Money Made Good: Recent Episodes

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At any given time, you’re either getting better or you’re getting worse. This extends to health, wealth, relationships...anything. It’s rare that you can maintain the status quo. So when it comes to improving in your job or career, you have to constantly look for ways to improve.

1. Personal Growth Fund
   1. Roughly 5-10% of your income
   2. Separate from your main checking account
2. Reclaiming Dead Time
3. Layer Complementary Skills
4. Think 12-36 Months Out
   1. Most people think 1 week to 90 days out...so they get short-term results
   2. Ask yourself, where do you want to be in exactly one year from now? (work backwards from there)
5. Join Facebook Group
6. Start a Side Hustle
   1. You learn a lot more through doing than just by soaking up knowledge
   2. This includes both successes and failures

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Americans are spending $765 more a month than they did in 2020.

• Post-COVID revenge spending
• Savings rates dropping from 33% to 9%
• The Psychological difference between spenders and savers
  • The pandemic has exposed a lot about our relationship with money. When heat is applied, you see what people’s natural tendencies are. Sometimes we confront them for the first time.
  • Factors that impact spending habits
    • Mother more than father
    • Individual life experiences (did you lose a lot at a key moment in your life?)
    • Amount of money you make doesn’t impact whether you’re a spender/saver
    • Money scripts concept
• How do you alter your spending habits to become a more intentional spender or a saver?
  • Get clear on where you land on the spectrum
    • If spending stresses you out…
    • If you love shopping and spending...
    • You want to land somewhere in the middle
  • Understand your weaknesses
  • Be mindful of the company you keep
  • Create a spending plan
  • Set up guardrails
    • Unsubscribe from Prime
  • Start small with saving
    • IRA Example

Saving often gets a bad rap – like it’s boring – but the truth is that it gets a lot less boring the longer you do it. Because eventually you’re the one with the disposable cash and leverage to live life on your terms.

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A grown child is someone who is physically old enough to be an adult, but who continues to think, act, and respond to the environment around them with childish behaviors, tendencies, words, and habits – as if they were still a young, helpless child.

Grown children are everywhere. There are 25-year-old grown children, 45-year-old grown children, and even 65-year-old grown children – though it appears to be a more prominent and persistent problem with today’s younger adults.

The culture is teaching young adults to stay children – even encouraging them to do as much. And while it’s too late for the culture to turn back at this point, the door is wide open for individual transformation...to those who are willing.

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This week’s episode is a primer on what to do with your paycheck.

In other words, you get paid, and then what?

Maybe you already have a plan and you know exactly what to do, but I find that most people just sort of play defensive money management.

• Defensive Money Management
  • Sit back and wait to see what happens
  • Bend don’t break
  • Generic, safe, prevent defense
  • Problem: It’s almost impossible to win if you’re only playing defense

But at a very basic 101 level of personal finance, you have to stop being reactive and start being proactive. And that begins with how you manage your money. You need to adopt an offensive approach to money management.

• Offensive Money Management
  • Control the game
  • Blitz
  • Come in with a game plan and then adapt
  • Have a system
  • Take calculated chances

At a fundamental level, having an offensive approach to money management means having a plan for where your money goes once that paycheck hits your account.

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Retirement Account (straight out of your paycheck)

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Checking Account

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Necessities

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Emergency fund

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Debt payments

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Investments

⬇️

Discretionary spending

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It doesn’t matter where you live in the U.S….the real estate market is scorching hot. And anytime you have a real estate boom, there’s a certain amount of pressure that bubbles up to the surface for younger buyers – particularly first-time buyers.

1. Historically low interest rates (with threat of rising rates)
2. Rapidly appreciating real estate values
3. Social media frenzy (social pressure)
4. Fear of missing out

Anytime you have financial pressures and social pressures converging, there’s a possibility for a dangerous outcome. 

Buying a house is not bad (and can be very smart), but here are some reasons it might not be right for you...right now:

• Renting offers more flexibility
  • Moving when you own a home is a pain + it’s expensive (8 to 10%)
  • With renting, you can move much easier when things change (job move, salary cutback, growing family, etc.)
• Renting requires no maintenance costs or unforeseen expenses
  • If something breaks, it’s on your landlord
  • Less stress
• Renting offers access to amenities
  • Pool, fitness center, business center, better location, etc.
• Renting requires no down payment
  • Buying a house can destroy your emergency fund
• Renting requires no property tax
  • Pennsylvania: 1.43% @ $300,000 property = $4,290/yr // $357/mo
• Renting insulates you from a crash
  • It’s not hard to see a bubble forming...do you really want to buy before the bubble bursts?
• Renting requires cheaper insurance
  • Average homeowner’s policy: $1,249
  • Average renter’s insurance policy is $179
  • Savings of $1,070 ($90 per month)

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1. Start Early
   1. Maria vs. Ana
2. Automate contributions
3. Choose good index funds (25% each)
   1. Large cap fund
   2. Mid cap funds
   3. Small cap fund
   4. International fund
4. Don’t bail when times get rough
   1. Warren Buffett Clip (Berkshire Hathaway)
   2. Bogle Clip (Founder of Vanguard)
   3. Growth example (missing best market days)
   4. Rolling Returns
5. Diversify
   1. As time goes on and your income increases, look for ways to diversify your investment portfolio (though never abandon index funds)
      1. Index Funds (within an IRA or 401k – preferably a Roth)
      2. Stocks and mutual funds
      3. Cryptocurrency
      4. Real estate
      5. Insurance/protection products (whole life/infinite banking, annuities, etc.
6. Work on increasing your income and staying the course
   1. Boredom is one of the biggest risk factors you’ll face in investing

