The Personal Finance Podcast - How to Save $100,000 on a Low Salary

Starting point is 00:00:00 On this episode of the personal finance podcast, how to save your first $100,000 on a low salary. 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're going to be talking through how to save your first $100,000 on a low salary. If you guys have any questions, make sure you join the Master Money newsletter by going to mastermoney.com slash newsletter. And you can respond to any of those newsletter issues that come out with your question. And we may have your question answered on the show.

Starting point is 00:00:50 Also, if you're getting value out of the show, consider leaving a five-star rating and review on Apple Podcasts, Spotify, or your favorite podcast player. And don't forget to follow the personal finance podcast on your favorite podcast player. Now, today, we're going to be diving into how to save your $100,000 on a low salary. And you may be asking yourselves, well, why should I listen to this guy? Because I'm the person that actually did this. So when I first started my career, I was making $30,000 per year. And when I was making that $30,000 per year, I've told this story a couple of

Starting point is 00:01:24 times in the show before, but I ended up hitting a wall. I was living paycheck to paycheck. And every single month, I would get to the end of the month. And it felt as though I just did not have enough money left over to try to achieve some of the financial goals that I wanted to achieve. And there was a moment in time where one month I went up to go fill up my tank of gas and I pulled up to the pump. I got out and I checked my bank really quick. And I had this habit of checking my bank account all the time because I had to. I had to make sure that I had enough money inside my bank account so that I could pay for certain things. And when I opened up my bank, I realized very quickly as I was holding the gas pump in my hands, I did not have enough money to fill up my

Starting point is 00:02:06 tank of gas. And this was the moment. This was the light bulb moment for me where I said to myself, this is never, ever going to happen to me again. I was frustrated, but more so I was angry, because I knew that this is something I can control and I can make this transformation. I can absolutely transform my finances over the course of the next couple of years. Even though I don't make good money, I am going to find a way to make this happen. And so you know what I didn't do? I didn't blame other people. I didn't blame our government.

Starting point is 00:02:43 I didn't blame my parents. I didn't blame every single circumstance around me. Instead, I decided to figure out what can I personally do in order to change this situation. And that moment right there, me realizing that I can take personal control, that I can actually think through what to do next, that was the moment that changed my life. Now, I want everybody to listen to this podcast to know, you can absolutely transform your finances no matter where you came from. Maybe you didn't grow up with enough privilege.

Starting point is 00:03:16 And you feel as though, man, I came from a household that was just dirt poor. Nobody understands money in my family. What if you're the first person in your family to turn it around? What if you're the first person in your family to build that generational wealth? What if you're the first person to decide right now? You draw a line in the sand right now and you say, no, I'm going to do this. And I built this podcast for people just like you. People who are living in low-income areas who want to be able to build wealth.

Starting point is 00:03:44 People who grew up with a ton of money. Maybe you're making good money right now and you don't know what to do with it. This episode's going to help every single one of you no matter what end of the spectrum that you're on. And I promise you that if you figure out step by step, day by day, week by week, month by how to get 1% better with your money every single week, my friends, you were going to see a massive difference long term from where you are today to where you are in the next five years. So for me specifically, in two years, I went from that gas pump sitting there trying to figure out where all my money is going, frustrated, angry, confused.

Starting point is 00:04:23 anxious, stressed. To a point in time, we're at the age of 25, two years later, I had my first $100,000 saved. And eight years after that gas pump moment, I had my first million dollars invested. You can do this. And it just takes a transformation of your mindset, and it takes a transformation of understanding what to do next.

Starting point is 00:04:44 Now, your income is a big part of this equation, and we'll talk about that today. But staying at a low income is not part of the game that you really want to be playing. You don't want to stay at a low, income because this is going to be one of those things that as you start to ladder up and as you start to level up, you're going to see a big difference by just increasing your income. It solves a lot of problems when you increase your income. And so I want each and every one of you to begin focusing

Starting point is 00:05:08 on that. So I'm ready for this. So without further ado, let's get into it. Now first let's talk about why your first 100K is so important. This is something I think most people don't realize as how difficult it is to get to your first 100K. Now, it isn't a magic moment that all of a sudden your wealth is just going to explode after you hit your first 100K. I've heard people say stuff like that before, and I'm like, I don't know what you're talking about. But what does happen here is you're going to notice the math behind your first 100K.

Starting point is 00:05:37 See, when you were trying to get to this point in time, a lot of times you'll realize it's a slog in a grind because your contributions are what are doing the most work to get to your first 100K. So you may be putting money into your investment accounts. and realizing it doesn't feel like this is growing very fast unless I put more money in there. And the reason for that is because at a, you know, 10% rate of return, but you have $10,000, that means you have $1,000 every single year that that portfolio could be generating. But if you have $100,000, all of a sudden that portfolio is generating what?

Starting point is 00:06:13 $10,000 per year. That's a big difference long term. And once your contributions start to kick in, you could start to see these accounts grow over time. do the same math of a million dollars with a million dollars at a 10% rate of return now it's a hundred thousand dollars per year so as you start to grow your wealth you're going to realize that the time to your goal is going to shrink even though the horizon or the path to get there feels as though it's going to be longer and so i want you to realize this moving forward contributions are everything when you're trying to get to your first 100k it's all on you

Starting point is 00:06:48 And if nobody's ever told you that, this is where I think you will have that mindset shift realizing, oh, I got to do this. I got to get my money into these accounts so I can hit that first 100K. So then my portfolio can start generating some more income that allows it to start to compound. And eventually what's going to happen is you're going to keep contributing and keep contributing. And all of the sudden, over the years and over the decades, you're going to realize, wow, my portfolio is returning more every single year than what I am making in a given year. And that's the crossover point where at that point in time, you realize that your money is working harder than you ever can. Your money is working while you sleep and you have the ability to have true passive income when you're investing your dollars. Compounding becomes more meaningful after the first 100K.

