The Personal Finance Podcast - How to Manage Money Like the Top 1%

Episode Date: January 22, 2025

In this episode of the Personal Finance Podcast, we're going to talk about how to manage your money like the top 1%. How Andrew Can Help You:  Don't let another year pass by without making significant strides toward your dreams. "Master Your Money Goals" is your pathway to a future where your aspirations are not just wishes but realities. Enroll now and make this year count! 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. Shopify: Shopify makes it so easy to sell. Sign up for a one-dollar-per-month trial period at  shopify.com/pfp 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 Fundrise for Sponsoring the show! Invest in real estate going to fundrise.com/pfp Thanks to Policy Genius for Sponsoring the show! Go to policygenius.com to get your free life insurance quote. Go to joindeleteme.com/pfp20 for 20% off! Go to Acorns.com/pfp and start automating your investments and get a $5 bonus today!  Links Mentioned in This Episode:  Why Index Fund and ETF's Investing Could 10x Millionaires How to Break The Paycheck-to-Paycheck Cycle (IN 2025) How to Invest In Yourself and Earn More (THIS YEAR!) 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

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Learn more at tellus.com slash online security. No one can prevent all cybercrime or identity theft. Conditions apply. On this episode of the Personal Finance Podcast, how to manage your money like the top 1%. Everybody and welcome to the personal finance podcast. I'm your host, Andrew founder of MasterMoney.co. And today on the Personal Finance Podcast, we're going to be talking about how to manage your money like the top 1%. If you guys have any questions, make sure you join us on the Mastermoney newsletter by going to Mastermoney.co slash

newsletter. And don't forget to follow us on Spotify, Apple, podcast, YouTube, or whatever podcast player you love listening to this podcast on. And please, if you want to help out the show, consider leaving a five-star rating and review. Cannot thank you guys enough for following the show and leaving those five-star ratings and reviews. They truly mean the world to me, and it helps this show spread the message. Now, today, we're going to be diving into how to manage your money like the top one percent. And the number one thing that I want you to take away from this is it's not how much money you make. It's about how much of your money you can actually keep. And so what I'm going to do today is I'm going to show you how much you should be spending in various areas when

your money comes in. When that money hits short checking account, how do you need to manage that money so that you can have top 1% wealth and do it the same way that wealthy people do? And for most people, you're going to learn how much you should be spending on essentials and what that goal should be. We're going to be talking through how much you should spend on investments, where I would actually allocate those dollars, how I would think about investments. And then lastly, you're going to learn how much you should spend on things that you love and enjoy because we want you to utilize money as a tool and we want you to spend more on the things that you love. And so I want you to spend as much as you possibly can on the things that we love. Now, to do this, I'm going to introduce you to the 255-25 rule. Now, this rule works in a very specific way because we're going to talk through how much you should spend in these various areas.

And then we're going to nail down how you can improve some of these areas if you're spending way outside of where you should be. So, without further ado, that's something you're into. Let's get into it. Now, the first part of the rule is 20% and 20% is allocated towards future you. This is going to be something I think most people, need to make sure that you focus on first is when you get paid, you want to pay yourself first. This is the number one rule of personal finance because if you do not pay yourself first, you start to commingle all of your money with the rest of your bills and you really don't

allocate any money for future you, you will have a very, very hard time getting ahead with your money. And so we want to make sure that we are allocating at least 20% for our future selves. Now, what most people need to understand is as we start to talk through some of these numbers, this number is just partially a baseline to where you need to be in a range. I like when you try to set up spending plans that you have some sort of range set up for people. A lot of people are in different phases of their wealth-building journey. And so you have to have a range in order to make sure that you have this set up. 20% is the minimum amount that I want you to allocate towards future you.

Now, some of you may be saying to yourself, there is no way I can allocate 20% of my income towards future me. And that's where I want you to learn about the 1% rule of improvement. We talk through this a ton on this podcast. But what I want you to do is figure out how much you can actually save and invest for your future. And I want you to increase that amount every couple of months by 1% until you get to 20%. So say, for example, you can only allocate 10% of your income towards saving for your future. Well, next month, I want you to allocate 11.

then I want you to start to work your way up towards 12, then 13%. And you can do this every other month. And by the end of this year, you're going to be able to allocate another 6% towards future you. That means you're going to be at 16%. And so you only have to make up another 4% over the course of the next couple of months. And by next year, you will be at 20% of your income. Now, you may be saying yourself, well, where's all this money going to come from?