Show Links

https://www.moneyunder30.com/small-cap-vs-mid-cap-vs-large-cap

https://www.schwab.com/investing-principles

https://www.thesimpledollar.com/investing/stocks/tempted-to-sell-missing-just-a-handful-of-the-best-stock-market-days-can-tank-your-returns/

https://www.thebalance.com/rolling-index-returns-4061795

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Post-Pandemic Study on Americans and financial regrets:

https://www.bankrate.com/surveys/biggest-financial-regrets/

Pre-Pandemic Study on Americans and financial regrets:

https://www.investors.com/etfs-and-funds/personal-finance/financial-mistakes-americans-learn-from-biggest-financial-regrets/

2021 Data:

• 20% regret not saving enough for emergency expenses
• 19% regret not saving for retirement early enough
• 18% regret taking on too much credit card debt
• 10% regret taking on too much student loan debt
• 7% regret not saving enough for their children’s education
• 4% regret buying more house than they can afford
• 4% regret something else

Cause Of Financial Regrets

"Financial mistakes generally stem from a tendency to live day to day financially. People start to get over their mistakes when they start to think about the future and think about what's possible financially in their lives. It boils down to this: People's financial mistakes stem from focusing on the near-term financially instead of the long-term." (Brian Madgett, head of consumer education at New York Life)

How to Avoid Financial Regrets

• Stop living paycheck to paycheck/build an emergency fund (episode 20)
  • There’s no excuse
  • Earning $50k per year, you’ll make $2M in your lifetime. ($4M @ $100k/yr)
  • Learn how to manage a little and you’ll win with a lot
• Start saving and investing when you’re young
  • You have decades to recover. Dips in the market are only paper losses. Unless you believe the entire American economy is going to collapse (meaning the entire world’s economy will collapse), you shouldn’t stress. It’s a long-term game.
• Stop trying to time the market → Stick with dollar cost averaging
  • When the market pulls back – which it does regularly – if you're systematically putting money away (not trying to time the market), you get more shares as prices go lower. Then when the market rebounds (which it always does), it accelerates your growth. That's the power of dollar-cost averaging."
  • Take advantage of employer match (Episode 7)
• Stop acting rich when you’re not rich...and you can actually become rich (episode 21)
• Don’t let escalating income lead to escalating expenses (episode 10)
  • 25% Rule: 25% goes to spending and lifestyle // 7% to saving, investing, etc.

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Reasons Why People Hate Budgets

1. Feels constricting
2. Puts us on the hook
3. We’re in denial
4. Seems like too much work (laziness)
5. Not sure where to begin
6. We’ll say we’ll budget when we make $X per year
7. We tried it once and it didn’t work
8. We think people will make fun of us (pride)

How to Actually Start (and Stick With) Budgeting

1. Reframe your view (think of it as a “Spending Plan”)
2. Put yourself in charge of the budget
3. Create a discretionary expense fund
4. Make it automatic
5. Tweak the system to work for you.
6. It’s not 100% or nothing…

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If you’re anything like me, you know there are decisions you need to make with your money, but you’re hesitant to take action until you feel like you’ve read enough books, listened to enough podcasts, or talked to enough people.

And while I’m all for research, there comes a point when you just have to do something. You have to take action.

1. Potential Energy vs. Kinetic Energy
   1. Learning vs. doing
2. If you’re 80% there, act now.
   1. Use what you know and do what you can
   2. Observe what happens, learn from the mistakes, iterate to great
3. Progress not perfection
   1. The goal is not to do something perfectly
   2. If you look at the people who are most successful with their money, they’re rarely the people who took years and decades to carefully plan everything out. They took action, made mistakes, and learned from them.
   3. Show me a successful person, and I’ll show you someone who has a long list of mistakes and failures in their past. (Why do we glorify these stories, yet try to pretend like we can be the exception to the rule?)

Resources:

https://taraenergy.com/blog/potential-and-kinetic-energy-explained/

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How do you add value?

Stop trying to impress everyone and start impressing the people that actually matter by doing work that adds value.

Trying to make friends with everyone is something that a high school kid does to fit in.

An actual adult doesn’t care about short-term happiness nearly as much as long-term happiness – which is rooted in assurance.

If you’re always trying to please others, you’re fixated on short-term happiness. And if you’re fixated on short-term happiness, you’re unable to provide maximum value to the people that are in charge of your income (whether that’s an employer, clients, customers, etc.)

Stop trying to please people who will never like you anyway and focus on doing what it takes to plant long-term seeds that will eventually grow into something far bigger and better.

1. Intentionally architect your day
   1. Start on Sunday
   2. Prep the the night before
   3. Begin the day
   4. Rest at the midpoint
   5. Brain dump before finishing your workday
2. Wake up with purpose
   1. Put your alarm/phone on the other side of the room.
   2. Prep the night before
   3. Minimizing decision fatigue
   4. Fight the first 90 seconds
3. Leverage the UOA strategy
   1. Under Promise
   2. Over Deliver
   3. Ask for Feedback

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I was on LinkedIn today and one of the headlines in the curated “LinkedIn News” section of the news feed read “Millennials Face Wealth Conundrum.” It piqued my interest, so I clicked...and the content was pretty predictable.

Scott Olster: “As the oldest members of the millennial generation — born in 1981 — turn 40, many are struggling to build wealth at the rates of their generational predecessors. While baby boomers in the U.S. enjoyed an average of $113,000 in wealth (in today's dollars) in their early 40s, millennials only had $91,000, according to Bloomberg. What's behind this wealth gap? Part of it is unfortunate timing, with millennials facing both the Great Recession and the pandemic's economic shocks at key moments in their economic lives. Mounting student debt and skyrocketing housing costs have only made matters more challenging.”

