Money Rehab with Nicole Lapin - Building a Guilt Free Budget | Listener Intervention

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Starting point is 00:02:54 indeed-sponsored jobs. I feel like I'm so overwhelmed by just everything being out there and like news outlets, social media. I feel like I need to be doing better. It seemed like I'm behind. Today I'm talking to Kate. She has some good money habits, but she wants to know specifically what she should be doing now to better set herself up to reach her money goals. I think I do best when I have a goal. Every time like I say a goal, like that goal just keeps moving further and further and further away. Your first 100K saved is the hardest. But that is actually the level where compounding gets very exciting.

Starting point is 00:03:28 With the high-yield savings account, I really want to build this up. I'm working with SO-Fi because I truly, truly legit love theirs. Every dollar is maximized up to eight times the national average savings rate with eligible direct deposit. So that means every dollar is working smarter. Is it common over time to look at a certain stock and just go all in on that? I never say go all in on a single stock. It's just too risky. What's great about index funds or ETFs

Starting point is 00:03:57 is that it's a basket of a bunch of different stocks all with one purchase. I feel like it's money and finances as an ever-ending game. I want to be able to have the end of the month end and still feel like I have a cushion underneath me. What would you say is your biggest financial goal right now? I would say... I'm Nicole Lapin.

Starting point is 00:04:23 The only financial expert you don't need. need a dictionary to understand. It's time for some money rehab. You guys, I'm so excited. I'm about to do one of my most favorite things, which is talking to a money rehabber who has a wealth question. And today I'm talking to Kate. And as you'll hear, she wanted to talk to me about leveling up her finances. You know what? My DMs are full of people asking the very same thing. And I love this question. Okay, to be honest, I love all money questions, but this truly is one of my most favorites. We work so hard for our money. I think we need to be. make sure that it is returning the favor. And no matter where we are on our financial journeys,

Starting point is 00:05:05 there is always something we can do to take us one step further. Kate knows she has some good money habits, but she wants to know specifically what she should be doing now to better set herself up to reach her money goals, like being a better investor. And perhaps most of all, she wants to know what she doesn't know, don't we all? We dig into that and a lot more. So let's get into it. All right, Kate, welcome to money rehab. Yeah, thank you. Thank you so much for having me. I love that you're here and I love that you have some money questions about leveling up your finances like once you have an emergency fund now what, right? Do you mind if I ask you how old you are? Yeah, no problem. I'm 22. First of all, to be 22. Amazing. I have to give you mad props because I would

Starting point is 00:05:53 probably give anything to go back in time and tell my 22 year old self to have your financial mindset. So you are already killing the game. That's so great to hear. I feel like it's each day, it's like something new. I feel like I'm so overwhelmed by just everything being out there and like news outlets, social media, and just being so involved in my 20s. So it's like to be here today and just ask some questions is really what I need to hear. And it's nice to hear that I'm not behind and I'm only 22. You're only 22. You have so much time. And we can talk about how time really factors into compounding interest, which is the most beautiful force in all of finance. So help me get a sense to whatever extent you're comfortable with. What's coming in and what's going out right now? Yeah. So I started my first real job about six months ago. And really before then, I know. never had much. Everything I made I spent right away. There was no retirement funds. There was

Starting point is 00:07:05 nothing like that. It was working at an ice cream shop, which I deeply miss now. I'm not nine to five. So now I'm just trying to save for retirement with my paycheck that comes every two weeks, have enough for savings, have enough for my needs of groceries, and then try to do some fun stuff in there too. Approximately how much is coming in? Approximately how much are you spending? Yeah. So I spend about 3,000 a month. That's between everything of like rent. And then I take in about $4,500 a month. And then where is the $1,500 going? Miscellaneous because I try to come up with a budget. it and it's very much loose numbers because I wouldn't say that I have the best discipline whenever it's like, hey, walking by a store, that looks really nice. Or my energy bill was really high this

Starting point is 00:08:12 month because it's really hot and all the air conditioning. And I'm like, well, thank God that I planned for that because it was triple last month. So little things like that I kind of account for. But also, I have 10% of my income going into a high-yield savings account. And then I also have some student loans. So I'm paying off those about 400 a month. And then another 100 is going towards, I just started doing this, 100 towards a brokerage account and a Roth. I love that.