Starting point is 00:07:34 I will say that. It's not magic. It just becomes more meaningful. And that's what I want you to understand. Because 100K, even at an 8% rate of return, is $8,000 per year. at a 10% rate of return, it's 10 grand. At a 12% rate of return, you guys can do math. It's 12,000 bucks, okay?

Starting point is 00:07:52 So you just want to understand that the first 100K is meaningful. Charlie Munger, Warren Buffett's business partner said it best. He said the first 100K is the hardest. And the reason for that is because you have to contribute more. So do whatever you can to get to your first 100K, even when we're actually thinking about this. If you've been listening to this show for a while, you know it's not just me anymore.

Starting point is 00:08:13 It takes a great team behind the scenes to make everything happen. And if I had to hire someone tomorrow, I'd want someone who could jump right in and make an impact. That's why I'd use IndeedSponsor jobs. When Workplace Chaos hits, IndeedSponsor Jobs helps you reach qualified candidates faster. Your job gets boosted in search results, so you're spending less time searching and more time interviewing the right people. Plus, you only pay for results, which I absolutely love. Sponsored jobs posted directly on Indeed are 95%, more likely to report a hire than, non-sponsored posts. That's a huge advantage when you're trying to grow your business.

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Starting point is 00:10:56 Does that mean keeping it inside of a savings account? No. Saving your first 100K when we are talking about it in this episode, we are talking about doing this in a way where it is in things like your investment accounts, okay? So this could be your 401K. This could be your Rothair. This could be your HSA, your taxable brokerage, your 403B, your 457.

Starting point is 00:11:17 Those are the types of accounts that once your money is invested, it is invested into something. That is what we are talking about here because that's where compound interest is kicked in. Your high-yield savings account is absolutely wonderful and you should have money in there with your emergency fund and all those different things. But that's not part of your first 100K that we're talking about initially here because it doesn't have investments that are compounding for you. We want you to make sure that we are talking about your first 100K invested. So financial assets, that's what we want you to have on. end, okay? So what are some of the things that we need to make sure that we are doing? What are some of the things as we start to work towards our first 100K that we need to ensure

Starting point is 00:11:57 is in place? Okay. Well, there's a couple of things that I really want you to do. One is I want you to get current on every single bill. If you are the person who is falling behind and you're falling further and further behind on bills or maybe you're falling further and further behind on some of your expenses, and it's because you're trying to either fund all these different accounts or you're trying to fund your lifestyle or you're taking on more debt payments than you should be, then we need to get current on everything first. We need to be able to start at a foundation that allows us to be in a position of strength. And if you're not in a position of strength currently, let me show you exactly how to do this. So we have this thing called the

Starting point is 00:12:39 136 method. If you've never heard of the 136 method, this is basically how to be a one three six method. This is basically how to build out the building blocks for your financial foundation. Okay. The first thing you want to do stands for one. One stands for one months of expenses. And you want in your high yield savings account to be able to save up one months of expenses. If you're asking yourself, where should I open a high yield savings account? I will link up our favorites down below in the show notes so that you can check it out.

Starting point is 00:13:06 But you want to have one months of expenses inside of a high yield savings account. Now, how do you get here? Well, at first, this may feel like it's really difficult. If you spend $3,000 every single month, coming up with $3,000 can be tough. But I want you to make sure that you are diligent about this. So every dollar or every extra dollar that you have on hand, trying to put it towards this one month of expenses is really important. This is going to protect you against life when life happens.

Starting point is 00:13:34 If you have kids, if you have family members, you know life happens all the time. You get sick. Maybe your cat has to go to the vet. All of a sudden, you have an ER visit. randomly. Your water heater breaks. You got to fix a faucet in your house. You have all these different things that just pop up all the time. I can tell you right now, last month alone, I had four different things break at my house that I did not anticipate paying for. And I already had a bunch of different bills that added up over the course of the month. When it rains, it pours. And many of you who are

Starting point is 00:14:01 living on that paycheck to paycheck line understand that. And it never gets better. It doesn't get easier over time. And so this is why we want to build up this financial foundation early and often so that you can get yourself out of this mess and out of this stress and remove that low hanging fruit, that low humming anxiety in the background. Many of you feel it right now. You feel a little pressure in your chest. You feel a little low hanging anxiety. That anxiety is just humming in the background all the time and it's money stress that you feel as though I don't know how to get out of this. Well, I'm showing you right now some of the things that we want to do. Okay. So one month of expenses in place. What do we do next? Next, we want to make sure that we are looking at high interest.