I’m not going to argue what boomers (or any generation did or didn’t have, in terms of circumstances – though the successful boomers I know worked their tails off...and many still are...so I’ll be the first to push back on that). But my question is, why are we wasting time comparing how difficult our situation is today to how “easy” theirs was?

Who cares?

There’s absolutely ZERO value in doing that.

Do you want to know the real reason most millennials don’t have any wealth and probably never will?

It’s because our generation would rather look rich than actually be rich.

3 Things That KILL Your Ability to be Rich

1. Settling for an average income

Always look for ways to increase your value in the job marketplace:

• You’re either adding value to your employer/clients, or you’re not. People will pay you anything if you can add more value than you command in payment (E19)
• Nothing wrong with earning a middle class salary, but are you using some of that money to create additional streams of income?

2. Investing in depreciating assets

Cars, Boats, Phones, etc. The value of these items – with very rare exceptions – goes down every single day. And if you hold off on buying these things before you actually accumulate wealth, you’ll be able to get your hands on as many of them as you want down the road. Embrace the concept of delayed gratification.

3. Divorce

According to a study recently reported on Bloomberg.com: Divorce leads to very grim outcomes for the majority of couples – and it gets worse as you age.

If you get divorced after age 50, expect your wealth to drop by about 50%

Researchers found that when women divorce after age 50, standard of living plunges 45%. Older men see their standard of living drop 21% after a divorce.

And the later you get divorced in life, the more difficult it is to bounce back.

Links

https://www.linkedin.com/news/story/millennials-face-wealth-conundrum-5074252/

https://www.bloomberg.com/news/articles/2019-07-19/divorce-destroys-finances-of-americans-over-50-studies-show

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The Real Secret to Being Successful With Money

• Successful personal finance is really just the combination of doing dozens of small things right – at first for days, then for weeks, then months, and then years. It’s not picking the right stocks or waiting until you start earning a higher income.

What is an Emergency Fund?

• A pile of money that’s intentionally set aside to cover unforeseen emergency expenses that come your way. This includes things like car problems, medical expenses, and unexpected home repairs.

Why Do You Need an Emergency Fund?

• Keeps you out of debt
  • 26% of people have unpaid medical bills
• Preservers your retirement and helps maintain momentum
  • 14% of people have had to take a loan against their retirement account
  • 10% of people have taken a hardship withdrawal from a retirement account
• Provides peace of mind

How Much Do You Put In an Emergency Fund?

• Conventional school of thought is 3-6 months of essential expenses.
  • 6 months is ideal if you’re single or in a one-income household.
  • 3 months should be okay if you’re in a two-income household.
• What are essential expenses?
  • Food
  • Shelter
  • Transportation
  • Medical
• Not essential:
  • Eating out
  • Vacation
  • Amazon shopping
  • Investing
• In most households, only a percentage of monthly spending is essential. You might spend $5,000 per month, but don’t be surprised if just $3,000 is essential. (In that case, you’d need to set aside somewhere between $9,000 - $18,000.)
• An emergency fund is not designed to “float” your normal lifestyle. It’s intended to keep you solvent when everything goes wrong. Ideally, it’s used as a stopgap for random emergencies. In a worst-case scenario, it should be able to cover you for a period of several months if you lose 100% of your income.

What to Use an Emergency Fund For

• An emergency is something that you don’t foresee coming at the beginning of the month when you draft your budget, but that must be dealt with quickly. As previously mentioned, it’s something like car problems, medical expenses, or unexpected home repairs.
  • Recently had the water pump on my car bust…$800 fix
  • AC unit and furnace at old house...$6,500 expense
  • Emergency room visit….several hundred dollars

Tips for Starting an Emergency Fund (and Keeping it Fully Stocked)

• Start by cutting everything for 90 days
  • Eliminate non-essential expenses and put all of that money to your emergency fund (this includes investments and retirement contributions)
• After the 90-day blitz, you can relax a little bit. But you still want to be putting significant money toward the emergency fund. (Still no investing or retirement contributions. Min payments on debt is fine.)
• Once you fill it up, keep your hands off it. (Out of sight out of mind. Separate account if needed)
• Refill immediately w/ next month(s) budget

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Depending on where you are in your career, reaching $52k a year may be a big leap, or it could be something you’re pretty close to already.

For me, whenever I’m setting financial goals, it helps to break it down into the smallest increments possible.

52,000 is a big number (and 365 days is a long time). If you want to be successful in reaching your goal break it down further:

$1,000 per week = $200 per day

$200 per day = $20/hr (10 hours) OR $25/hr (8 hours)

Simply reframing the goal makes it look even more manageable than it originally seems.

Tips and Tactics for Earning $1,000 (or More) Per Week

If you go online and look for answers on how to earn $X per week, you’re always going to get the same generic answers and recycled suggestions. Someone who probably has no experience generating money online will tell you to start earning passive income. (Well, duh!) And they’ll give you a list of options like:

• Affiliate Marketing
• Digital Marketing Consultant
• Dropshipping
• Amazon FBA
• Refurbishing items
• Freelance Writing
• Stock Photography
• Filling out surveys
• Starting a blog

There’s nothing technically wrong with these suggestions, but they’re so saturated and it’s going to take you forever to start making $200 per day.

If I woke up tomorrow and had no clients and no income, this is precisely what I would do. And I have no doubt that I could scale to $1,000 week by the end of the month. And I’m confident you could do the same, too.

For starters, it’s all about adding value. (People will pay you anything if you can add more value than you command in payment.)

