"I teach them that"—Shark Tank's Daymond John outlines three steps to achieving wealth

Daymond John, an investor on ABC's Shark Tank, recently shared a three-step approach to achieving wealth that he usually emphasizes to his children and others. The founder of the apparel brand FUBU mentioned that financial success comes from a strategic approach to money management, which can be implemented by individuals at any income level.

In an interview with Fortune on December 13, 2024, the Shark Tank investor explained:

“I teach them that...there's no one who couldn't use a basic knowledge of how money works.… And that's how you really simply look at things.”

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Shark Tank's Daymond John shares his proven strategy for achieving financial success

1) Prioritize necessary expenses

In his wealth-building strategy, Daymond John underscored the importance of addressing essential expenses first. He emphasized that whether a person has a small or large amount of money, the first dollar should go toward necessary costs.

He explained that the first step includes paying for items such as "rent, medical bills," utilities like "heat and electricity," as well as any outstanding debts or "loan repayments." In his words:

“I teach them that if you have $3, $3 million, or $3 trillion. The first dollar goes for what you have to pay for.”

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2) Invest in yourself and your future

Daymond John Special Screening For "Bob Marley: One Love" (Image via Getty)

John recommended that once basic expenses are covered, the next dollar should be allocated for investment purposes. The Shark Tank investor clarified that investments could take various forms, whether it is in the stock market, a business venture, or even in self-education. John highlighted:

“Investment can be into a book, into a business, or into the public market.”

According to John, the core idea here is to take the next portion of the funds and put them into something that will generate growth and build wealth over time. This will potentially lead to long-term security and success.

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3) Use remaining funds for enjoyment or reinvestment

John elaborated on the third step of his wealth-building approach, which is, to use the remaining funds for discretionary spending. He explained that after expenses are covered and investments are made, the next available money should be used for personal enjoyment or non-essential purchases. He stated:

“Buy what you would like to have, but don’t have to have.”

However, John also recommended that if people feel that they not want something, it could be more beneficial to reallocate that money back into investment opportunities.

Over time, the Shark Tank investor emphasized that this process will lead to the investments growing, which can then flow back into both expenses and enjoyment. This cycle, as John stated, is a simple way of viewing and managing personal wealth.

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The importance of financial literacy for all ages

Daymond John has consistently stressed the importance of teaching "financial literacy" to younger generations. He believes that understanding money from an early age is crucial to long-term financial success.

To this end, he wrote a children’s book titled Little Daymond Learns to Earn, designed to introduce young readers to financial concepts through engaging and relatable stories. He mentioned on his website that he didn't want his kids and "future generations to struggle with making, saving or spending money." That was his motivation to release his first children's book.

He further highlighted on his website that:

“Too many of us only begin to educate ourselves on money when it's controlling us.”

The Shark Tank investor also mentioned that individuals, from teenagers facing college loans to senior citizens managing retirement savings, often lack basic financial knowledge. He added that he aimed to equip people of all ages with the tools to manage money effectively and avoid common financial pitfalls.

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Tune in and catch the new episodes of Shark Tank air on ABC every Friday at 8 PM ET. Fans can stream episodes anytime on Hulu.