- What is going on, you guys
welcome back to the channel. So in this video today,
we're gonna be talking about a step-by-step plan for, going from scratch or like $0 as a complete beginner. Somebody just getting
started with their finances to a financial plan for building up a net worth of around $350,000 by age 30. And just for a bit of background here guys I actually was planning on
following this exact plan when I was younger and I followed it for
many years going forward from 18 to about 21, but I ended up starting a YouTube channel which ended up being much more successful than the previous path I was following. However, this is the
exact step-by-step plan I was planning on following back when I was just 18 years old. And I wanna tell you guys that this is not something that you're going to see anywhere else. I literally on a plane ride the other day, wrote it out on paper myself. So this is not some
kind of Dave Ramsey plan or anything you're
gonna see anywhere else. But what it is is a step-by-step plan for setting yourself up
for success financially. Because when I was in my twenties my whole mindset was
how can I set myself up for an easy life for the rest of my life? What things can I do in my
twenties to set myself up in my thirties, forties, and fifties because what many people don't realize is that what you do in your late teens and in your twenties is
what's going to set you up for the rest of your life. And you'll be much better off by having a solid financial plan where you're owning many different assets and setting yourself up for
a good life financially. Now, that being said, guys I do have to make a quick
disclaimer here that I am not a financial advisor. This is not financial advice. And while these strategies
have worked for me and other people there's always
unforeseen risks out there. And before you make any
of your own investments you should always do
your own due diligence. That being said guys, one quick thing here I have to ask you, if you are watching this on your desktop and you have a phone next to you make sure you silence that phone and get rid of any distractions because I'm gonna be teaching
you a step-by-step plan for setting yourself up
for success financially. And if you get distracted you're gonna basically lose
track of what's going on and probably not take
action on this video. So do yourself a favor,
put that phone on silence unless you're using it
to watch this video, take out a pad of paper
and a pen for some notes and let's get right into it. Alrighty guys, so step one
of this plan actually starts before the age of 18. And this starts when you
are just 16 years old. And step one of this plan is making sure you maintain
a good relationship with your family. And what I mean by that is a lot of my friends in
their late teenage years had a lot of arguments with their parents. And they ended up in this situation where they were moving out of the
house by age 18 or 19 or 20. And while there's nothing
wrong with growing up and moving out of the house,
it's a lot harder to do that in 2021 than it was to do many years ago. So what I wanna encourage you to do if you're 16 or 17 and
you're still living at home. You wanna make sure you're
maintaining a good relationship with your family because that's what's
ultimately going to allow you to live with them in a civil environment for as long as possible. So when I was 16 years old I made sure that I was
helping out around the house. I was doing chores. I was working a part-time job and earning my own income that way I wasn't a burden on my family. And I wanna encourage you guys
to do the exact same thing. So step number one on this plan at age 16 maintain a good relationship
with family members. And the other thing I want you
to do at this age is to speak to your parents and speak to
your grandparents and ask them whether or not you're going
to have any money to help out with your first car or with college. So full transparency here
guys, when I was 16 years old my grandfather helped me out with $5,000 towards my first vehicle. And he also helped me
out with about $10,000 towards my community college education. And so some families are
going to be able to offer this based on their finances while others may not be able to. And it's important to understand that whether or not your
family helps you with this you're still gonna be able to do well and figure out a good plan. However, the very first thing
you have to understand is whether or not anyone plans to help you with paying for a car
or paying for college if the answer is yes,
you're in luck for sure. And if the answer is no we're just gonna have to figure out a plan for paying for a car and potentially some level
of college education. So step number one at age 16 remain civil with your
parents as long as possible, help out around the
house and ask questions about your first car and your college education. Alrighty guys, so step number two on this plan happens when
you turn 18 years old and I'm kind of a finance nerd
myself, I always have been. So I actually decided to do this on my 18th birthday at about 9:45 in the morning. And that is opening up my very first credit card. Now, most people are not
thinking about this at age 18 and it's not something
you really think about until you're usually in
your mid or late twenties. But the important thing is here. You have to establish credit early in order to begin building up something called your credit score. And if you're not familiar
with what this is guys a credit score is kind of
like a report card for adults. So as I'm sure you know in school you're getting your report
card every single quarter or however so often that it comes. And that is a report for
how you're doing in school across your different programs while your credit score is
pretty much the exact same thing. And every time you make good decisions with your money and your
credit, it tends to go up. And if you make bad decisions
like overloading your cars or skipping payments well your credit score or
your report card goes down. However, the longer that you
have credit available to you the more this score goes up over time. So it's important to establish good credit card habits early. So essentially what I did to
get my very first credit card on my 18th birthday. Is I went into my bank and I opened up what is
called a secured credit card. And essentially what this means
is your setting a set amount of money aside to actually
back that credit card with something called a
certificate of deposit. Now that's pretty confusing
guys and kind of deep in the weeds, but