How am I going to increase it by 1% over time? If you increase it by 1% over time, then look at areas that you can cut back by one person. It may be a bunch of different areas across your budget. Or you may need to make a little bit more money, but this gives you time to increase your income to fill that capacity so that you can allocate dollars towards your future you. Now, if you do not invest your dollars towards future you, if you don't take this action step, this is the number one action step that I want you to take in this podcast episode. Because if you are not doing this, you will never be able to retire. You will never be able to have financial freedom. And if you're listening to me and you're at your day job right now,

you're driving on your way to work in traffic, or you're on your way home in traffic, or you're in your cubicle right now, or you're in your office. Guess what? The only way to get yourself out of having to do that every single day is investing your dollars towards future you. You work so incredibly hard for these dollars, and you work so hard for your money that you need to make sure that you are saving some of it for yourself. And I'm going to show you exactly how to do that today in the first part of this episode. Now, when I'm talking about future you, I'm talking about two different things. One, is saving for your emergency fund.

And number two is saving dollars towards investments. That means putting dollars in your retirement account, putting money in your brokerage account, saving for a real estate investment. It depends on what your specific goals are. So, first, we're going to talk about how you need to build your financial foundation. And we do this with what? The emergency fund. We're going to go through the 136 method on how you need to allocate.

your dollars towards that emergency fund, very, very important because we have to have this financial foundation set up in order to make sure that we are allocating dollars towards future us. So first, how do you set up your emergency fund? You start with a starter emergency fund with one month of expenses. Now, you're going to save up one month of expenses in a high yield savings account. And you're going to do this automatically. So you're going to try to save as much as you possibly can in a high yield savings account. There's a bunch of great high yield savings account. There's a out there, I use Ally Bank because they have buckets that you can allocate there. If you can find another high yield savings account with buckets, I would absolutely make sure

I am looking to do that as well because you can budget inside of that high yield savings count. Once you have one month saved up, then I want you to start paying down high interest debt. High interest debt is the number one thing that you need to get rid of as fast as you possibly can. Specifically, if you have something like credit card debt or a personal loan or a really high interest car note, you need to make sure that you are paying that down. as fast as you possibly can. High interest debt is compounding against you and not for you. It is compound interest working in reverse. And so you need to understand. I've seen people trying to work through just $12,000 worth of debt and they're paying $500 every single month,

and they are still falling further and further and further behind because they are not taking care of that debt. You need to get way out ahead of that debt as fast as you possibly can. Now, if you are in debt, and you want to learn how to get out of debt as fast as you possibly can, we have a free course. It's called How to Get Out of Debt Fast. If you go to mastermoney.com slash courses, you'll see it there. And it's absolutely free. And you can take an hour, go through that process. I want you to work through that process if you can.

Secondly, so once you get that high interest debt paid off, you have one month saved up in a high yield savings account. Now we're going to go to the three, which stands for three months. And what we are going to do is we're going to save up now three months of expenses in our high yield savings account. Once we have that saved up, oh boy, we can start to get our dollars. is rolling in. This is where the fun part starts because we can begin investing in our future selves. Now, the beautiful thing about investing is that once you start investing, you are able to watch your money grow and you can watch a compound and all of a sudden you can make some

amazing moves for future you. And future you is going to appreciate this. And so once we get three months saved up, it's going to take you some time to get three months of your income saved up in a high yield savings capital. Once we get that rolling, we start investing our money and growing it over time. Now, how much should you allocate towards each one? Because now we want to make sure that once we start investing, we are still putting more in our emergency fund until we get to six months. Six months in your emergency fund is the ultimate goal. And the reason why this is your ultimate goal, and this is what the six is, is because it is going to protect you against job loss, it is going to protect you against your car breaking down, it is going to protect you against medical bills, it is going to

protect you against any other surprises that can happen in life. Maybe there's an emergency move that you need to make across the country where you got offered a really amazing promotion and you need to take advantage of that promotion. Maybe there is some sort of natural disaster that wipes out your home and you have no other options. That has happened a number of different times this year. In Florida where I live, there were so many people who lost their homes to flooding. In California right now, there was just a bunch of fires that swept through L.A. Natural disasters are another possibility that could happen and you need to have cash on hand in order to protect yourself when life happens. Those who have cash on hand and those who have an emergency fund are those who actually consistently

