How to Manage Your Money (and Still Enjoy Life)

Transcript:

On this episode of the Personal Finance podcast, How What's up everybody?

And welcome to the Personal Finance Podcast. I'm your host, Andrew, founder of Master money.co, and today on the Personal Finance Podcast we're going to be diving into how to manage money and still enjoy life. If you guys have any questions, make sure you join the Master Money newsletter by going to mastermoney.co/newsletter and you can respond to any of those issues every single week and you may get your question and answer on the show like some of the questions we are answering today.

Also, don't forget to follow us on Apple Podcast, Spotify, YouTube or whatever your favorite podcast player is. And if you want to help out the show, consider leaving a five star rating and review on Apple Podcast, Spotify or your favorite podcast player. Now to end today's episode, we're going to talk about the reasons that you should get good with money and the reasons why getting good with money is one of the most freeing things that you will ever do.

Then I'm going to walk you through step By by step how to manage your money and still be able to enjoy life at the same exact time. And then lastly, we're going to go through some of your questions and we got some really good questions here at the end of the episode that we are going to dive into. But we have three questions to dive into that I think are going to be really, really helpful to many of you out there.

So we've got an action-packed episode. So without further ado, let's get into it. Now one thing I want you to note is I have heard this time and time again from friends and family when I talk to them about money is they feel as though getting good with money feels restrictive.

They feel as though every single time they try to set up their finances or do it the right way, they just do not enjoy the process. Or it feels like they can't buy what they want or they can't do what they want. And if you feel that way, it's because you have the equation flipped.

I'm going to show you today why A that doing this is going to be very helpful for you to spend more on what you love and B, it's also going to reduce your stress and anxiety around money. Why is this? Let me give you a bunch of reasons why getting good with money is actually the most freeing thing that you will ever do 1 is guilt free spending actually becomes the default.

So when your savings is going to the right place, when your investments are going to the right place and all of your bills are taken care of, guess what you get to do with the rest of those dollars? You get to spend them on things that you actually value, and that leads to you enjoying life more. So let's say, for example, I want you to imagine a life, and I want you to imagine a life where you have all of your bills already covered.

They're on autopilot, You have all of your investments going on autopilot, and you have all of your money going exactly where you wanted to go. You're already saving for retirement. You're hitting every single goal, and you feel good about this. Plus, you've got a little bit of money leftover because you decided to prioritize what you were spending your money on and you weren't just wasting it on random things.

And so when you do this, you actually get to spend more on those things that you love more on those vacations, more on those hobbies, more on the things that you want to do day in and day out. And you spend less on the things that you could care less about. I cannot tell you, and this is still a problem to me to this day, how many times I will walk into a store.

Let's say I go to a random store and take my kids in there. And this usually happens at stores like the Walmart or Target or something like that. And I walk into that store and I walk out with three things I never planned on buying. This happens still even to this day.

As someone who prioritizes thinking about spending, I walk in with some random things that I never planned on buying. So I've worked very hard to fix this and I've gotten way better at this than what I used to be, which is a great thing because overall I'm spending on things I don't value. I'm buying random things I could care less about and I want to spend more on the things that I value. 2 is because all of your stuff is getting taken care of and you're spending more on things that you love.

You sleep better at night, you'd sleep better knowing that everything on your financial life is taken care of. Money stress is the number one cause of anxiety in America right now. A fully funded emergency fund, automating your investments, planning to eliminate debt in a way for you to see progress and you see the light going forward is going to allow you to sleep better at night.

And I cannot tell you how much better it feels once you get your money together again. Your car breaks down, you've got the cash just there to take care of it to be able to not worry about, you know, having to replace something in your your car or maybe you have something that goes bad in your house. Maybe you have to replace your sink or you got to replace a refrigerator.

I just had to replace a refrigerator recently because of that. You have the cash just there to be able to not even worry about it. Big expenses don't become a big deal. And that's what I want you to do with your money and have it start working this way. 3 is you stop trading hours for dollars.

Every single dollar you invest is going to be a little employee that works for you 24/7 for future you. Meaning those dollars can produce more money over time than you ever can. And they can work so much harder than you ever can. And so the earlier you start investing and prioritizing your money and making sure that you know where your dollars are going, the sooner you can get more of those dollars working for you #4 is you get to say yes to the things that matter.

Now, this is something I think many people feel restricted with their finances and they don't get to do it the way they want to do it. Let's say you have a friends bachelor party or a Bachelorette party in Las Vegas. Well, some people are going to gripe about that because they're not going to be able to do it because they have not prioritized their finances or maybe they're not making enough to be able to go out and do that.

But if you wanted to go out and do something like that, you can say, yes, maybe your family wants to take a once in a lifetime trip to Europe and you have to fund it or you have to fund part of it. Well, if you don't have your finances together, you're going to miss out on that opportunity or you're going to make a bad financial decision and go into debt for that opportunity.

But what if you could say yes every single time? Or what if your kids come to you and say, hey, I want to have my dream wedding. I want to have the wedding I've always dreamed of. I don't have the funds in place. Can you help me pay for it? There's probably no worse feeling than not being able to pay for one of your kids weddings.

And so you could say yes to that because people with a plan can say yes more often. You want to do a big trip, you can say yes. You want to buy a safer car for your family, you can say yes. You wanna buy the bigger house because it's in a better school district? You can say yes.

The reason is because you prioritize the right things and got your finances in order. Number 5 is you can buy back your time. Boy oh boy is this a valuable one. Time is your most valuable asset. We say it time and time again on this podcast, but financial freedom is not about Lambos. It's about Tuesday afternoons at your kids school play.

