Do This EVERY Time You Get Paid (Paycheck Routine)

Summary

This video offers a comprehensive guide to managing your paycheck effectively. It advises separating needs from wants, aiming for a financial baseline under 25% of income, and allocating 20% to a high-interest savings account. Further recommendations include paying off high-interest debt for a guaranteed return, investing 35-40% in tax-advantaged accounts like a Roth IRA, and considering high-risk investments like cryptocurrencies for potential high rewards.

Takeaways

• 💼 Spend less than you earn and have a paycheck routine to avoid money disappearing.
• 📊 Separate your expenses into 'wants' and 'needs' to better manage your finances.
• 🏡 Aim to keep your financial baseline (needs) to under 25% of your total income.
• 💰 Prioritize saving 20% of your income into a high-interest savings account for emergencies.
• 🚫 Avoid dipping into your emergency fund for non-emergency situations.
• 🚀 Pay off high-interest debt as quickly as possible for a guaranteed return on investment.
• 📈 Consider the avalanche method for debt repayment to save on interest costs.
• 💹 Invest in tax-advantaged accounts like ISA or Roth IRA to grow your wealth tax-free.
• 🌐 Diversify your investments with a mix of low-cost index funds for long-term growth.
• 🚀 Allocate a small portion of your income to high-risk, high-reward investments like starting a business or investing in cryptocurrency.

Q & A

What is the significance of having a paycheck routine?

A paycheck routine is significant because it helps individuals manage their finances effectively, avoid unnecessary spending, and build wealth over time.

How much does the average person spend on daily expenses according to the transcript?

The average person spends $5 on coffee, $15 on lunch, $4 on transportation, $2 on a sweet treat, and $1.40 on unwanted subscriptions daily.

What is the yearly equivalent of the daily expenses mentioned?

The yearly equivalent of the daily expenses is $10,000.

What is the first thing one should do after getting paid according to the video?

The first thing one should do is separate their wants and needs.

Why is it important to differentiate between needs and wants?

Differentiating between needs and wants helps individuals prioritize essential expenses and identify areas where they can cut back on non-essential spending.

What should be included in the 'needs' category?

The 'needs' category should include essentials like rent, insurance, bills, and other utilities.

What percentage of one's income should ideally be allocated to needs?

It is suggested that the financial baseline, or needs, should be around 25% of one's total income.

What is the recommended percentage of one's paycheck to save in a high-interest savings account?

It is recommended to save 20% of one's paycheck in a high-interest savings account.

Why is it beneficial to have a separate high-interest savings account?

A separate high-interest savings account acts as a safety net and provides better interest rates than a regular account, making it a more effective place to store emergency funds.

What is the avalanche method for paying down debt?

The avalanche method is a debt repayment strategy where you pay off the debt with the highest interest rate first.

What is the snowball method for paying down debt?

The snowball method is a debt repayment strategy where you pay off the smallest debts first to gain momentum and psychological satisfaction.

What is the recommended investment strategy for a tax-advantaged investing account?

The recommended investment strategy is to invest in a low-cost index fund like the S&P 500, with a long-term perspective and auto-investing feature.

What is the potential long-term return on investment for a low-cost index fund?

Historically, low-cost index funds have provided an average annual return of around 8% to 10%.

What is the final place to put one's money according to the video?

The final place to put one's money is in high-risk, high-reward investments such as starting a side hustle or investing in cryptocurrency.

What percentage of one's paycheck is recommended to be allocated to high-risk investments?

It is suggested to allocate 5% to 10% of one's paycheck towards high-risk investments.