can build wealth over time. And if you don't have that financial foundation where if you don't have cash on hand, you will never be able to get ahead long term. Something is going to happen to derail your progress and you're going to have to go backwards all over again. How many times if you're living a paycheck to paycheck, have you gone through this process? Have you gone through this process and you're like, you save up a little bit of money and all of a sudden it feels like it's wiped out again. You save up a little more money and it feels like it's wiped away again. This is because we got to get ahead with our cash. Now, I know this can sound daunting if you are just getting started. I know this can sound like it's something that is very difficult, but I promise you

if you stay disciplined, you can do this. Now, when we start talking about investing, what do we need to be doing when we start investing? Well, first, we need to make sure that when we begin investing, we are investing in the correct accounts. Now, what accounts are out there? There is stuff, and this is the order that I like. The health savings account is number one. Now, most people are like health savings account. What are you talking about? That sounds like it's a health care account. It is, but it's an amazing retirement account if you qualify. The way that it works is you put money in and you're not tax on that money. The money will grow tax free. And you can pull the money out tax-free as long as you have a qualified medical expense. And so because of this, the HSA is a very,

very powerful way to grow your money over time. I don't use it for health care expenses. I save for retirement in my HSA. So the HSA is number one. Number two is a Roth IRA. Now, many longtime listeners know, this is the order we talk about all the time. The Roth IRA is absolutely amazing for wealth building. Why? Because money goes in. You've already been taxed on the money that goes in. But then your money grows taxed. free inside of a Roth IRA. Now, why is this powerful? Because if you look at the long-term growth of your money, the growth is the majority. So you can be investing and maxing out your Roth IRA over the course of 30 years and $800,000 of that growth will be completely tax-free. Imagine having

almost a million dollars tax-free. Now, if you do it over the course of 40 years, you're going to have one and a half to $2 million tax-free depending on what your rate of return is. And so this is a very, very powerful way to grow your net worth over time. is your 401k. Now, your 401k, money goes in and you get a tax deduction on that money when it goes in. The money grows. And then when you pull the money out, then you get taxed on the money when you pull it out. And so for high earners, this is an amazing option as well because you get that tax deduction this year. If you need a tax deduction this year, IRA 401K, those are fantastic options for you. And beyond that, if you were maxing all these accounts out, you can go to a taxable brokerage account, you can start investing in real estate.

there's so many cool options out there. But we got to make sure that we are investing our dollars for our future selves. Now, what are you invest in? I like index funds and ETFs. And so one way that you can do that is look into investing into an S&P 500 index fund. There is international funds. There's bond funds, all those different things. If you want to learn more about investing in index funds in ETFs,

we have a course called Index Fund Pro that teaches you exactly how to do that. But as we talk through this, and we just had an episode talking through the benefits of index funds on the previous episode. So this is an amazing way for you to grow your wealth over time. And you want to make sure that you're allocating at least 20% towards future you. Now, 20% to 30% is the range that I like you in. Now, if you want to retire really, really quickly, some people will focus on increasing their income dramatically so that they can save a larger percentage of their income towards wealth building activities like this. And when they do that, if you save 50% of your income, for example, you can retire in 17 years.

I've seen people save 60 to 75% of their income because they keep their living expenses the same and they raise their income. And when they do this, they are able to retire in 10 years or less. This is all just one big math problem. Retirement is not an age. Retirement is a number. So if you figure out what your goal is and you know how much you want to spend every single year in retirement, say it's $60,000 per year, what you're going to do is you're going to take that number, $60,000 and you're going to multiply it by 25. And what's you're going to get is your freedom number. And that is what retirement is. That is where you don't have to work anymore. That is your FU money. You don't have to spend any more time working when you hit that number. And so if you do this simple math, you have your North Star and you have the goal ahead of you, and you'll be able to go after and chase after that goal. It's a really, really powerful thing that most people need to understand. Now also, once you have that six months expenses saved up, that is when you can start to do some big other savings goals as well. You can start to, if you want to buy a home and you run the numbers on total cost of ownership and you want to go buy a house, that's a great time to do it.

