The Personal Finance Podcast - 10 Steps to Get Ahead of 99% Of People Financially (In the Next 6-12 Months)

Starting point is 00:00:00 Amazon presents Laura versus Fruitflies. Swarming your fruit and terrorizing your kitchen, these little freaks multiply at a rate that would make a rabbit say, yo. Chill. But Laura shopped on Amazon and saved on cleaning spray, countertop wipes, and fly traps. Hey, fruit flies, your baby boom ends here. Save the Everyday with Amazon. There's more to life than finding the perfect car.

Starting point is 00:00:34 But finding the perfect car can help you get the most out of life. Like the SUV that handles everything from drop off to off-road, and the car that hulls groceries and hockey teams, or the van that's gone from just practical to practically family. Whatever you want, wherever you're going, start your search at autotrater.ca. Canada's Car Marketplace. On this episode of the Personal Finance Podcast, 10 steps to get ahead of 99% of people financially

Starting point is 00:01:07 in the next 6 to 12 months. Welcome to the Personal Finance Podcast. I'm your host, Andrew, founder of mastermoney.com. And today on the Personal Finance Podcast, we're going to be diving into 10 steps to get ahead of 99% of people financially in the next 6 to 12 months. If you guys have any questions, make sure you join the Master Money Newsletter by going new mastermoney.com. Don't forget to follow us on Spotify, Apple Podcasts, YouTube, or whatever podcast player, you love listening to this podcast on it. If you want to help out the show,

Starting point is 00:01:57 consider leaving a five-star rating review on Apple Podcasts and Spotify. And if you want to be coached by me, we have launched Master Money Academy. So if you haven't heard of Master Money Academy yet, this is the place where we are going to transform your finances. So we have something in Master Money Academy called The Wealth Builders Journey. And this is a step-by-step. step exact guide that is going to help you transform your finances. We have 25 steps in there taking you through your entire journey from the very beginning on how to set up your accounts, how to start automating your money, how to start cutting back on expenses you don't care about, how to start increasing your income and making more money. Then we go through how to invest your dollars in the

Starting point is 00:02:36 order of operations for investing more money. We go through wealth accelerators, how to save money for your kids, how to set money goals. And in addition, inside of Master Money Academy, we're going to have all of our new courses that we have coming out. So Index Fund Pro is in there. Master Your Money Goals is in there. But we're going to have so much more. But also, I coach people live inside of Master Money Academy. So we do live calls every week. And our entire goal is threefold. Number one is we want to help keep you accountable. So we have a group called the founding wealth builders who joined as the beta group. And they are so amazing. And everything that we have been doing inside of Master Money Academy has been so cool. Because every single week,

Starting point is 00:03:11 we talk about our goals for the week. And we talk about our wins at the end of every single week. And so we go through this and everybody is supportive. And that is the huge key with this community is we want you to have a very supportive group by your side. And so everybody in this community thus far has been absolutely amazing and they have been super supportive. Number two is we want to transform your finances. So we want you to have a financial transformation. And so Master Money Academy has the wealth builder's journey so that you can go from being, I don't even know where to start. Or if you're even a little more advanced, it'll show you the order of operations of how to allocate your so you know what to do next. So we want to see that financial transformation for you. And number three,

Starting point is 00:03:49 we want to keep you motivated. And that is the big key is you need continuous motivation, especially when it comes to your money. And Master Money Academy is going to do that for you. So you're going to learn a ton. You're going to have a peer group who is also working on the same goals. And in addition, you're also going to be able to have live coaching from me. And some of the cool things that we're doing now is we have small groups. Like right now, we have small groups running on how to increase your income. We have investing for beginners small groups. people are working together to keep them accountable. We also do hot seats where I coach people live in front of everyone else and we look at their financial situation. So there's so much more

Starting point is 00:04:23 inside of Master Money Academy than even what I'm talking about right now. We're launching an AI budgeting tool just for people in Master Money Academy. There's so much going on in there. So I highly encourage you to check out the link in the show notes below because Master Money Academy is launched to everybody out there now. And so really, really excited to have you in there. And if you join, can't wait to meet you. So that is something I think, can absolutely transform your finances. So check out Master Money Academy just launched this week. Really, really excited to have you in there. Now, today we're going to talk through the 10 steps of how you can get ahead of 99% of people financially. Now, this is something I want you to

Starting point is 00:04:57 understand is I believe every single person listening to this podcast can build wealth. And I want every single one of you to become a millionaire. But you have to make sure that you are doing the right things and taking the right steps. In addition, you have to have your goals set up in the proper way in order to actually accomplish these goals. So today we're going to be talking through all the steps that I think and all the different areas that I think you need to be focusing on if you want to get ahead of everybody else financially. And we all want to get ahead of everybody else financially so that we can, A, pursue financial freedom. Our entire goal is not to be better than anybody else. Our entire goal is so that we can

Starting point is 00:05:31 have freedom with our time, freedom with our energy and freedom to do what we want when we want. And the only way to do that is to focus on the North Store and do the right things in the right order. And so today in this episode, we're going to get into those various areas that you need to focus on and those areas that you need to master your money. So this is going to be an action-packed episode. I am really, really pumped for this one. So without further ado, let's get into it. All right. So number one is you need to get crystal clear on what your goal is. So I think there are a couple of different areas where you need to make sure that you know what your goal is. First, what is the big thing that you're going to be working on over the course of the next six to 12 months?

Starting point is 00:06:09 So is there a specific area as we go through all these different steps that you really want to focus on? And I would look at this quarterly. So the way that we currently set goals, and if you look at Master Your Money goals, you'll see that we set goals quarterly. Meaning every three months, we're looking at a new goal that we are trying to break down and figure out ways that we can accomplish that goal. And so you got to think through, okay, what are my major goals for the next six to 12 months? Maybe one of your main goals is to get out of that high interest debt. Maybe you have credit card debt or you have student loan debt that's really high interest above a 6% interest rate or you have a personal loan that's really high interest.