It's about slow morning so you can do what you want with your time and the ability to walk away from a job that is toxic to your mental health. These are the things that money can buy and they are invaluable to every single one of you. And if you do this right, you'll be able to buy back your time.

You know how amazing it feels to be able to be flexible with your time and do what you want with your time. Money allows you to do that. Money is the tool that gets you there. Number six is you become unshakable in a crisis. So there's layoffs, there's recessions, there's medical bills, there's bear markets, there's all these different things that could happen to you and they will happen to you in life.

It's not if, but when will all of these things happen? And if you prioritize your money and you put it in the right order, all of these things become stuff that you can just shake off. You don't have to worry about it anymore. You don't have to stress about it anymore. If you have cash on hand, you can take care of the chaos and you can get wealthy in the chaos.

This is just how the world works right now. The stock market goes down, you have cash on hand. You're buying stocks on sale or the real estate market goes down. You have cash on hand. You're able to buy rental properties that make a lot more sense than they may do right now. And so this is, is a really great opportunity for a lot of you.

It starts now and it starts slow, and it feels like you're in a slog and it feels like it's taking some time. But once you get that ball rolling downhill, it'll absolutely be amazing what you can do with your dollars. Now for all my high earners out there, all the folks out there who are earning a good amount of money, you need to make sure that you're taking a good chunk of those dollars and putting them towards assets so you become unshakeable in any crisis as well #7 you build a legacy that outlives you.

Money managed well doesn't just change your life, it can change your kids life. It can change your grandkids life depending on how much you have on hand. And you stop becoming a consumer. And if you start becoming a builder, you can build a financial legacy. You can build a financial foundation that is for generations to come.

Generational wealth is what we love to talk about on this podcast because a wise person leaves an inheritance to his children's children. And I want you to remember that because when that happens and you're able to leave an inheritance to your children's children, your grandkids, you have the ability to strengthen your family tree.

You have the ability to give your family opportunities that you never had. You have the ability to start them in a position of strength. Now it's up to them to see what they do with it. But if you taught them well about how to manage money and they taught their kids well about how to manage money, generational wealth is inevitable.

And so this, my friends, is why we want to get good with money. It's going to remove stress from your life. It's going to remove guilt from your life. You're going to stop trading hours for dollars. You get to spend more time time doing the things that you love. You get to buy back your time and become unshakable in a crisis. Plus, you get to build generational wealth.

I think all of those things are positive. I think all of those things, if you really peel back the curtain, all of us want every single person listening to this podcast right now or watching the show right now. You want all of those things. And plus you want to sleep better at night, and I know most of you do. And if you have money stress, you want that removed from your life.

Well, let's talk about exactly what we can do step by step to be able to remove that money stress from our life, but in addition, also be able to spend money on things that we love. We want you to have that balance. We want you to have the ability to be able to do what you want with your dollars. And once you're able to do that, boy, oh boy, does your life change.

The truth is, people think managing money is no fun. It actually means that you're saying yes to things that matter to you. And once you see this and once you prioritize it in this way, you're going to see everything change in your financial picture. Let's dive into next how to do it step by step.

All right, let's talk about how to manage your money in a way where you can still enjoy life. So step one, and this is the thing I want each and every single one of you to start with is you need to know your numbers. And there are three numbers that I'm gonna talk about in this episode.

There's 6 numbers in total that you need to know. And I'll tell you about all six of them here. But there are three that I want you to focus on for this process that we're doing right now. Number one is your take home pay. If you don't know how much money hits your checking account every single month, you may know the gross amount that you make every single month, but you'd be amazed at how many people do not know the net amount, the amount of money that hits your bank account every single month.

They do not know what that number is. I want you to know exactly what that number is so that you know what you're working with here. You know exactly where we're gonna land. OK, 2 is you need to know your monthly expenses. What is your burn rate? How much money do you spend every single month?

If you don't know this number or you don't have a ballpark of what this number is, it's gonna be pretty hard to get ahead financially. Because those who don't know these two numbers, first how much they spend and how much they burn are folks who are just wandering through life, especially with their finances. And in reality, they most likely are not optimizing how much they could be saving and investing long term, but also they're not optimizing how much they can be putting towards vacations or spending more time of doing the things that they love.

You cannot manage what you have not measured. Now, on top of that, the third number I want you to be tracking here is your net worth. Why? Because your net worth is your scorecard. This is going to tell you, hey, are we progressing year over year or are we going backwards?

Because you can decide, hey, I'm making a little bit more money now. I'm going to take on a new car loan. And all of a sudden, you actually went backwards when it came to your net worth instead of forwards. Or maybe you decided to take on a larger mortgage payment and so you have this big debt on a house and so you went significantly backwards by buying a new house.

So you want to understand where your net worth stands and what's your financial picture looks like? OK, so that is the first thing that we are going to do #2 is I want you to figure out a spending plan. Now, there's a couple of different things that you can do. Number one is you can do something like the reverse budget if you absolutely know, you know yourself.

And if you absolutely know I will never, ever, ever budget, I never ever will do it. And so you can do with the reverse budget, meaning saving off the top and then spending what is left over. So this just is working off of the old classic and financial advice that says, hey, pay yourself 1st and then everything else falls into line.

And that's the same thing. You want to save off the top, save whatever your savings rate is, 20 percent, 25 percent, 30%, whatever you think your savings rate needs to be, you want to save that off the top. And when I save that, I want to save it towards my emergency fund. If you have not had that built up yet up to six months and you want to put it towards your investments, those are the two places we want to put those.

Then whatever is left over, we can take those extra dollars and put them towards everything else from things that we want to enjoy for food, transportation, housing, all that other good stuff. OK, that's the simple method to do this. Now for those of you out there who want to optimize this and make sure you have every extra dollar going towards what you actually want, I would recommend what we call the block method.