If you want to invest in real estate, that is a great time to do it, is when you had that six months saved an emergency fund. If you would go out and buy a business, there's a lot of people going out and buying businesses now, myself included. This is the big focus that I have right now. And if you're going out and buying businesses, having that emergency fund in place is going to be imperative for most people. Now, six months is the minimum. And when we're talking about this emergency fund. You can go up to a year. You can go to two years. Whatever makes you comfortable. But six months is the minimum that every single person needs to have in order to make sure that they are protecting their money and having the ability to build wealth going forward. Let's jump into the

next one, which is 55. Now, 55 stands for 55%, which is what we want to cover your baseline expenses. Now, again, with everything in this, I want you to be in a range. So 50 to 60% is the range that I want you to be in for your baseline expenses. These are your bare bones expenses that you need to have to survive to live all of those different things. By 55 is right smack in the middle. And so we are going to say 55 for most people. Now, here's the thing I want you to understand is that most people spend a lot more than

55% of their income on living expenses. In fact, the U.S. Bureau of Labor Statistics came out with a study. And it showed that on essential costs, people spent a lot more than what we're talking about here. In fact, they spend way too much. And this is why most people can't get ahead with their money is because they're spending too much with their money. They spent 33% on housing. What is our rule?

Our rule is to spend a lot less in that. In fact, I want you to spend 30% or less on housing. This means their rent, mortgage, property taxes, all those different things. They spent 17% on transportation. If you spend 17% on transportation, something else in your budget has to give. And that means most likely you are going to spend way, way less on things that you love or future you. And for a lot of people, this is car payments, this is gas, this is insurance. 13% on food on average, which is groceries and dining out.

And 8% on health care, which is absolutely necessary. Now, what classifies as baseline expenses? This is going to be your rent or your mortgage. It's going to be your utilities, groceries, insurance that you need. Transportation and a big one that most people don't consider is debt payments. Your debt payments are required to be paid back. And so that is going to be part of your essential expenses because you need to pay that back. If you don't pay that back, you were going to get yourself into a ton of financial trouble.

And so making sure we factor that in as well is going to be really, really important. Now, a Harvard Business Review study shows that as income increases, baseline expenses will also increase over time. And this is called lifestyle inflation. We've talked about it a number of times. But what we want to do is, A, first, we want to figure out what our baseline expenses are. And so we talked about this in the recent paycheck-to-paycheck episode where I said, hey, print out the last three months of bank statements and underline anything that falls into

these categories. Housing, transportation, food, health care, debt payments. Those are going to be your big baseline expenses. Now, obviously, other things are going to fall into play there. Maybe you have daycare costs. If you are someone who has young kids, maybe you have clothing items in there that you're going to have to, you know, if that's a necessity, it is something that you absolutely have to have. And so there's going to be things that are necessities, but you've got to figure out how to quantify what a necessity is. And so auditing your spending and listing those essential expenses is going to be very, very important. And as you go through this, you're going to realize pretty quickly when you audit yourself that you're spending way more than you actually think you are on housing, on food,

on transportation, all these different things. So first, let's look at housing. At housing, you should be spending 30% or less your income on total housing costs. This is why we have you run total cost of ownership when you go and buy a house. Because most people, go and buy a house willy-nilly. They don't think twice about what the additional cost would be outside of their mortgage. They look at the mortgage and say, yeah, I think I can afford that. And they don't think twice about the other costs associated with owning a house. There are tons of different costs associated with owning a house and or even renting a house. And you have to factor all of those in. So we created this spreadsheet called the total cost of ownership spreadsheet. It's completely free.

If you go to mastermoney.com slash resources, you can utilize that spreadsheet. And that will show you how to run the numbers on buying a house and if it's better to rent or buy in your area. At the time of recording this, right now, for the majority of people in the United States of America, you are much better off renting than you are buying a house. And people say to me, well, you're going to build up equity in that house over time and yada, yada, yada, run the numbers. If you do not run the numbers, you have no idea what the actual math is. And most people don't understand the actual math because there's a lot more costs associated with owning a house, even people who own homes. And this is the interesting part about

this. You have to do the math. If you don't do the math, you have no idea what the actual costs are. So just check out that spreadsheet. We made it for you so you could run the numbers on the biggest purchase of most people's lives, which is their house. And most people don't do that. And so I want you to be able to do that with the TCO spreadsheet. Secondly, is transportation. Now, for a lot of people, they are overspending on transportation because they have a jacked up truck or they have the fancy SUV, which is hauling kids around, and they're way over spending on those. Listen, I have a truck. I drive a truck around.

