The Personal Finance Podcast - Boost Your Savings Rate to 20%+ in 5 Easy Steps (Money Q&A)

Episode Date: May 8, 2023

In this episode of the Personal Finance Podcast, we're gonna give you the five step master plan to talk to your partner about money. How Andrew Can Help You:  Join The Master Money Newsletter where you will become smarter with your money in 5 minutes or less per week Here! Learn to invest by joining  Index Fund Pro! This is Andrew’s course teaching you how to invest!  Watch The Master Money Youtube Channel!  Ask Andrew a question on Instagram or TikTok.  Learn how to get out of Debt by joining our Free Course  Leave Feedback or Episode Requests here.  Thanks to Our Amazing Sponsors for supporting The Personal Finance Podcast. Chime: Start your credit journey with Chime. Sign-up takes only two minutes and doesn’t affect your credit score. Get started at chime.com/ Thanks to Ka’Chava For Sponsoring the show! Go to kachava.com/pfp and get 10% off on your first order.  Shopify: Shopify makes it so easy to sell. Sign up for a one-dollar-per-month trial period at  shopify.com/pfp Policygenius: This is where I got my term life insurance. Policygenius is made so easy. To get your term policy go to policygenius.com and make sure your loved ones are safe. Hello Fresh: Check out Hello Fresh www.hellofresh.com/pfp50 and use promo code PFP50 for 50% off your first order and free shipping! Delete Me: Use Promo Code PFP20 for 20% off!  Links Mentioned in This Episode:  Relevant Episodes: How Much Should You Spend on a Car? (My Answer May Surprise You!) How You Can Create Life Changing Money Routines (Copy Mine!) The Stairway to Wealth (Where to Put Your Money In Order!) The Stairway to Wealth 2.0 (The Order You Should Put Your Money in!) Bank: CIT Bank Ally Bank Connect With Andrew on Social Media:  Instagram  TikTok Twitter  Master Money Website  Master Money Youtube Channel  ‘  Free Guides:   The Stairway to Wealth: The Order of Operations for your Money  How to Negotiate Your Salary  The 75 Day Money Challenge  Get out Of Debt Fast  Take the Money Personality Quiz Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Square knows that in hospitality, efficiency is everything.

That's why their system lets you take payments. Track sales, handle inventory, manage staff, send invoices, and keep up with finances all in one place. Fly through orders with zero mistakes. Get the data you need and keep everything working together. So you're ready for whatever's next. Learn more about their customizable with plans at squareup.com. On this episode of the Personal Finance Podcast,

boost your savings by 20% in five easy steps. What's up, everybody, and welcome to the personal finance podcast. I'm your host, Andrew, founder of mastermoney.com. And today on the personal finance podcast, we have a money Q&A for you with the first question being boosting your savings rate by 20% in five easy steps. If you guys have any questions, you can hit us up on Instagram, ask your question at Master Money Co. or you can get on the master money newsletter and respond to that newsletter and those questions are always

prioritized. Listen, if you're getting value out of the personal finance podcast, make sure to leave a five-star rating and review on Apple Podcasts or Spotify or whatever podcast player you are listening on right now. And don't forget to subscribe to this podcast so that you can catch all of our new episodes. We have two episodes every single week that come out. And all our entire goal is is to bring as much value to you guys as we possibly can. So today we have three questions that we're going to be able to go through. And I'm really excited about this episode because this is really, really hitting home for me as a lot of people

are struggling with these three questions. So I'm excited for you guys to hear this one. The first one is how to boost your savings by 20 percent. And we're going to talk about this and how you can do it in five easy steps. The second one is how to deal with unexpected expenses in your budget. We had somebody asked this question where they are getting expenses coming from left and right, small and big, and they don't know how to deal with all these unexpected expenses every single month. it feels like it never ends. The third one is how to manage your money in the age of sky high inflation. So how do you manage your money? What do you do with your dollars? How do you allocate your dollars towards certain things? How do you save enough money so that you can retire in sky

high inflation when prices are rising and income is decreasing? So really excited to share this episode with you guys. We have further ado. Let's get into it. All right. So the next question is how do I get my savings rate up to a 20% savings? rate or more. I am truly struggling with getting my savings rate up. Can you please help me with some actionable tips? So today what I'm going to do for this question is I'm going to show you how to boost your savings rate by 20% in five easy steps. Now, if you have not heard me talk about your savings rate, we are talking about your net income. How much of that income are you saving as a percentage? This is an important number that every person listening to this podcast should know what that number is.

