At any given time, you’re either getting better or you’re getting worse. This extends to health, wealth, relationships...anything. It’s rare that you can maintain the status quo. So when it comes to improving in your job or career, you have to constantly look for ways to improve.

1. Personal Growth Fund
   1. Roughly 5-10% of your income
   2. Separate from your main checking account
2. Reclaiming Dead Time
3. Layer Complementary Skills
4. Think 12-36 Months Out
   1. Most people think 1 week to 90 days out...so they get short-term results
   2. Ask yourself, where do you want to be in exactly one year from now? (work backwards from there)
5. Join Facebook Group
6. Start a Side Hustle
   1. You learn a lot more through doing than just by soaking up knowledge
   2. This includes both successes and failures

Americans are spending $765 more a month than they did in 2020.

• Post-COVID revenge spending
• Savings rates dropping from 33% to 9%
• The Psychological difference between spenders and savers
  • The pandemic has exposed a lot about our relationship with money. When heat is applied, you see what people’s natural tendencies are. Sometimes we confront them for the first time.
  • Factors that impact spending habits
    • Mother more than father
    • Individual life experiences (did you lose a lot at a key moment in your life?)
    • Amount of money you make doesn’t impact whether you’re a spender/saver
    • Money scripts concept
• How do you alter your spending habits to become a more intentional spender or a saver?
  • Get clear on where you land on the spectrum
    • If spending stresses you out…
    • If you love shopping and spending...
    • You want to land somewhere in the middle
  • Understand your weaknesses
  • Be mindful of the company you keep
  • Create a spending plan
  • Set up guardrails
    • Unsubscribe from Prime
  • Start small with saving
    • IRA Example

Saving often gets a bad rap – like it’s boring – but the truth is that it gets a lot less boring the longer you do it. Because eventually you’re the one with the disposable cash and leverage to live life on your terms.

A grown child is someone who is physically old enough to be an adult, but who continues to think, act, and respond to the environment around them with childish behaviors, tendencies, words, and habits – as if they were still a young, helpless child.

Grown children are everywhere. There are 25-year-old grown children, 45-year-old grown children, and even 65-year-old grown children – though it appears to be a more prominent and persistent problem with today’s younger adults.

The culture is teaching young adults to stay children – even encouraging them to do as much. And while it’s too late for the culture to turn back at this point, the door is wide open for individual transformation...to those who are willing.

This week’s episode is a primer on what to do with your paycheck.

In other words, you get paid, and then what? 

Maybe you already have a plan and you know exactly what to do, but I find that most people just sort of play defensive money management. 

• Defensive Money Management
  • Sit back and wait to see what happens
  • Bend don’t break
  • Generic, safe, prevent defense
  • Problem: It’s almost impossible to win if you’re only playing defense

But at a very basic 101 level of personal finance, you have to stop being reactive and start being proactive. And that begins with how you manage your money. You need to adopt an offensive approach to money management.

• Offensive Money Management
  • Control the game
  • Blitz
  • Come in with a game plan and then adapt
  • Have a system
  • Take calculated chances

At a fundamental level, having an offensive approach to money management means having a plan for where your money goes once that paycheck hits your account.

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Retirement Account (straight out of your paycheck)

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Checking Account

⬇️

Necessities

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Emergency fund

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Debt payments

⬇️

Investments

⬇️

Discretionary spending

It doesn’t matter where you live in the U.S….the real estate market is scorching hot. And anytime you have a real estate boom, there’s a certain amount of pressure that bubbles up to the surface for younger buyers – particularly first-time buyers.

1. Historically low interest rates (with threat of rising rates)
2. Rapidly appreciating real estate values
3. Social media frenzy (social pressure)
4. Fear of missing out

Anytime you have financial pressures and social pressures converging, there’s a possibility for a dangerous outcome. 