Starting point is 00:14:41 debt. Now, if you don't know what high interest debt is, it's any debt between, you know, that 6 to 7% interest rate or above, we want to make sure we're paying that off. So if you're listening right now and you have credit card debt, I want you to get rid of that credit card debt as fast as you possibly can. Credit card debt is the enemy of building wealth. It is the opposite direction of where you want to be going. It is the one thing that will absolutely destroy your financial life if you let it. Don't you dare let it destroy your financial life. Instead, you want to come in on the attack. Now, if you are in credit card debt and you don't make enough money to pay it off, now we're going to have to really get down and dirty here. We're going to have to decide a couple of

Starting point is 00:15:18 different things that we are going to be doing in order to increase our income so that we can get out of this debt. And so some of the things that I want you to think about is, hey, what are some side hustlers you could take on for debt payoff only? So maybe you're driving for Uber eats, maybe you're delivering groceries, maybe you're doing side jobs, maybe you're doing handy work for other people. Another thing you could do is sell items in your house. If you have these closets filled to the brim of crap that you don't need, stuff you don't care about. Let's start selling that stuff and putting it towards our debts. But we have to, for your family's sake, your future family's sake, your futures, kids' kids'

Starting point is 00:15:53 sake, we want to make sure that we are getting rid of this stuff and paying down that debt. Why? Because compound interest is working against us instead of for us if we do not get rid of this debt. Many people stay in this poverty cycle. They stay in this paycheck to pay. paycheck cycle, even when they're making good money. They stay in the cycle because of their debt.

Starting point is 00:16:14 Their high interest debt is killing them. Now, if it's below that 6 to 7% interest rate or it's a mortgage, I'm not as concerned about it right now. We will be concerned about it later on in the line. But if it's above that interest rate, if you have a personal loan, if you got a payday loan, I don't care what you got, let's get rid of it as fast as we possibly can. Those are the first two things I want you to do. Next stands for 3 in the 13-6 method.

Starting point is 00:16:36 three means that after we have one month of expenses in a high-yield savings account to protect us against life while we're trying to pay off debt, then we pay off our high-interest debt, three stands for three months of expenses in place. And what we want to do is get two months more of expenses inside of our emergency fund. Now you may be saying to yourself, well, what? I just did all this stuff. Now I've got to get two more months into my emergency fund. Absolutely.

Starting point is 00:17:00 Because that's going to protect you against more things that are going to happen in life. And we're ultimately trying to get to six months of expenses. So if you spend $3,000 every single month, you need to make sure you have $9,000 in that high-yield savings account to protect you against life. And then ultimately, our goal is to get to six months of expenses, which is $18,000. It's going to take you some time to get there if you don't make good money yet, but it's going to be one of the things that you want to strive for, one of the things that you want to ultimately get to.

Starting point is 00:17:28 And when you get there, man, celebrate. Give yourself a round of applause because this is one of those things that as time goes on, realize you can get there. And I promise you, you can do this. And so that's going to be where we want to get to is three months, ultimately six months. Once you're at three months, we can start the investing process. And the investing process is getting our dollars towards that point in time where we're getting towards our first 100K. So what are some of the places that we can start to think about this? What are some of the things that we can do? We will start to think about this as time goes on. But that's building the foundation, is getting that emergency fund in place. And then once we're at

Starting point is 00:18:02 three months, we can split off half towards investments, half towards the rest of our emergency fun until we get it to six months. Now, where are we going to do this? Well, let's think about our savings rate, okay? Our savings rate is any dollars going towards that emergency fund or going towards our investments. And I want you to start where you can. You may be saying to yourself, well, I've heard you say in the past, I want you saving 20%. And I do.

Starting point is 00:18:28 That's the minimum I want you really saving long term for wealth building. But if you're just getting started and you don't have much money to put towards it, maybe we start with 5%. and we start to find ways to increase our income by 1%. And we take those increases and we start to put them towards our financial future. Now, our savings rate is classified as two different things. One, it is your investments. Two, it is your money going towards your emergency fund.

Starting point is 00:18:52 That combined is our savings rate. It's not saving money so you can buy clothes. It's not saving money for a wedding. It's not saving money for a car down payment or a house down payment. It is those two things. Emergency fund plus our investments. those are the two things that we classify as a savings rate. But your goal is if you're at 5%,

Starting point is 00:19:11 your next goal is to try to get to 10% ultimately. When you're at 10%, your next goal is to try to get to 15%. Let's take this 5% at a time. If you're at 15%, you're trying to get to 20%. And so you're trying to set up goals that you can go from 5% to 10%. Maybe it's increasing at 1% every single month. And over the course of the next 5 months, you're at 10%. Once you hit 10%, maybe you're trying to reevaluate and you say,

Starting point is 00:19:34 actually, I could probably save 2% a month. And so then, you're going to, you're going to be 10% a month. And so then, you get to your next goal at 15% in two and a half months. And you start to pursue some additional jobs, some additional work. Maybe you get a side hustle. Maybe you get a raise at work. Well, now you can go from 15% to 20%.

Starting point is 00:19:48 And it's funny how life just kind of allows this all to work out if you're intentional about this and you're really thinking through how badly you want it. How bad do you want it deep down? How bad do you really want to build wealth and not have to feel that financial stress, not have to feel that low humming anxiety in the background? How bad do you want that? How bad do you want financial freedom for your life so you don't get to retirement living off Social Security alone? No, you want to thrive when you get to retirement.

Starting point is 00:20:16 How bad do you want to retire early? Maybe you absolutely hate the job that you're in right now and you said to yourself, I can't do this for another 30, 20, I can't do this for another 30 years. And you decide financial freedom is now my priority. How bad do you want it? Let's find out because your dollars are going to be a vote for what you want in this life. every single time you spend money, that's a vote for what you truly want. That's a vote for where you want your dollars to go.

