Do This EVERY Time You Get Paid (Paycheck Routine)

it's Friday just got paid new shoes new restaurant movies and it's gone when it comes to Payday it's hard to know the best things to do with your money so today I'm going through step by step the eight things you need to do with your money as soon as you get paid the first and most important thing you need to do is find your financial Baseline when it comes to personal finance most people feel like it's too much work but that's why most people struggle 64 of Americans live paycheck to paycheck because they commit one

of the worst Financial mistakes in Psychology they call it mental accounting basically it's when you mentally categorize your money instead of physically writing it down in May you might receive a tax refund from the IRS and you mentally categorize this as extra fund money you get excited and start spending it a new PS5 a new TV or Mr magic lamp the problem is just money is the same as your regular income you just pay too much in taxes and the IRS is just returning it the good news is the solution is simple open up a

spray spreadsheet and take account of all your monthly expenses rent internet pineapple pizza floss so putting all this together in a Google sheet was a great way for me to discover how much I needed to survive every month with my current lifestyle I'm self-employed so my income varies widely and this is just a great number to know all right now for the real work delete the expense items that aren't your core Essentials yeah that means Netflix staplers your Candy Crush subscription and then sign up for my free Weekly Newsletter rethinkable to build a wealthier and

healthier life link below after a grueling self-reflection moment you should end up with just a few core expenses first housing which could be rent or mortgage generally you want this to be under 30 of your income second groceries and food about 10 of your income third insurance and utilities like internet cell phone and electricity about 10 this number now becomes your financial Baseline the absolute bare minimum you need to survive each month aim to keep your Finance Baseline under 50 percent of your total income if it's over look for expenses that you can easily swap

for cheaper ones do you really need that apartment with an indoor pool a phone plan that has satellite coverage or free range organic pasture-raised avocados knowing your financial Baseline builds the foundation for the next step what would it feel like to have saved up to six months worth of expenses in your bank account at all times imagine the kind of freedom and peace of mind you'd have knowing that if you ever got sick lost your job or get injured you'd be completely fine this is why having an emergency fund is crucial mathematicians explain why with

the Murphy's Law basically everything that can go wrong will go wrong instead of asking your parents for money again or pulling out your credit card going further into debt you will have something to fall back on a study found that as much as 56 percent of Americans can't afford an unexpected one thousand dollar expense and 22 percent don't have any merge agency fund at all I remember when I got into a car accident when I was 20 that cost me about five thousand dollars to fix if I didn't have any emergency funds saved up I

might have needed to take out a loan and paying back that loan with interest would have easily cost more than seven thousand dollars generally you want your emergency fund to cover six months of your financial Baseline if your Baseline is three thousand dollars a month you need to save eighteen thousand dollars for emergencies emergencies don't include a wild Night Out Vacations or pineapple pizza Cravings the money should only be used when all hell breaks loose when your house floods when you get stranded in the middle of nowhere and have no other options basically when your

life is Fubar that's when you use your emergency fund once you fill your emergency fund immediately move to the next step 77 of American adults are in debt and this is something that we've just all accepted as the norm maybe we bought luxury clothes we didn't need to keep up a lifestyle we couldn't afford or purchase new furniture sure when we could have used Craigslist one of the worst things with debt is that it strangles your monthly income when you're paying hundreds of dollars or more for your credit cards your car loans it quickly eats

up the amount you can save and invest so forget about cutting back on Avocado toast and iced coffee because paying off your high interest debt will save you thousands in interest and fees if you have a credit card balance of sixty five hundred dollars with an interest rate of 19.5 percent and you decide to only pay the minimum payment of a hundred and thirty dollars per month it's gonna take you eight years eight years to pay it all off with an additional six thousand dollars in interest so what's the best strategy to pay off your

high interest debt early there are two ways to do this you could tackle the high interest rate loans first credit cards payday loans car loans stuff with an interest rate of 10 or more pay off the highest interest rate first and then move on to the next loan this is called the Avalanche method and mathematically speaking is the cheapest and most efficient way to pay off your loans another option is called the snowball method although it is less efficient it takes a more psychological approach instead of focusing on the interest rates you tackle the smallest

loan amount first you'll be able to pay these off quicker which builds momentum and motivates you to keep going for me when I first got serious about personal finance and paying off my debt I Consolidated everything into a Google spreadsheet it contained each debt the amount I owed and their interest rate every time I made a payment I would open up the spreadsheet and manually adjust the remaining amount every other day I would visualize paying off the debt until everything went to zero and this motivated me to keep pushing after you pay off your high

interest debts you'll have a bit more wiggle room with your monthly income but before you do anything you need to prioritize the next step when it comes to investing most people think of flashing screens day trading and aggressive screaming but apart from what you've seen on Wolf of Wall Street investing doesn't need to be hard or overwhelming the basics are easy and once you're familiar with them you could make millions in your lifetime Einstein once said compound interest is the eighth wonder of the world he who understands it earns it he who doesn't pays it

compound interest is the reason that you should have started investing yesterday over time the stock market returns about 10 percent a year meaning your money will essentially double every 10 years without you needing to do anything if you invest six thousand dollars each year from 25 to 65 years old with an annual return of 10 you'll end up with a total of over 2.7 billion dollars if you choose not to invest and instead you just keep that money under your mattress you're gonna end up with a total of two hundred and forty thousand dollars that