Buying a house is not bad (and can be very smart), but here are some reasons it might not be right for you...right now:

• Renting offers more flexibility
  • Moving when you own a home is a pain + it’s expensive (8 to 10%)
  • With renting, you can move much easier when things change (job move, salary cutback, growing family, etc.)
• Renting requires no maintenance costs or unforeseen expenses
  • If something breaks, it’s on your landlord
  • Less stress
• Renting offers access to amenities
  • Pool, fitness center, business center, better location, etc.
• Renting requires no down payment
  • Buying a house can destroy your emergency fund
• Renting requires no property tax
  • Pennsylvania: 1.43% @ $300,000 property = $4,290/yr // $357/mo
• Renting insulates you from a crash
  • It’s not hard to see a bubble forming...do you really want to buy before the bubble bursts?
• Renting requires cheaper insurance
  • Average homeowner’s policy: $1,249
  • Average renter’s insurance policy is $179
  • Savings of $1,070 ($90 per month)

1. Start Early
   1. Maria vs. Ana
2. Automate contributions
3. Choose good index funds (25% each)
   1. Large cap fund
   2. Mid cap funds
   3. Small cap fund
   4. International fund
4. Don’t bail when times get rough
   1. Warren Buffett Clip (Berkshire Hathaway)
   2. Bogle Clip (Founder of Vanguard)
   3. Growth example (missing best market days)
   4. Rolling Returns
5. Diversify
   1. As time goes on and your income increases, look for ways to diversify your investment portfolio (though never abandon index funds)
      1. Index Funds (within an IRA or 401k – preferably a Roth)
      2. Stocks and mutual funds
      3. Cryptocurrency
      4. Real estate
      5. Insurance/protection products (whole life/infinite banking, annuities, etc.
6. Work on increasing your income and staying the course
   1. Boredom is one of the biggest risk factors you’ll face in investing

Show Links

https://www.moneyunder30.com/small-cap-vs-mid-cap-vs-large-cap

https://www.schwab.com/investing-principles

https://www.thesimpledollar.com/investing/stocks/tempted-to-sell-missing-just-a-handful-of-the-best-stock-market-days-can-tank-your-returns/

https://www.thebalance.com/rolling-index-returns-4061795

Post-Pandemic Study on Americans and financial regrets:

https://www.bankrate.com/surveys/biggest-financial-regrets/

Pre-Pandemic Study on Americans and financial regrets:

https://www.investors.com/etfs-and-funds/personal-finance/financial-mistakes-americans-learn-from-biggest-financial-regrets/

2021 Data:

• 20% regret not saving enough for emergency expenses
• 19% regret not saving for retirement early enough
• 18% regret taking on too much credit card debt
• 10% regret taking on too much student loan debt
• 7% regret not saving enough for their children’s education
• 4% regret buying more house than they can afford
• 4% regret something else

Cause Of Financial Regrets

"Financial mistakes generally stem from a tendency to live day to day financially. People start to get over their mistakes when they start to think about the future and think about what's possible financially in their lives. It boils down to this: People's financial mistakes stem from focusing on the near-term financially instead of the long-term." (Brian Madgett, head of consumer education at New York Life)

How to Avoid Financial Regrets

• Stop living paycheck to paycheck/build an emergency fund (episode 20)
  • There’s no excuse
  • Earning $50k per year, you’ll make $2M in your lifetime. ($4M @ $100k/yr)
  • Learn how to manage a little and you’ll win with a lot
• Start saving and investing when you’re young
  • You have decades to recover. Dips in the market are only paper losses. Unless you believe the entire American economy is going to collapse (meaning the entire world’s economy will collapse), you shouldn’t stress. It’s a long-term game.
• Stop trying to time the market → Stick with dollar cost averaging
  • When the market pulls back – which it does regularly – if you're systematically putting money away (not trying to time the market), you get more shares as prices go lower. Then when the market rebounds (which it always does), it accelerates your growth. That's the power of dollar-cost averaging."
  • Take advantage of employer match (Episode 7)
• Stop acting rich when you’re not rich...and you can actually become rich (episode 21)
• Don’t let escalating income lead to escalating expenses (episode 10)
  • 25% Rule: 25% goes to spending and lifestyle // 7% to saving, investing, etc.

Reasons Why People Hate Budgets

1. Feels constricting
2. Puts us on the hook
3. We’re in denial
4. Seems like too much work (laziness)
5. Not sure where to begin
6. We’ll say we’ll budget when we make $X per year
7. We tried it once and it didn’t work
8. We think people will make fun of us (pride)

How to Actually Start (and Stick With) Budgeting

1. Reframe your view (think of it as a “Spending Plan”)
2. Put yourself in charge of the budget
3. Create a discretionary expense fund
4. Make it automatic
5. Tweak the system to work for you.
6. It’s not 100% or nothing…