Starting point is 00:20:42 And I want you to start voting for financial freedom. Why? Because that's the most fulfilling place you can put those dollars. One of the most fulfilling things that you can do outside of probably giving to causes you believe in is really, really one of those amazing things that you can see. So if you're starting off low, I want you to set a goal. And I want you, if you're watching on YouTube or you're watching on Spotify, tell me your goal down below. because I want you to tell me how much you're going to increase that dial.

Starting point is 00:21:07 Maybe it's 1% a month, maybe it's 1% a quarter, but you're eventually going to get there. You're going to get there because I know that you've got it in you to get to that point in time where you can hit this crossover point. And I'm so excited for that once you hit it. All right. Next is once we start to do this and we have our money in place, we're going to be talking through how to get to our first 100K and I want you to automate your money. So I just got done in Master Money Academy teaching a bunch of students how to automate their money in one weekend. We have a bunch of people who took action and we have a couple of people who didn't take action. Those action takers are going to see a massive transformation over the course of the next couple of years because they decided to automate their finances,

Starting point is 00:21:53 meaning that they could focus their time and energy on increasing their income so they don't have to rely on their willpower. so they don't have to rely on remembering to invest their money or to pay their bills or to make sure they're saving their money. But instead, the automations do it for them. We live in a day and age where you can automate everything when it comes to your finances, including your budget. And I want you to be doing that so you can become a millionaire on autopilot. How awesome would that be is you could get to spend time with your family. You get to focus on things you love. You get to focus on making more money, which is the most important part of this equation,

Starting point is 00:22:27 so that you can then automate everything else. So I want you to, A, automate your savings first. So everything going to your emergency fund, you can automatically send it right after payday. B, I want you to automate your paycheck into your investments. Maybe it's going to your 401k or your employer match. Maybe it's going towards your brokerage account or your Roth IRA. But you can automatically send that money to those investment accounts and they can auto invest. Third is then we want to automatically make sure we're paying our bills.

Starting point is 00:22:57 and we want to pay our bills in clusters. We don't just want to do it all at once where it's scatter all over the place, but you want to change the dates of your bills so that they are getting paid in clusters. Maybe it's a two or three day cluster twice a month where, you know, over the course the 12th, 13th, and 14th, for example, your bills are getting paid. And over the course of, you know, the 27th, 28th, and 29th, your bills are getting paid every single month. So that you know exactly when this is going to happen.

Starting point is 00:23:23 And it happens typically after you get paid. a couple of days after you get paid. So there are ways to automate this process that we teach that can absolutely transform your finances long term. And so, yeah, that's one of the things that I definitely recommend that you do. Now, many of you have already experienced some automation. If you've ever contributed to a 401k or you've ever contributed to an employer-sponsored plan like an HSA or even a flexible spending account,

Starting point is 00:23:47 all of these different accounts are actually automated. And especially when you're using employer-sponsor plans, these are automations that can be really, really helpful. and a way for you to see that automation. I've talked about this many times in the show before, but if you've ever logged into your 401k years later and you've noticed, whoa, this is way larger of an amount than I ever thought was in here.

Starting point is 00:24:07 That's because of automation. You automated your money in there. It's out of sight, out of mind. You don't have to think about it. You don't have to worry about it, and it just gets done. I love that. And I love seeing people kind of unlock the power of automation as they go through this.

Starting point is 00:24:22 Now next is we're going to start to attack expenses. Now, for many people out there, if you are on a low income, you can only cut back so much. But I want you to start to think about how much money you spend every single month. If you are spending more than 60% of your income, then the likelihood is two things. One is that you are overspending in a couple of different categories. That's the most common thing that happens.

Starting point is 00:24:47 But number two is you are literally not making enough money and that's just the reality of what you're dealing with. Like if you're spending 80% of your income, for example, on just essential expenses, things like housing, food, transportation, clothing, medical expenses, those types of things. If you're spending over 60% of your income, then you could just really not make enough money. And if that's the case, you can't cut back any more, then we have to focus on the income side of the equation. But if you know there are some areas that you could trim a little bit of fat to reduce your expenses, I think that's going to be one of the areas to look through. So how do we audit this?

Starting point is 00:25:23 How do we figure out if that's the case? Well, first, I want you to add up all these essential expenses. One of the ways that you could do this is you can print out bank statements from the last three months and you can start to add up the amount that you spent on essentials, not eating out, not the extra spending that you did on clothes or the time that you spent money going out for drinks or whatever else you did. No, the essential expenses, the bare bones expenses that you would need to spend in order to survive and live, your rent, your utilities.

Starting point is 00:25:55 your medical expenses, your car payments, those are the types of things that are essential and in addition to debt. And I want you to figure out what percentage of that is your income. And then we're going to audit these things and try to reduce some of these expenses. And what I want you to focus on is if you can't reduce expenses anymore, we're going to focus on the income side. But if you can reduce expenses, let's try to cut them back by 15%. That's a big number, my friends. If you make $100,000 per year, someone who's making $1,000, good money like $100,000 per year or a household that's making $100,000 per year, that's $15,000. But if you're making $30,000 per year, we're trying to cut back our expenses a little more per year.