Understanding this, here are some suggestions:

1. Brand yourself with authority & put yourself out there (FB & LI groups)
2. Know your skills and know what value you add (be bold with your rate)
3. Find people you can help (ideally business owners) and reach out in a non-spammy way
   1. LinkedIn Profile → Loom Video
   2. BombBomb
   3. Do this three times per day
4. Do away with the notion that certain work is beneath you
   1. Do anything on a short-term basis if it creates potential for long-term gain

If you’re looking for a generic answer, you’ll find plenty of message board warriors who will point you in the direction of taking online surveys and other bogus. But if you’re serious about growing your income to $1,000 per week (and eventually $2k, $3k, or $5k or more per week), then you have to figure out how to add value.

I think this formula of branding yourself + building authority + reaching out is the best approach.

Links

https://bombbomb.com/

https://www.loom.com/

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Data for couples that are dating:

• 88% of men and 96% of women do NOT bring up the topic of money on dates.
• The majority of men (64 percent) and women (53 percent) say they talk about money with their SO "only when necessary."
• When talking about money with their SO men are most likely to (50 percent) feel "confident;" while women (34 percent) are most likely to feel "comforted."

Data for couples that are married:

• nearly one-in-three (30%) couples say finances cause the most stress in their relationship, followed distantly by intimacy (11%), their children (9%) and their in-laws (4%).
• 12% of the general population say they’ve never talked about money with their spouse.
• Among those surveyed, $275 is the average threshold at which couples need to consult with their partner before making a purchase ($395 among affluents and $249 among young professionals).
• Forty percent believe their partner spends more money than they do on things outside of household expenditures. The same number (40%) consider themselves more diligent than their partner when it comes to saving money and budgeting.
• While only 43 percent of the general population talked about money before marriage, the number rises to 57 percent for affluent couples and jumps to 81 percent for young professionals.

Problem: Lack of Communication over Finances Often Leads to Financial Infidelity and/or Can Create Resentment 

Examples:

• Keeping your full income a secret
• Hiding a bank account from a spouse when you have a joint account together
• Opening a credit card your significant other doesn’t know about
• Hiding money before divorce so it’s not included in the settlement
• Using a partner’s credit card or credit identity without their knowledge
• Secretly saving money from your spouse so they don’t spend it

“When you talk about how much you make, you are assigning a value to your worth, and that puts you in a really vulnerable position to be judged or discredited,” Dr. Madeleine Katz (psychologist).

Reasons to open up:

• Getting on the same page financially does more than align dollars and cents – it aligns your goals and values. (Money talks are rarely about money.)
• You shouldn’t be making important financial decisions in a silo. (“The prefrontal cortex, the part of the brain that allows us to think critically and make decisions, doesn’t fully develop until the early 20s for women, and the mid-20s for men,” Katz says. “Technically speaking, that is probably not the best time to be making big financial decisions.”)

How to be more open:

• Take small steps
• Talk about each other’s financial upbringing
• Unify around a shared goal
• Do away with separate accounts (for married couples)
  • Idea of equal value, but not equal responsibility
• Have a weekly/monthly money meeting

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Here are some specific ways you can spring clean your finances and get organized this year:

1. How do you spend money?
   1. Cash
   2. Debit
   3. Credit card(s)
2. Set up a spreadsheet and/or password manager
3. Get clear on subscription services
4. Organized bill payments
   1. Same dates if possible
   2. Set up reminders
5. Develop a filing system
   1. Physical: Receipts, Taxes, Temporary Hold, Bills
   2. Digital: Google Drive Cloud Folders
6. Curb “Account Sprawl” (consolidate accounts)
7. Update or create a will
8. Update beneficiaries on accounts
9. Stop the clutter (opt out)
10. Reset your budget

The goal is progress not perfection. Take small steps. One foot in front of the other. It might not feel like you’re going anywhere fast, but you’ll look back and see major progress in three months or six months from now.

FTC.gov Opt-Out:
https://www.consumer.ftc.gov/articles/0262-stopping-unsolicited-mail-phone-calls-and-email

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Awareness + Sound Principles + Discipline + Money = Wealth

• Awareness: You have to be aware of the fact that you have a problem/need. If you’re disillusioned by the idea that your finances are fine or that you can spend your way out of the issue, you’ll never make the changes needed to discover financial freedom.
• Sound Principles: You need the right techniques, tactics, and frameworks to get from where you are (broke, paycheck to paycheck, anxious, stressed, envious, etc.) to where you want to be (no longer anxious, financially free, able to spend time doing what you enjoy).
• Discipline: The principles I teach are proven. They work. (And they’re easy to understand.) The difficult part is putting them into action and developing the mental muscles to make smart decisions over and over again. If the principles are the technical element in the equation, this is the soft side - the psychological/mental side of things.
• Money: Finally, you need money. I intentionally include this last on the list because I think it’s the least important of the four. But you do need money to build wealth. And it helps if you’re proactively working to elevate your career so that you can gradually increase your earnings over time. Because while it’s not necessary to make $100k, $250k, $400k per year to gain financial freedom, it can certainly accelerate the process.

Financial literacy rates are lower than they’ve ever been among young people, which is a byproduct and a consequence of a broken system. It’s not your fault. Your educators, the government, and even some of your parents have let you down...and they aren’t going to pick you up or show you the way.

It’s up to you to seek out financial education and understand how to earn, spend, save, invest, and give with intentionality and purpose.

“Financial literacy is a 21st century survival skill; everyone should be learning that.”

Just five states – Alabama, Missouri, Tennessee, Utah, and Virginia – require a standalone personal finance course for high school graduation in 2021. That means 90% of states have no personal finance requirement!

If you’re a young adult listening to this, there’s one thing I want you to know: It’s not your fault.

If you commit to learning for the next 90 days, your entire mindset will change. I can promise you.