Starting point is 00:06:45 And you just want to get out of some of this debt over the course of the next six to 12 months. Well, that could be one of your main focuses for a quarter, maybe two quarters. Maybe it's the entire year. Or maybe you want to just get started investing or maybe you want to increase the amount that you've been investing. You've been investing for a long time. You want to make sure that you can get more dollars into those investments because you want to accelerate your path to financial freedom.

Starting point is 00:07:06 maybe you want to earn more money. This is a big one. A lot of people want to do is they want to earn more because that is a huge accelerant to being able to build wealth and your earning power is going to have huge potential. But what are some of the big areas that you want to focus on? And we want to set money goals and we want to set up ways that we can take daily actions towards those goals so that we can actually accomplish them. So those are some of the short term goals. We want to think through what are some of these short term goals? How are we going to accomplish one of these goals in the next 12 weeks so that I can have one each quarter getting knocked off. And so that's something very, very important that I think you need to do. If you want to get ahead

Starting point is 00:07:42 of other people in the next six to 12 months, you need to make sure you have very specific goals in place and you are working daily to accomplish those goals. Now, some other goals that a lot of people have been talking about as of late outside of just earning more is learning how to cut back. So something else that people can do is they can cut back on areas they don't care about so they can increase the amount that they are investing and putting towards their wealth building activity. Some people just want to find ways to take their yearly vacation. Some people want to go out and actually have an emergency fund built up fully. It doesn't matter what your goal is. You want to make sure that you have those goals in place. Now, a second goal that you need to set up is figuring out

Starting point is 00:08:17 what your retirement number is, meaning how much money do you need in order to have financial freedom? This is easier said than done where a lot of people will say, okay, well, just use the 25x rule. and we say that all the time because it's quick and dirty math on the back of a napkin where you can take whatever you are spending currently, multiply that by 25, and that is a rough and dirty number of where your retirement number should be at this given point in time. But one thing I want most people to note here is that your retirement number is going to change year over year, meaning you need to be tracking what your retirement number is and you need to be checking it every single year. Now, I've not heard many people talk about this and I want to nail this down right now, is that inflation is going to change

Starting point is 00:08:58 your retirement number year over here. And one thing you need to note is this is why we need to continue tracking that retirement number. So how do you do this? Well, you're going to ask yourself a couple of different questions. One is how much money do I need in retirement? So I have heard traditional retirement advice say, well, you only need 80% of what you're spending now in retirement because maybe you don't have a mortgage or maybe you are spending less on your kids or maybe you're doing all these other things. I, for one, think that you need to start where you currently are. So whatever you are currently spending right now, you need to think about this and say to yourself, well, am I okay spending this amount in retirement? Or do I need to spend more? Or do I need to spend

Starting point is 00:09:35 less? Okay. And so you're going to start at that given point in time. So let's say, for example, that you spend $80,000 a year, because we're going to do easy math. Well, 80,000 times 25 is going to be $2 million is what you need invested in order to be able to retire if we do the 25x rule, if we're thinking about it that way. But there could be other things and other parameters in your way. Maybe at $80,000 per year, you feel like I'm just getting by. I'm not able to travel or do some of the things that I want. So you want to bump it up to $100,000. Or maybe you're like, actually, that's way too much. I can't spend $80,000 per year. I'm spending a ton of money on my kids daycare right now. I'm spending a ton of money on my kids college. I'm spending a ton of money on youth sports and all these other things. I'm not going to spend that much when I'm in

Starting point is 00:10:14 retirement. So maybe you can reduce it down a little bit. But we got to think about what is going to happen in the future and how we want to think about our money and what we want to do with our money. Because money is a tool. It is to be used in order for you to get the things you want in life. Money is not there to just hoard in cash. It is there so that you can use it for your freedom so you can spend your time doing what you want. That is the beautiful thing about what we're talking about here in finance is that you can change your life and you can do what you want in life by using money as a tool. Refram your mindset to think about money as a tool. There's not something to go out and spend just to buy frivolous things. No, this is going to gift you your freedom. And I want you

Starting point is 00:10:51 to think about it that way because it's going to change your life. Okay. So we're going to start with getting crystal clear on these goals. Now, as we're starting to think about this number, and as we're starting to round this out, I want you every single year to adjust it. I want you to think about, okay, well, last year, I spent $80,000, but in 20206, what if you spend $83,000? Well, if that is the case, and you spend $83,000, we need to make an adjustment to our retirement number. And so this is why we have to track it year over year, because inflation is going to increase that number by the time you retire. Now, you can run some inflation. metrics right now. The problem with that is that it scares people because if you do an inflation rate

Starting point is 00:11:29 at 3% every single year, well, now my retirement number is double what it currently is right now. So instead, I want us to track the real inflation rate and figure out, okay, how much am I actually spending and how much has my spending increased year over a year? And this is a good thing to see, because then you can see how inflation actually impacts your real dollars. So every year, I encourage people to track their retirement number and what they think it will be, and it's going to change. Now, I can tell you this right now. My retirement number, has changed so many different times over the course of just the last decade. Why? Because life has changed. Things like, I've been married now almost 12 years. So when I got married, my spending

Starting point is 00:12:07 changed. Now, I was young. I was 25. My wife was 23 when we got married. But my spending did change when I got married because now there's two people in the household. Okay. Then we had our first kid. When we had our first kid, our spending changed a little more. When we had our second kid, our spending changed even more. Now that we have our third child, our spending, changed even more. And so life is going to change how much you are currently spending. And so by adjusting this number dynamically year in and year out, once a year, you can look at this and just think about this stuff. What do I want to do? What do I want to do with my life and how do I want to spend my time in retirement? I think a lot of people dream about retirement and I think it's going to be

Starting point is 00:12:43 one of these things where I'm going to golf every single day. Well, sure, that could be the case. But eventually, if you're golfing every single day and you love golf right now, eventually golf is going to kind of feel like the chore and you're going to want to get back out. And you're going to get back after it and want to do some other things. And so we just want to make sure that we're not just planning drastically in one direction. We're planning dynamically so that we have flexibility in retirement and have the ability to make those changes. So we'll have an entire episode coming up on this retirement number because I'm starting to nail this down more and more on exactly how we want to talk about this. And we have part of the wealth builder's journey in Master Money Academy.