and if your number is not above 20%, I want you to work on trying to get it above 20%. Now, a couple of things to note as a caveat here is, we all are in seasonal situations. If you are really struggling paycheck to paycheck and you just do not make enough money, then sometimes you're in a season where you just can't save enough money. The key here, though, is to not get complacent with that season

and you want to work towards making sure that you can increase your income so that you can save that 20%. Sometimes you just can't cut back anymore. That's the reality of life. And most people don't realize this and they beat themselves up and they feel guilty. If that's you, then what I want you to do is save as much as you possibly can and increase that amount by 1% every single month. Once you increase it by 1% every single month, do it until it hurts where you cannot

save anymore. And that's going to be the maximum amount that you can save during this time frame. And if it's below that 20% frame, then what I want you to do is go and look towards increasing your income so that you can increase your income during that area. So if you know that this is an income problem and not a saving problem, meaning that you're really spending almost $0 in discretionary expenses, then what I want you to do is go through that exercise, see how far you can get. And then from there, you're going to work on your income problem, which is the major factor

for a lot of people when they're not saving a lot of money if you're living paycheck to paycheck and you don't make a lot of money. So that's factor number one. But I'm going to give you the five steps here that I would take to evaluate my finances and really deep dive and look into my finances so that I can figure out where am I spending too much? How can I reduce spending in some area so that I can get that savings rate up to that 5% area? So if you're finding it challenging, this is going to be really, really helpful for you. Step one is to be precise with your budget. So if you don't track your spending at all,

you need a budget. I know you don't want to hear this, but you have to have a budget in place in order to build wealth, especially if you are overspending. If you're overspending, you have to have a budget. There's two budgets we talk about here on the personal finance podcast. Number one is the reverse budget where you save off the top. In this case, if it's 20%, you're saving 20% of that net income and then you're spending what is left over. Now, for some people, if you're new to this, you got to make sure that you know how much you're going to be spending. Otherwise, you're not going to leave enough left over for your spending. Then you're going to have to dip into your savings. It's going to be a whole ordeal.

So make sure you run some numbers before you do that. But once you do it, it's an easy way where you don't have to do a line by line on a budget. I know how most of you are. You don't want to do a budget. So that's the easiest way you don't want to do a budget. Now, if you want to be more precise and you want to maximize every single dollar, a budget is the best way to do that. I budget still. A budget is what I think everybody should be doing is a line by line on budget. The reason why we have the reverse budget available for people is so that you can at least track your spending in some way, shape, or form. But if you're not doing a line by line on budget, here's how it works. I use a tool called YNAB. And what I do is I make sure that I am

to the exact dollar every month so that I can maximize my dollars and put them, towards the things that bring me value because this is really just allocating your dollars towards your values. This is actually very freeing where most people think a budget is constricting. It's actually very freeing once you start to get the hang of this. So being precise with your budget is number one. And what I want you to do is if you must round your budget, maybe you're doing a reverse budget, you must round, then I want you to round your income down and I want you to round your expenses up. What this does is it creates a natural buffer between your income and expenses so that you can stay within your budget. Now, step two, we are going to identify

spending patterns. How do you do that? What I want you to do is I want you to analyze your last three months of bank statements, go into your bank statements, dig through there, and you're going to analyze your spending patterns for the last three months. Now, one way you can do this is with a tool like Rocket Money. Rocket Money, this is not sponsored, but Rocket Money is a tool that I like to use in order to go and look at my spending habits, look at my bills that are available, and then if you're using YNAV, you can go back on your historic YNAV

and see your spending habits there also. Now, here's what I would focus on, though. Focus on the months where you don't spend a lot or the month that you spend the least and see how you can replicate that month. What happened during that month where there just no surprises and that's why you spent the least,

or were you really actually being conscious with your spending and looking towards where every single dollar should be going. Then I want you to focus on the months where you spent the most. What happened during that month? Did you spend too much because you had unexpected expenses, which we're going to be talking about in this episode also? Did you spend too much because you had a vacation?