essentially you're putting up some collateral in case you
don't pay your credit card. And if you don't they can just simply take that
money and pay off the card. So with a secured credit card, the risk for the bank is zero
because you're putting up the collateral in case
you don't pay your bill. So what you wanna do is on your 18th birthday
or shortly thereafter, go to your favorite bank or credit union and inquire about opening
up a secured credit card. I started off with a balance of just $500 meaning I set aside 500 in a
CD to back that credit card. And then what I would
do is every single week I would put my gas on that credit card and then pay it off every
single month in full. And while it may not sound, very important to be putting
a couple hundred dollars on your card per month and paying it off well every single month a on-time payment is being
reported to the credit Bureau as well as you paying
off that entire balance. And what this begins to show is that you are a
responsible borrower who has, good financial sense in
terms of knowing what to do with their credit card and making sure you're making payments. Now, after you get that
secured credit card you're gonna wanna wait anywhere from six to eight months while
you slowly build your credit and make those on-time payments. And then after that the very next thing that
I personally recommend is applying for a store credit card. Now your store credit cards
are very easy to get to because most retailers don't
have very strict requirements in terms of who they offer these cards to. In fact, you're actually
looking at one of the former store credit card experts here. I used to work for JCPenney and I used to help people sign up for these credit cards to
get a discount on clothing. So I used to get $2 in my paycheck every
time somebody signed up for a JCPenney credit card. And so I was always
promoting these to people. Now later on in life, I learned about how store
cards can be very dangerous and they're definitely not something I recommend to shopaholics but if you can be responsible
with your use of credit cards then a store card is a logical next step. Now, in my case, I ended up
getting a JCPenney credit card from my employer and I used
it for my Christmas shopping and to take advantage of different sales. And that's exactly how
I recommend using it. Use your secured credit card to buy gas, pay it off in full every single month and then put small purchases
on a store credit card and pay that off every single month. The whole point here guys is to pay $0 nothing in interest that
way you're building credit and essentially getting a free loan from these credit card companies without actually paying any interest. If you find yourself paying interest or racking up a credit card balance you may not be somebody who
should use credit cards. And so it might be a good sign
that this just isn't for you but if you're able to do it responsibly, this is one of the best assets
that you have going for you is building up a good credit score in your early twenties. And after that guys, after you
have that secured credit card and your store credit card, the next logical step is to go out and get a student credit card. These are credit cards
designed for college students. And in my case, I ended up applying for a
discover student credit card in my first or second year of college. Now, at that point I had already
had my secured credit card for somewhere around three or four years. I had my JCPenney store
card for around two years. And so over that period of time I had built up a credit score
that was now around 700. And so when I applied for that student credit card with Discover they had absolutely no
problem accepting me because of my good credit score. Now to share a different
story with you guys a friend of mine never did the secured credit card never did the store card. And at age 22 basically had zero credit. And he tried applying for
a Discover credit card. And even though it was for a student card and he was a student,
they still turned him down because he had no prior
credit established. That is why the secured credit card. And then the store credit
card is so important to this formula. So now that you understand the importance of establishing credit young and that's really gonna help us out in a couple of years going forward. Another step to follow when you're 18 is potentially getting a
community college education. Now speaking from personal experience, like I said, I had $10,000 put aside towards my college education which I was very fortunate to have because my grandfather
had set aside some money for the grandkids. Again, I understand that not everybody has this available to them. And so some people have
an unfair advantage here. So if you have money from
any person in the world other than like the federal
government giving you a loan towards college or towards your first car understand that you truly
have won the lottery here. And most people just do not have that option available to them. So don't waste it. That being said, if you
are looking into college what I would recommend is
looking for high ROI program or high return on investment. Now, myself personally, I ended up going to community college for electrical construction
and maintenance which was a two year associate's program. What that means is that after two years I would be able to get a job without having to continue on
and get a bachelor's degree. So I ended up getting this
degree over a two-year period. I got my associates in electrical construction and maintenance and I ended up working
for my local power utility where I earned a really good salary but we're gonna get
into more of that later. The important thing is
at 18 years old or 17 when you're graduating high school and figuring out your next step if you don't know what
your passion is in life which was me and you have
no idea what interests you, look at a high ROI program from community college. A few to recommend to you
guys would be nursing, dental hygienists, x-ray technicians, and
anything related to trades. Those are all good bets in
terms of high ROI programs. So that's the next step here guys is, figure out if college is
something on your path. And if so, look for a high ROI program at a local community college. Now you have just one more
step at age 18 for this plan. And it is to figure
out your first vehicle. Now I'm actually doing a video shortly on the best cars for $5,000 or less. And by the time you're watching this video that video is already on my channel. So make sure you pause that
and check that video out later if you want some help on that. But the next step here is