Starting point is 00:13:16 Talks about this retirement number. We have calculators and stuff in there that is going to help you with this. So making sure that we nail this down is really, really. important. So those are two goals I want you to think about over the course of the next six to 12 months. What is my retirement number? Let's start tracking that. And then also what are some of the goals that we are going to be tracking quarterly that we're going to be working on accomplishing every single quarter? So every 12 weeks, we want to make sure that we are focusing on a new goal so that we can start to really compound some of the things that we are accomplishing with our finances. All right. Number two, if you want to change your financial life over the course of the next six to

Starting point is 00:13:48 12 months is you need to automate your financial life. Gone are the days where we start to manually pay bills. And gone are the days where we are going to manually start investing our money into our investment accounts. And gone are the days where we are going to manually start saving money for our vacation or manually start just moving money around. Why do you do this to yourself? Instead, you could automatically have a money system in place that sends your dollars and allows for a money flow to happen where you don't have to lift a finger. I don't understand why we are still currently in this day and age deciding to manually do things with our finances. Because there are a number of different reasons why you need to automate your dollars. Number one is that your willpower is feeble.

Starting point is 00:14:32 Your willpower is not something that you can rely on. And if you have to rely on your willpower to go save some money, that is never ever going to work. Now, maybe some of you have enough discipline to go and do that. But you may forget a month. You may miss a month. You may be 10 days late. And so you're not doing it the optimal way. Instead, just start automating your money. So there's a bunch of different areas that you want to automate with your money flow. We talk about these in Master Money Academy. We have a whole automation chart. But there's a bunch of different areas from your paycheck, hit your checking account. It needs to go towards your bills automatically and take care of some of those bills that you need to take care of. Then it needs to go to your savings. Then it needs to go to your investments and

Starting point is 00:15:09 making sure that you're automatically sending money to all those places. In addition, Why not, while we're doing this, automate our budget? And so there's a lot of tools out there that can help you automate your budget. Or you can think of this in a way. If you are someone who doesn't want to utilize a tool for some reason, then you can go out and do this on a spreadsheet as well, but just figuring out where where does my money need to go. So I like it three different ways.

Starting point is 00:15:32 20% at a minimum is going towards your future self. So this is going to be investments and your emergency fund. Those two areas are your future self. So if you follow the 136 method, which we talk about a lot, we'll talk more about it in a second. That is one thing that you need to do is just follow that order of operations. Secondly, is baseline expenses. So these are your needs and obligations. So this is going to be your debt payments. These are going to be your housing costs, your utilities, your health care. All of this is going to fall under needs and obligations. And so this usually can be in a range of 50 to 60

Starting point is 00:16:03 percent of your income can fall into that range. And then lastly, is things that you love. So 20 to 30 percent falls towards things that you love, spending dollars. on things that you actually value? Wow, that is a concept, right? We actually want to intentionally spend money on things that we actually value. Intentionally, spend our dollars so that we can actually enjoy our money. Huh. Isn't that a fun concept? Because really, what most people do is they think, okay, I got to get my finances together. Every extra dollar that I get in, I got to make sure that I hoard this cash so that I can get my finances together. Well, my friends, that's not sustainable. That's not something that you can do long term.

Starting point is 00:16:40 So instead, what we want to do is ensure that we are taking our extra dollars and we are putting them towards things that we actually value. Okay. What would that mean? Okay. Well, let's say you want to take a vacation with your family every single year. Start taking some of that money and putting it towards the vacation. Let's say you love to go out to eat. You love to go out to drinks with your spouse.

Starting point is 00:17:00 You love to go out to drinks with your friends. Put some money towards that. Let's say you want to play in 12 pickleball tournaments this year because you're really into pickleball right now. Well, put some money towards that. Let's say you love going to college football games or you love yoga classes or you love fishing and you want to do some fishing charters. Put some money towards that. Our money is not there to be restrictive. Our money is there to bring us abundance and we need to make sure that once we get our financial life together,

Starting point is 00:17:29 we are spending some money on ourselves. The last thing I want you to do, unless you are working a job that you absolutely hate that you need to get out of as fast as you possibly can, is hoarding all of your cash and not using it for enjoyment. Money is there as a tool. Remember, money is a tool and we need to treat it as such. So what I want you to do is when you come up and automate your money, I want you to automate every single area. So automate your bills, automate your savings, automate your investments. Those are the three areas that I want you to focus on. You will get way ahead of everybody else because it's just going to automatically happen. Removing your willpower from the equation is the number one thing you always want to do with your

Starting point is 00:18:04 finances because again, your willpower is feeble. All right, number three is let's talk about this. We want to build up our safety net. And so when it comes to our safety net, we want to use the 136 method. Now, we have an entire episode on the 136 method going into detail. I think it's our most popular YouTube video podcast episode on YouTube ever. And so the 136 method is something I think most people need to look into in order to figure out how to manage their rainy day fund.