Did you spend too much because you just blew money? You didn't even think about it. You were just buying stuff, shopping online, doing all these extra things. What happened during that month? Analyze that spending and then see if you can actually start focusing on your lower spending month. Now, if your lower spending month was still not good enough to save 20%, then we need to look at why, especially if your income is high enough because we know a large portion of six figure earners are still living paycheck to paycheck. And we're trying to eliminate that for a lot of you who are

six figure earners so that you can get to that 20% savings rate. Now step three is you're going to understand your payment methods. So if you find a month where you spend more than you make, investigate how you cover those expenses. Because if you spend more money than you make, how are you covering that? Are you dipping into your savings account? Are you using a credit card and you're falling a little bit behind on your credit card bill. How are you doing this to actually catch up? Because what people will notice is all of a sudden, their savings account starts to dwindle down slowly.

Maybe you save $10,000 to $15,000 in a savings account for a buffer or emergency fund. And you're noticing that it's starting to go down because you have to cover for your overspending that you have every month. So I want you to evaluate this and see, am I spending too much in this area? What can I do to make the adjustment?

Now, step four is you want to prioritize savings. So by utilizing something like the reverse budget, you could prioritize savings off the top. So I want you to save money first when it comes in, then spend what is left over. This is the classic Warren Buffett budgeting method, which is why we call it the reverse budget. But Warren Buffett says you always must save first, then spend what is left over. This is incredibly important. Now, I've done this on TikTok before, and someone on TikTok has said, yeah, I'll just not pay my bills and I'll save my money. That's not what I mean.

What I mean by this is you are going to save the amount that you want to save off the top and then spend what is left over and maybe your discretionary spending goes down a little bit. You're eating out money, your money to go out to the movies, your money to go out to the bars, all these different things may just be reduced a little bit because you are reducing that discretionary spending. Now, if you don't have a lot of discretionary spending, then you have that income problem that we're talking about. So it's one or the other. Now, one other thing I want you to look at here is when you are looking at some of these bills, a big, big culprit for a lot of people is their car payment. Now, Is your car payment the big culprit for you?

A lot of people in America now, these car payments are rising close to $1,000 per month. And you can see people on social media, car dealerships, trying to normalize a $1,000 car payment. I'm going to tell you right now, if you have a $1,000 car payment, it is very difficult to build wealth unless your income is extremely high

and it matches that car payment. If you haven't heard our rules about car buying, we have an episode on that. We can link it up down below also. But if you want to be financially independent, you don't want to be spending more than 20% of your income, in a one-year income time frame on a car. If you want to be less conservative,

you want to work for a longer period of time, and you can go all the way up to 35%. But this is kind of the range where you don't want to be making these massive car payments. You do not want to do that for a number of different reasons, and this is one of them. Now, after you do all of these things, you go and analyze your finances,

you have your bank statements available. So you know how much is left over that you can start to spend. Once you have that available to you, I want you to establish a realistic baseline. I don't want you to get way overconfident, super excited, but then you can't hit this baseline anymore. If it's 15%, then what we're going to do is we're going to work our way from 15% on how we can increase that. But you've got to start with 15%. Save that 15% and how can we get

that extra 5% squeezed out by increasing income, maybe picking up a side hustle, maybe doing some other things like negotiating our salary at our job. What can we do? That's what we need to focus on next in our personal finance journey is we need to figure out how can we get that 5% gap there. If it's 10%, how can we increase that 10% gap so that we can get to the point where we're saving 20% and beyond. If you're in your 20s, 20% is okay. If you're in your 30s, I want you to get up to that 25% range. The reason for this is you want to accelerate your path to wealth to financial independence. And if you want to be financially independent or fire within 20 years or less, I want you to get to 50%. Now, 50% may sound insane to a lot of people, but the math shows if you