to figure out purchasing a used car for around $5,000. Now, as I said earlier, my
grandfather did help us out with our first cars and he gave me $5,000 towards the purchase of my first vehicle, which I was very thankful
for because this allowed me to buy a car that wasn't
a complete piece of junk. If you're spending like a
thousand dollars on a car or anything around there you're pretty much getting a
heap of junk in most cases. These days it's pretty hard
to find a good used vehicle for any less than five grand. That's not going to be
an absolute money pit and something that needs
numerous different repairs. That being said guys I'm gonna give you a few
general pointers here, Hondas and Toyotas tend to be some of the best vehicles out there. You want to avoid domestic
vehicles like Dodge, Ford. They go down in value a lot faster and they don't tend to be as reliable. So something like a Toyota Camry, a Toyota Corolla, Honda Accord,
Honda Civic, Honda CR-V. Anything in that realm is
probably going to be your best bet for a $5,000 car. And essentially guys,
you wanna have those goal of purchasing your first car with cash because it's really going to be difficult to get attractive financing at 18 years old, getting your first car. And another question I
want to address here is whether or not you
should get your first car at age 16 or age 18. And speaking from my experience I got my first car when I was 16 and it ended up being a big money pit in terms of insurance and gas. And I didn't find I actually
used the car that much. So I actually recommend holding off on purchasing your first car until you are either 17 or 18 years old. However, that doesn't mean
don't get your license. You should still get that at 18 just so you're ready for
the next step in life. But that's the final chapter here guys in age 18 is to go out there and purchase a car for around five grand. That's not gonna break the bank. It's gonna be somewhat
reliable, hopefully. And your goal is to own a vehicle and have $0 in debt in terms of any form of car payment down the road you're
gonna replace that car and you're gonna get a car loan but for now just try to own
something free and clear. That is a reliable form of transportation. And if you don't need a car whatsoever, maybe you hold off on the vehicle until you get your first job. So now from age 18 to age 21, it's a pretty simple process. What you're going to do is
continue paying the full balance on your secured credit
card, your store credit card as well as your student credit card. If you choose to open up more
credit cards in this time just do so responsibly and understand that every time you open up a credit card it may lower your credit score. So I would just recommend
keeping track of that score as you go. Not to mention, if you did have to get any kind of loan for a car, hopefully you don't have to but
if you did aim to pay it off from age 18 to 21. Essentially you want to
exit college, ideally with no college debt, no auto
debt and no consumer debt. I know for some people, this is difficult but I'm telling you guys
it's not impossible. If you really work hard and
minimize those expenses. Like I said, some people including
me did have the advantage of having some family money for the community college
and the first car. However, even if you don't have that if you work during college
and save up your money I'm a firm believer that as
long as you're living at home and you maintain that relationship that good relationship with
your family, which was step one you should be able to
live at home for cheap if not free, save your money,
put it towards college, put it towards that vehicle,
get everything paid off. Ideally age 21, you find yourself exiting
college with a high ROI degree with a good credit score, with no debt period. So it's a lofty goal, but trust me guys it's something that you can
attain if you work hard. Now, this is where things
start to get more exciting because you're able to begin
building your net worth. Now somewhere around age 20 or age 21 is when you're
going to be finished up with community college
and looking for a job. And that's all going to depend
on what your degree is in, in terms of what type
of employment options are available to you. So what I do wanna say about this guys is I always liked looking for jobs that included some amount of downtime because just to fill you guys in so far, everything we've
discussed is exactly the step-by-step plan that I was following before I started this YouTube channel back in 2016. Now I graduated from
community college back in 2015 and I got a job in 2015. So it took me a little while there before I started this channel. But from 2015 to 2016 is when I was just
kind of working this job and saving my money. But essentially that's where
I veered off to the right. And this is where this
path continues straight. I ended up deciding to invest my time into this YouTube channel. I quit that job to accelerate my income but even if I didn't, even
if I kept following this plan I truly believe I was on
track for a very good start. And so this is where the
plan starts to deviate away from what I actually followed. So at age 21, you wanna find a job
ideally with some downtime because that downtime on my job is what allowed me to
create my YouTube channel. I had about four hours of work per day. And for the other four
hours, it was pretty much just keep yourself busy
and don't bother anybody. So I would get all my
work done in the morning and I would spend the afternoon outlining my YouTube videos quietly and just minding my own business. So that might be a good option if you're looking to
start your own side hustle like a YouTube channel. So once you lock down that job, hopefully a high paying one
from your high ROI degree. At this point, you're pretty well off because ideally you have no consumer debt, no auto loan debt, your crappy car is paid off. And so at age 21, this is when I would invite you to replace that original vehicle. Now, if you bought a somewhat reliable car for around five grand in 2018 and you bought like a Honda or Toyota and you made a good pick maybe that vehicle is still good and you could still drive it. So if you don't necessarily
want a newer car and that vehicle still works I would encourage you to just
keep that as long as possible. But if you're finding that that $5,000 car that you bought three years ago is turning into a money
pit or it's rusting out, or you just simply want to drive something a little bit newer. This is when you can purchase a two to three year old