Starting point is 00:18:32 So a rainy day fund, also your emergency fund, is something we talk about a lot here because a lot of people do not have enough in their emergency fund. Why? Well, maybe they heard somebody say, ah, you only need like a thousand dollars saved up in your emergency fund. Or maybe they heard somebody else say, well, I need, nah, you need about three months expenses in your emergency fund. No, the 136 method will walk you through the methodology of how to do this. So it starts off by saying you need one month of expenses saved up before you do anything else. One month of expenses is going to help protect you. For example, if your car breaks down. Or if a couple small emergencies pop up, and it seems like all those emergencies always happen in the same month, it's so freaking annoying. Or maybe you need to replace your water heater. Your water heater goes bad. No matter what happens in life, and we all know all these different things can happen in life, having one month of expenses stays up. Step one is going to help you tremendously. Then what we want to do is we want to focus on paying off high interest debt. So any debt above a 6% interest rate, if you have a credit card debt or you have any other high interest debt, we want to make sure that we are paying that off next. Once we have that

Starting point is 00:19:32 high interest debt paid off, anything above a 6% interest rate outside of your mortgage. Then we want to go to three months. Now, at three months, that means we're going to be saving two more months because we already have one month saved up. So we're going to save two more months of expenses so that now we have three months saved up. Well, this gets you in a pretty good position to take care of a couple of things. A short-term job loss, if somebody were to fire you, you have three months to go and

Starting point is 00:19:53 find another job, which is not enough, which we'll talk about in a second. But at least get you to the point where you're started. You could take care of most emergencies out there, meaning you have three months. months of cash in your account, you can take care of a lot of different things. And then number three, it also just allows you to have flexibility and freedom to take advantage of opportunities when they arise. So three months of expenses is the middle ground. And then when you have three months of expenses, we're trying to get you to get started investing because we really want you to get your money working as soon as we possibly can.

Starting point is 00:20:21 We do not want to just sit there at three months and just work our way up all the way to six months because that's going to take a lot of time. Instead, we want to get our dollars working. So we're going to go through our investment order to make sure that we are starting to invest our money and get those dollars to grow. Then over time, you start to split off 50-50, half to emergency fund, half to investments, and over time, we're going to build it up to six months emergency fund. Why is six months the minimum here at Master Money in the Personal Finance Podcast? Why do we say six months in your emergency fund? Because if you lose your job, you need six months on hand. There's no if-ands or buts about it. Let's say you lose your job, okay, now you got to

Starting point is 00:20:59 dust off the old resume, got to get that resume together, got to get that resume together, got to that LinkedIn put together, now you're going to start to apply for jobs. I don't know if you've applied to jobs lately, but it's not a very quick process. And for a lot of people, they have been looking for jobs for long periods of time. In fact, always be looking as ABL is what I like to say, always be looking just to see if there's better opportunities out there. But this is something that you need to be doing. It's thinking through, okay, well, if I lose my job, it's going to take me a little time to even start to find people who are looking in my industry. Okay, maybe it takes me a month and I start to send about a bunch of different resumes. I'm sending hundreds of resumes

Starting point is 00:21:35 out a day. Okay, now finally I'm landing interviews in month two or three. Okay, now I go through the interview process. And now I'm having, you know, my first round of interviews. Well, now I've got to go to the second round of interviews next week. And the third round of interviews is the following week. Well, okay, now we're in month four. Is three months emergency fun enough? If you're going to take four months to go through all these interviews and sending out your resumes, no. Then maybe you don't land some of these interviews and you got to do more rounds of interviews and send out more resumes, we're looking at six months before you actually can land another job. Now, that's not to scare you. That's to say, this is the reality. And we need to make

Starting point is 00:22:06 sure that we are prepared for this. Anybody at any given time can lose a job and it can take you a long time, no matter how popular your industry is, no matter how big of a shortage there is in what you do, that can still absolutely happen. Just look at the great recession of 2008 and 2009. We need to make sure that we bulletproof our finances. And the way to do this is with a six-month emergency fund. So, that is step three, okay, is making sure that you have that safety net build up. Step four is let's start investing immediately, even if it's small. So first, you go through the 136 method, you got your one month of expenses saved up. You got your three months of expenses saved up.

Starting point is 00:22:42 Now let's talk about investments. We're going to do that next. So lately, I've been noticing how fast things are changing at home. The kids are growing like crazy, clothes don't fit anymore, and routines are changing. And it just hits you. Life is expanding. And when your life grows, your responsibility grows with it. That's something I've been thinking about more this spring,

Starting point is 00:23:03 making sure the safety net we have in place actually matches the life that we're building. And that's where PolicyGenius comes in. PolicyGenius is an insurance company. They're an online marketplace that helps you compare life insurance quotes from some of the top insurers in America, all in one place for free. And their licensed team works for you, not the insurance companies. So they help you find the right coverage for your situation. without all the guesswork.

Starting point is 00:23:27 And they walk you through everything. Answer your questions, handle the paperwork, and help you get the coverage that actually fits your life today and where it's going. So protect your family with a policy that grows with your life. With PolicyGenius, you can see if you can find 20-year life insurance policies, starting at just $276 a year for $1 million of coverage.