Starting point is 00:08:52 We, 100 in each? Yes. 100 altogether. Each, yeah. Awesome. So you, so between the high-yield savings account, the loans, so it sounds like you have student loans, or do you have any other kind of debt? No, just the student loans. And that payment, the 100 for the Roth, the 100 for the brokerage, you're at 1050. And so you really have, like, the cushion is about 450 for the energy bill. the random retail therapy, anything else that might come up.

Starting point is 00:09:31 Yeah. And you have this debt repayment plan that's pretty consistent. Do you feel like it's manageable? Yeah, I feel like it's manageable right now. I'm lucky that I don't have a high interest rate on it. I think it's about 4.9. And since it's not a really high interest rate, I'm like, I don't want to do anything outrageous of like paying it off

Starting point is 00:09:53 of just doing like an outrageous amount just because it's high interest. So I feel like it's manageable, yes. Okay. And how is the savings account and the Roth retirement nest day going? They're going. With the high yield savings account, I really want to build this up, build up the high yield savings account. I started from zero like I didn't have any other prior savings. So I feel like that's very slow for me where I'm like, okay. Like I look at it and I'm like, okay, it hasn't moved. And I got an interest payment of 67 cents. So that's, I'm like, but for me, honestly, I'm a big spender.

Starting point is 00:10:39 Like anytime it hits my account, I'm just like, I want to spend this. So for me, it's honestly more or less like having a place where I can just park my money. and I know in my brain, like, I'm not touching that. Like, there's nothing that comes in my way unless it is literally an emergency, then I will touch that money. So that's the high-old savings count. The Roth and the brokerage have been a challenge, and I think I'm definitely one who learns their experiences, and this is one of them.

Starting point is 00:11:12 And it's just from the start of it of like I went into an app, and I'm like, why can't I just buy it? Like, no, you need the cash, Kate. You need the cash in the account to buy it. That's how things work. So just little things like that of just understanding, I know that I want to consistently do this. I know it's going to be trial and error,

Starting point is 00:11:35 but like what to buy and like which account does it need, do I buy certain things in the brokerage versus the rock? So little things like that are, I'm starting to think about more now that I know how to actually buy something. Yeah. I mean, a lot of people, what I see happen is that they fund those accounts, but they don't actually put that money to work. So they put the $100 in the Roth, but then they leave it just in the vehicle. So the Roth doesn't actually do anything. You have to tell it what to do. It's just like a wrapper, basically, for the retirement account. And then

Starting point is 00:12:14 the brokerage is the same thing. If you transfer money into that brokerage, but you don't don't actually tell it what to do. You haven't invested yet. That's crazy that I like wouldn't that that would be the hardest thing to know about this. Like I've known what to do all these years, what I had to do to build my wealth and just create freedom for myself. But I never knew like the more actionable parts, the buying parts, the nitty gritty stuff that do matter that I feel like it's it's a whole. job within itself of just even trying to understand that kind of stuff and the fatigue that comes with it too. It doesn't have to be. It's like you set it up once and then you forget it,

Starting point is 00:12:58 truly. It doesn't have to be a full-time job. Don't let that get in your head. You're doing great, by the way. And the fact that you already know those basic things are things that people twice your age don't know. So don't be hard on my new friend. How much approximately is in your high yield right now? About 700, I think. Okay. So you've only started automating it sounds like for a couple of months. Yeah. Okay. And then for your Roth, what's in there? Like how much? Yeah, approximately. I think it's 200. This is where he sent to both the Roth and the brokerage. Okay, cool. So you just started automating a couple of months ago. So you have 700 in your high yield. you have 200 in your Roth and 200 in your brokerage?

Starting point is 00:13:52 Mm-hmm. Cool. Okay. I know you also had a question about retirement accounts versus brokerage accounts. Is that right? Yes. Okay. Tell me.