certified pre-owned vehicle which is exactly what I did myself. So at my first job, I was
driving my old beat up car which was a 1999 Honda CR-V and fun fact guys I still own this vehicle. I've had this car in my
family for like 10 years now and it still runs pretty good today. But at the time I was driving
this old beat up Honda and then at age 21, I decided to buy a newer car just because I had a really long commute. I had no debt. I had a good amount of money saved up and I was tired of driving around a car with busted air conditioning
and not a great sound system. So I ended up buying a Chevy cruze which probably looking back wasn't my best choice because
it's a domestic vehicle. I should have bought a Honda
or Toyota, but anyway, I bought a two to three year old
certified pre-owned Chevy cruze. And because of all the steps
I had followed earlier on I was actually able to buy this
vehicle, get good financing without having to actually get a co-signer. Now, for those of you that know me and have watched my other videos, you will know that I had a
couple of financial mistakes in this period where I had a couple of different
cars when I was younger. At one point I had two cars and I was driving a Subaru
WRX that I bought on impulse that I actually lost like nine grand on. So I'm not saying that I've done everything perfect here guys. In fact, I did make a lot of
mistakes when I was younger, related to buying vehicles and they were really good lessons for me. But nonetheless that Honda has always been the
most reliable vehicle I own. And at age 21 I replaced that with my
pre-owned certified Chevy. And I did that through a loan. Again because of my good credit I was able to get attractive financing and I had an interest rate
of somewhere around 5% which is pretty good for a 21 year old without a co-signer. Now the important thing to remember here when purchasing that vehicle, if you do decide that
you need a newer car. Number one, never buy a new car. That is one of the
dumbest things you can do. And you're going to take a huge loss in terms of depreciation. That's why I say two to three years old let someone else take
the hit on depreciation and you get yourself a gently used certified pre-owned vehicle. Another thing aim to put 20% down on that vehicle if possible. If you're able to continue
driving that old car from college or high school and save
up a bunch of money try to put 20% down on that vehicle to avoid something called gap insurance. Gap insurance is essentially
something that you should have if you are driving like
a brand new vehicle. And what that means is if you total that car and the insurance company doesn't pay you as much as you on the car the gap insurance would
cover the rest for you. That way you're not stuck owing more money than the car is actually worth. But if you do have 20% down
or more on that vehicle and it's two to three years old especially if it's a Honda or Toyota you shouldn't have any
worries about gap insurance and you don't have to waste money on this. Also guys, another thing
I recommend at age 21 if you haven't been doing so already once you get that first
job or shortly thereafter begin contributing towards a rent at home. So a lot of people may not want to live with
their parents at age 21. But if you're looking to do
what makes sense financially that is oftentimes your smartest move. And so that's why I said at
the very beginning, at age 16 you got to maintain a good relationship with your family or your
guardian, whoever it is because you wanna stay
there as long as possible. These are always going
to be your cheapest years where you're able to save the most money. And so at age 21 hopefully you're still
able to reside at home. And this is when you are
going to offer to pay rent towards your parents or
whoever you live with. Now, myself personally I was paying my mother $600
per month towards the mortgage since I was a working 21 year old adult still living at home. And so I wasn't a freeloader. I was making good money. And so I helped my mother
out in the process. And I encourage you guys
to do the same thing. And if your parents flat out
say, no, we're not taking rent. Well, then you are blessed and you have a really
good situation to save and invest a ton of money that other people just don't
have available to them. So from age 21 to age 24, you wanna have the goal of saving as much money as possible. And you're gonna keep doing
everything you've been doing. You're gonna make your
credit card payments on time. You're gonna keep putting gas on your credit card and paying it off. You're gonna pay off credit
cards every single month, pay $0 in interest. You have ideally, no debt, no consumer debt. You might have a small car loan where you have a reasonable interest rate since you've already built your credit. So now from age 21 to age 24, my challenge for you is saving 50% of the income from your job. And I know what you're saying,
Ryan, that sounds crazy. That sounds impossible. How am I going to do this? But guys, this is what I did myself. I was working. I was living at home. I was driving the old car. Even when I was driving my Chevy. I was still able to save about half of all of my money. And let me tell you how
I was able to do that. So the very first thing I
did that allowed me to save 50% of my income was bringing my lunch and bringing coffee to
work every single day. I know this doesn't sound
like a lot of money guys but I did the math one day. And I realized that if I were to buy a coffee on the way to work and then go out for a lunch
and pick up a snack for later, it was going to cost me $20 per day. Now I worked that job five days per week which means every single
week I'd be spending $100 per week on coffee and lunch and a snack, obviously guys, per month that's $400 per month. And over the course of one year, that's around $5,000. So I could not justify
that expense personally. So what I decided to do is make my own coffee at my desk. I actually bought one of
those four cup coffee makers, made my coffee every single
morning for like 10 cents a cup. And then I made my own
lunches at home on Sundays and brought those into work for the week. This may not be fun, guys. Trust me, especially
if you work a desk job it's nice to be able to
get out of the office and go get lunch but I would instead encourage
you to eat your food and drink your coffee at your desk. And then simply go take a walk during lunch to get that same
outing and get some sunshine. But literally guys, just by making your own food
at home from age 21 to age 24 and coffee just between those two things I'm convinced that could allow