Starting point is 00:23:48 Head to PolicyGenius.com to compare life insurance quotes from top companies and see how much you can save. That's PolicyGenius.com. I remember when I needed to hire someone fast, but finding the right person quickly felt impossible. And if you've ever been there, you know how stressful this can be. That's where Indeed comes in. When it comes to hiring, Indeed is all you need. Instead of struggling to get your job post noticed, Indeed's sponsor jobs help you stand out and hire faster. Your post jumps up to the top of the page, making sure it reaches the right candidates. And it makes a huge

Starting point is 00:24:20 difference. Sponsored jobs on Indeed get 45% more applications than non-sponsored ones. And there's no need to wait any longer. Speed up your hiring right now with Indeed. And listeners of this show will get a $75 sponsored job credit to get your jobs more visibility at Indeed.com slash personal finance. Just go to Indeed.com slash personal finance right now and support our show by saying you heard about Indeed on this podcast. Indeed.com slash personal finance. Terms and conditions. apply. Hiring, indeed is all you need. Local news is in decline across Canada, and this is bad news for all of us. With less local news, noise, rumors, and misinformation fill the void, and it gets harder to separate truth

Starting point is 00:25:04 from fiction. That's why CBC News is putting more journalists in more places across Canada, reporting on the ground from where you live, telling the stories that matter to all of us, because local news is big news. Choose news, not news. Noise. CBC News. Okay. When I sell my business, I want the best tax and investment advice. I want to help my kids, and I want to give back to the community. Ooh, then it's the vacation of a lifetime. I wonder if my out of office has a forever setting.

Starting point is 00:25:39 An IG private wealth advisor creates the clarity you need with plans that harmonize your business, your family, and your dreams. Get financial advice that puts you at the center. your advisor at IDPrivatewealth.com. All right. So having your investments in place is the next step that we want to make sure that we are looking at. And when we are looking at our investments, there's a couple different orders that we want to see. Number one is you want to get your employer match. Always, always, always get that employer match. It is one of the most important things you

Starting point is 00:26:08 can do. Why? Because it's free money. And so there's a lot of different variables to an employer match. If you haven't heard our entire episode on employer matches, we did one on there because there's a bunch of different things that you want to consider. And so I would highly recommend you checking out our employer match episode if you have not. But when it comes to your employer match, you want to make sure that you are at least getting up to the match. So if you have a 401k with your employer and they match all the way up to 3%, then you want to get that 3% match. If they match up to 6%, you want to at least be putting 6% in there because it's a 100% rate of return. It is free money. And free money is my favorite number. I don't know if you like free money, but I love

Starting point is 00:26:42 free money. And so that's something you definitely always want to do. Step 2 is now we want to go to phase two, which is the HSA and Roth level. So the HSA is going to be the level where it's a health savings account. You've never heard of a health savings account. This is where money goes in tax-free. You can invest the money and grows tax-free, and you can pull the money out tax-free as long as you have a qualified medical expense. But a caveat with an HSA is you need to have a high-deductible health plan. Well, everyone doesn't have a high-deductable health plan. So then we move to the next one, which is the Roth IRA. Now, the Roth IRA, or Roth 401k, is a level that is really a very high-dedible health powerful. Why? Because money goes in that has already been taxed. The money can grow tax free and

Starting point is 00:27:22 you can pull the money out tax free. So you pay taxes up front and then you never pay taxes again even on the growth of that money. Now, why is this powerful? This is powerful because if you are maxing out a Roth IRA every single year, for example, and you put $7,000 per year into a Roth IRA, let's do the math right now. If you put $7,000 in that Roth IRA every single year, over the course of 30 years and you got a 10% rate of return, which is the S&S. and P500, go look at historic rate of returns, you would have $1,151,000 inside of that Roth IRA. Now, guess how much of that would be your contributions? You would have contributed $210,000 in the Roth IRA.

Starting point is 00:28:01 So that's it. You would have over $1.1 million. Compound interest is amazing, and you would have only put in $210,000. Guess how much of that is completely tax-free? You would have made $941,000 that is completely tax-free. conversely, let's look at the Roth 401K. I'm going to do the same calculation. Let's say, because we don't do this enough,

Starting point is 00:28:21 let's say that the Roth 401K gets maxed out every single year. Holy cow, this is unbelievable. If you have a Roth 401k or access to one, okay, 10% rate of return over the course of 30 years, that means you're putting $23,500 per year, the current amount that you can max it out at. You would have $3.865 million dollars in that Roth 401k. And guess how much your total contributions would be?

Starting point is 00:28:45 $105,000. That means you'd have $3.1 million that is completely tax-free. You could pull that money out after the age of 59.5 and it is completely tax-free. Also, the Roth 401K does not have RMDs, meaning they don't force you to pull it out of that Roth 401K. This, my friends, is absolutely incredible what you can do with the Roth 401K. That's over the course of 30 years. Let's say that you're young and you're making good money. You're maxing out that Roth 401K because these numbers are wild, okay?

Starting point is 00:29:13 you would have put over the course of 40 years, $940,000 in that raw 401k, and guess how much money you would have? 10,400,000, which of $9.4 million would be completely tax-free. This is why we talk about the Roth IRA so much, and this is why it is so powerful. And if you're watching on YouTube, I'm doing my Italian hands right now because I'm so fired up about this. You would have $10.4 million in a raw 401k over the course of 40 years, and 9.4 million of it is completely tax-free. You can't get that anywhere else, folks. And so that's something I think a lot of people need to make sure that they are considering. Also, in addition, though, when we are looking at this, we also then want to go to our traditional or pre-tax accounts. So if you're a high earner, you may want to look at pre-tax anyway. But when you look at these pre-tax account, this is going to be your 401k or your traditional IRA or your 403B. All of those different accounts would come back to those again. Okay. Then after that, we'd be looking at a taxable brokerage account. So for those who want to be financially independent. A lot of you listening do. You want to retire early. If that's you, and if that's the case, then we want to make sure that we are looking at this taxable account

Starting point is 00:30:20 for flexibility. This is going to help us retire early, especially if you're going to want to retire in your 30s, 40s or 50s. This is going to help us tremendously to be able to do that. Now, what are we invest in? I like low cost, index funds and ETFs. Inside Master Money Academy, we have Index Fund Pro there for our members so that they can go through and learn about index funds and ETFs if they want to. And when it comes to this, I think it's really, really, really important to make sure that we understand that fees matter. And index funds and ETFs are going to help us have that low cost. And then reinvesting those dividends over and over is really, really important. So that's where we get started investing. But let's say

Starting point is 00:30:56 we're not investing enough. We feel like we're still not getting 20% into these investments. But what do we do next? Well, step five is to slash some of the major money leaks. So I want you to audit your top five expenses. And I want you to think about this for a second. What are the top five areas that I spend money on? For most people, it's going to be how housing, food, transportation, maybe it's insurance or subscriptions, maybe it's daycare. It depends on what these different areas are. Maybe it's youth sports. Maybe it's something crazy.