Now the block method is going to be the way that you can budget your dollars with four different categories. So first you have your fixed expenses. Your fixed expenses are your needs. They are the things that you absolutely cannot live without. So this is going to be housing, this is going to be food, this is going to be transportation, this is going to be medical.

We'll all be part of these fixed expenses. OK, Then we have lifestyle. OK, so lifestyle is the next one. This is going to be the fun stuff, the guilt free stuff. You know, if you want to go out to drinks with friends, that's where lifestyle comes into play. If you want to go on a vacation, that's where life style goes into play. If you want to go spend more money on a driver or a pickleball paddle, or you want to spend more money on, you know, doing something fun, then that's where that comes into play.

Is the lifestyle OK? So when we look at fixed, we're looking at 50 to 60% of our income going towards fixed. If it's less than 50% that is a OK. But if it's more than 60% then we know we have one of two problems. Either we have an income problem or we have an expense problem.

And so you may have both of those two issues. And so because of that you want to either cut back or increase your income over that time frame. Next is the foundation. So the reason why I think something like the 5030 twenty budget doesn't work well is because there is no foundation component to it.

Meaning if you have debt payments, you need to make sure that this is part of your foundation to ensure that you can get some of those debt payments off. But in addition, you also need to build up your emergency fund. You need a place for your emergency fund to go. And so when we're thinking about the foundation, this is going to be the foundation that builds up your financial life moving forward.

And so the foundation is going to be the third component of the block method where you want to send 10 to 20% towards that foundation depending and if you have a lot of debt, that number may even be higher, but it's somewhere in that range. And then lastly, we have future you. So future you obviously is going to be your savings and investments, but we really want this to be your investments going forward.

And when it comes to future you, we would like to get your investment number up to 20% as time goes on. That is the goal is the minimum of at 20%, especially if you want to build wealth. But if you are someone who is just getting started, we can start lower and then move that up over that time frame. Once you have these four areas set up, let's go over them again.

It is fixed expenses. So this is everything that has a necessity, OK? It's foundation. This is your emergency fund and debt payments. It's building the foundation to make sure that you can get yourself in a really good position financially. You have this rock solid foundation when it comes to managing your finances.

Then we have a lifestyle so you can spend more on the things that you love. We want to turn that dial up on lifestyle more and more over time so that you can spend a lot more on the things that you love. And then lastly, the last category we have is future you. This is your investments, this is your 4-O1K contributions, this is your Roth IRA contributions, and this is everything going towards future you.

Free is once we have all this thought through, we want to make sure we automate everything. So when you're building out that budget, you're thinking through, OK, well, if I have this budget in place and I start to utilize a tool like Monarch Money and be able to send these dollars towards the right places, then I can figure out how to automate everything to the right location.

And so we're automating everything, want to set up automatic transfers to our investments first, then we want to send it to our savings, then we want to start to pay our bills and start to automate that process every single time the paycheck hits. If your money sits in checking, it is never going to go to the place that it needs to go to.

You need to automatically make those contributions. So you can set up automatic transfers to your investment account, for example. And let's say that you use Fidelity. Well, once that money goes to Fidelity, you can actually send it where it automatically invests in an index fund or an ETF or a stock or whatever else you're interested in investing in.

You can automatically invest it there. And so everything needs to be automated. Why? Because automation removes your willpower from the equation. And the last thing we want you to do is rely on that willpower. Instead, we want you to build wealth by changing the way that you think about money so you're not spending so much time in the weeds.

Automation also allows you to spend less time managing money. In fact, you would probably spend less than 30 minutes every single month managing your dollars if you just automated your finances. So that is a really key component to understanding how all of this works. Now we have a free automation checklist. If you want to check that out at mastermoney.co/resources, you can go check that out there.

That's just going to help you step by step learn how to automate your money. We also have a full episode talking about how to automate your finances. We'll leave that down below in the show notes. Step 4 is we want to make sure that we're building up that emergency fund. So we got the system in place now, OK, so we know some of our numbers. We know how much we're making, we know how much we're spending.

We have built out a budget by utilizing something like the block method or the reverse budget, and we are automating everything every single time we get paid. OK, so we have all of these three things set up. So now we have a system running. The gears are turning. And as we start to see this happen, now we have to have a strategy.

We have to understand where our dollars need to go and we have to understand where we are going. So we're going to think about something like the 136 method. The 136 method is going to allow you to build an emergency fund of six months of expenses, but it's also going to allow you to make sure you do this in the right order and you pay off things in the right order.

So one month of expenses is the start. I think everybody needs at a minimum one month of expenses, not $1000 in stopping. That's not going to get you you anywhere. When life throws 3 things at you to derail you, that means you're going to have to start over again. If you're trying to pay off debt and you only have $1000 in an emergency fund, you're never going to get anywhere, especially if you have a lot of debt.

So instead, what I want you to do is focus your time and energy on getting one month of expenses to protect you against life, then paying off that high interest debt. OK, Once that high interest debt is paid off, anything above a 6% interest rate is what I classify as high interest debt.

If you want it to be above a 7% interest rate because you feel better about that, more power to you. But a 6% interest rate or above is what I really want you paying off outside of your mortgage. So if you have credit card debt, if you have a personal loan, if you have a buy now pay later loan that kicked in, if you have any other debt out there, we want you to get rid of that if it's high interest debt.

So you may be saying to yourself, well, what if it's a 10% interest rate personal loan, pay it off. What if it's a 15% rate credit card, pay it off. What if it's a 9% interest rate key lock, pay it off. Those are all things we want to make sure that we are getting rid of so that moving forward we can make the best choices.