Starting point is 00:14:02 So Roth versus brokerage, I know there's different tax implications. And honestly, for me, they're meant for two different things. Like a brokerage, I think of as more like short-term, maybe fun is the word that I would use. And then Roth, I know, is 100% going towards my retirement and how I want to live my retirement. To me, those are very two separate things. So does that mean I invest in different products or in different things? I know the time horizon is necessarily different, but I don't know how that looks or what maybe you can give an example of how that would look. Yeah, for sure. So think of your retirement account, right, as the do not touch this until you are old and gray money, because

Starting point is 00:14:47 That's the literal deal you're making with the IRS in exchange for some sweet tax benefits. So with a Roth, that money is tax-free when you take it out. With a traditional IRA or a 401K, it's tax deferred. You are going to have to pay taxes when you take that money out. So that's where you want to max out contributions for stuff like index funds or target date funds where you're playing the long game with the overall market. So ideally you're not looking at that balance every day. You're putting it in.

Starting point is 00:15:20 You've already automated it, which is incredible. You're setting it and forgetting it. But contributions for retirement accounts should be in relatively safe stuff, in other words. Does that make sense? Yeah. Yeah. And for your brokerage, you know, that's your, I love that you call it the fun money. You can't spell fund without fun.

Starting point is 00:15:44 So I would think of it as your grown-up freedom fund. There's no contribution limits there for a IRA. It's $7,500 a year right now. And by the way, it changes all the time. So make sure that you know what the max is. But for a regular brokerage account, you don't have any penalties when you pull the money out. So you can do that at any time.

Starting point is 00:16:05 But you also don't get any tax perks there. So that's your spot for money that you might need before you're 59 and a half. whether it's a down payment, if it's a big trip, or it's, you know, just extra investing once you've already stuffed your retirement accounts full for the year. Does that make sense? Yeah. Yeah, yeah, that makes sense. So with, like, if you, if we were to talk about like my situation, would you go all in on the Roth right now before I feel like I can hit that contribution limit? Yeah, the Roth is a super powerful vehicle. So not paying tax when you take the money out is a huge, huge benefit.

Starting point is 00:16:54 And right now I would just say, you know, you're in a lower tax bracket. You assume that as you go on in your career, you're going to be making more money? Yes. Awesome. Me too. My money is on you, sister. So as you make more money, you pay more taxes, right? And then generally just in the world, do you think taxes will go up or taxes will go down?

Starting point is 00:17:19 Right. So if you're in the low tax bracket and taxes are potentially, who knows what ends up happening going up, then right now you're putting in post-tax money into the Roth IRA for the privilege of taking that money out tax-free later on. And that's huge. So with a traditional IRA or a 401k, the tax treatment is flipped. You put in money pre-tax, but you pay taxes later on. So the idea is to maximize your growth, putting money in post-tax after you've already paid taxes in a lower tax bracket, which is exactly where you are right now. And the investments within those two types of accounts don't actually have to be different. So you could do index funds, target date funds in both of them. Even for the brokerage, like being a beginner investor, I feel most comfortable doing like the index funds, even if it is more risky or if it's like in tech, for example, that may be more risky. Some might think that. I don't know. I don't even

Starting point is 00:18:30 know if it is. But like is for now that feels comfortable. But then is it common over time to look at a starting stock and just go all in on that. The brokerage account, if I'm understanding correctly, is that account and is the place to do that? I never say go all in on a single stock. It's just too risky. Right. And what's great about index funds or ETFs is that it's a basket of a bunch of different stocks all with one purchase. So if one of them goes down, then you're propped up in theory by the others. And so it is more risky for sure than something that's principal protected, like a bond or a CD or any sort of fixed income asset. So there's equities and then there's fixed income. And so equities are always going to be more risky, but the more risk,

Starting point is 00:19:27 the more return you get. So that's the trade-off. So the overall stock market has yielded 7 to 10% over time. And so if you're investing in index funds, they could be, you know, more risky, but compared to what exactly? More risky compared to a CD or a bond where you know you're going to get your money back. It's principal protected. You don't get your money back exactly in the same way from the stock market. But in exchange for that, there's over time been much higher reward. I don't think it matters whether it's a retirement account or a brokerage account. Generally, it's not advisable to go all in on one individual stock, regardless of the account that it's in.