you to save about $10,000 towards your first big investment which we're going to get to soon. Another thing you should be
doing while working this job is contributing to the 401k which is your employer sponsored
retirement savings plan. The other thing that
you should be aware of is that oftentimes the 401k is able to be used towards the down payment
of your first home. So you might be worried about
locking your money up forever in a retirement account, but there are some scenarios that allow
you to use this money early. One of which is the
purchase of your first home. Now a lot of employers offer something called a employer match which is where your employer
is matching your contributions towards your 401k. So in my case with my job
at the utility company they would match me 50% dollar for dollar up to 6%. So what I did is I put 6% of my pay into my 401k and they gave me an
additional 3% for free. Free money literally just
put it right in my 401k a free bonus that a lot of people just
don't take advantage of. So for those years that I
worked for this company, every single week, 9% of my pre-tax income was going right into my Vanguard, 401k. I wasn't touching it. I didn't see it. I didn't even know it was happening but I was automatically saving and investing every single week. Now, if your employer does not
offer any kind of 401k match probably not something that you have to do but I would still set
aside that same money in your savings account or some type of separate
investment account. If you want to save and invest that money. Another thing I would recommend doing is if you work for a publicly traded company which is a company where the stock trades on the stock market
with the major exchanges ask your employer about an employee stock purchasing plan. I did this with my HR department at the company I worked for and I'm glad I did because I found out that they actually offered
employees a discount if they agreed to hold shares
for a set period of time. So I was able to actually
purchase shares of my employer at an immediate discount compared to what they
sold for on the market. As long as I promised
not to sell those shares for a set period of time. So for me, that was like a guaranteed ROI of as long as I put my money in, I can get it for a cheaper price than it's already for sale for on the market. As long as the company
stock doesn't go down which it's a utility stock,
they don't really go anywhere. It was a way for me to
immediately get some free money. So that's another thing
I did is I directed a percentage of my paycheck
towards company stock purchasing and just essentially
did that automatically every single week from my paycheck. So you're gonna wanna
talk to your HR department and ask about 401k match as well as any type of employee
stock purchasing program. And then the final step here
for saving 50% of your income from 21 to 24 is be frugal AF. You guys know what AF means. I'm not gonna say it out loud but do that be as frugal as possible. And I know this may not sound fun. This may not sound cool. This is not a video called
how to have an exciting life in your twenties. This is a video about how to set yourself
up in your twenties to where in your thirties,
forties, and fifties you probably don't have to
worry about money that much because of how much you've already done. So be as frugal as possible and gamify your life. I know this sounds kind of weird but I used to be really into
video games when I was younger. And I started applying
the same school of thought to my life and my finances. And I turned it into a game to see how little money I could live off of how little I could spend and how much I could
possibly save and invest. And I encourage you to do the
exact same thing yourself. Also, guys, one question
people always ask me when talking about this is whether or not you should
have a relationship during this period. And what I wanna say about that is if your partner is on the
same page with you financially and they're fine with you being frugal and cooking and bringing
your lunch places, then absolutely. There's no reason to make yourself suffer and not to date in your twenties. However, if you have a certain goal in mind of what you're looking to attain be it financially or whatever and your partner is not on the same page meaning that you want to stay
in on Friday night and cook that way you save money and your partner is fighting
with you because she wants to or he wants to go out for a date and to the movies or something that is where you either have
to budget entertainment funds or that may not be the
right relationship for you. So I'm not saying to avoid relationships but just make sure that your
partner is on the same page with you about what
you're looking to achieve. Alrighty guys. So now let's get into
some of the fun stuff here which is going to be actually, looking at the numbers and
how this all plays out. So assuming you got a high ROI degree from a community college I'm going to assume you'll
be able to land a job with a $50,000 salary and just to speak from my
own personal experience. I got a two year associates
degree from a community college. I got a union job for a utility company where I was starting off at a salary of around 63,000 per year fresh out of college, 20 years old. So I am living proof that
this is actually possible. And so by saying 50K we're actually way undershooting based on what I was able to do. So trust me guys I know you can do the
exact same thing yourself and probably make even more than 50,000. So starting off here guys, if you make a $50,000 salary of course you have to pay
your taxes to uncle Sam. So after you pay taxes your take-home is going
to be around $37,500. And I'm encouraging you to
save half of that income which is going to be savings
of around $18,000 per year. And as I said, you're going
to do that from age 21 to age 24, which means you should be
able to save slash invest around $54,000 over three years from 21 to 24, by saving half of your income. Now, in terms of what you
actually do with that money that's kind of up to you to decide if you want you can invest
this money to allow it to grow or you can set it aside in savings or you may decide to go out
there and do some stock picking. If you want to invest yourself. I personally did a
little bit of everything which is what I recommend as well. However, let me just restate this guys. I'm not a financial advisor. This is not any kind of
personalized financial advice. This is simply what I did myself. And it's up to you to decide if you think this is a good idea for you yourself to follow this. But what I did is I got all