OK, so we have one now. We're going to move all the way up to once that high interest debt pay is paid off, we want to go to three months of expenses, OK. So three months of expenses is going to protect us against most things that can happen in life. And this is truly an emergency fund that protects you against everything except for job loss, say.

So when you think about the three month of expenses, this is going to help you a lot. When things break at the house or issues come up in your life that really is going to protect you against most things. Medical emergencies, those types of things will all be protected with three months of expenses, but it really does not protect you enough against the ultimate emergency, which is job loss.

If you lose your job, then you are going to need six months of expenses in place. But this is also why during this time frame we begin investing our dollars and until we make sure that sure you can always get the four O 1K match and get 100% rate of return on those dollars. That's great to do it even before the 136 method starts.

But then once you are getting the ball rolling here, I want you to make sure that you are now investing your dollars, investing as early as you possibly can because every single dollar that you put into the market is so incredibly valuable. And so at this point in time, if you're in your 20s or your 30s or your 40s, you have plenty of time for compound interest to get to work.

And so I want you to, as much as you possibly can, get those dollars working by following this. Then ultimately, as you start to split off, some money's going towards your emergency fund, some of it's going towards your investments. Ultimately, we want to build it all the way up to six months. Now you may be saying to yourself, six months, how am I ever going to save that amount?

It takes time. It takes time to get to 6 months in your emergency fund. But it is the only way to protect your finances against life. And life is going to come at you hard and it's going to come at you all at once. Some of you may have been experiencing this before and you're nodding your head right now as you're listening to this podcast.

Life will hit you hard and the only way to combat against it is to have a little cash on hand. Now, where do you keep the emergency fund in? A high yield savings account is the best place to do this. We have an entire episode. It's one of our most popular ones on emergency funds. If you want to check it out, we'll link it up in the show notes.

It walks you through step by step the 136 method. So the next thing we want to do is we started our progress of building up the emergency fund. We started to crush off that high interest debt and we're starting to invest our dollars. Now we're trying to think through, well, where do I invest these dollars? Where do I put my money after I get the ball rolling on this?

Well, I'm so glad you asked 'cause we're looking at maxing out our tax advantage accounts. And so we can look at things like a four O 1K or a Roth IRA or an HSA and get a number of different things that can help us here. Now, I think even before you start building your emergency fund, you should be getting that four O 1K match.

The four O 1K match allows you to get free money. What does that mean? Well, every single time you contribute money into your 401K, if your employer has a match program, they will match a certain percentage. Sometimes it's 50%, sometimes it's 100%. I just heard somebody the other day tell me they get a 100% match all the way up to the Max, which is the craziest thing I've ever heard.

But this perk is absolutely fantastic. So whatever that match is, if it's up to 6%, then you just contribute 6%, then you go through the 136 method. Or if it's 8%, try to contribute 8%, then go through the 136 method. This is going to allow you to get that free money.

I don't know about you, but I love free money. This is going to allow you to get that free money that allows you to build wealth even faster. And so for folks out there who are trying to think through which retirement accounts should I look at first, I like the order of something like the HSA. If you have a high deductible health plan, If you don't have a high deductible health plan, you will not qualify for an HSA.

But the HSA allows you to put dollars in tax free, gross tax free, and you can pull the money out tax free. I also like the idea of the Roth IRA. And the Roth IRA allows you to grow money tax free and pull it out tax free, but the money that you put in has already been taxed through your paycheck. So those two are great starting points for most people.

Now if you make too much to contribute to a Roth IRA, you could do what is called a backdoor Roth IRA where you contribute money to a Traditional IRA, then convert it to a Roth IRA. That's something I do every single year and still get dollars into a Roth. Then you can look at a 401K. Now there is an argument to be made that if you are a high earner or someone out there who is making, you know, over $150,000 per year, the 401K, maybe 1 that you want to put at the top of your list.

But if not, the four O 1K can come a little later on down the line after you get your match. Then you go through the Roth and the HSA. Then you can come back to the well at the four O 1K if you want to go that route. But also another consideration here is the taxable brokerage account. Because the taxable brokerage account gives you that flexibility and allows you to bridge your way from maybe your 50s to your 60s if you decide to retire early.

And a lot of you listening are part of the FIRE movement or the early retirement movement. And so you are considering retiring early. Well, if that's that's the case, a taxable brokerage account is a wonderful account for early retirees. So this is something to consider when you're looking at all of these different accounts to make sure that you understand which one could be the best one for you.

I love using, you know, the taxable account when I think about this now you may be getting to this point in time where you're saying, OK, Andrew, I'm looking at some of these investment accounts, I'm looking at some of these retirement accounts, and these are some great options here. But how do I invest our dollars? Well, that's where our portfolio pyramid comes in.

So we just did an entire episode on the portfolio pyramid. We talked through how to think about the portfolio pyramid in a way where you invest your dollar. So 80% goes towards that foundation, meaning index funds, ETFs, target date funds, those types of things, whatever works best for you. Then we have 15% going towards towards individual stocks.

If you want to later on down the line after you hit your foundation, you still have to do 100% of your foundation at the beginning. Then once you hit the numbers for your foundation, then you can move up to some of these other areas like the growth. And then also if you want to consider speculation, doing 5 to 10% of your portfolio and speculation is going to be the next thing to do.

Now we have a webinar that we just did on the Portfolio Pyramid as well. If you're interested in that, it's free. We can link it up down the show notes below so that you can check out that Portfolio Pyramid webinar that just shows you exactly how to think about investing your dollars and how to build out your portfolio in a way that fits your specific risk tolerance.