Starting point is 00:20:17 Okay. And I was just, I feel like I think very negatively about a brokerage compared to a Roth because of the tax implications. and I just like the idea of, you know, pay taxes now. Well, like you had said, I'm in the lower tax bracket. And it's like all that money is my money 100%, like just to know that everything that's in the account is mine. Like there's nothing that's going to be taken from me.

Starting point is 00:20:44 So is there, what are the percentages of for a brokerage if I was to take money out eventually? Like what percentage is going to the IRS? Well, you're only paying on the capital gains. So you're not, the money that you put in is yours, but the gains, because that's post-tax money, right, the gains are what's taxed. And so hopefully you're going to have a whole bunch of gains, right? And then that depends on whether they're short-term capital gains or long-term capital gains. So if you sell it before a year, which I do not advise, then you're going to pay short-term capital gains. And then you're going to pay short-term capital gains, so it's the same as your ordinary income tax bracket. If you wait past one year,

Starting point is 00:21:32 then you pay long-term capital gains, which is a more favorable tax rate. But these are high class problems. You could go the other way, right? You could have capital losses. And so when we're thinking about capital gains, if you're holding on to something for a long period of time, those are going to be taxed at more favorable rates. But don't let the taxed. tax tail wag the investment dog. If you wouldn't buy something, if it had a different tax treatment, then I wouldn't buy it at all. This is like people talking about, you know, I should buy a home because of the tax deductions. No, can you buy a home first? The question is about the bigger purchase and then taking into account the tax benefits. It's so smart of you to take into account

Starting point is 00:22:21 all of the different tax implications here, but I would just say overall, don't let the tax tail wag the investment dog, if that makes sense. Yeah, yeah, no 100% that makes sense. Don't let it dictate my entire purchase. Yeah, especially when we're talking about big purchases and big investments here. Tax implications are really important, but it's not the whole thing. So let's dream a little bit, Shall we? Let's. Let's fast forward two years and your finances are exactly where you want them. What's different? What can you do then that you can't do now? I would say my freedom of going on vacation and being able to relax while I'm on vacation, of not worrying about how much is dinner going to cost or really wanting to do the

Starting point is 00:23:23 excursion while you're on the trip, but then you're like, you think about the overall cost of the trip and that drags me down and feels like too much. Or just going out for a nice dinner and some drinks and not feeling the guilt with that in knowing that I still have more than enough in the account for all my needs for the month and that I can still live how I want to. Yeah. Beautiful. Where are we going, by the way, on a trip?

Starting point is 00:23:57 Let's go to Hawaii. Yes, please. What island are we going to? All of them. Why not? Why pick one? Is there a number attached to that? Or is this just more of a feeling, like less stress, more choice?

Starting point is 00:24:15 I think it's a feeling. 100%. It's definitely a feeling. And I think it's a feeling of guilt. I feel like I feel the guilt because it feels wrong. It's always like, for example, I went shopping this weekend. I had a lot of free time and I got this amazing new dress. And then I get home and I'm like, did I remember?

Starting point is 00:24:40 I like it that much. It's so, and then I rationalize it. So it's like, it's definitely the feeling part of it of taking away that guilt and having to rationalize each purchase in my mind of, will I still be okay? Will I still be able to afford these things and still feel comfortable? Right. Like the sweet spot is somewhere in between thinking you're going to live forever and thinking you're going to die tomorrow.