Starting point is 00:31:23 You got a shopping addiction. It doesn't matter what it is. Look at those top five different areas. And if you're not investing enough money, I want you to focus on the top five areas and say, how can I reduce these costs? Okay. Now, there's a number of ways to reduce your costs in these areas. The big three always are housing, food, transportation.

Starting point is 00:31:38 Those are the big three. Most people spend the most money on. If you can control those three, everything else is great. gravy around you, you could be able to really spend less. So 30% or less on housing costs, 12% or less on transportation costs is what you should be spending. And then when it comes to food, it's going to fill in the gaps based on what your needs are. So 50 to 60% on baseline needs is the big key that I want you to think about here. Also, look at your subscriptions. That's easy pickings, my friends. We just had people in Master Money Academy who went through some of their subscriptions

Starting point is 00:32:07 and looked at them. They're reporting wealth wins of being able to save hundreds of dollars per month and thousands of dollars per year just by cutting back some of their subscriptions. I've done the same thing in the past. I've saved a couple hundred dollars a month just by cutting back those subscriptions. And I encourage you to audit your subscriptions. And we talk about this also in the academy. But I encourage you to audit your subscriptions every six months. Why? Because things just kind of trickle back in. And you have all these extra subscriptions. And so you need to make sure that you stay on top of those. Because even a $10 subscription is $120 per year. A $20 subscription is $240 per year. A $30 subscription, you get the math. $360. per year. It all adds up and it's really big deal. Your insurance is another big place. Negotiate your insurance every single year, specifically your car insurance, homeowners, all those different

Starting point is 00:32:50 policies need to be negotiated yearly and looking for ways to reduce those. And make sure you're negotiating your bills. You can negotiate your internet bill. You can negotiate your phone bill. You can negotiate your cable bill. Look for the best lowest prices. This isn't just being frugal. This is being prudence with your money. This is being someone who is going to save themselves a couple thousand dollars extra per year than the person who is not doing this. You need to learn to negotiate your bills. It is very, very important. And you could take those extra few thousand dollars. You could take that vacation you want, or you could put it towards your Roth IRA, or you could put it towards something that you actually value. This is why we do this stuff. Now, let's talk about housing for a second,

Starting point is 00:33:27 because for a lot of people, a big portion of their income is going towards housing. And so we want to think through, well, how can we reduce housing costs? One is if you weren't thinking about buying a house, I want you to run the numbers first. Total cost. of ownership. So we have a total cost of ownership house calculator. If you want to check that out, it's at mastermoney.com slash resources. It's free that you can go and use this spreadsheet in order to figure out, should I buy or should I rent? Which one is actually cheaper? In a lot of scenarios right now, renting is cheaper. Even though most people don't like it when I say that, it is. So run the numbers and then come back to me if you want to argue with me on that. Also, your car. Your car is another

Starting point is 00:34:05 huge factor. So let's talk about that. There are way too many people in this country. Who are spending way too much in their car. Driving your car for longer is the real key to getting the most value out of it. We talk about this all the time. 20% down, four years or less on your loan because I want you having car payments your entire life. 7% or less spent on the car payment. And the remaining 5% should be spent on maintenance, upkeep, all that different stuff, totaling 12% and then you drive the car for 10 years or longer.

Starting point is 00:34:38 That's how we buy cars here. and I like to buy cars two to three years used, try to drive them 10 years or more, and that has worked out for me every single time because I buy them used so that they can take that depreciation hit and then works out every time. So that is something for sure that I think is going to be really, really helpful. And Master Money Academy, eventually we're going to have a car buying course in there that will take you through all the different parameters and some of the things that you need to do.

Starting point is 00:35:02 All right. Number six is we want to track and optimize our money. So there's a couple of things, especially if you want to change your life over the course the next six to 12 months, the first thing I want you to do is I want you to track your net worth more frequently. Now, looking at your net worth all the time is not always productive because the market goes up, the market goes down and it's going to shift your net worth dramatically. But looking at your net worth month over month, if you're trying to get out of debt, or if you are someone who has a negative net worth and you're trying to get to a positive net worth can be

Starting point is 00:35:29 something that I want you to do. Now, if you have a huge portion of your net worth in the market, looking at it less frequently, probably every three, six, 12 months is going to be much better. but if you are someone who is trying to work your way up to get to a positive net worth or you're just getting started and working on your first 100K, then looking at your net worth more frequently can be helpful and it's a great motivator. Why, this is your scoreboard. Your net worth is what matters most and that is your big scoreboard that we want to look at. Also, if you are working on getting your spending under control,

Starting point is 00:35:57 doing something like the five-minute drill with your budget can be very powerful. The way the five-minute drill works is that you look at your budget and you say, okay, every single day for five minutes, I'm going to categorize all my expenses and ensure I know where these dollars are going. And what this does is it ensures that you are on top of your money. And that's what I really, really want you to do is ensure that you're on top of your money. You can use a simple dashboard, like a spreadsheet or an app. There's a bunch of different things that you can do there. Monarch money is great. There's a bunch of great options out there if you want to look through

Starting point is 00:36:26 and figure out ways to actually follow the five-minute drill. And then just tracking and optimizing is really, really important. So net worth, you need to know. tracking that spending and that budget is really, really important. But you also need to know what your savings rate is. I want you to know what your savings rate is. I want you to know what your income is. You'd be amazed at how many people I ask,

Starting point is 00:36:44 how much do you make? And they have no idea. Maybe they know their gross income, but they have no idea what their net income is. It is astounding. And so making sure you know what your income is is very, very important. Also, as we start to progress through here, I need you to know what your debt number is.