Now the next thing I want you to do is step 8. You've got the system in place now. So we just thought about this for a second. OK, you know your numbers, you started to budget out those numbers and put them in places that you know that you actually value. You started to automate your money into the correct location so you could spend less time in the weeds and less time budgeting.

You started to build up your emergency fund with A136 method and you were paying off high interest debt. You got started investing. You're getting your employer match and now you're moving the ball down where you're building out your portfolio and deciding what you want your asset allocation to be. If you're doing all that stuff, if you're really knocking the ball out of the park here and you're really crushing it when it comes to all that stuff, you can't help but start to fund some of these lifestyle expenses, some of these things that you actually want to do.

And so you can take some of those extra dollars once you get the ball rolling on these and you could put them towards the vacation fund. Almost every single person here loves a good vacation. We want to go and there's two types of people on a vacation. There's the folks who want to sit on a beach and lay around all day and not move a muscle and just absolutely relax.

And then there's the adventure seekers, the folks that love to go on excursions. They love to see every single site in the area. And depending on which one you are is going to dictate how you operate your vacation, how expensive it's going to be, how you're going to think about that vacation. But no matter what, you all love a vacation, no matter what type of vacation person that you are.

And so maybe you want to travel more, maybe you want to dine out more, you really love eating out, you really enjoy your time spent eating out. Maybe you have hobbies or you want to go buy a boat, for example. A boat is obviously not a good financial decision, but it may be a great lifestyle decision for you and your family. Maybe you want to go out and buy an RV where you can travel the country, or you can travel to different locations with it and have the ability to be able to just drive around and have a hotel room on the road, baby.

All of those are great options that you could think through if you want to do something like that. But building wealth, the front end and making sure that you get started and get the ball rolling allows you to do all these other things where your life can really be run by some of the activities you absolutely enjoy.

But it starts with your finances. It starts with money. And in fact, money is the tool that allows you to get there. And then what I want you to do is because you know where your dollars are going now, I want you to start to increase the amount that you're contributing to these lifestyle blocks. I want you to start increasing the amount that you're sending to these accounts so that you can spend more on those things that you love.

Spend more. Maybe. Maybe you're into watches, maybe you're into jewelry, maybe you're into all. Spend more on that stuff. If you love it, you should be spending more on that stuff. But it's all about getting the foundations right first so you can do it. Otherwise it's going to be in the wrong order.

And if you do this in the wrong order, if you buy the stuff you like first and then start to build up your wealth and your finances, you'll never catch up in time. You'll never be able to do it in time. And so if you reverse the order, all of a sudden you're going to see this, get the amount that you can send to those accounts grow more and more and more, but you got to do it right.

Now when you are thinking about this and you're thinking about your lifestyle block, I recommend using savings buckets, especially for the bigger purchases. So let's say you're saving up for a boat or you're saving up for an RV. If you want to go out and buy that boat and you want to get the the perfect motor for that boat that you want at the perfect horsepower and you want to go out and get all the nice customizations to that boat.

Maybe you want a nice fish Finder in there. Maybe you want to have a nice center console. Maybe you want all this extra stuff in place and you're trying to buy a boat of your dreams. Well, if you're doing that, I want you to make sure you're sending it over somewhere, sending it over to a high yield savings account. And even if you have a long enough time horizon, let let let's say you want to buy a boat in 20 years.

You can even send it to a taxable brokerage account if you want to because that time horizon is so long. But if it's five years or less, starting to send it to a high yield savings account is the best place to do that. It keeps your money safe and it keeps it where it's supposed to go. And if you have a location that has savings buckets, Sofi has savings buckets.

There's a, there's a ton of places that have them where you can go and look and see which one is the best option for you. I'll leave a link down below to my favorite high yield savings accounts so that you can check those out. But if you're looking for a place to park this money, that's the best thing to do. And just start small. Even if it's 20 bucks a month and you're starting to save for this boat, that's $50,000 or $100,000.

Trust me, over time, as you start to make more money and as you start to get your finances right, this is gonna grow more where you can start to throw extra dollars out there. But you've already got this head start on the savings plan. So I highly recommend that you set up these savings buckets so that you can look deeper into saving more dollars for your financial future.

And the last thing I'll say for these steps is I want you to review this quarterly. So making sure that every quarter or at least every year, you're on track for exactly what you need to be doing with your finances is really, really important. If you review this plan so that you could spend more on the things that you love and less on the things that you hate. And you do this more frequently because we all get out of whack all the time.

And I feel as though every quarter or so, I start to drift away a little bit and I got to recenter myself. And every single time I do that, I feel so much better when I do it. So I would recommend setting up a quarterly meeting with you yourself if you're single, if you're married, setting it up with your spouse and having a conversation about, hey, how do we recenter when you have your 15 minute money meetings every month?

That's going to be very helpful to think through exactly what you want to be doing with your dollars and your finances because I want you to spend more on what you'd love and obviously less on what you hate. Listen, I hope this was helpful. So let's dive in next to some of your questions as we get into this Q&A. Again, if you take action on this, shoot me an e-mail, shoot me Adm, let me know some of the things that you're going to take action on with this episode or leave a comment down below on Spotify or YouTube.

Would love to hear from each and every single one of you on some of the things that you are going to be doing. And again, we read all of those. So would love, love, love to hear from you. Now, let's jump into a few questions. All right, so now we're jumping into our Q&A segment. If you guys have questions, you just join the Mastermind newsletter and you can respond there, or you can DM us on the Personal Finance podcast on Instagram.