My biggest piece of advice would be to learn from as many different voices as you can:

• Go back and listen through all of the previous episodes of the Money Made Good Podcast
• Research questions on YouTube
• Find personal finance blogs and Reddit boards
• Read books! (I’ve discussed some of my favorite money books in Episode 13)
• Surround yourself with people who have a higher financial IQ. Ask questions...then be quiet and listen

It doesn’t matter if you’re 15, 20, 25, 30...even 35 or 40 – two things are true:

1. It’s never too late to become financially literate
2. There are no shortcuts to becoming financially literate

Nobody can learn the skills required to build wealth other than you. Yes, you eventually have to go out and execute...but for right now I want you to focus on acquiring that baseline understanding of how to earn, spend, save, invest, and give.

It is, however, your responsibility to pick yourself up and learn.

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50-30-20 Budgeting Ratio

20% Savings (cash savings, investments, retirement)

30% Wants (entertainment, eating out, travel, etc.)

50% Needs (housing, food, bills etc.)

6X Month Emergency Fund Ratio

Strip your budget down to basic expenses (What does it take to survive? Food, shelter, transportation, insurance, minimum debt payments, etc.)

Multiply this by 6. (If your basic expenses are $4k, you need $24k)

This is how much you need in an emergency fund to be reasonably secure.

If you’re a dual-income household, you can probably get away with 3 to 4 months ($12k to $16k on $4k/mo expenses)

Targeted Net Worth Ratio

Age X (Pretax Income / 10)

Don’t get too hung up on this ratio, because it can be intimidating. However, it’s a good figure to keep in mind. It can take you well into your 30s or 40s to finally meet/surpass the recommended threshold, but keep it in sight. (That’s when income starts to increase dramatically and student loans start to slide off.)

10X Ratio for Life Insurance

Take your income and multiply it by 10. This is how much term life insurance you need.

If your income is $50k/mo, that means $500k in life insurance.

If your income is $100k/mo, that means $1 million in life insurance.

This ratio is designed to allow for 4% annual withdrawals – i.e. roughly 40% of your annual salary each year. (Invested properly, this means your life insurance ‘nest egg’ will actually get bigger each year.)

(Quick note: If you’re single and have no kids or dependents, you don’t need to follow this ratio. Even if you’re married with no kids, you probably don’t need to worry about a massive life insurance policy, in my opinion….)

Mortgage Ratio

2.5 X Primary Income = Maximum Mortgage Balance

If you make $100k per year, this means your maximum mortgage balance should be $250k.

This doesn’t mean you can’t buy a house worth more than this – just that your mortgage should remain within this limit. If you want more house, put down more money.

Debt-To-Disposable Income Ratio

Monthly Non-Mortgage Debt / Monthly Disposable Income

Example: You have $400 car payment, $250 in student loans, and $100 credit cards = $750 per month. // Your disposable income is $2,500. Debt-to-Disposable income = 30%

You should ideally keep this ratio below 15%. And unless you have a lot of good debt – meaning investment real estate, savvy business investments, debt that produces income – the closer you get it to zero, the better.

10% giving

Others may disagree, but this is the rule of thumb I like to use. It’s sort of the biblical framework for giving, but you don’t have to be a Christian to see the value in giving.

Giving is something you have to practice at all times, not just when your income skyrockets. It’s a muscle that you have to work. If you wait for some future point, it’ll never come.

Find causes that you believe in and want to support. Giving should make you slightly uncomfortable. It should cause you a little discomfort, but it should also bring joy.

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Welcome to the Money Made Good Podcast where we teach people how to handle the Big 6 of money and personal finance:

• Earning
• Spending
• Saving
• Investing
• Giving
• Dreaming

If this is your first time listening to the podcast, I’ll give you my 10-second definition of what it takes to build wealth. I’ve boiled it down to a simple equation with four variables.

Awareness + Sound Principles + Discipline + Means = Wealth

That last variable one is pretty important.

I’m a big believer in living within your means. And as boring as it sounds, it’s one of the foundational elements of wealth-building. It doesn’t matter which way you slice it – it’s impossible to build wealth without living within your means.

Living within your means means spending less than you bring home every month and using that surplus to to save and invest.

I’ve laid this out in previous episodes (like Episode 1 and Episode 10)

One of the keys to punching back against Aspirational Wealth is escaping the “Keeping Up With the Joneses” mentality.

HOWEVER, it can be interesting to look at what others are doing and to use it as a measuring stick for positive financial decision-making.

This is something you can actually do using a website called StatusMoney.com

Every year , the average American spends:

• • $18,886 on housing (including property taxes) ($1,573 per month)
• • $9,049 on transportation ($754 per month))
• • $7,203 on food ($600 per month)
• • $2,913 on entertainment ($242 per month)

How to Combat Social Pressure Spending

• Who are you spending time with?
• Limit cash on hand (spending limits // out of reach)
• Focus on earning/creating
• Learn to say no

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This is not a list of the best books I’ve ever read – or even my favorites – it’s more a list of useful resources that sort of run the gamut in terms of different financial ideas and beliefs.

Some you’ll find in the “personal finance” section of the bookstore, while others don’t actually have anything to do with money (but provide useful frameworks that can be transposed to how you handle money).

• The Richest Man in Babylon (by George Clason)
• Think & Grow Rich (by Napoleon Hill)
• Stop Acting Rich (by Thomas Stanley)
• Everyday Millionaires (by Chris Hogan)
• Thinking Fast and Slow (by Daniel Kahneman)
• Mistakes Were Made...but Not by Me (by Carol Tavris and Elliot Aronson)
• Atomic Habits (by James Clear)
• Tools of Titans (by Tim Ferriss)

So those are a few books that have influenced my financial DNA, so to speak. Obviously some of them are finance specific, while others are more or less psychology books. But I think one of the keys to creating wealth and mastering your ability to earn, spend, save, invest, and give with purpose is to hear from multiple voices and then figure out which pieces work for you.