Starting point is 00:37:00 How much debt do you actually have? That is going to be very important. to also know is to track to optimize, tracking and optimize your money. Number seven is next, we want to focus on supercharging our income. So how do we supercharge our income? Your income is one of the most important factors that are out there for you to build wealth. So in order to build wealth, you need to make sure that you have enough income coming in so that you have a gap. What is the gap? It's the difference between your income and your expenses. And to grow that gap, you need to increase your income. You're going to have to cut back or increase your income. It's a lot easier, my friends,

Starting point is 00:37:32 to increase your income if you know what you're doing. So how do you do this? There's a couple of different ways. Number one is I want you to focus on skills stacking, meaning the skills that you possess currently right now are going to dictate how much money you can actually make. Again, the skills you possess right now are going to dictate how much money you can actually make.

Starting point is 00:37:52 And so I want you to focus on and put this in your goals if you have to for the next quarter. One to two different skills that you can actually learn that are going to help increase your income. Now, this could be a number of different things. If you work in finance, it could be learning how to create different reports for your boss. If you work in project management, it's figuring out systems to increase productivity or systems to increase production within your company.

Starting point is 00:38:15 If you work in construction, maybe it's getting additional certifications that are going to help you become the go-to person for very specific things. If you're a nurse, maybe it's getting the ball rolling on becoming a nurse practitioner so that you can go and make more money in the future. It doesn't matter what it is. we need to focus on stacking up these skills or stacking up these certifications that are going to help us make more money. That's number one is learning those skills. That is a very valuable place to spend money because nobody can take those skills away from you.

Starting point is 00:38:44 You'll have those skills forever. And so really, really important to do that. Two is a great place to start is to ask for a raise at your day job. So we have a free ebook that you can check out in mastermoney.com slash resources that teaches you how to increase your income at your day job and negotiate your salary and get a raise. And so check that out if you haven't already. But this is going to be something that I think is really, really important and a lot of people need to note. Is learning how to increase your salary at your day job by learning how to negotiate and learning how to work with your boss is one of the most valuable skills you could ever have. If you start to learn how to get 10, 20, and 30% raises pretty frequently, that is a multi-million dollar decision.

Starting point is 00:39:20 And in fact, most people make minor mistakes. But if they tweak some different things, they will have a tremendous outcome when it comes to increasing their income. And so what we teach here is to collaborate with your boss. So you're going to go meet with your boss and you're going to talk to him and say, hey, I want to make more money. I want to make more money here. And so what are some of the things that I need to do in order to either get a promotion or earn more over time?

Starting point is 00:39:42 And they're going to tell you some of these things. You're going to have a conversation. And then you're going to continue to meet with them over and over again until you get to your yearly review. And when you get to your yearly review, you're both going to be on the same page because you were continuously meeting and collaborating with them. They knew you were doing this so that you can earn more money. And if they don't give you more money based on you doing,

Starting point is 00:39:59 everything they told you to do, well, maybe it's time to get a new job. And so that's where we're going to look at this and we will analyze this. In fact, in Master Money Academy, the next course that we are creating is all about this, how to negotiate your salary, how to ask for your raise, how to collaborate with your boss. We're going to actually go step by step through all these steps because I think it is a multi-million dollar decision to learn this skill and is so, so important. And then when you start to earn more money, deciding where that money is going to go. So as your income increases. The big mistake a lot of people make is they take this increase in income and they throw it towards things that don't actually bring them value. Instead, what I want you to do is the 50-50

Starting point is 00:40:36 rule. Take 50%, put it to your future self, your emergency fund, your investments, the other 50% you can spend on things that you actually love. And that's going to be a balanced way to have some lifestyle inflation, but that's okay because that is something that I think you have earned and you deserve to spend more dollars on things that you love. So that's what we want you to do here as much as possible. Number eight is I want you to build a wealth mindset. What do I mean by a wealth mindset? Well, I want you to make sure that you keep that fire in your gut when you are starting to build wealth.

Starting point is 00:41:07 So number one is reading at least one finance or investing book per month. Now, we have something called the High Performance Book Club. We have a book club inside Master Money Academy too. I forgot to mention that. But we have something called the High Performance Book Club also in our newsletter. That is some of the books that I'm reading. I try to read a book every single week. And it is one of those things that really does make a tremendous.

Starting point is 00:41:26 tremendous difference when it comes to your mindset and when it comes to your knowledge about finance. And the more knowledge you have, the more calm you become around money. So if you find yourself stressed or you find yourself anxious or worried about money, start to invest more time and energy and learning more. Because the more you learn, the more you just become calm and you have an understanding, okay, this is happening because of this or the market is going down because that's very normal. And so these are different things that I think are going to help you tremendously. Number two, joining a community like Master Money Academy is going to help you tremendously with your mindset. You should see the changes that we are having in people when it comes to their mindset and how they

Starting point is 00:42:04 think about money. Why? Because we are all supporting each other. It is basically one giant group of people supporting each other and each person is working on their financial transformation. But in addition, it's also people learning from each other. They are teaching each other different things where people will post questions in our Q&A section inside Master Money Academy and they will get tons of comments from members of how they tackle the same exact situation. So it's support, it's help, it's coaching. There's so much involved and we're really excited for it. Also, adopting a long-term mindset is a big shift for most people because you've got to understand building wealth takes time. This is a long-term thing. This is not going to happen over the course of just one quarter.