Starting point is 00:26:36 So maybe it's going to be $3,000 per year. And so when we look at that, maybe we're trying to cut back a couple hundred bucks a month. And so we start to think about this in ways that we can reduce these. Well, what are the biggest culprits overall? Number one is housing. Housing is a big one for a lot of folks. And if you have a really nice apartment but you don't make good money, probably not the best choice to have made. Or if you are really over leveraged on housing and you bought a house and you feel

Starting point is 00:27:00 as though I can't really afford this house and I am house poor, that could be the reason. You want to keep your housing expenses 30% or less of your overall income. And so if it's above that, that's housing expenses plus maintenance plus all the other things that are associated with housing. If it's above that, I can tell you right now, you're probably teetering that line of being above 60% if you're not over 60% already because it's a big, big thing. Two, is transportation. If you are living in a middle-class house and you've got a Mercedes BMW, Lexus in your driveway that isn't 15 or 20 years old,

Starting point is 00:27:35 then you most likely are over-leverage on your transportation, especially if you're not making good money yet. Or maybe, and for a lot of you out there, this might hit home too. Maybe you're driving the $60,000 truck. Maybe it's your work truck. Maybe you're driving the $55,000 SUV because you got kids. That's the excuse that you gave yourself. Well, all of these need to be evaluated and you need to start thinking through this.

Starting point is 00:27:58 If you are drowning in payments, and I don't take this lightly, this is way easier for me behind a podcast microphone to say to you said than done. But if you are drowning in car payments, one of the things that you can do, and I have people who have done this in Master Money Academy, because they decided actually I want to prioritize my family's financial future over me in this vehicle. But you can go and sell your vehicle and take the difference, pay off the rest of the balance if you're underwere, water on it and move on to paying cash for a different vehicle that is significantly cheaper. Not a great situation for most of us to have to do, but if you really want to do this, if you really want to make it happen, that is an option. Guess what? You got free will and you can do a lot of different things.

Starting point is 00:28:39 Even if society doesn't say this is the way to go, you can do certain things that are going to prioritize your family's financial future or your financial future over everybody else. Because a lot of times, I want you to think about this for a second. If nobody else in the world was here, would you still be driving that car and making that car payment? Or would you just be buying the safest, most reliable car at the best possible price that you can find?

Starting point is 00:29:05 That's the question I want you to ask yourself. And it's a deep question. It goes deeper than just this surface level conversation you and I are having right now. And so I want you to remember and think through exactly how you want to do that. Lastly is food. Jesse Meacham was just on this podcast and his episode, we were talking through

Starting point is 00:29:23 some of the things that he has seen time and time again when it comes to folks who are finding ways to find money. And he said the place that he sees it the most is eating out. Groceries are one that I see a lot too. And so when we look between those two things, your food costs could be significantly higher than even you realize. Hey, if you don't make good money and you're door dashing all the time, I'm going to tell you right now you are way over spinning on food.

Starting point is 00:29:48 I don't even door dash. I can't stomach the cost. So if you can stomach the cost and you're not making good money, we are overspending probably. Listen, you can get mad at that all you want. You can get mad that I am saying this. But the reality is that's probably true. And sometimes when we feel this feeling of, this guy's telling me not to get DoorDash, what is he talking about here?

Starting point is 00:30:11 When we feel that feeling, but we're also not financially ahead of where we need to be, many times that might be what you need to hear. And so I want you to really evaluate what you value in life. This is what it comes down to, is spending more on what you value and less on what you hate. And you may be saying, well, I don't value spending money on my power bill. You don't like the lights on? I really value that.

Starting point is 00:30:34 That's one of the most valuable things I could spend my dollars on. One of the most valuable things I could spend my dollars on is my utilities bill, because I got running water that is warm in my house. What a time to be alive. And so being grateful for some of the stuff we have, finding ways to engage. increase our income and having the ability to be able to cut back some of our expenses is the trifecta to really getting ahead financially. And so I'm telling you to attack these big three expenses because this is the most common area that many people don't realize could be costing them a lot.

Starting point is 00:31:05 But you may be saying to yourself, all right, well, let's think about this for a second. What am I going to do if I'm buying a daily coffee or what am I going to do if I'm eating out at lunch every single day? Sure, you could be losing because you have death by a thousand cuts. You could have a thousand cuts where you're just at micro expenses. I've seen this with people, for example, who go to the gas station every day and go inside to buy something, where all of a sudden you look back and they're spending $8 per day at the gas station. Well, if you're doing that and you don't make good money, all of a sudden, you are taking all the extra dollars that you have that could be the runway for you to be able to build financial freedom and you're spending it on stuff that doesn't really matter. I care about death by a thousand cuts way more for people who don't make good money yet. or don't have a high income. If you make less than $50,000 per year, then those small expenses

Starting point is 00:31:53 will add up and they were really going to matter. Now, if you make $150,000 per year, your daily coffee is going to matter a little less depending on where you live and the cost of living. I, yeah, yeah, yeah, I get it. But it's going to matter a lot less than someone who is making less than $50,000 per year. Because if you make less money, that $8 coffee or that $8 gas station run or that $8 daily transaction is going to be a big deal. It really is. It just is overall into how much you make because it is a percentage of what you make. And what you have to realize is when it comes to personal finance, percentages of your income matter. And when you have expenses in place, this is why it is personal for most people. It's going to depend on how much you make

Starting point is 00:32:35 and it's going to depend on that percentage as to if this is a good choice or not. All right, next. My relationship with money has changed a lot over the years. Early on, I thought building wealth was about making more money. Now, I know it's really about having clarity. When you know exactly where your money is going and whether you're on track, you make better decisions. That's one of the reasons I love Monarch. It's the personal finance app that tracks everything from your accounts and investments to your savings, goals, and spending. So you can see your entire financial picture in one place. One habit that's made a huge difference for me is, is my five-minute drill every single morning. I open Monarch, check my spending, investments, cash flow, and net worth, and I'm done in just a few minutes.

