Do This EVERY Time You Get Paid (Paycheck Routine)

Mark Tilbury
24 Jul 202417:19

Summary

TLDRThis 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.

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Financial PlanningBudgeting TipsSaving StrategiesInvestment AdviceDebt ManagementWealth BuildingEmergency FundSide HustleCryptocurrencyTax Advantaged
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