Maybe there’s a book or two in here that piques your interest? Also, I’d love to hear if you have a favorite book or resource...so just let me know!

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Data from EducationData.org:

• The student loan debt crisis:
  • Student loan debt in the United States totals $1.71 trillion and grows 6 times faster than the nation’s economy.*
• 43.2 million student borrowers are in debt by an average of $39,351 each.
• 15% of all American adults report they have outstanding undergraduate student debt; 7% report outstanding postgraduate student loans.
• Student debt experience:
  • 52% of students who had taken on student loan debt did not feel it was worth it.
• Student loan payments have an annual growth rate of 6.6%.
• 53% of millennials have not bought a home because student loan debt either disqualified them or made it impossible to afford a mortgage.
• Average Payments:
  • The average student loan monthly payment: $393
  • The percentage of borrowers with growing loan balances: 47.5%
  • Just 37% of all borrowers saw their student loan balance shrink
  • Average repayment period of 21 years

College isn’t for everyone

• If you rewind to the 1940s, somewhere around 5% of the U.S. population had a bachelor’s degree (25 and older). Today, 35% of the U.S. population aged 25 and over has a college diploma. Over that time, the population has more than doubled. So the number of college-educated Americans has ballooned from 6 million to something like 110 million people.
• The graduate degree is really the new college degree...but even that is fairly commonplace in many industries. (And costs even more to secure another degree.)
• I’m not telling anyone not to go to college, but I would think very carefully about going into massive debt just to secure a degree that no longer sets you apart. And, unfortunately, the old way of paying your way through college doesn’t work. (Waiting tables, part-time work, etc.)
• Scholarships and grants remain the best option, but there’s another alternative.

Deferred Tuition / Income Share Agreements (ISAs)

• What?
  • According to NerdWallet: “An income share agreement is a contract in which you receive money for your education. In return, you promise to pay the ISA provider a fixed percentage of your income for a set amount of time after you finish school. You may repay more or less than the amount you received, depending on your agreement's terms.”
• Why?
  • Greater accessibility to education (don’t have access to loans and/or don’t want to go in debt)
• Greater motivation for the school to prepare you to find a job (and help you obtain one). They have a vested interest in your success.
• Gives you time to build up your finances until you make enough to afford to make payments.
• Removes most of the risk for the student: If you don’t end up getting a good job, you aren’t saddled with a massive student loan that gives you value in return.
• How to find them?
  • Colleges offering ISAs
  • ISA Lenders
    • Stride Funding
    • Avenify
  • Bootcamps
    • App Academy
    • The Grace Hopper Program
    • The Lambda School

Conclusion:

• I hope you found this discussion today helpful. It’s a little different than what I typically do on the podcast, but is a relevant issue that I don’t feel like gets discussed nearly as much as it should.
• Everyone seems to think it’s a four-year college or nothing, but there are so many more options.
• Yes, there’s a lot to be said for the college experience, moving away from home, growing up, and maturing in a semi-controlled environment, but it’s not always worth tens of thousands of dollars in student loan debts.
• Whether you’re a high school student preparing for the next step, someone in your mid-to-late 20s who is contemplating getting a degree, or even a parent who has children nearing “college age,” give ISAs some thought. If nothing else, explore the different options that exist – including apprenticeships, trade schools, and alternative forms of education.

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COVID Relief Bill #3 → $1.9 Trillion

What’s Inside?

How much will you get?

• Stimulus Check Scenarios
• Child Tax Credit

NOT Free money!!

You’ll spend decades, possibly the rest of your life paying for this...

1. Inflation...
2. Higher taxes...

If you need the money, use it to cover the basics first: food, shelter, healthcare, etc.

If you don’t “need” the money, put it to work.

1. MAX Your Roth IRA/401k
2. Spread out across mutual funds and crypto investments
3. Go cash heavy so that you’re ready to invest when the real estate market pulls back
4. Use it to offset tax burden
   1. Rolling over an IRA
   2. Cashing in a whole life policy
   3. Etc.
5. Start a business
   1. No more excuses (“I don’t have the money”)

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What is Lifestyle Creep?

In the most basic sense, lifestyle creep is a natural reaction to spend more money as you make more money. It can be good or bad...it’s all about how you handle it.

Examples of lifestyle creep include:

• Buying a bigger house
• Upgrading your cars
• Going on a shopping spree
• Getting loose with your budget

The Good: You work hard so that you can enjoy life and provide for your family

The Bad: The problem is when your lifestyle upgrades in lockstep with your increasing income (or, worse, it outpaces).

Dan Egan Quote: “By my estimate, for every additional $100 in monthly lifestyle spending you start having before retirement, you’ll need about an additional $30,000 at retirement to keep steady.”

Equation: $100 per month x 12 months per year x 25 years in retirement = $30,000

Mindset:

The truth is that lifestyle creep is purely a mindset game - not a numbers game. There’s no one telling you that you have to do something with your pay increase...in fact...all other factors tend to remain the same. (Unless the pay raise comes with a move to an expensive new city, there’s no requirement for spending more.)

It’s all about your mindset. Good habits will help you maximize the increase. Bad habits will make you wish your income never increased.

Tips for Overcoming Lifestyle Creep

1. Spend the first increase on whatever you want

2. Max out your savings and investment goals

3. Treat it like windfall money (Episode 5)

4. Beef up emergency fund

5. Pay down high-interest debt
6. Invest in yourself

7. Joy multipliers

8. Use the 25% Rule

9. 25% goes to spending and lifestyle increases

10. 75% goes to saving, investing, growth opportunities

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In the business world, corporations use the term “tech stack” to describe their unique combination of applications and software for running certain processes.