I love driving a truck. I don't think I would drive anything else. My wife has a big giant suburban. We drive around a fancy SUV, but we ran into the numbers to make sure we could afford those prior to making those purchases. If you got an $800, $900,000 car payment, you are most likely spending way too much on transportation because that doesn't even factor in insurance and it doesn't factor in gas usage as well. All three of these together need to be a much smaller expense in your light

in them. So let me show you how to figure out what this is. Let's say, for example, you want to go out and buy a new car. Well, first, when you buy a new car, you need to be make sure that you are putting 20% down because the last thing I want you to do is drive off the lot, get into some sort of accident, and now you're underwater on that car. Sure, you can also buy gap insurance and you can compare those costs and see which one is best for you, but it's got to be one of the other. Secondly, is you need to make sure that your car note is four years or less. If you are extending your car loan out so that you can have lower payments, that is a huge sign that you are spending way too much on that car.

You do not want to have extended payments out for six, seven, eight years. I don't want you to have car payments for the rest of your life every single month for the rest of your life. I'd rather you have years where you don't have car payments so you can take that extra cash and put it towards wealth building activities. You're going to build so much more wealth if you have less months with car payments. So shrink those down, make sure they fit in your budget, which is the third item, seven. Seven percent or less of your income should be spent on car payments. The average person spends 17 percent of their income on transportation.

I want you to spend seven percent or less, at least on the payment. Gas and insurance are going to factor in there as well, which is probably going to bring you up closer to 10 to 12 percent. Okay. Now, as you get through this, you have 20 percent down, you have four years or less on the car note, you have seven, and then there's one more number, which is 10. If you buy a new car, at a minimum, I want you to plan on driving that car for 10 years, at a minimum, not four, not six, not seven, and it's kind of getting raggedy inside, so it's time to trade it in.

Ten years. Why? The longer you drive those vehicles, because vehicles can last a long time now. It is 2025. For most people, vehicles will last a long time if you buy a quality vehicle. And so 10 years or more is what I want you to drive for new cars. Now, if you buy a slightly used car, I still want you to try to drive a 10 years. I have driven every single car I have ever had for at least 10 years.

And I want you to try to do the same. It is so incredibly important to help you build wealth in the long run. That is a huge, huge thing. Next, we have food. Now, food is a big one where I have worked with people in the past, and they'll add up their grocery list. And they'll be so shocked at how much they spend on groceries. And the reason why this happens is because a lot of times you may do your big food hall for the week. and then you will pepper in little pickups.

And those little pickups can add up over time to really increase the amount that you're spending. It could actually add an additional grocery trip or two if you're not very careful. Secondly, a lot of people will eat out very frequently. And if you add all of those up throughout the month, it can become a very, very big number, specifically if you're eating out at lunch every single day at work, or if you're doing something where you are spending a ton of time eating out at nighttime or you're doing a lot of Uber eats,

a lot of you doing a lot of Uber Eats out there, those can really add up. So, first of all, if you are ordering Uber Eats on a very, very consistent basis, your boys got some chattice, okay? I still cannot stomach the prices of Uber Eats half the time. I will order it if I really need convenience, but I cannot stomach all those additional fees. I mean, it is one of the things that, and I really value convenience, but for some reason, jacking up the price to almost double what I would be paying for it just does not seem logical to me.

And so for a lot of people, if you add up those costs, it is a massive, massive different. Now, listen to me, if you have money and you're okay paying that premium, more power to you. If you like convenience, if you love just getting Uber-Each, you don't want to leave your house. You just like order and stuff left and right, and that's where you like to value spending your dollars. Great. Me, can't stomach those fees. Those fees are way, way too high. But look at your food costs.

And I want you to add up those food costs and see where they are landing because that could be a huge factor into why you are going way over the 50 to 60% range. and not in the realm of 55%. You got to make sure that you're keeping it in that range. Otherwise, you're going to go way, way over. And then lastly, it's looking at health care, which health care is something. It is very valuable to spend your money on. It is going to keep increasing over the course

of the next 20, 30, 40, 50 years. And it is accelerating every single year. It is outpacing inflation. It is something that I am honestly a little bit worried about for a lot of people because you've got to make sure that you're factoring in health care, which is why I think the HSA is very, very important

for the long term for a lot of people as well. And then we have debt payments. adding up those debt payments for most of you, debt is the problem. It is going to be the problem on what is taking you way, way over for most of you. Now, if you find yourself with no money left over and you're spending like 90% of your income on these essentials, it's like all of your essentials are there, that means you probably have an income problem and you need to raise your income. But if you are someone who is spending a massive amount on your essentials, but you've got the 4,000 square foot house, you've got two cars that are leased in your driveway that are brand new.