Starting point is 00:25:06 And I think people end up hanging out in one of the extreme. like over spending because, you know, Yolo, right? So let's try to dig a little bit deeper here. What trips you up with the finances, do you think? Is it knowing what to do or is it actually doing the thing? Doing the thing. Because I think it's really nice to have the plan. And I think the plan helps me sleep at night and just makes me feel good. But it's fully executing on it. That's the hard part. So let's go a little bit deeper. Where did you learn how to handle money? Was it family, trial and error? I taught myself everything. Growing up, I was, had to make every dollar that I wanted to spend. And I love my parents, but I've paid through college and everything after that. And I feel very

Starting point is 00:26:09 supported by them and not say anything bad, but I've just had to work hard to be able to get the things that I want in life and everything that I have up until this point is with the dollar that I've worked very hard for. So it's like every dollar that comes in still feels very important or tracked. I know of everything that's coming in and out. And I feel like that's why as soon as like I get that paycheck, it's like act. Like what do I need? to do like fight or flight figure it out spend it right like so there's a lot of urgency and importance around it well it sounds like you're not freezing and you're not running away so are you fighting i think are you fighting yourself i don't know i just feel very like

Starting point is 00:27:02 overwhelmed and i think something that i struggle with is i think i do best when I have a goal, but I feel like every time, like I say a goal, like that goal just keeps moving further and further and further away. So it's like in the beginning, whenever you had said, like, oh, you're 22. Like, you're, you're far from retirement. You're doing great. And it's like, I feel like I need to be doing better. I could be doing X, Y, and C. So it's like always just moving that goal post further away makes it seem like I'm behind. Well, first of all, both things can be true. You are so young and you do have so much time. And also, there could be more things that you could do. Both things are true at the same time. And

Starting point is 00:27:52 a lot of ambitious people move the goalpost on themselves midgame. This is a thing that happens to myself, to a lot of people who create financial goals. And then as soon as they hit them, they're like, no, no, no, no, I'll just be happy. But when I get this other thing and you never get your brain to the other side of it. So let's try to come up with a financial goal together. What would you say is your biggest financial goal right now? I would say coming up with a budget and sticking to it. Okay. Because I say that because I think right now, like my, my husband, having my savings and a lot of my investment vehicles be automated, that it's like, it's not a choice for me. And that's what works for me. And that's what I needed to do.

Starting point is 00:28:49 But if I can stick to a budget where at the end of the month, I do have some money left over, and I'm not at ground zero or feel like I need to compensate work over time or do something to to make up for because I spent too much. Like, I want to be able to have the end of the month end and still feel like I have a cushion underneath me. Okay. So right now you're saving 10%. Mm-hmm.

Starting point is 00:29:22 If you saved 15% that'd be instead of 450, it would be 675. How would that make you feel? Good. Doable. Okay. So let's say that 675 is. the overall goal. I would say just getting 75 more bucks in there. And you're at 15% of your overall, I like to call it a spending plan, not a budget, by the way. It feels more sustainable.

Starting point is 00:29:54 So 15% to the end game, 15% to the extras, and then 70% to the essentials. So if you're taking 4,500 a month, we have 15% to the extras. to the end game. You're so close. I would add 75 more bucks into the Roth account. I would take 675 as the most you would spend on extras a month. Does putting a number on it make you feel less anxious? So if you, it's all above board. So if we're saying, hey, here's, you have 675 to do whatever that you worked for it. You want to buy an awesome dress. awesome dress. But keep it within this parameter. And then it doesn't feel like, you know, should this buyer's remorse? Should I have bought the dress? I mean, you're creating what a business

Starting point is 00:30:50 would create, right? Where you work has an overall P&L, right, a profit and loss statement. It has an overall balance sheet, has an overall spending plan. They're not buying staples and saying like, oh, I don't know if I should buy these staples. Like, I feel bad about it. No, it's like, it's there. It's accounted for. And so I think the same thing can apply for you. It's accounted for.

Starting point is 00:31:18 We have to account for those extras. It would be unrealistic to not spend anything extra on yourself. Yeah. And I think, do you think that that would help diminish a little bit of that guilt? Because it's, if I know that, hey, you have. $675 and you can spend exactly how you want to. Everything else is taken care of because I've done the math. Like, I think having a number would make me feel better.