want to retire in 18 years, you have to save 50% of your income to be able to do that. So run the math, learn how this work so that you can get to the point where you are financially independent as fast as you possibly can be. Now, once you have this realistic baseline, you're just going to work to increase that so that you can get to the point where you are saving enough money. Now, you can really transform your finances just by doing these five steps if you've never done this before. And so I want you to learn how to do this and maybe do this audit every time you feel like your finances are getting a little out of control or spiraling out of control. If you budget daily for one to two minutes a day, it's really, really easy. to do it that way. It's the same thing where if you think about somebody who has to weed their garden, if you weed your garden every six months, you are going to have hours and hours and

hours of work to do by pulling those weeds. But the person who just goes out and pulls the weeds that show up once a day, it takes them one minute a day to pull those weeds. So save yourself hours and hours and hours, but just budgeting a little bit daily. One, two, three transactions, however many transactions you have per day, it'll save you so much time. And so that's why we do that. I talk about it in my daily routine episode that we had late last year. So I want you to check that out. If you haven't seen that episode, I talk about my daily money routines. So we also did that in the master money newsletter as well. So if you're not subscribed to the newsletter, make sure you are, because I talk about my daily routines in that newsletter. And in addition, we also will update

those routines as I change my routine. So that's how I would look at it. Those are the steps I would take. I would go through those five steps so that you can increase that savings rate. I'm having 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 difference. Sponsored jobs on Indeed get 45% more applications than non-sponsor. once. 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. 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, 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 license team works for you, not the insurance companies. So they help you find the right coverage for your situation without all the guesswork. 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. Head to PolicyGenius.com. to compare life insurance quotes from top companies and see how much you can save. That's policy genius.com. 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 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 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. 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. Find your advisor at IDPrivatewealth.com. A major problem with my finances, and I don't know how to deal with unexpected expenses in my budget. I feel like we are getting killed by death of a thousand cuts.

So this question is one that I personally relate to so much. So I understand how you're feeling here, because even now, This still happens to me where I have to deal with unexpected expenses in my budget. Let me give you some examples here. So just in the last two months alone, I've had a surprise vet bill of $700. I've had a surprise doctor bill from my kids that was like way delayed in the billing cycle that they just forgot to bill us for $500. I had a bill where I had to redo a bunch of landscaping in my yard that was unexpected.

We kind of were planning part of it out. But there were some additional things that we had to do, which increased the amount to almost $1,000. We had my wife's rear brake pads needed to be replaced unexpectedly. That was another $800. And so the list goes on and on and on. But then we also had a bunch of little unexpected expenses that came into the budget that also were just small things that add up over time.

So I know how you feel when it comes to this stuff. This is always ongoing and happening, especially if you have kids in the picture or you have other people in your family. Stuff's just going to happen over and over. and over again. So how do you deal with these unexpected expenses? There's going to be a number of things I'm going to go through here. And a lot of this is why when we talk about budgeting, we talk about you have to roll with the punches. You're going to get hit with punches all the time. And what you have to do is figure out how to roll with those punches. When a boxer is boxing, they have to roll with the punches to

lessen the impact. And so you have to do the same exact thing when it comes to your budget. This is a very important thing that it takes practice and it takes timing. But if you have a budget, that is the best way to start. So if you don't have a budget and you are trying to deal with unexpected expenses, it's going to be very, very difficult to deal with those unexpected expenses. So the first one is you're going to become flexible

when it comes to your budget. So you're going to roll with those punches. What do I mean by that? What I mean by that is if you have a line by line item budget, what I want you to do is if they're spending in a certain area of your budget that you have over allocated dollars for, meaning say, for example,

you allocate $300 a month for gas, and in one month you started working from home and so your gas bill went down to $100 per month, where you're not driving as much from A to B. So you have an extra $200 in your budget there. And say, for example, you get a vet bill of $300, but you only put $100 per month into the vet category. You're going to roll that $200 for gas into the vet category.