Starting point is 00:33:21 It gives me confidence that nothing is slipping through the cracks. I also love the AI Weekly Recap because it'll flag spending changes, upcoming expenses, or shifts in my net worth before they become a problem. Instead of reacting after the fact, I can make adjustments early. It really feels like having a financial advisor in your pocket. Write your own money story with Monarch. code pfp at monarch.com to get your first year of monarch core half off at just $50. That's 50% off your first year at monarch.com with code pfp.

Starting point is 00:33:55 It's kind of amazing how much can change in just a single year. Every summer, the kids are a little bigger, a little more independent, and life looks a little different than it did the year before. And it reminds me that while we can't predict the future, we can prepare for it. That's one of the reasons I like policy genius. See, policy genius isn't an insurance company. They're an online marketplace that lets you compare life insurance quotes from some of America's top insurers side by side for free. And their licensed team helps you compare coverage, prices, and terms, answers your questions, and even handles the paperwork so you can get the right policy without the hassle. For me, having life insurance isn't about expecting something to happen. It's about

Starting point is 00:34:38 knowing my family is protected so I can actually enjoy these. moments together instead of worrying about what comes next. And with PolicyGenius, 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 PolicyGenius.com. Let's talk about increasing our income. This is the biggest part of this equation that I want you to realize is very, very important. In fact, this is the most important thing that you can do with your money is focus on increasing your income. There is a ceiling to how much you can cut back spending, but there is no ceiling to how much money you can earn. And I want you

Starting point is 00:35:24 to start to change your mindset from someone who is making, from someone who feels as though, oh, I can't make more money to someone who knows they can. And I want you to pull a bunch of different levers. I'm going to go through each and every single lever that I want you to think about today. All of these can be ways that you can increase your income and they can be ways that could be low-hanging fruit that are right in front of you that maybe you just have not taken advantage of yet, all right? So number one is raises. I want you, if you have not gone through our e-book yet, on how to ask for a raise at your job. If you go to mastermoney.com slash resources, I literally wrote a free e-book for you that's going to show you how to ask for a promotion or a raise at your job.

Starting point is 00:36:04 We have two podcast episodes talking about how to ask for a promotion or a raise at your job that we will link down below in the show notes. I want you to to learn my system like the back of your hand. It's a six-month system that takes you through the entire process of how to get a raise or promotion at your job. I cannot stress enough how powerful this can be. We've had people go through it, and they've gotten tens of thousands of dollars raises

Starting point is 00:36:28 over the course of their career. We've done some really cool stuff that have helped a lot of people go to this process. I want you to understand it like the back of your hand. It's a six-month process. What you're not going to do is you're not going to walk into your boss's office and say, I deserve more money today and slam your fist down. No. Instead, what you're going to do is go through the process, understand how to create value at your company, understand why those values allow you to earn more money and take some action. Okay? That's number one. That's the next six month plan. But there are other things that you can look into. One is job hopping. Many people who go from one company to another make 14% on average more than a person who stays the same job. Loyalty doesn't pay anymore. This is not 1950. Loyalty. Deliety does. doesn't matter to a lot of these companies.

Starting point is 00:37:15 But job hopping does. Now, I'm recording this at a time where I feel as though the job market is a little shaky. I think a lot of people are trying to figure out, what's AI going to do to my job, what's going to happen here? So do not start job hopping if you feel as though you're in a shaky position. But start job hopping, if you feel as though I'm in an industry that is thriving right now and there is a huge demand for what I do. That's an industry that you can start the job hop and really start to make more money.

Starting point is 00:37:41 What about overtime? Does your company offer overtime? If not, can you request overtime? Overtime is one of those great things that you can do some pretty cool stuff with overtime. My first job in the corporate world, I actually requested that I work on an hourly wage and then I got overtime because I realized that that job is going to be about 60 plus hours per month. And so I got 20 hours per month at time and a half. And I used to love doing that stuff.

Starting point is 00:38:04 So I would get in really early in the morning. I would leave. I'd be one of the last ones to leave, just getting all my work done. And there was so much work to get done. It didn't matter. I could have worked literally 24 hours a day and not have it all done. So it was one of those things that was very valuable for the company. In addition, I was willing to work hard.

Starting point is 00:38:20 And so I would work and work and work to try to increase my income. That's one of the things that I did was why I worked a bunch of overtime. What about certifications? Well, there are different certifications that you can get in different industries, depending on where you are and what you do and some of the things that you can do in place that can help you increase your income. An example is, you know, maybe you work in the construction industry. or you work in a blue collar job and you can get additional certifications based on where you work,

Starting point is 00:38:44 whether you're an electrician or a plumber or if you're, you know, someone who works, you know, out in the field for government jobs. Maybe you work on bridges. Maybe you work on repairs. Maybe you build buildings. Or there are certifications that you can get within your industry that help you make more money. There are things you can go back to college, for example. And if that college degree helps you earn more than what you are currently earning and that ROI, you can do an ROI calculation on this. but if that ROI calculation makes a lot of sense, there are some pretty cool stuff that you could do in there. So certifications is another low-hanging fruit for some people.