Starting point is 00:31:48 So let's have a number. Let's have a number. And the beauty of it is that having that number for right now might just be a good North Star for you and say, it's not nebulous, right? You're not going to the, where did you go shopping? Is there even a mall anymore? I don't know. I went to anthropology. Okay. So you went to a store and you're not like, oh, can I afford it? Like here, here's what you can afford. 675 bucks. How does that sound? Good. Good. Doable. That feels doable. Yeah. So obviously you're saving, you're growing your hard-earned money, which the steps that you've taken in the last couple months are awesome. And it's just about staying consistent in working toward those savings goals.

Starting point is 00:32:44 So where do you keep your savings right now? Right now I keep my savings in a high-yield savings account under Amex. But listen, you're not alone. Most of us leave it on autopilot, a paycheck lands. It sits in a checking account doing nothing. I mean, you're earning something. What's worse is most traditional banks will give you, you know, less than 0.1% APY on your savings. That's literal pennies.

Starting point is 00:33:16 So that's not great. I know you're crushing it in your high-ield savings. Like, do you, are you happy with your high-held savings account? No. I mean, I'm working with SOFI because I truly, truly legit love theirs. Every dollar is maximized up to eight times the national average savings rate with eligible direct deposit, no account fees, no minimum deposit to open, and a bonus when you join. So that means every dollar is working smarter. So let's just put finding the best high yield savings account for you on your to-do list.

Starting point is 00:33:50 Okay, your goal is $5,000. And when you hit $5,000 in your high-yield savings account, How are you going to feel? The same. I feel like it's like the goalpost thing. I'm just going to keep doing what I'm doing. Honestly, like being 22, I live in an apartment right now, and I don't foresee myself buying a house within the next five years. But maybe after that 10 years down the road, I would look to buy a house.

Starting point is 00:34:23 And then I would like to have more money for a down payment and such. But whenever there is an emergency to know that I'm going to be okay to have that, I feel like it's just going to be like, okay, like check it off the list. Well, the good news is that you're going to hit that at your current rate in less than a year. That's great. And there is a threshold. So I think your first 100K saved is actually the hardest. It feels like you're not making any movement.

Starting point is 00:35:02 There's no momentum on your side. But that is actually the level where compounding gets very exciting. So capital grows capital. And so it's a slog until you actually get there. And then compounding really, really does its thing. But your goal, I love this. you know, this time next year, you're going to already be there. And if you look for a little bit of a higher yield on the high yield savings account,

Starting point is 00:35:31 you could get there faster. So at that point, if I'm like having these goals, then what? Like, do I just make more? I feel like it's money and finances is a never-ending thing and it's a never-ending game in a good way. like it helps me do a lot of things in life. But then what? What do I think about? You do, you do come up with other goals. You know, as you grow in all aspects of your life, you're going to have new goals. Your life is going to change. You might move. Who knows what's going to happen, right? We didn't know there was going to be a pandemic. We didn't know anything. You know, overall,

Starting point is 00:36:12 we have no crystal ball. I wish I had one for your life and whatever happens there. career, personal, or the macro economy or the overall world. It's about understanding the rules and then playing the conditions on the field. So you have these awesome goals now and you will hit them. No doubt. Like my money is on you. You are a winner. And when you hit them, you might be in a different spot in your life. Or you might use that to get a certification or, you know, invest in yourself in some way or start a business. who knows what will happen. But what I love is that you are using a high yield savings account. You're absolutely crushing it. And for anyone else listening, the name kind of says it all. It's a savings account that gives you a higher yield than a traditional account. And so you're

Starting point is 00:37:05 already doing the thing that a lot of people aren't doing. They're leaving their money in their checking account and it's not growing at all. And inflation is growing at about 3% year over year. So you want to try to earn more than that to just keep pace with inflation. Okay, so let's work backwards. So in order to save the 5K, are we good with this contribution plan? So we have $450. We're going to put $1.75 now in our Roth. We're going to put $100 in our brokerage account.

