons with others can distort one's perception of financial well-being.
Brad Klontz [05:52]: "Your financial wellness is entirely subjective based on your comparison to other people."
He advises cultivating relationships with individuals who possess a wealth-building mindset, as these social interactions can reinforce positive financial habits and attitudes.
Money Scripts and Beliefs
Klontz introduces the concept of money scripts—deep-seated beliefs about money that influence financial decisions. He categorizes these into patterns like money avoidance, which are often rooted in upbringing and socioeconomic background.
Brad Klontz [18:45]: "We call these money scripts. These are beliefs we have about money for most of us. They're held out of our conscious awareness."
Understanding and re-evaluating these scripts is crucial for overcoming financial limitations and fostering a mindset conducive to wealth creation.
The Role of Education and Mentorship
Challenging conventional education, Klontz emphasizes the importance of seeking mentorship from successful individuals rather than relying solely on academic teachings.
Brad Klontz [22:16]: "One of the best hacks I've had in terms of success in my life is to try to find somebody a step or two ahead of me, whatever the goal is, and try to pick their brains."
He advocates for proactive learning and networking with those who have achieved the financial goals one aspires to, rather than depending solely on formal education.
Homeownership vs. Renting
The conversation addresses the financial implications of homeownership compared to renting, with Klontz presenting evidence that wealthy individuals tend to own their homes rather than rent.
Brad Klontz [48:28]: "Most wealthy people, they are money vigilant... nine out of 10 millionaires in the United States own their own homes."
He argues that homeownership acts as a form of forced savings and investment, providing long-term financial security and appreciation, whereas renting often leads to perpetual expenditure without asset accumulation.
Critique of Retirement
A provocative topic discussed is the traditional concept of retirement. Klontz argues that retirement, as commonly defined, is psychologically detrimental because it removes the sense of purpose that work provides.
Brad Klontz [62:12]: "Retirement is terrible psychologically because you really have to have purpose. The definition of retirement is to stop working."
He suggests that maintaining purposeful activities post-retirement is essential for mental well-being, debunking the idealistic view that retirement inherently leads to happiness.
Practical Financial Strategies
Throughout the episode, Klontz shares actionable strategies for listeners to adopt a wealth-building mindset:
- Own Your Time: Focus on investments and career choices that free up personal time rather than merely increasing income.
- Delayed Gratification: Prioritize long-term financial goals over immediate consumption.
- Selective Social Circles: Surround yourself with individuals who embody the financial attitudes you aspire to develop.
- Homeownership: Consider purchasing property as a long-term investment and a means of building equity.
- Continuous Purpose: Engage in meaningful activities and maintain a sense of purpose beyond traditional work roles.
Conclusion
The episode concludes with Klontz offering resources for listeners to further explore his work and adopt the principles discussed. He encourages proactive financial planning, mindset shifts, and continuous education as fundamentals for achieving financial freedom.
Brad Klontz [69:02]: "For your listeners, we have a website, startthinkingrich.com, where if people want to get the book, then get it there."
Cole Smead wraps up by emphasizing the importance of understanding and implementing these wealth-building strategies to navigate the complexities of modern financial landscapes successfully.
Notable Quotes
- Brad Klontz [04:36]: "There is really no association between money and happiness above that."
- Brad Klontz [07:30]: "We do talk about the difference between rich and wealth... it's about your definition of what is rich."
- Brad Klontz [11:06]: "The whole concept of getting rich quick is probably one of the most self-destructive mindsets that I've ever seen."
- Brad Klontz [22:16]: "If you're approaching a struggle in life, where are you getting information about how to pursue this or how to achieve this particular goal?"
- Brad Klontz [62:12]: "Retirement is terrible psychologically because you really have to have purpose."
Follow Brad Klontz
Listeners interested in delving deeper into Brad Klontz's insights can follow him and his co-author Adrian Brambilla on social media platforms and visit startthinkingrich.com for more resources and information on their book.
This summary captures the essence of the conversation between Cole Smead and Brad Klontz, highlighting key insights and actionable advice on cultivating a wealth-building mindset. For a comprehensive understanding, listeners are encouraged to tune into the full episode and explore Brad Klontz's work.