Starting point is 00:39:15 I mean, I've seen certifications, for example, there is a friend of mine who owns a painting company. They actually paint bridges. And when they go through the process of being someone who is a painter versus someone who is an inspector versus someone who could do all these different things, there are certifications you get for $3,000 that increase your income and double your income. And so I want you to look for those low-hanging fruit in your industry if they exist. If you're in the corporate world, maybe becoming like a project manager, a PMP is something that it helps increase your income.

Starting point is 00:39:44 Maybe there's additional certifications in AI or Excel that you can go and get to help increase your income. Just make sure you're kind of looking for this low-hanging fruit. And it doesn't have to be this really expensive college degree. It could be something that is just a certification that helps you increase it. So just look for that stuff. Continue your education as much as possible and see if it helps, okay? And then side income. I think side income is really important.

Starting point is 00:40:05 If you're in debt, if you're trying to get your emergency fund going, If you're just trying to get some extra income going, any side income can be helpful, whether it's flipping items on Facebook marketplace. I used to sell things on Amazon. I used to flip things on eBay. I had a side of the road Christmas tree stand that I would sell Christmas trees. I would try literally everything. I had so many different online blogs and businesses that I was trying and I was failing and trying and failing and trying, trying to make something work. And eventually stuff started to work because I would get better and better and better every single time.

Starting point is 00:40:34 And every time I failed, I'm like, why am I doing this to myself? But all of a sudden I realized my purpose was to continue to push forward so that I could figure out something that worked. And I figured out a lot of different things that worked, which has been really cool over that time frame. So I want you to think about ways that you can increase your income. If you're like, I don't know where to start, we have an entire series on this podcast called side hustles that can turn into a full-time income.

Starting point is 00:40:58 Go listen to that series and go think through some of the things that you can do based on that, okay? That's what that's for is to start to generate ideas, start to think through some of those ideas and start to think through ways that you can do this. Next is once you start to increase your income, don't let those raises just get eaten into your lifestyle. Use those raises to build wealth. Use those raises to pay down debt to increase your net worth and have the ability to also

Starting point is 00:41:22 put them towards investments. You want to make sure that every raise is going towards your financial future until you get to the point in time where you're hitting your retirement goal. So if you go from 50K to 55K a year, take that extra 5K, put it towards wealth building. If you go from 55K to 65K the next year, take that extra 10K and spend maybe part of it and then the rest of it. Put it towards wealth building. But making sure you're balanced with this so that you can enjoy life but also increase the amount that you're investing every single year is how you're going to get out of this situation and how you're going to get to your first 100K. Next is make sure you have an order for every single dollar.

Starting point is 00:41:59 So for many people looking into making sure that you get your emergency fund in place, making sure you pay off that debt. And then we go when we start to invest our dollars towards employer match, making sure that we, you know, put our dollars in the Roth accounts, in the HSA accounts, in the 401K. Have a plan in place. We've got lots of episodes that teach you with that plan in place on what to do. But have a plan in place on what to do with those next dollars so that you're not just veering off and straying into crypto and all these random things that you got to know what you're doing with your money. You got to know what's next. And so I think for many of you, that's why we have things like Master Money Academy, for example, as we teach people, what to do with their next dollar so they understand how this is actually going to work and how to

Starting point is 00:42:39 kind of think about this. And also, when you think about investing, don't try to get flashy with it, especially if you're just getting started. Keep it boring. Boring is how you build wealth. Look at some of the greatest investors of all time, people like Warren Buffett. He puts his family's money into index funds. I personally invest in low-cost index funds in ETFs. Many people who listen to this podcast invest in low-cost index funds in ETFs. And so you want to build your foundation first. meaning the foundation of your portfolio should be the boring stuff that is proven. The boring stuff that has historically been something

Starting point is 00:43:15 that has been proven over the course of the last few decades. It's got to have low fees, diversification, and something that you can consistently continue to invest in long term. Because time in the market is going to be timing the market every single time. If you're trying to time the market or buy into all these crazy different things that are out there now that you can invest in, you're just going to get lost.

Starting point is 00:43:36 So proven, Low-cost index funds and ETFs are the way to go. Do your research on those. Dive deeper into some of that. We have tons of free episodes here on exactly how to do that. Now, when we start to think about this first 100K and as we start to work towards this, I want you to break this up into smaller chunks into smaller milestones. We've had an episode talking about the big three milestones in your financial journey,

Starting point is 00:43:59 and we've talked about $10,000, $100,000, and $1 million. So I want you to break this into chunks so that you can stay motivated. Let's say, for example, you're trying to get your first $100,000 first. Then your first 5,000, then your first 10,000. But have this in place where you're starting to get more and more motivated. After 10,000, maybe you want to get to 15 or 25. After 25, maybe you're like, no, let's move the jump to 50. That's the next big milestone that I'm going for.