Starting point is 00:42:44 Instead, you're working on transforming your finances over the course of the next six to 12 months. And once you plant this seed over the course in the next six to 12 months, it'll absolutely change your financial life forever. And so that long-term mindset is really, really important. Another thing I'll say is when it comes to mindset is making sure that you consume content that actually is going to help you and not hurt you. So there's people out there, for example, complaining. And they're complaining. None of us can ever get ahead financially or all just screwed by the government or whatever else is going on right now. Stop listening to those people. Because you can absolutely do this. I guarantee you can do this. And it's all about focusing on the

Starting point is 00:43:20 things that you can control. So cut out all the noise, buckle down, and we're going to do this over the course of the next six to 12 months. Next is, I want you to think through and eliminate any high interest debt. So we talked about this briefly when it talked about the emergency fund and the 136 method. But high interest debt is a wealth killer. It is going to absolutely destroy your wealth building ability if you do not get a hold of it as fast as you possibly can. And so when it comes to high interest debt, I want you to focus on any debt above a 6% interest rate. That is not your mortgage. I want you to focus on paying that. down and attacking it aggressively. You can use the avalanche method. You can use the snowball method.

Starting point is 00:43:56 Either one can work, but you want to get a debt paydown plan as fast as you possibly can. And so once you clear out those debts, then you can redirect those payments and start investing. And so that I think is something that is really, really important, really powerful. We get people debt paydown plans all the time in Master Money Academy. I send them a spreadsheet, and then I give them a loom video back on how I think the order of operations of how they should actually pay down this debt. And so having that plan in place and being able to just attack that debt is really, really important. Lastly, number 10 is we want to make sure that we are protecting our wealth over the course of the next six to 12 months. So we need to get the proper insurances.

Starting point is 00:44:33 So term life insurance from policy genius is one. Health insurance, disability insurance, if you need it. Renters or homeowners insurance, all of those need to be in place and they need to be the proper policies. That's one. We also need to make sure that we have an estate plan or a will in place. Maybe you need to trust because you have a lot of assets. Maybe you just need a will, but we need to make sure we have those in place. And also, we need to make sure that we are also protecting our wealth, a third way, which is protecting our wealth by making sure we have an online protection plan. You need to be bulletproof online, meaning that you freeze your credit when you need to, and you use services like delete me to remove your personal information. So if you've never heard of delete me, it is a service that

Starting point is 00:45:12 goes out and removes your personal information from data brokers that are out there. So there are tons of data brokers out there right now that have your personal information. If you Google your name or your address and quotations, you'll see your name pop up on all these different websites, all these info websites and all these different places. What delete me does is they go to those websites and they remove your personal information so that if some scammer gets a part of your information, they can't find the rest of it. And that's the key. So they don't open student loans in your name or they don't open credit cards in your name. Like, that's happened to me. That happened to me in the past before I had this in place. And so if someone who you do not want

Starting point is 00:45:46 to get your information, get your information, and they have a part of it. They can go look up the rest of it online. And so that is the big, big problem, which is why a service like Delete Me is so incredibly powerful because they are going to help you remove that personal information from the internet. So if you want 20% off of DeleteMe, just go to join DeleteMe.com slash PFP20, and you can get 20% off and delete me. It is the best service that I've ever used for this kind of stuff. And so you need to have that financial protection play in a place.

Starting point is 00:46:13 And in addition, we also have full entire episodes on how to put together. they're a financial protection plan. And this is why I'm so passionate about it, though, is because it's happened to me. I've had it happen to me. There was a whole story that I've told in the past of what happened to me, but you need to protect your finances online or somebody can come after them. And so making sure you have that plan in place is really important.

Starting point is 00:46:32 So when it comes to insurance, when it comes to a will or trust, we were talking about those in Master Money Academy too. But those are all really important just to make sure you have at least term life, looking at health insurance, looking at if you need disability or not, trying to figure out if you need umbrella or not, trying to figure out renters or homeowners are all important. And then from there, you can go and add some additional protections. Okay. So protecting your money is very, very important. Insurance is there to protect you when life throws crazy monkey wrenches at you. So really, really important. All right. So even if you do

Starting point is 00:47:06 70% of this list in the next six to 12 months, you're going to get way ahead of most people. Most people don't even have a thousand dollars saved up in their emergency fund. I just gave you 10 steps that could absolutely change your life in the next 6 to 12 months if you actually follow through. Even if you focus on one a month and you start to set up systems for each one of these, one every single month, it could absolutely change your life if you let it. And so this is something for most people out there. I want you to focus your time and energy on learning how to get ahead of 99% of people. I want you to be in the top 1% when it comes to your finances and this is how you do it. It's following each and every single one of these steps. Listen, I

Starting point is 00:47:45 I hope you got a tremendous amount of value from this episode. Cannot thank you enough for being here. Again, join Master Money Academy. We would love to have you. I would love to meet you in there and be part of this community that can absolutely transform your finances. Thank you guys so much for being here and we'll see you on the next episode. Rosen lasagna, medium power, 15 minutes. Sounds like Ojo time.

Starting point is 00:48:20 Let's play. Feel the fun with Play Ojo. The online casino with all the latest slot and live casino games. What you win is yours to keep. No wagering requirements, instant payouts, and no minimum withdraws. Hey, I just won. Woohoo! Feel the fun.

Starting point is 00:48:35 Play, oh Joe. Honey, forget about the lasagna. Let's celebrate. 19 plus Ontario only. Please play responsibly. Concerned about your gambling or that of someone close to you. Call 1866-531-2600 or visit conexonnetontera.com.ca.

The Personal Finance Podcast - 10 Steps to Get Ahead of 99% Of People Financially (In the Next 6-12 Months)

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.