And we check those DMS as well for your questions. But we get questions from all over the place. You can even leave them down below in Spotify if you want to, and we will check out your question there as well. So this one is from Shannon and she's got a great question here. Hi Andrew, I'm middle-aged and have never been financially set. I don't have a strong understanding of budgeting or finance in general, which makes concepts like financial independence confusing or far fetched to me.

I'd like to learn more about managing money, saving and investing so I can make smarter financial decisions now for my future. Thank you in advance. So Shannon, First off, great question and thank you so much for writing in. I want you to hear this loud and clear. You are not behind. And I think a lot of people feel as though they are behind when they are thinking through their money.

But if you start today with the concept that intention beats perfect planning, you're never going to have a perfect month when it comes to your money. I've never had a perfect month in my entire life. Every single person I know has never had a perfect month in their entire life. And if you go into it thinking through, OK, I need to be intentional about this.

And listen, the average multimillionaire does not hit their first million until their 50s. So the idea that you're too late is not something that is going to be the case. So here's the good news for you. OK, this entire episode that we just talked about today is going to help you step by step walk through your question.

Everything I walked through the seven reasons to getting good with your money and actually making it more enjoyable is going to help you step by step with this. So here's what I recommend. If you feel as though you're starting late, there's a couple of things I want you to focus on. One is focusing on investing as much money as you possibly can. And if you can increase your income to do that, I think it's really important.

So your income is going to be the catalyst to getting to your goals, especially if you were starting a little later. And so when you think about your income, look at your income sources and say to yourself, OK, how much do I need to save in order to hit my retirement goal? Well, if you go to mastermoney.co/resources, we have something called the retirement calculator that will give you your retirement number so that you can figure out exactly where you need to go and how much you need to save.

And so when you think about this, I would definitely recommend using that so that you can go step by step to get started planning and having conversations about this. Secondly though, is let's look at our income. If we are not making enough income to really get by, we need to increase that as much as we possibly can. And so if you can negotiate the salary at your job or if you can do things that'll help you increase that income, that's going to be a huge starting point.

Because if we have a larger income, especially during our peak income earning years, which is usually in your 30s, your 40s and then your early 50s, that's going to help you really start to take those extra dollars and put them towards financial independence. OK. Then 2 is we need to get those dollars invested.

We need to get them invested so that we can pack in some of these retirement accounts and we can pack back in our taxable brokerage. So if you can get as much as you possibly can into some of those accounts, it'd be very helpful. Honestly, if you can find a way to say to yourself, I'm going to do whatever it takes to Max out these accounts every single year, that'll set you up in a great position to get started.

Another big thing is understanding that you don't need to understand every advanced concept day one. This is not something where you have to overcomplicate everything. You don't have to overcomplicate the way that you're doing this. It really comes down to spending less than you make, avoiding debt and investing the difference.

That's truthfully what it comes down to. And so this is something that I think can, for a lot of folks out there who feel like they're starting a little late, be helpful is focus on your income. Focus on how much you're saving and investing because your savings rate can absolutely change your life. We have a listener who wrote in a couple of years ago and she was in her 40s when she started listening and by her early 50s, already had enough money to become financially independent because she was listening to the podcast, learned exactly the steps to take and actually took action.

And so the key here is you can listen to me all day long, but the folks who take action are the ones who are the world changers. They're the ones who are the life changers. They change their entire life because they decide I am not going to do this anymore. I am not going to take this anymore. And instead I am going to pick myself up and change my life.

Sure, I missed out on a couple of years. Sure, I missed out on some compounding years, and I'm going to regret that, but that's OK. I need to accept the fact that I made a mistake and I am OK missing out on some of those years. And it's Shannon, I know you can do this. I think this is something that I think most people feel as though, well, I don't know if I can do this. I know you can, and it's just taking the right steps and moving forward.

Listen, I hope that helps. And if you have any questions, please reach out and let me know because I know that you can do this. The next question is about money psychology. Let's get into it. So the next question is from David. So good morning, Andrew, and thank you for your time and energy you put into your personal finance tools.

Personally, I struggle with the psychology of money and with trying to take the emotion out of money and look at it more like a tool. My relationship with money has been up and down and my emotional connection to money based off of past and present circumstances may be impacting the way I approach it.

Thanks again for the time and hope you enjoy your day. Well, Dave, thank you so much for writing this in and honestly, it is so great that you sent in this question because I think this is one of the most helpful things for most people to learn is to master money psychology. So the first thing I want you to know is that money psychology is the majority of finances, when it comes down to it, 80 to 90% of managing money actually comes down to your psychology.

Doing well with money has little to do with how smart you are and it has a lot to do with how you behave. The majority of it is how you behave. And the fact that you're even asking this question puts you ahead of 90% of people because you have self-awareness. This is the first move for most people is to have that self-awareness. So here's what I want you to think about.

First is I want you to identify your money story. OK, So every one of us has these money stories that we have grown up with. Did your parents fight about money? Well, if your parents fought about money all the time, this may have ingrained some things about money in your brain. Did you grow up with a scarcity or abundance mindset?

Did you have people yelling at you saying hey, money doesn't grow on trees, turn off the light, make sure your fan is off all the time? We don't have any money for that. We can't afford that. All that different type of language is going to really impact the way that you think about money. Did money feel safe or stressful in your household growing up? That's another question you want to ask yourself, if it felt safe or if it felt like something that was healthy, that could be a starting point.

But if it felt like the main point of stress in your household, that could be something where it could be causing a ton of different emotional reactions. And so your current money reactions to money almost always are a direct echo of what you witnessed as a kid. And ironically, that is something that not enough people talk about.

But if you name it, you can start to diffuse it. So if you figure out what those things are and I would even take out a sheet of paper or take out your phone and and their notes app and write out what you think some of those things are. How do you think about money? How do you feel about money? How did you grow up with money? What are some of the things that you remembered about money when you were growing up?