of the free money first. And what I mean by that is, I mean things like the 401k where you got the free bonus
in terms of your company match. I also did the employee stock purchasing and I got that free bonus 'cause I was buying shares at a discount. After I got all the free money all of the rest of my savings here whatever it didn't go over
here to the free money stuff went into this pie right here, which breaks up basically into three even chunks in one area I was doing passive investing. So I'm gonna say PI this is just passively
putting your money into index funds or something
really boring where there's not a heck of a lot of risk. You're just slowly investing over time. I put about a third of that into my EF which is my emergency fund which is just a cash savings account where I have money in case of emergency. And in this third piece of the pie this is where I did my stocks. So at that point in my life I actually wanted to be a swing trader and I was trying to be a swing trader. So I took a portion of
all of my leftover money after I put it towards the 401k and the stock purchasing. And I took about a third
of that leftover money. And I put it into swing trading and basically trading
stocks to try to make money. I was unsuccessful with that. I wasn't able to make much money at all. So eventually I got rid of that and I didn't do swing trading. I just did like some individual
stock long-term ownership. But if you do decide that you want to dabble
with the stock market or anything like that, you can do this. I would just say make sure you're
successfully making money. And if you find that this area right here ends up being a drain on your account where like the values here are going up, or this wouldn't go up 'cause
it's just your emergency fund. But if your passive investments
are doing really well and then your active investments
are making you lose money maybe it's time to just get
rid of the active component and just be a passive investor. But essentially from age 21 to 24 you should be able to save
up and invest around $54,000 which is going to be
important for the next step. All right guys, so if you
follow these steps from age 21 to age 24. And you followed all the other steps that we've outlined so far, this is the situation
that you should be in as a 24 year old adult. First of all, 750 plus credit score should be possible at this point, based on eight years of on-time payments. If you start building
credit at 18 years old guys from 18 to 24, I'm sorry, that's actually six years let me fix that, math there guys, before he yelled at me in the comments. Six years of on-time payments there. You do also from age 21 to 24, you stayed at that job which gives you three
years of work history. Not to mention since
you saved slash invested around 50% of your income, you should have about a $50,000 net worth between your 401k individual stocks emergency fund and potentially your passive investments. And you may even have $0 in debt. If you were able to pay
off your pre-owned vehicle in that three year period, you know what that means, guys all of this right here paints a picture for somebody who is financially wise which means the bank will
let you borrow money. This is when it's time
to put that 50K to work and start building up some real
assets through real estate. I know this is where
things get exciting guys. And from 18 to 24, it might sound kind of boring but this is very important stuff for setting yourself up for success in this six year period right here. So now let's get into the very next step. So now at age 24, the next step which I followed is getting
into my first house hack. If you've been paying attention to YouTube videos, you've probably
heard of this concept before and I still do this today at age 26, I'll turn 26 shortly. I'm actually recording this from the bedroom of my house hack. And so essentially what I did is rather than going out there
and buying a single family home which is a terrible investment. I actually purchased a three unit property which allowed me to occupy
one of the units myself while renting out the others. And you pretty much have
two different options. When you get started with
your first house hack. Option number one is for a conventional 20% down loan which is gonna be tricky especially when you don't
have a lot of cash flow other than just the money from your job. You've got like one income stream maybe a little bit of investment income but you really haven't had
much time to allow it to grow. So most of the money you have is just what you were able to save
over the last three years. But again, because you're
driving a old car or, one that isn't, brand new where your payment is too high. And because you're living
at home during this period from 21 to 24, you're paying a lesser amount of money towards rent to your
parents or your guardian. And you're keeping those
expenses as low as possible. So hopefully this has ultimately
allowed you to save up around $50,000. Your second option which is way
more appealing in my opinion is utilizing something called the FHA loan which is just 3.5% down. And this is exactly what I did with my first house hack. So just for numbers sake here, guys, let's say a decent house hack is gonna cost you around $500,000. However, depending on where you live it could be a million dollars or as low as 200,000. In my real estate market a nice three family property cost me around half a million dollars but the important thing is guys I didn't need to have
almost any of that money because of my responsible credit history and my work history and all this stuff that
works to my advantage. So if I was looking to
purchase a $500,000 property with a conventional loan, I would have to put down around $125,000 between closing costs and my down payment. And clearly if you only
have 50 grand saved up that's just not a logical goal or outcome. 'Cause you probably don't have 125 grand. However, with that FHA loan at three and a half percent down that was a much lower amount of money. In fact, you could probably
get away with about a $30,000 down payment. Mine was even lower. I actually put 22 grand down on this property. So for 22 grand, I locked in a half a million dollar asset which had three different units. The only downside is you are going to have to pay something called PMI, which is insurance that
the mortgage company requires you to have to insure the bank because you have almost zero
equity in this property, which means if you walk away from it the bank may not be able
to sell this property for enough money to pay off that mortgage