Starting point is 00:37:37 Do you have, everything that you have so far is automated, right? At first I was like, okay, I'm going to try $20. and we're going to see if I can even figure this thing out. And then once I figured it out and kind of understood it a little bit more and looked into what to buy, then I was like, okay, let's just do $100 a month, see how that works. That feels doable for me. And yeah, I'm like, we'll see how that goes. And if it does feel too tight one month or something, then I wouldn't do it.

Starting point is 00:38:11 And then that's me, it's like, it's okay. the world wouldn't end. So, and then for my, the 400 for the student loans, that was really not calculated at all. I was like, what's something that seems a little bit aggressive, but not too aggressive? And when can I pay these off? Because I don't want to pay them anymore. Yeah, that makes, that makes total sense. But you're also really smart about understanding where that interest rate is, that it's relatively low. Like, you're not dealing with consumer credit. it right there. Okay, so we have, it sounds like we have a plan right now. Here's what we talked about. Taking advantage of the beauty of a high yield savings account, love, determining how much we want

Starting point is 00:38:57 to contribute monthly. So, 400 to the high yield savings account, 175 to the Roth, 100 to the brokerage, that's 675, 675 to extras that you decide what your extras are. It's your fun money. You worked hard for your money. Do whatever you want with it around 675 a month. Automate your contributions. So increase the contribution that we talked about. And you have 1350 there. So do you have 3154 essentials? How does that sound? Good. Yeah. Yeah, more than enough, I think. We have our next steps. Yeah. How do you feel? Good. I feel like it's it's nice to have a plan and it's comforting to hear. I think the part that I just think about is like the spending money and the like the less guilt I feel with that to still know that I'm putting a lot towards my savings and

Starting point is 00:40:09 building even trying to invest and starting that as soon as I can while also having the high yield savings account making that automated and that I don't have to think about that is just very helpful. So awesome. So I stand by it. You're killing it. You're doing awesome. And also, there are ways to level up. And that's what you just did. What would the leveling up look like? You just came up with a whole spending plan. What do you mean? What did it leveling up look like? Once I hit those goals, like one year from today, I hit them. Oh, then call me. I'll talk to you next year. Goodbye.

Starting point is 00:40:55 Good. I struggle with being in Hawaii. I'll see you in Hawaii. Goodbye. Take that trip. Enjoy it. I'll find you on Maui. Yeah. We'll talk about next year's goals next year. But by this time next year, you'll have $5,000 at least in your high-ield savings account. You'll have $2,100 in your Roth. You'll have $1,200 in your brokerage. look at look at those amounts this time next year and we'll be zipping a mitai drinks on you kate straight from the high yield savings account that's right that's right but yeah definitely look and see like no pressure whatsoever but um you know high yield savings accounts that do earn more than what you're getting okay i'll look into it thank you for sure so we have our year goal. And then if we sort of zoom in in the next few months after sticking to this plan,

Starting point is 00:42:07 which is going to get you to the goals that you outlined, like it sounds like, don't let me put words in your mouth. But my goal for you would be to have this plan and to have more peace of mind with the plan. What do you think? Yes. Does that resonate? A hundred percent. And just I think, I think it's executing the plan too of just knowing that if I tell myself like if I execute this plan with the numbers, which I do feel good and nothing feels too short or too much, then be able to have that peace of mind and still be able to spend how I want with that 600 and just be able to still be in the moment and not thinking about the future of next year. I think that's really hard.

Starting point is 00:43:05 And I think talking about money just makes me think of the future, the future, and getting there. And how do I get there? How do I get there? But just starting with this step, like I said, like step one, really just honing in on this. And knowing that I did the work and it's okay and it's going to, work out how it shouldn't. Yes. And I want that for you. And I know this is achievable. And one of the big pitfalls that people fall into when they're coming up with a spending plan is not allowing for small

Starting point is 00:43:43 indulgences. You know, the reason that I call it a spending plan instead of a budget is similar to an eating plan. You know, the idea of a crash diet is not sustainable. It's just not. Like you have to allow yourself small indulgences or you'll end up binging later on. So any crash diet that doesn't allow for a Hershey's kiss, you know, you're going to end up in the middle of the night nothing on a big old hunk of chocolate cake because you're so hungry and you're so deprived. And that's what ends up happening when people stick to a budget that's not sustainable that doesn't allow for these small indulgences, that doesn't allow for the 600 or 675 that you're spending on your extras. because then people will say in the beginning of the year oftentimes to me,