you've got all the toys with debt payments, you've got credit card debt, all those different things. Well, we got a different story here. We can fix this pretty, pretty quickly. Whereas if you are someone who's spending 90% of your income on this stuff and you are just doing it on the bare bones, essentials, and you are just trying to get by, then we have an income problem. And so we can figure out there's a spending problem or an income problem pretty quickly just by looking at those two things. And so as you go through this list, make sure you're thinking through how to operate in this way. Now, as time goes on, I also want you to do. just be conscious of lifestyle inflation. Lifestyle inflation is when your income increases,

so does your baseline expenses. Some lifestyle inflation is great. In fact, you know, as time goes on, you start to have a family, and so maybe you upgrade your home. And then you have kids, and maybe you upgrade your home again so that you can have more space for everybody involved. That's healthy lifestyle inflation, as long as you don't over-extend yourself. But if you're the type of person who every single time you get a raise, you try to take on more payments immediately. with the entire amount of your race, then that's unhealthy lifestyle inflation. What we want to do is take a portion towards future you

and then take another portion towards increasing our lifestyle so we can enjoy life more. Money is a tool, and you've got to use the tool to your advantage. We've got to create a balance here when it comes to increasing your income. If you are an impulse spender, if you are really quick to take any bonus or anything like that and just spend it within the first month, then we need to really be conscious about the way that we are spending our dollars

and looking at our money psychology. Now, a lot of this, if you are a big impulse spender, comes back to the way that you were raised and your upbringing. There's a lot of different things we could talk about there. But for most people, just understanding and being conscious about this is the first most important step. So we have 20 to 30% that goes to future you. We have 50% to 60%, which is the 55 number,

which goes towards your baseline expenses or your essentials. Let's look at the last number, which is going towards your true values. 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.

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And so you want to spend more dollars on the now to be able to enjoy things that you love, maybe going on vacations or all these different things. But this last 25% number is going to be spending more on things that you value, guilt-free spending, allowing yourself to spend on stuff that you love. And so this is your discretionary expenses. If you love going on target runs and you just love walking through the aisles and grabbing a couple of things, this is going to be part of those discretionary expenses. If you love buying random grilling items because your hobby is grilling,

this is going to be part of discretionary expenses. If you love playing pickleball or golf, this is going to be part of your discretionary expenses. If you love going on fishing trips or your vacations, this is all part of those discretionary expenses. And what I want you to understand is that I want you to be able to spend more in this area if you can. So as you start to increase your income, you can start to allocate some of your dollars towards this as well. Now, as you start to progress in your financial journey, what you're going to realize is spending money is a skill. And so as you start to develop this skill, you will

then be able to add in more of this fun stuff, dining out, hobbies, entertainment, travel, you know, personal growth, maybe buying books or gym memberships or therapy, all these different things that you can add into this is really, really powerful. Now, here's the crazy part. I'm telling you that 25% is the number. Now, this is obviously another range. You can be anywhere from 10% all the way up to 30%. I'm saying 25% because the average American spends 4.7% of their budget on entertainment,

including hobbies and recreational activities. In fact, studies from the journal of consumer psychology show that spending money on experiences like travel tend to bring more happiness than material goods. And there's also a huge ROI on personal growth. So I really want you to increase this area. Why? Because first of all, this is where you're going to be able to create memories with your family. You can go on those vacations. You can go spend money on experiences. In addition, you can spend more dollars on your personal growth. Honestly, that's going to allow you to make more money in the future. That's an investment.

And so because of this, I really do think that if you maximize this area of your life, but you do it intentionally. And intentionally is the key word here. See, what most people do is if they overspend in this area. If they overspend on their guilt-free spending, they do so because they have no intention behind it. They don't plan this out whatsoever. And so if you're really intentional about your guilt-free spending, you identify what you absolutely love. You can thrive in this area. Now, if you're just getting started and you realize how valuable certain dollars are and you want to spend more in other areas, that's completely fine. This is a very flexible section, but you got to make sure that it aligns with what you truly value. And so I want you to think through and spend more on the things that you love.