As I work on simplifying my own finances, I think about it in a similar vein. If I can develop my personal finance tech stack, it removes so much of the friction that exists with trying to: track money, move money around, and filter out noise.

Budgeting Tech: Every Dollar

Other Good Options: YNAB & Pocket Guard

Investment Guidance Tech: Sound Mind Investing

Investing Brokerage: Fidelity (IRAs & Mutual Funds), Robinhood & WeBull (Stocks)

Other Good Options: Schwab, E-Trade, Vanguard

Net Worth Tracking: Excel Spreadsheet & Personal Capital

...

The goal isn’t to have the most advanced apps and tools!

My goal is to simplify things, so that I’m spending LESS time researching, moving money around, trying to track expenses, etc. This allows me to spend more time producing, being creative, and doing the things I enjoy.

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This week, we’re going to discuss some of the psychological factors that prevent wealth building in the first place.

There are tons of different elements in play, but there are three that I believe are pervasive and destructive.

Identifying them is the first step.

Neutralizing them is the second step.

Replacing them with smarter habits is the final step.

In this episode, we’re going to expose three psychological inhibitors that hold many Americans back.

Factor #1: Laziness

It’s rare that someone just waltzes into wealth. The data proves that wealth building requires hard work, effort, and discipline.

Factor #2: Impulsiveness

Do you walk into a store and buy things you weren’t planning to purchase?

Does your Amazon shopping cart get bigger the longer you spend on the site?

Do you make major purchases without doing any research?

If you answered yes to any of these questions, you may have an impulsive personality. And even though impulsiveness can have positive qualities in other areas of life, it puts a strain on finances and prevents optimal wealth building.

Factor #3: Scarcity Mentality

If you look at people who are struggling financially, many of them have what's referred to as a "scarcity mentality."

The scarcity mentality is a pessimistic view of money. It sees the world’s money supply as one big tub of ice cream. Every time someone else makes a dollar, there’s one less scoop for you. And as more people find success, fewer people have the opportunity to build wealth.

Learn how to overcome these three BARRIERS and begin your path to financial success.

Visit

MoneyMadeGood.com

and plug in your email address to receive our weekly “Health, Wealth, & Wisdom” content.

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QUESTION: “27, engaged, getting married in October, and seeking advice on how to get my finances moving in a positive direction. We just bought a house, both have salaries, and I just don’t know where to start with saving, investing, etc. Whether it be pay off credit card debt as fast as possible or chisel away at the debt while saving cash? Or how to pay off debt, while saving cash, and still investing all at the same time?

It’s all just daunting because of all of the different advice I get. I also happen to be professional procrastinator and wanting to turn it around. Thanks in advance for the advice.”

7-Step Money Plan for Newlyweds

Step 1: Figure out what the heck is going on.

Step 2: Save enough cash to cover 30 days of expenses

Step 3: Get current with credit cards.

Step 4: Speak to HR about employer match

Step 5: Develop a hands-off investing plan. (Optimum asset allocation.)

Step 6: Invest in yourself (The power of ‘skill stacking.’)

Step 7: Stay focused (Do this once a month.)

Visit MoneyMadeGood.com and plug in your email address to receive our weekly “Health, Wealth, & Wisdom” content.

Links:

• Reddit Question
• Employer Match Information & Explanation

Sound Mind Investing

(Full Transparency: SMI will give me a couple of free months if you sign up through my link. But it doesn’t cost you an extra dime!)

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Sometimes your brain will automatically and subconsciously dictate your actions. 

Other times intentionally making smarter decisions will rewire the neural pathways in the brain. It works both ways. But in this episode, we’re going to discuss the second aspect.

More specifically, we’re going to discuss the relationship between smarter spending habits and how you can trick your brain into saving more money. 

To understand how this works, we must first understand what behavior change looks like in the brain.

Saving is something that’s often seen as stingy and boring, but it’s an integral component of good financial health. 

Examples include:

• Saving up for a down payment on a house
• Saving to build up an emergency fund
• Saving for retirement
• Etc.

There are really three ways you can save money:

1. Increase your income and save the surplus
2. Spend less on things you’re already spending on
3. Cut out expenses and stop buying things you don’t need

5 Strategies for “Tricking” Your Brain Into Saving Money

1. Price in to Hours
2. Pay in Cash
3. Round Up Savings
4. Give it time
5. The Stranger Test

Visit MoneyMadeGood.com and plug in your email address to receive our weekly “Health, Wealth, & Wisdom” content.

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Windfall Money: Sudden and sometimes unexpected money that randomly and intermittently comes your way.

• Stimulus
• work bonuses
• tax refund
• birthday money
• small inheritances

Two things everyone should know (in relation to their finances):

1. How much you make each month
   1. Gross
   2. Net
2. How much you’re spending

Unfortunately, most people don’t know how much they’re spending. Research from Mint shows:

• 65% of Americans say they don’t know how much money they spent the previous month.
• 1 in 3 people say they wish they’d spent less the previous month.

It’s no surprise then that the number one stressor for 44% of people is money. We can’t feel in control if we don’t know what we’re doing with our money.

Tips for Putting Windfall Money to Good Use

1. Beef up emergency fund
2. Pay down high-interest debt
3. Invest in yourself
4. Invest in Joy Multipliers

Visit MoneyMadeGood.com and plug in your email address to receive our weekly “Health, Wealth, & Wisdom” content.

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What we were taught as young kids:

• Find a good job with a large company
• Work 40 to 50 hours per week
• Get a small raise every year (and maybe a bonus!)
• Save and invest a little
• Retire at 60
• Enjoy life

There are so many things wrong with this formula - and there are things we can pick apart in future podcast episodes and blog posts - but in this episode, I want to drill down and get to the core of the problem.