Starting point is 00:44:28 it'll be so proud of me. I came up with this great budget and I cut out the latte and I cut out all the stuff and I'm not buying the cute dress at anthropology or I'm not buying the thing that I really wanted. Okay. And then a few months later, it's like, well, I got a Gucci purse or I got a fancy purse or I got a fancy thing because I was so good. Well, you could have just gotten those little things along the way and kept yourself

Starting point is 00:44:53 content and kept yourself on track so that you wouldn't binge later on. I mean, a lot of this is the psychology behind it, too, that you want something that's sustainable. And a spending plan that's sustainable allows you to spend on yourself. And it allows you to spend on your future self. So I even, like, rethink the idea of the savings, right? Like, is it savings? Because that feels like, oh, it's a dark hole, a dark abyss. Like, when am I ever going to see that? I'm 22 right now. Like, it's so far away.

Starting point is 00:45:30 I'm so proud of you that you're investing so much in your retirement so young. I wish I could go back to my 22-year-old self, slap her around and have her talk to you and be best friends with you so that she would get those habits. But it can feel like, oh, my gosh, what am I doing? It's just taking more money out of my paycheck. Who knows, like, what's going to happen at that point? But if you reframe it and you think, like, I'm sorry. spending on my cool old lady self. I'm spending on her. Like, I'm investing in her. You know, I think just some of the word changes, too, and the way you talk to yourself about money. And I'm so

Starting point is 00:46:02 proud of you that you've taught yourself so much and you're so independent and you're on your own right now. People that do take money from their parents and don't get me wrong, like, I would love to have parents who gave me money. That would be awesome. I'm not knocking it. I'm for sure jealous of it. But that comes oftentimes with strings attached, right? And so, like, there's no free money. There's no free money. And so what you're doing is that you're creating your own path and you're also creating your own story or rewriting whatever narrative and we didn't get into all that, but I'm sure there's more there of how money was talked about in your household or what money meant or the word association that comes up with it. But you get to write that now and you get

Starting point is 00:46:46 to decide and you get to think, you know, just because it was done a certain way doesn't mean it's the way it needs to be done moving forward. And, you know, this idea of the dialectic that both things can be true, right? Just because, you know, I did certain habits in the past, maybe those were not okay. And I give my former self forgiveness and also my future self some tough love. And that's okay. Like, I can forgive my former self for what she didn't know. She didn't know. like how much she should be spending on the extras before this conversation. And that's cool. And she had some anxiety and she bought the cool dress and, you know, she had some buyer's remorse and, you know, the mean girl was in her head. But we can tell the mean girl to sit down now. Like we have a plan.

Starting point is 00:47:39 So forgive our former self for which she didn't know before we had this conversation. But then moving forward, you know, it's a little bit of tough love too. That's now that we have a plan, it's about sticking to it. We've done the work. Now just execute the plan. We've done the work. Now we execute. And that's on you, boo.

Starting point is 00:48:00 So. No. I'll do it. I got this. You got this. Little tweaks. Little tweaks. You got this.

Starting point is 00:48:10 You're so good. For today's tip, we can take straight to the bank. We talked a lot about high yield savings accounts as a nest egg for overall savings. But it's also a really good place to park your emergency fund. And if you're an OG listener, you know that I like having at least three to six months of bare bones expenses saved away just in case. You know what? I had to tap into my emergency fund years ago when I was backing out of the garage.

Starting point is 00:48:33 I hit my right side view mirror off my car and then I backed back into the garage and I hit my left side view mirror off. Seriously, that is not a joke. I wish it was. But that's the thing. Life happens. And when it does, you'll be thankful. you have an emergency fund. And if you have one in a high-yield savings account, that money is working hard for you until you need it most.

Money Rehab with Nicole Lapin - Building a Guilt Free Budget | Listener Intervention

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