So you're going to roll with the punches. Nobody ever has a perfect month budgeting. You're never going to find anybody that has a perfect month. So this is something you have to do when you budget. You don't just give up and quit when your budget blows up like this. Instead, you roll with the punches. So you've got to embrace the art of flexibility. and roll with those punches.

Step two is I want you to add a line item in your budget or a cash buffer is also made to do this. This is why we talk about the cash buffer of stuff I forgot line item. So this is, I do this in my own budget. There's a stuff I forgot to budget for in my budget that I just throw cash in there when I have extra dollars. Why is this important?

Because every time a category is underutilized, I'll take some of those extra dollars, roll them into this category. And the purpose of this is that when the, these unexpected expenses come up, I have a little extra cash, a buffer there that's going to allow me to do that. Also, if you follow step one in the stairway to wealth, you have that cash buffer sitting in your standard savings account, then what's going to happen is you can also use that money if you don't have this line item yet laid out. This is just part of your wealth protection

plan, protecting your money before when these things come up. So this is very hard to say for if these are happening at the same time. So if you're just getting started and these expenses are just getting thrown at you left and right, it's hard to put dollars in there. So you've got to work on this over the course of a few months. It's not going to happen at one month or two months. You're going to have to work on this over a longer period of time. And slowly you'll start to see this category start to build up over time as you have months with less unexpected expenses. So that's the second thing I would do is add this extra line item, the stuff I forgot line item, so that you can protect yourself from some of these things happen. It's not going to solve all your

problems. Your emergency fund is there for that. Your cash buffer is also there for that. But it's going to solve some of the problems that may come up, especially the longer the time period that you have where you're building this up, then it's going to solve all of these problems and then you don't have to worry about it because you got a system in place where it's just running and humming on its own. So the stuff I forgot line item is one. We haven't talked about in this podcast yet, but I've been utilizing it for years and it really does help me when this happens all the time. Now, as you go through this, I want you to do quarterly checkups, and I want you to print out your bank statements or look at your bank statements, put it on your iPad and take your Apple Pencil, highlight it,

whatever you want to do, and go through all the surprise. expenses that you've had in the last couple of months. Because what you're reviewing here is all the expenses that just were not planned for. So if you go through three months, maybe six months, if you want to be really, really thorough, go through those months, see how much it was in total. Because that may be the amount that you want to add to the stuff I forgot budget line item. And if you can't afford that amount, then maybe make some adjustments on some other line items. Now, if you see something reoccurring over and over and over again, maybe your medical bills, maybe you have to take your kids to the doctor pretty frequently because it was six season and you're paying all these co-pays and

just happening over and over and over again, then maybe you just kind of figure out what that total is and put it into an entire year, and then you just put that as a new budget line item. Sometimes things that are happening unexpectedly happen over and over again, and they need to be a budget line item, and this would be a reason to do this. So as you hear me talk about this,

this is why the budget's so important, because you can make adjustments as you go through this. I know nobody wants to hear about budgeting, but this is how you make adjustments with your money is inside of that budget. So it's very, very important to have that so you can make these adjustments. If you don't have one, all that's going to happen here is you're going to have to,

worry about what the heck's going on. I don't know where these expenses are coming from. I don't know what is happening. So this is very important to look at this. Now, you can also use Rocket Money. If you use Rocket Money before, it is a way that tracks what your upcoming expenses are and you can see some of those recurring expenses in there as well. Now, the next thing I want you to do is look at seasonal surprises. So sometimes when it comes to your money, there are seasonal surprises. Maybe there's a season where your entire family has birthdays month after month after month. Birthday parties now, news flash are really expensive for kids.