Starting point is 00:44:22 After 50, maybe it's 65, maybe it's 75. And then you're starting to move up the list so that you can stay motivated over time. And I want you to celebrate each milestone. Sit down with your family. Sit down with your friends. Celebrate these milestones together. Sit down with your community of people who are working together to build wealth with you. That's going to be the power of staying motivated long term. What you're going to see

Starting point is 00:44:43 is you're going to have some changes mathematically, but you're also going to have some changes psychologically, where you hit the next one and you get even more motivated. And you're like, oh, I want to make even more money so I can get more dollars invested so I can get closer and closer to my goal. And eventually, you're going to build this into a habit. This is going to start to become who you are. Is once you start to make these shifts, your purpose then becomes, okay, I'm going to take this extra dollars and start to put it towards freedom. Because guess what? When my kids become teenagers or me and my wife, you know, are starting to move down the line or me and my husband are going to start to move down the line, all of a sudden, you see, wow, there's some cool stuff that we could be doing. I could be doing whatever I want with my time and energy if I just keep pushing here.

Starting point is 00:45:24 And you can get there even faster than you probably realize once you get the ball rolling. So how long does it actually take? All right? Let's say, for example, that we start to work backwards here. And you start this journey at $250 per month, okay? at $250 per month, it would take you at an 8% rate of return 16 years to get to your first 100k. Well, let's say you make a little more money, and at $500 per month, it would take you 11 years. Then you make a little more money.

Starting point is 00:45:51 At $750 a month, it would take you $8 years. Then you make a little more money at $1,000 per month. It may take you six and a half years to reach your first $100K at an 8% rate of return. And at $1,500 a month, you made a little bit more. Now it's 4.6 years before you hit your first $100K. And all of a sudden, you're going to realize, wow, but then you hit your first $100K, And all these contributions plus compound interest, plus the rate of return that you're getting, all of a sudden is going to start to snowball.

Starting point is 00:46:17 This is how compounding interest works. And this is why it's so powerful and one of the best things that you could ever do. Your contributions plus that compounding interest is going to change your life forever as you start to think about this. And if you take those raises, if you take those additional increases, you keep throwing them at these investment accounts, you'll see your life change. Then what I want you to do is you get the system going. and it's starting to move in that right direction.

Starting point is 00:46:41 I want you to avoid all the mistakes that reset your progress. Let me give you some examples of this. Buying too much car will really kill your progress. Credit card debt would really kill your progress. Lifestyle inflation would really kill your progress. Rating your investment accounts or cashing out your 401K for the next hottest stock tip would all really kill your progress. Trying to get rich quickly.

Starting point is 00:47:06 Believe it or not, would kill your progress. If you feel as though you don't want to wait, it's going to be hard to get wealthy if you're not willing to wait a little bit. Because any of the get rich quick schemes that are out there typically lead to more ruin than they do progress. And I want you to make sure

Starting point is 00:47:21 that you are focused on the things that are actually proven long term. But the biggest risk overall is interrupting compound interest and doing it when you're doing it unnecessarily and starting to pull money out of these investment accounts or whatever else too early. So making sure you avoid those, I think is really, really important

Starting point is 00:47:37 as we start to begin this. So I want you to start to think about how you're going to get to your first 100K. And I want you to comment down below and tell me some of the things that you're going to change, some of the things that you're going to shift to get to that first 100K, even if you don't make good money. Because once you start to realize that you can do this, it's going to take a couple of different things. One, let's increase our income by 10%. Make that goal number one. Two, let's decrease our expenses by 15. If you can do those two things. that's a 25% delta, a 25% gap that you could start putting towards financial freedom. And boy, oh boy, can you do a lot of cool stuff if you're investing 25% of your income?

Starting point is 00:48:19 And so I want every single person to make it their goal. Two, try to invest 20, then 25% of their income at some point in time. It might sound impossible right now, but I want you to take the first step. Start investing five, then six, then seven, increase your income. Now you're investing 12, then 13, then 3,000. Then 14. You increase your income again. Now it's 17, then 18, then 20.

Starting point is 00:48:43 And I promise you you're going to get there. If you're motivated enough and if you lock in, keep listening to this show, I will motivate the wazoo out of you. That's what I'm here to do. And so the more you listen here, the more I'm going to help you through this process. So listen, I hope you guys got a ton of value out of this episode today. If anybody listening wants to dive deeper with me, we have Master Money Academy. Master Money Academy is where you will see a massive,

Starting point is 00:49:07 transformation in your finances over the course of the next year or less, where you will be it help directly from me. We have bunches of masterclasses every single month that are live with me in there. I do live coaching calls every single week in there. In addition, we have all of our courses. We have a lot of different content. And I answer every single question inside Master Money Academy personally. I'm on all the calls that are the Q&A questions. In all those sessions, I am on those personally. So, if you, you're just, you know, you. You want to get help with your finances and you want to help transform your finances, I would love to be the person who helps you.

Starting point is 00:49:43 Again, we have a seven-day free trial that we will link up down below in the show notes for you to check out. Feel free to join, jump on some coaching calls, see if it's for you. If it's not, no worries. No worries whatsoever. But if it is for you, I would love to help you through that process. So join Master Money Academy. If you feel as so, you are inclined. And if not, no worries.

Starting point is 00:50:03 Keep listening to the podcast. Podcast is free. podcast is one of those things that many people have had massive transformations just from listening to the show. So I appreciate each and every single one of you. My goal is to bring you as much as value as possible. I hope we did that today. Thank you so much for being here, and we will see you on the next episode.

The Personal Finance Podcast - How to Save $100,000 on a Low Salary

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