I’m talking about the notion of trading time for money.

When you work for someone else, you’re basically trading hours for income. And while that might seem fine when you’re first starting out in your career, it’s a very limiting place to operate from. You might get paid a lot for your time, but you’re still limited.

I call this the Time = Money Equation - and there are two computations every listener should run today:

• Equation 1: Hours Worked x Hourly Rate = Earnings

(Ex 1: 50 hours x $20 per hour = $1k Paycheck)

• Equation 2: Max Hours You Could Work x Hourly Rate = Max Earnings

(Ex 2: 75 hours x $20 per hour = $1,500 Paycheck)

(Ex 3 w/raise: 75 hours x $30 per hour = $2,250 Paycheck)

You might be able to make some decent money, but in order to make more money, you’re always going to have to put in more hours. (And the more hours you work, the less you’re actually taking home, due to tax increases. So you might be making $500 more when you scale from 50 hours to 75 hours, but your net gain is smaller.)

If you work less, you make less. (Vacations, sick days, etc.)

When you’re constantly trading time for money, your life becomes limited. Every decision is judged with a computation.

• The question is, how do you stop trading time for money?
• How do you escape the Time = Money Equation and finally enjoy freedom and greater earning potential?
• How can you earn money while you’re on vacation or enjoying a hobby?
• Solutions/Takeaways

Action Steps

1. Rethink you you present yourself

2. Do what you say you’re going to do

3. Underpromise and overdeliver
4. Show up on time

5. Treat people as people

6. It’s time to think about trading value for money. (Mindset shift)

7. Stop spending your time building someone else’s dream and start building your own. (Think like an entrepreneur.)

8. 10X your value (Instead of working with 10 clients who pay you $10 per hour, work with 2 clients who pay you $50 per hour)

9. Create a product or service that you can sell at scale

10. Learn to love automation and systemize everything

11. Create Your “3 Lists to Freedom” (Chris Drucker)

12. HATE doing

13. SHOULDN’T do

14. CAN’t DO

15. Reinvest in yourself and business NOW (delay gratification)

16. Work Smarter

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IYADWYADYAGWYAG = If You Always Do What You’ve Always Done, You’ll Always Get What You’ve Always Got

If You don’t have a good track record with money, why are you still doing the same things?

• If you get harassed by a dog every time you walk down a particular street in your neighborhood, you aren’t going to keep walking down that street. You find a new way so that you don’t get harassed.
• If you get your pay docked every time you show up late to work, you eventually learn not to show up late to work. You show up on time, so that you can get your full paycheck.
• If you’re playing golf and you always swing a 9 iron into a particular par 3 and it always sails 20 yards past the green, you eventually stop swinging the 9 iron and go a club down.

We make changes in almost every area of our lives, yet we seem to repeat the same financial mistakes over and over again. (This is largely because we don’t even know they’re mistakes. We just think that’s the way things are.)

PLUS...4 Detrimental Money Patterns I See Our Generation Making:

• Normalizing bad debt as “just a part of life”
• Spending every last penny (no emergency fund)
• Refusing to accept entry level jobs
• Putting off investing for another day

How can you create better financial patterns?

What’s the one thing you can act on?

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If you want something, you can pretty much get it right away.

And it’s cultivated a sense of instant gratification in every area of our lives...which is dangerous.

This happens in both big ways and small ways. But at the end of the day, it all comes down to our unwillingness to forgo satisfaction today in order to enjoy something bigger and better tomorrow. 

And when I think about this idea, I can’t help but think about one of my favorite movies as a kid: Willy Wonka & the Chocolate Factory. (The Gene Wilder version)

And my least favorite character from that move...Veruca Salt.

If you remember, Veruca Salt is the second Golden Ticket winner. She’s the manipulative brat of a little girl who has rich parents and has been fed with a silver spoon her entire life. And when she gets into the Chocolate Factory, she asks her father to buy here one of Wonka’s golden egg-laying geese. Wonka refuses and Veruca goes into a tirade of a song singing, “I want it now!”

We do the same thing. When we want something...well...we want it NOW!

I call this the Veruca Salt Mentality. And it’s especially evident in our financial lives where we’re accustomed to instant gratification.

The problem is that you can’t instantly build wealth or find financial freedom. And the harder we try to achieve it right away, the further we slide. 

Examples:

1. Amazon shopping spree
2. Overpaying for a house
3. Buying a car that you can’t afford with money you don’t have
4. Only paying the minimum on student loans (I’d rather have the cash today)

Solutions/Takeaways

1. Setting goals (long-term goals with check points)
2. Tracking progress
3. Creating a spending plan
4. Giving yourself discretionary spending
5. Practice saying no (strengthens neural pathways in the brain)
6. Find accountability to ensure you say no

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Nobody wants to talk about money because it’s not something that’s taught by most parents or in the public school system. 

And because nobody teaches it, most young people are entering into adulthood with no understanding of how to handle what I call the Big 6 of money and personal finance:

• Earning
• Spending
• Saving
• Investing
• Giving
• Dreaming

This is problematic, because money touches every aspect of our lives, including where we live, the health of our relationships, how we interact and whom we interact with, safety, security, housing, career retirement, generosity…

Because there’s no education surrounding personal finance and simple financial intelligence, there are deep misconceptions about what it means to establish financial security and build actual wealth.

One of the big symptoms is an idea known as Aspirational Wealth.

In this episode, we explore the Wealth Spectrum and how you can avoid the trap of Aspirational Wealth.

Visit: MoneyMadeGood.com

Links/Resources Discussed:

• How to Turn Your Car Payment Into a Million-Dollar Retirement
• Roth IRA Calculator