I don't know when we got so bougie with birthday parties, but now they're like, I don't know, every time we have to have a bounce house, we have to have 25 different things. I don't know what happened here. But for example, if that happens to you and you have these surprise birthday parties all the time, you got to worry about all the birthday party stuff. You got to worry about the additional expenses that you have when it comes to presents for your kids. You have to worry about all these other things that happen and they come up and seems like

the cake is $100 every time and it's, you could tell I'm having a pay point. I'm just venting to you guys. But anyways, this is one where if you have seasonally surprise items, obviously Christmas is the biggest one, then you want to make sure that you are planning for those ahead of time, 12 months out. So like what I do for Christmas, for example, is in January, we start to save a little bit of money every single month for Christmas. So I see how much did I spend on Christmas last year? Divide that number by 12. And every month I save for that because that is a true expense that is going to come up.

And so you have to save for it like it's a bill. I want you to plan for those seasonal expenses just like that. And like I said, you have to give yourself some time as you build this out. This is not going to happen instantaneously. So time is very important when you're building this out. It's not going to be perfect. Maybe next month you get a little better. And then the month after that, you get a little better than that. And so as you're going to see is this gradual progress is going to be really helpful. Personal finance is not a rip the bandaid off type of thing. And you see me talk about this, especially when you're saving more money or trying to increase the amount that you're saving. This is not a rip the entire bandit off because most people will quit when they do that. Instead, this is a gradual thing where you're getting. a little bit better. Maybe your savings is dwindling down a little less because you have all these

protection plans that you are putting into place. And then obviously the most important thing when you do this is having an emergency fund. Emergency fund is imperative if you are trying to build wealth. It protects your money and protects your wealth building ability, protects your future retirement dollars, all of these different things. So making sure that you have three to six months expenses. And if you are a wealth builder, I want you to have six month expenses saved up in your emergency fund and or more, having that cash is security. Cash is security. I know it gets reduced in value over time based on inflation.

We all know that, but we can put it in some places where we get a rate of return that at least is going to be helpful because you have to have it in cash so that if something happens in the market, if you invest those dollars and the market gets cut in half, your emergency fund gets cut in half at the time you need it most. So I don't want you to be investing those emergency fund dollars. So listen, these are some of the things that you can do when you have all the money. of these unexpected expenses in your budget. I know how you feel. I know how painful this can be and I know how frustrating it can be because sometimes when you are living paycheck to paycheck and I remember this when I was

living paycheck to paycheck when I first got my money together. When you are living paycheck to paycheck, you just want to scream every time these unexpected expenses come up and they seem like they never ever end. So putting some of this stuff into place, getting some protection into place. And if you're truly paycheck to paycheck, you don't have those extra dollars. Do whatever you can to start to build up a little bit of a cash cushion so that you can take care of this stuff. Emergency funds are the way to do that. They're going to be the way that helps you the most, but at least get a cash buffer in place, one, two, three thousand dollars so that you can cover any unexpected expense that comes up and cover it with your deductibles and your insurance and all those different things. So this is very,

very important to understand when it comes to fixing that. I know how hard that is, but keep pushing on. And I promise you, if you give it some time and you follow some of these steps we just talked about, I promise you you'll be able to cover some of those unexpected expenses. Because now, when they happen to me, there's no stress, there's no worry, the money's just there. And there's power in having the money there. And these steps are going to help you do that. All right. So the third question is, how do you manage your money in the age of sky high inflation? So obviously, this is a very broad question, but I'm going to give you the best tips on how to do this. Now, low key, this episode is turning into a budgeting episode without having the word budgeting

in the title. But this is all these types of things, when your money gets tight and it gets tough, the budget brings freedom into your life. And so I want you to understand that because building wealth and bringing that freedom into your life reduces your stress and it reduces your anxiety, especially in times like this when inflation is sky high. Listen, every time I go to the grocery store, I feel like I get sticker shocked because inflation is so high. So I want you to understand that we're all going through this. Even people who are good with money, we're all going through this sky high inflation and it's one of those things that if you're living paycheck to paycheck, I know how hard that can be. I know how hard it can be. Prices are rising, but your wages are not

rising. What do you do? It is very, very difficult to deal with this situation. So budgets are the key to having this. Even if your budget is something where you're still spending more than you make because you're trying to catch up and you're living that paycheck to paycheck. And it feels like what is the point of all of this and having this budget is still important to have that. Why? Because you're getting closer and closer and closer to getting to break even. And then once you get positive and you actually grow that gap between your income and your expenses, that is where wealth is built. So I want you to keep pushing forward.