And start to go through that list and say to yourself, OK, well, I'm identifying some areas that may not have been optimal for me. That's going to be the starting point. Next, I want you to separate your identity from your bank account. Too many people feel as though they are less than because of their net worth, or they feel as though they are less than because of their income.

Just because you've made past money mistakes or because you were never taught how to handle this stuff does not mean that you are less than. In fact, society is going to tell you that you are. I'm here to tell you that you're not. As the guy who talks about money all day long, I'm here to tell you that you're not less than. Why?

Because your past mistakes are not going to be indicative of what your future results are going to be. And in fact, when we think about this, if you can detach money and if everything is about money and if every market dip makes you even more stressed out, or if every single thing that goes wrong, maybe you have a unexpected bill or maybe something breaks in the house and everything comes back to money, this is going to be the thing that you want to work on.

You want to separate the two. You are your own individual person and money is just a tool that gets you what you want in life. Just separate money out as a tool. Next is figuring out what enough looks like for you. A lot of people who have a problem detaching the emotional side of money, they also don't know what their enough number is.

And so figuring out what that number is, maybe it's 2 million, maybe it's 5 million, maybe it's 50 million. But figuring out what that number is, if you have this amount of money, everything else will be a lot easier. I want you to figure out that number and I want you to define what that number is. Step 5 is I want you to automate every single decision that you can because this is going to remove the emotion out of the equation.

If you automate your finances totally, you don't have to worry about emotions as much. Instead, all you have to worry about is how you react to things. And so when we think about this, if you can automate your finances to the right places, this allows your emotions to be removed and then stop chasing your portfolio every day. One of the things that I've noticed people who are always worried about money or they're always stressed about money is they're looking at their portfolio on a daily basis.

And for some people, this can be a OK move. Like if you're an investor and you understand where the market's going and you don't mind if the market takes a dip, you can look at your portfolio every day if you want to stay on top of it. But if you were the type of person who gets stressed out every single time you see the market down 1%, please.

For the love of all things that are green, stop looking at your portfolio every single day because that's just gonna stress you out and bring anxiety that you want nothing to do with. And so really important that you don't check your portfolio every day, especially if it stresses you out. I check My Portfolio on a monthly to quarterly basis and there are times where I check it once a year, depending on what the portfolio is.

And the only reason why I check it is to make sure my automations are are moving correctly. Everything else is already going into the right places. Or I'll dive in there if I want to buy some individual stocks or things like that. But I am not the type of person that checks it every single day. And I don't think most people should be. I don't think it's healthy to check your portfolio every day, especially if you're a long term investor.

Next is I want you to reframe your spending. Spending is values. Every time you spend a dollar, that means you are putting a dollar towards something that you value. So if you value, you know, pantry full of groceries, then you're going to spend and more on groceries. If you value a huge, massive portfolio, then you're going to put more dollars in your portfolio.

If you value the feeling of making random purchases at a random store, then you're going to make more random purchases at a random store. This is how money is used as a tool and it's a vote for what you value. Every single time you spend a dollar, you are voting with your values. And I want you to make sure that you think through that and change the way you think about money.

The next thing I want you to do is I want you to forgive yourself. I want you to forgive your past self if you do have financial mistakes because sometimes when people can't separate money from their emotions, it's because they haven't forgiven themselves yet. Just because you made mistakes or just because you did things that you do not agree with now does not mean that you have to beat yourself up about it.

And then surrounding yourself with the right voices, making sure that you know that the folks who are around you are also doing things that you feel as though are productive in your own life. You may have heard the term you were the average of the five people around you, and that is very true. Every person around found you can dictate how you act, how you react to things, and it's very important that you make sure that the people around you are high performers or are people who are going to encourage you in this situation.

And the last thing again, and you already know this, but I want you to treat money as a tool, not a job. So this is gonna be the area where mastering psychology is understanding that all money is, is it's just a tool. It's just the tool that allows you to get what you want in life.

So listen, I hope this helps you. Really good questions, David. And the bottom line is the goal is not to become emotionless about money. It's to become aware of your emotions, that you know how to deal with them, you know how to handle them. And you can build systems around to this to make sure that you avoid the bad emotions and lean in to the good ones.

Really good question. I hope this was helpful and thank you so much for sending it in. And Congrats to you on recognizing this and asking the question. That's one of the most powerful things that you can do. So the next one is from Madeline. How should new earners with advanced degrees allocate paychecks to fit the lifestyle required? Things like networking events, court clothes, etcetera, and pay necessary bills, save and manage high student loan debt for example, I'm an attorney with two years of experience.

I have a decent high paycheck, but also a very high debt and very high lifestyle demand due to the nature of my profession. So, Madeline, this is a great question because when you are in a position like this, sometimes you feel as though you're expected to drive the fancier car because you're an attorney.

So you want your clients to understand, hey, I'm a successful attorney. And there have been studies done that show, hey, people in those types of positions who drive nicer cars tend to be more successful or to be seen as more successful by their clients than people who do not. And so this can be one of those areas where you're thinking through this or maybe you need nicer clothes because you're in court all the time.

And so you're thinking through, OK, well, how do I budget and allocate for these nicer clothes or these nicer things that I need to buy? And so this is a really good question because you really do need to get clear on this stuff. Because also when you are in some of these professions, whether you're a doctor, whether you're an attorney, maybe you're someone who went to Graduate School or you got your doctorate, there's a lot of different things where you're going to be paying a lot more in student loans than maybe the average person who just got their four year degree.