and get their money back. So as a result, you pay for PMI. That way the bank is insured in case they lose a bunch of money by you walking away from the property there is a way to eliminate
that PMI down the road, which I did. And we're gonna cover that later but essentially the
next step from 24 to 25 is looking for a nice three to four unit property for your very first house hack and utilizing that FHA loan. If you need to, based on your area that way you don't have
to put a boatload of money down on this property. So that's what I did. And that's what I definitely recommend. As far as the source of funds you could use cash from
your emergency fund. You could sell some stocks
from your own portfolio or some of your company's shares. If you've been using an employee
stock purchasing program or talk to a tax advisor and you may be able to use a portion or all of that 401k towards the purchase of your first home. So you should, at this point, have a lot of different
options available to you in terms of figuring out how to come up with that down payment. But this is what's gonna
get you into the door of true financial abundance. Is this very first step of, getting into a house hack where you're essentially
zeroing out your mortgage. And let me explain to you
what I mean about that now. So your goal with this house hack is to essentially have a $0 mortgage. And what I mean by that is after you factor in your tax write-offs associated
with owning real estate for rental purposes as well as things such as the principal pay down of the mortgage after factoring in those different things. You essentially wanna have a $0 mortgage. So what I mean by that guys is you take your total mortgage per month and then you subtract out any
money going towards principal. And then you would subtract
out any tax benefits which you're probably
not gonna factor those in until the end of the
year during tax season you're gonna subtract out
the rents from your tenants. And ideally that number
should be around $0. That essentially means
that you live for free and every month you're
building free equity in this property or
ownership in this property. And so now, rather than paying rent to your
mom or dad or your guardian you're not paying rent to
anyone you live for free. And now we can begin to
accelerate your rate of savings. So once you figure out your house hack from age 25 to age 27, you'll have two goals in mind. Number one, if you're handy, fix up the place because we're
gonna refinance it later. So if there's any improvements
you can make fixing up the place, remodeling it, any sweat equity you can
build into this property, you damn well wanna do that. In addition to that because you now ideally
have that $0 mortgage which is very possible with
a three unit house hack. Now rather than paying rent to a guardian you're able to accelerate
your rate of monthly savings. So at this point here guys from age 25 to age 27 you want to have the goal of
fixing up the place if possible and saving even more money. So over those two years you should be able to continue saving 50% of your income. And again, we're assuming that
you have not gotten a raise in this entire period,
which is very likely but we're still keeping the numbers low just to show you guys
how easy this is to do. So saving half of your income
means you're able to save another 18K per year, but in addition by having no rent, because you now have a house hack you're gonna be able to save that money that you were originally paying in rent to your family member. I'm estimating this is around
$6,000 per year in savings. So you went from being able
to save $18,000 per year to now saving around $24,000 per year. Thanks to your house hack. Now, if you bought a
property in a good area that's going up in value, especially if you've
been making improvements to that property. At age 27, two years after you started this loan, you may want to consider
something called a refinance where you're essentially
looking to refinance this as a conventional loan and eliminate that PMI. This totally depends on
the market that you're in. I personally owned real estate in a pretty good area where a lot of people are trying to move here. So the prices are going way up in value. So due to that I was able to refinance
and get a lot more equity. So let me walk you guys through that now because that's essentially the next step by saving money from 25 to 27. At these savings rates you should be able to
save up about $75,000 of cash slash investments in stocks and passive investments. And you should have
around $15,000 of equity in that house just from principal pay
down of that mortgage. At this point you may want to pursue
refinancing that property. So let's say for example, that house that you purchased for $500,000 over two years based on some improvements that you made is now worth 10% more or 550 K. Well, this is where things
start to get interesting because over that two year period, you actually were paying
down that mortgage every single month. However, if you did it right your tenants are actually
paying that mortgage for you because you live for free which is the clear
benefit of house hacking. So during that two year period, you actually build up about $30,000 of equity in that property which based on combining your down payment plus your principal pay down
means that your current loan on that property is
only around a $470,000. So what this actually means here is that you have $30,000 of
equity in this property just based on the current, the value of the appraised
value back when you bought it. But the interesting
thing is your property is actually now worth around 550,000 from a formal appraisal from a bank. So what that means is that you owe 470 on this property but it's actually worth 550,000 meaning you actually have 80,000 in equity based on the fact that
property has gone up in value while you owned it. So this might get a little
bit confusing here, guys. And if it does just follow along for now and eventually just talk
to a mortgage broker about a refinance and they're gonna explain
the whole process to you guys don't worry. But essentially between the pay down of
that mortgage right here, and it increasing in value you should have about $80,000
of equity in that property which you will now be able to
use to put towards that loan because the loan for the
property is only $500,000 but the bank is now
telling you it's worth 550. That is where the refi comes in. You're going to basically
take that additional equity get a new loan for $550,000 and get to something
called 20% loan to value. Essentially, what that means