I understand how hard it can be to actually have to fight through some of this stuff. Now, the first thing I want you to do is adjust your expectations because too many people think that with inflation skyrocketing, you're still going to be able to do all the things that they want to do with their wealth building ability. And sometimes you just have to adjust your expectations, not beat your yourself up, not freak out and stress out about this stuff. There are seasons of time where we just cannot save as much money. And Nick Majuli actually lays us out beautifully in his book, just keep eyeing about the seasonality of your savings rate. And having that percentage of savings

rate, he argues, is not the best option for a lot of people, whereas we argue it because I want you to have a target goal to achieve. I want you to go after that 20 to 25% savings rate so that you have that target goal so that you know what to go after. But in reality, not everybody can get to that goal during certain seasons. So, I want you to be able to adjust those expectations and you may have to cut back on some luxuries in order to adjust for some of these price changes. So that is the first thing I want you to think about. Now, number two is I want you to keep your budget flexible. Now, we talked about this with some of the questions today, but I want you to keep it flexible. I want you to roll with the punges and make sure

that you keep the big items flexible. So if you have some extra dollars with specific budget line items, I want you to roll some of those over to items that are struggling, and this will help you adapt to some price changes. Big price changes are going to be things like your groceries, for example. That's the one that people struggle with all the time. So I want you to be a little more price conscious when it comes to adjusting those budget levels because maybe you opt to buy cheaper items. You go generic instead of the name brand. You save a couple of dollars here and there across your grocery budget. And all of a sudden you're saving $50 per week, which is $200 per month, which helps you adjust to those inflation pricing areas. For example, my wife and I, we shop at Aldi to reduce some of the cost

that comes into play when you are shopping for grocery. So that is one tip that you could do. You could do meal prepping, all those types of things are going to help you keep your budget nimble when it comes to that type of thing. Now, cutting back on non-essential expenses may be something that you want to do. Now, we've talked about cutting back on expenses before, and I'm going to give you an example here that's going to help you when it comes to cutting back expenses. What I don't want you to do is if you're spending $700 per month on eating out and

you want to get that number down to $300 per month, then I do not. want you to just cut $400 per month out of your budget immediately to get down to that $300. Now, if you can do it, more power to you if you're that motivated, but most people are not motivated in this way. So instead, I want you to gradually reduce your spending over the course of six months, for example. So if you are trying to reduce your eating out budget by $400 over the course of six months, I want you to maybe the first month you reduce it by $50. Maybe the second month you reduce it by $100. Maybe the third month you're reduce it by another $50, maybe the fourth month, then you reduce it by another $100.

And so this gradual reduction over time allows it to hurt much less. And you kind of get used to the new lifestyle and you can settle in. Then the next month you reduce a little more. Then you settle in. Next month, you reduce a little more. And it reduces the pain point of just ripping the Band-Aid off. Now, more power to you if you can do it and rip the Band-Aid off, but most people cannot do that. So when you want to cut back on non-essential items, that really are something that really

are going to help you significantly, then gradually doing it over time is the better option for a lot of people. Now, the next thing I want you to do is think through as in times of high inflation, sometimes it can erode away your savings. So if you had an emergency fund for like the last 10 years and you really haven't had to touch it at all, you may want to start to beef up that a little bit more because the buying power of your dollars is going to be reduced. For example, the last couple of years, we've had inflation for 10% the last couple of years in a row. And so maybe your buying power has been reduced by 20%. And say if you have $50,000 saved up in your emergency fund, for example,

