Money

Shaq uses a brilliant analogy to show young people how billionaires manage their money

Basketball hall of famer Shaquille O'Neal is the first to admit that when it comes to managing money, he's "done a lot of things wrong."

After all, when Shaq was a 20-year-old, he blew through $1 million in an hour.

"I went through a lot of trials and tribulations. A lot of failures," he tells CNBC's Bob Pisani at BITG's Charity Day. But today, the retired athlete has made a name for himself as a successful investor and businessman.

Shaquille 'Shaq' O'Neal
David Paul Morris | Bloomberg | Getty Images
Shaquille 'Shaq' O'Neal

If O'Neal could give his younger self one piece of money advice, it's the same thing he would tell young people today who are coming into money. And he sums it up with a brilliant analogy:

"Alright children," he says, after asking Pisani for a blank sheet of paper. "This is $100," he continues, motioning to the paper. "What you want to do is, you want to rip the $100 in half."

Take one half and "save it. Don't ever touch it. Put it away. Don't even look at it. Now you've got $50 left. Now, the smart people ... the billionaires of the world, they'll take half of that $50 and put all that away," he says, while adding another quarter of the piece of paper to the "save pile."

"This right here," he says of the remaining quarter, is your fun money: "You want to buy houses, you want to buy cars, you want to buy planes, you want to travel? This right here is what you have fun with."

In short, O'Neal recommends saving and investing 75 percent of your earnings for retirement and other long-term goals, and living off the remaining 25 percent.

"A guy taught me that a long time ago, and it's been working for me," he tells Pisani.

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