That is part of our goals with this podcast is teaching people. I want you to use money as a tool to spend more on things that you love. And the more that you do that, the happier you will be with the success of your money. And so how do we do this? How do we actually maximize this 25% to make sure that we are spending enough? First, I want you to reflect on what truly matters to you. And I want you to talk to your spouse, if you have a spouse, or if it's just you, I want you to kind of think through.

What really matters to you? Is it seeing family more and you want to go travel to see your family and spend more time with him? is it traveling across the country or taking trips to Europe or taking trips to other countries and you want to visit other countries and experience different things? Is it spending more money on hobbies? Are you someone who is super interested in very specific hobbies? And you love spending a lot of money on hobbies. Maybe you love gaming.

Maybe you love Legos. There's a lot of Lego hobbyists out there. But define what you value. Define what you want out of this life. Maybe you love investing in cars and car parts. You love fixing up cars. Maybe you love Pilates and you want to buy your own Pilates machine. Maybe you love fitness and you want to invest in your own home gym.

It all comes down to what brings you joy. I want you to allocate more dollars towards that section. The average person spends 4.7%, guess what? I want you to spend more. I want you to be able to spend more of your dollars, but you've got to be intentional. Now, if you're living paycheck to paycheck, you are on a tight fine line. This may sound like a pipe dream to you. But if you can learn how to increase your income, we can start to balance out to this

so that you can manage your money like the top 1%. The top 1% get to allocate a lot more dollars towards these. things because they have a higher income coming in. And so if we can focus our time and energy on increasing our income so that we can get to this point in time, this is where the sweet spot is. Secondly, is once you start to have a little bit of extra money, you can allocate some more money towards this, I want you to budget for fun and growth. I want you to create dedicated accounts that are going to allow you to budget towards this. This is why we love the bucket method, because you can put some of this money in a high yield savings account if you're saving for

a vacation, or maybe you want to buy a new car, or maybe you want to buy something else big, but you can start to allocate dollars towards some of these things and budget inside of those accounts. And that's what I love about this system. Also, I would automate it in there every single month so that you can think through it. Now, there's a bunch of different ways that you can do this. You can put it towards your values. You can put it towards your fund money. You can put it towards personal growth. There's also a ton of different benefits. You get joy and fulfillment out of spending on some of this stuff. You get to align your priorities on what you actually want your dollars to do. You get long-term happiness in terms of you get all these memories and experiences,

you're going to be able to enjoy those over time. So it comes down to what do you want to intentionally spend your dollars on? Spend more on that. Now, there's a ton of different examples out there from convenience to health, to there's so many different cool things that you can use with this. And it really comes down to every single person's personal preference. So if you have a bunch of priorities, if you have a bunch of things that you want to spend more dollars on, make a list of them and order them from most important to least important and start allocating dollars towards those. Even if it's small amounts of money, let's say, for example, you want to buy yourself a Rolex watch, okay? You love watches, you love everything about watches, you've always wanted a Rolex,

and so you want to buy a Rolex watch. Start allocating a couple dollars a month towards that Rolex watch. Eventually, this is going to add up over time. Now, this may be something where you're like, this is just pointless. Why am I saving 50 bucks a month towards my Rolex watch? Because over time, at some point in time, you will get there no matter what, if you continually stay disciplined on doing this. And I think for a lot of people, they don't realize that taking small actions towards something actually can lead to very, very big results. And as you start to make more money, you can increase the amount that you're putting towards that. And you're just going to hit that goal so much faster. So listen, I hope this episode helped you learn how to spend

and manage your money intentionally, because that's what it all comes down to. It's not about how much we make always. It's about how much we keep. But if you do not make enough, I want you to spend as much of your time as possible on learning how to increase your income and investing in yourself. We just had an episode recently, if you haven't heard it, teaching you very specifically how to invest more in yourself. I want you to go back and listen to that episode because these episodes all are starting to intertwine to show you how to be your best self, how you can live a wealthy life in every single area of your life, from your health to your relationships, to spending more time on things that you love. And that is what I want for each and

every single one of you to be able to live your best life. Listen, thank you guys so much for listening to this episode. We truly appreciate you being here. And thank you so much for investing in yourself because it's exactly what you're doing when you listen to this podcast. I hope you guys are having a wonderful week. Make sure you follow this podcast because the next episode is going to be awesome. I'll see you on the next episode. Frozen 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

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