maybe you want to beef that up another 10 so that you can keep up with that inflation rate if you have not gotten any rate of return on that rate. So if you have not gotten any rate of return when it comes to that money, that's why it's so important to keep your emergency fund in a high-yield savings account so that you get some sort of interest payment back to you. And interest rates are obviously rising at the time of recording this. It's a great time to look at that when you are saving up your money. And then another thing to do is during high inflation times, you want to pay off any high

interest debt because interest rates are going to rise during those times. So you want to get rid of any high interest debt. So credit card debt, student loan debt that's above 6%. Any debt that's way above 6%, you want to make sure that you are reducing that amount so that you can actually get to the point where you are completely high interest debt free. We want you high interest debt free, low interest debt. If you have a mortgage for 2 or 3%, I could care less if you keep that mortgage. because you're better off investing those dollars into something like an index fund where you get an 8 to 10% rate of return.

The math is just better to invest those dollars. Now, another key is during high inflation times, managing money, you want to be investing your dollars. Now, we've talked about this before, but investing your dollars to outpace inflation is how you outpace inflation. So if you have a bunch of money outside of your emergency fund and you have this discretionary income, the last thing you want to do is be stuffing that money in a mattress like a drug dealer. Instead, you want to take those dollars, invest them so that they can outpace inflation. This is why we invest in index funds and ETFs. This is why we invest in real estate.

This is why we buy boring businesses. This is why we look for cash flow because we want to outpace inflation. This is the number one reason why you need to invest your money. If you don't invest your money, you will not retire. I'm telling you this right now. So it's very, very important to make sure that you get ahead of this as you go through this. Now, another thing I want you to do is look to leverage technology. So Rocket Money is a great one which used to be true bill, not sponsored, just like them.

Personal capital is another great one. YNAB is what I budget with. I use why. And people always say, how do you pronounce that? It's Y in A, B. It stands for you need a budget. So those are some of the great tools and technology that you can use to track your money. Get alerts when you're overspending in certain areas so that you can make sure that you're on top of this stuff. You've got to dial it down a little bit when it's high inflation times. The same thing if it's a looming recession or any of those things. You got to make sure that you are really dialing it in when it comes to understanding where your dollars are going. So the high level is making sure you're reducing spending on discretionary items that don't truly bring you value if you're overspending somewhere.

If you're getting too many Amazon boxes at your front door, maybe you want to cut that back a little bit, talking to myself. Number three, if you are not investing any of your dollars, you need to be investing your dollars to outpace inflation. Number four, if you don't have an emergency fund and it's not in a high yield savings account, it needs to be in that high yield savings account so that you get some sort of rate of return when it comes to that. My favorite high yield savings accounts are CIT bank.

link down below. Ally Bank is the other one, which I will also link down below. And then just making sure you're thinking through your financial choices and you're thinking through the repercussions of those financial decisions as you go through this process.

Listen, thank you guys so much for listening to this episode. I truly appreciate each and every single one of you. If you guys have any questions, you want to leave a question for Money Q&A. You can hit us up on Instagram at Master Money Co. And you can also hit me up on Twitter

at Master Money Co. Or if you get on the Master Money newsletter, these are the questions we prioritize is if you're on the master money newsletter, which is always linked up in the show notes below, and you respond to the newsletter with a question, I will always, always prioritize those questions to get on the show. So if you want your question on the show, respond in the master money newsletter and we will prioritize those questions so that you can get your question answered. I truly appreciate each and every single one of you. All we want to do with this show is bring you as much value as possible so that you can learn how to build generational

wealth for you and your family. We want to make at least a million millionaires who listen to this show. So thank you guys so much for listening. We will see you on the next episode. Rosen lasagna, medium power, 15 minutes. Sounds like Ojo time. 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 with no wagering requirements, instant payouts, and no minimum withdraws. Hey, I just won. Woo-hoo. Play, oh, Joe. Honey, forget about the lasagna.

Let's celebrate. 19 plus Ontario only. Please play responsibly. Concern about your gambling or that of someone close to you. Call 1866-531-260 or visit connexonterio.com.