difference is huge and that can easily change your life you can get my free investing starter kit to learn the basics of Stock Investing to easily and confidently start investing today link below the problem is which investing account should you invest with first taxable brokerage 401K Ira HSA a knowing which to prioritize will maximize your returns and minimize your taxes for most people you should first put money into your 401k account a workplace retirement plan that offers matching contributions essentially free money if your 401k plan offers this match contribute enough to meet the matching amounts

when it comes to your 401k not only can you get free money you can also lower your taxable income if you earn ninety thousand dollars a year and your employer matches up to three percent of your salary that means they'll give you twenty seven hundred dollars of free money if you contribute ten percent of your 90k income to your 401k plan when tax season comes you'll only pay taxes on eighty thousand dollars instead of your 90k salary after you max out your employer match with your 401k contribute to a Roth IRA account unlike the 401K

where contributions are pre-taxed with a Roth IRA contributions are post tax which means you'll first pay taxes on your ninety thousand dollar salary before you can add it to your Roth IRA the advantage of a Roth ra is that you don't have to pay taxes on any of the earnings in this account and you can withdraw your contributions at any time so even though you're contributing money into a retirement account you can withdraw money from the principal whenever you want after taking advantage of your retirement accounts it's time to invest with a regular taxable brokerage

unlike the 401K in Roth IRA there aren't any obvious tax advantages but it is one of the next best places to invest your excess money for me personally I've been investing with MooMoo for years and for a limited time if you create an account with my link below and meet the deposit requirements you can get up to 16 stocks for free with all my investment accounts I primarily invest in low-cost mutual funds for the long term when you invest for the long term you're not checking your account every day week or month you're putting your

money in you're making sure you have everything set and then you're checking it maybe twice a year but you're not stressing out every time the stock market is having a pen attack the problem is most people just can't stomach the ups and downs the market takes and over the past year things have been looking a bit dicey normally this is when people make one of the worst Financial mistakes in finance they call this timing the market basically it's when the market isn't doing too hot so you decide to stop investing or pull all your money

out and wait on the sidelines to get back in the right time there's two problems with this first you don't know if the stock market is going to go lower or higher because no one knows just like how economists have predicted 30 out of the last three Market crashes second even if you pull out at a really fantastic time when the stock market was really high and then it crashes you need to be right a second time to put it back in at the right time the best solution based on hard data in math is

to Simply invest a fixed amount every month consistently doesn't matter whether it's going up doesn't matter if it's going down let's say you invest 200 into Apple stock every single month for five years if you're investing a fixed amount amount of money each time you buy you'll get more shares when the stock price is lower and fewer when the stock price is higher over time this will minimize the cost per share you pay for your stock so if you have three hundred dollars to invest and you're looking at a very volatile stock called magic lamp

company in the first month it's ten dollars per share in the second month is five dollars and the third month is twenty dollars here's where dollar cost averaging comes in say you want to invest a hundred dollars a month for three months so at the end of three months you would have bought 10 shares in the first month 20 shares in a second month and then five shares in the third month so now you have 35 shares for 300 for an average price per share of eight dollars and fifty Seven cents your price per share

isn't the cheapest at five dollars per share assuming you could tell the future and bought everything in the second month but it's also not the most expensive at twenty dollars per share if you bought everything in the third month after you invested move on to the next step when it comes to life time is the most valuable resource it's the only thing we can't buy more of at the end of the day it doesn't matter how much money you have or save if you don't actually have the time to enjoy your life in economics they

call it opportunity cost basically the time you spend doing something is time not spent on doing something else on Sunday you might spend three hours washing the floors wiping the windows throwing out the trash but what if you spent those three hours working on a side hustle if you can make ninety dollars in three hours and you can hire someone to clean your house for thirty dollars then your time might be better spent on the side hustle over time you can use the difference to invest grow your money and buy even more time back to

do more of the things you love write down tasks that you absolutely hate to do cleaning a toilet mowing the lawn or driving 40 minutes to get groceries write down how much time it takes you to do each task how much money you could be making If instead of doing this test you were just working on your side hustle then look into how much it costs to hire someone else to do the task so putting all this together was helpful to see if it made more financial sense to hire someone to do something or to

keep doing it myself but the most important step of all is this I remember for a long time I did everything manually paying my bills saving for a house investing the problem is this takes dedicated time and brain power every week in Psychology they call it decision fatigue basically when you make a lot of decisions during your day the quality of each new decision decreases over time in the morning you might be able to make really great choices one after another but later that evening when you get closer to ten thousand decisions you might make

mistakes that you later regret buying a pair of airpod Max Mr magic lamp or this overpriced stapler but what if I told you that you can easily automate your finances so you never need to think about it again when it comes to setting up guideline automation it's going to save you so much time and headache in the long run nowadays I don't have to think twice about whether I paid my bills if I invest it this week I don't need track anything because I know it's already done here's how to do it first make sure

your paychecks are automatically deposited into your checking account then with your bank set up automatic transfers to move your paycheck into the first of two new accounts your spending account and your savings account your spending account includes fixed monthly bills and essential expenses like groceries gas and pineapple pizza by knowing how much you normally spend in a month set spending targets for non-essentials like restaurants movies and Uniqlo then set up automatic transfers at the end of the month to move what's left over into your second account savings from here the money and savings should flow

into whichever step you're at saving for an emergency fund paying off high interest debt investing or opportunity costs and that leads me to something that you've got to start accepting and it's not even if you're doing all these steps sometimes you still might not feel like you're not doing a good job financially and that might be because you don't know these 14 subtle signs click here to find find out you're financially doing better than you think [Music]