It's more expensive to go to Graduate School. And so we need to make sure that we are thinking about this. And for most, they have have to get student loans to be able to afford it because it's so expensive. So really good question here and I would do a couple of things. First is I would get clear on my numbers. First, I want you to know exactly where you stand when it comes to this stuff.

Because if you're thinking through, OK, I need to allocate my dollars towards the things that matter most, I want you to write down your gross income, your gross burn rate or your expenses. So how much are you spending on on core clothes? How much are you spending on things like your student loans? How much are you spending on groceries and housing and food and transportation?

How much are you spending in all those different areas? We need to get clear on that. We need to understand our fixed expenses. So like all those other areas, the necessities that we need, but we need to know what that burn rate is. It's very, very important. Next, I would look at the Student Loans. Because you're a high earner, I would look at this in a way where I would use the avalanche method.

So the avalanche method is taking your interest rates on your student loans and attacking the highest interest rate first and then paying the minimum on all the rest. So if you have extra capital on hand, you can look at some of those high interest debts and attack those high interest debts that way. So let's say for example, you have four student loans.

Let's say you have one that is 8%, one that is 7%, one that is 5%, and one that is 3%. Well, the 8% one needs to get taxed first, then the 7%, then the 5%, then the 3%. OK, that's going to help you when it comes to the avalanche method, making sure that you optimize the speed at which you get these paid off.

Now, if you're like, no, I just want to make sure that I feel the progress. I feel like I'm progressing and moving forward. Then the snowball method is a great methodology for you, which is the smallest balance 1st instead of the highest interest rate, But the highest interest rate is going to be the fastest way for you to pay this money down, especially if you want to remove emotion out of the equation.

Now, if you work in public service or you work for a qualifying nonprofit, you can explore things like the PSLF or the income driven repayment plan. If you're eligible. The likelihood of you being eligible unless you are working in public service probably is not high. But if you're in a private practice now, you need to know your options when it comes to save or pay or IBR plans.

And so we did an episode actually recently with Robert Farrington talking through those student loan plans and how to think about those because those are going to be very important to you, especially because they're changing a lot in July of this year. So we just did that episode with Robert Farrington talking about student loans. I would definitely recommend you check that one out too.

It's very important. And then when it comes to long term wealth building, obviously since you're a higher earner, if you're making over $150,000 per year or $200,000 per year, you wanna make sure that you're optimizing the way that you're thinking about the optimal order of of investing.

So we want to look at ways to save on taxes. So maybe doing something like a four O 1K all the way to the Max would be a great starting point. And then you get the tax deduction on $23,500 per year. Then you can look at things like the mega backdoor Roth IRA if you wanted to go that route. Or you can even look at things like maxing out your contributions to other tax advantage accounts as well.

But this is be the starting point for me is thinking through that kind of stuff and then treat profession expenses like a business owner. So court clothes or networking events or Bar Association dues or any of that kind of stuff, those can all be tax deductible if you're paying out of pocket, but you need to at least have ACPA in your corner for sure to run each of those through.

So if you're looking at some of this stuff and you're saying to yourself, hey, here's my expenses for court clothes, OK, If you're doing that, you want to send that to your CPA and say, hey, can I deduct some of this stuff and ensure that this is something that I can write off? If you can, it depends on situations. If you can, then that's great.

If you cannot, then that's gonna be something that you may just want to budget out for it because you're gonna have to eat that expense. But anything you think could be deductible, those networking events absolutely are obviously your bar fees and all those types of things absolutely are. Continuing with education obviously is. So all of those things, I would just have a professional line item in your budget that thinks through each and every single one of those.

And then you just make sure you track those receipts. You track each of those receipts so that you could send them to your CPA and see if you can write some of those off. Another thing I would look at is if you do have some high interest debt or decent amount of high interest debt, you can refinance some of those student loans. Just make sure you're not refinancing into something private. If you have these public student loans that does not allow you to have the flexibility that you need.

But if you're thinking about refinancing, you can possibly drop some of those interest rates, especially if you graduated a couple of years ago, the interest rates might have been higher. But also another thing to consider is when you are paying off debt, you can develop a plan. So come up with a plan on how long it would take you to pay this off, reverse engineer that date of when you would pay this off.

And then what I would say is from there, every extra dollar going forward will be allocated towards wealth building. So once you get that pay off date, you can decide, OK, well, do I want to pay all of this off? Do I want to pay a portion of it off and keep the low interest debt? Most likely that's what most people do. And then you can decide, OK, I'm going to take every extra dollar and put it towards wealth building.

Now the bottom line though, is that you have one of the highest leverage positions out there where you have your income in place. And taking that income and putting them towards the big things that matter, especially early on in your journey right now, is one of the best things that you can do so that you can get some of that debt payment pay down. You can get some of that extra stuff paid down and be able to balance life and enjoy life at the same time.

So this episode today actually was probably right on par with what you're thinking through as well. But I would recommend paying off some that high interest debt, investing all the difference there and trying to get as much of your dollars invested early because you have so much time for this money to compound. Listen, that's it for today's episode. Thank you guys so much for listening to this episode of the Personal Finance podcast.

If you guys want more help from me, we have Master Money Academy where we jump on weekly coaching calls with our members. We have all of our courses in there. We help you through your financial situation in addition to having the exact 25 step system on how to manage your money. So if you guys are interested, make sure you check out Master Money Academy.

We'll leave a link down below to a seven day a free trial. If you did want to check that out, you can go behind the curtain, join a couple coaching calls, check out some of the courses. If it's for you, great. If it's not, no hard feelings whatsoever. So would love to see you in Mastermind Academy. Would love to meet you inside again. Thank you guys so much for being here on this episode and we will see you on the next episode.