is you have enough equity in the property that PMI is no longer in the equation. And I don't know if you guys understand how much this can be, but like on my house hack, this PMI was around $325 per month. So if you're able to eliminate this you can significantly lower your mortgage and save more money every single month. Alrighty guys, so now let's go ahead and cover the specific numbers
here for this loan refinance. And if you're not familiar
with what a refinance is, guys that pretty much means you'll
get rid of the old loan on that thing and get a new one. Hopefully at more attractive rates. I did this myself with my first
house hack for two reasons, actually three reasons. Number one, I made some
updates to the property which made it more valuable. Number two interest rates
had fallen quite a bit. And of course, number three,
I wanted to eliminate that PMI and I had some extra cash
to put into the deal. Essentially, what you're going to do here is combine your extra money from saving up over the
last couple of years. Plus your principal pay down which means you own more of that property. Plus it has hopefully gone up in value. If you live in a good area
in a good real estate market especially if you've made
improvements to the property. So originally your loan was for $500,000 three and a half percent down. You've paid it off for a couple of years. So you have some equity in the property but now you wanna get a new loan on this property for 550,000 at 20% down. That means you're gonna
have to put down about 110K plus around 10K in other closing costs. The unfortunate thing is
most of this money right here the other 10,000 in closing costs is pretty much throw away money. It goes towards mortgage tax and different
things like that. A lot of this you're just never gonna see but this 110 right here essentially goes back in your pocket. It's just locked up in your house because you're holding that
value within the house itself. So anyways, guys, you've
got to come up with $120,000 in order to refinance this loan. And let's talk about
how you would do that. Well, first of all, you have some equity in your property because the bank has said we believe this is worth $550,000 and you had an original loan for 500K that you've been
paying off for two years. So now you only owe 470 grand left on this mortgage which means you have $80,000 of equity which you can use towards this new loan. The bank says the house is worth five 50K. You only owe 470. This is your money to put
towards that new loan. Now you just have to come
up with the difference between these two, which is $40,000 in cash which is essentially just
going to come out of your investments or your savings from the last two years. The good news is that since
you're living rent free now because of this house hack you're able to accelerate
your rate of savings. So coming up with another $40,000 over a two year period with house hacking with
this minimalistic lifestyle where you spend as little as possible this should really be no problem at all. At this point, you have refinanced drastically lowered your mortgage and eliminated that pesky PMI. So this alone should
probably mean you're able to save even more money
based on not paying PMI having more equity in the property and having a lower mortgage payment. So let's talk about that
rate of savings now. So first of all, you still
have $18,000 per year which comes from saving 50% of your income which we've been doing since the beginning of this whole plan. Second of all, because
you're living rent free in your house hack, that's
an additional $6,000 per year that you can save. Originally you were
giving that to mom and dad or your guardian but now you live for free and your tenants pay the rent or I'm sorry, your
tenants pay the mortgage. So you live there for free when you factor in the principal pay down and different things like that. But now you've refinanced. You've eliminated that PMI and you have more equity in this property. So your mortgage is
actually going to be lower which means your properties
should now be cashflow positive which means rather than living for free you're actually getting
paid to live there. And I know this sounds
like a crazy scenario but I'm living proof that it's possible because I get paid every
single month to live in my house hack because of exactly what I've done here. So I'm estimating that based on these numbers here with the principal, pay
down, getting rid of PMI. That should mean you're able
to earn about an additional $4,000 per year in additional cashflow from not having PMI and potentially having a
cash flow positive property which means you're now able to save up $28,000 per year drastically accelerating your rate at which you are able to save. So now at this point, after
putting some of your cash into the deal, you should
have about $35,000 leftover based on your previous rate of savings. And you should be able to save about $28,000 per year. So you got 35 grand ish in the bank and you're saving about 28K per year. And this is what you're going
to do from age 27 to age 30. So after you complete
that refinance by age 27 assuming you followed these steps this is what your personal
net worth should look like. First of all, you have $110,000 of equity in that new loan because you refinance that is your money. As long as the value of your
property, doesn't go down. In fact, it should continue
to go up over time. This is gonna climb higher and higher. Not to mention you're also paying that mortgage down over time which means that you're gonna
have more and more money here as you own that property,
the longer you own it the more it's gonna pay you as long as it's a good area and
prices continue going up. You should have about $35,000 leftover of liquid emergency fund
savings, as well as the stocks. We all love those. You're gonna have some of those there too. Be it passive or active investments and keep in mind hopefully you've been
contributing to that 401k now for a period of seven years or so, depending on when you got your job we figured you got it at age 21, so six or seven years now you've been slowly
contributing to that 401k. So between the contributions, as well as it going up in
value and earning dividends you should have around
$50,000 in your 401k. So now based on these three things the equity in your first house hack, your liquid investments in your stocks, as well as your 401k. You should now have a net worth of around $185,000 at age 27. But keep in mind, guys,
this is showing you my plan that I was going to follow to have a $350,000 net worth by age 30. So we have just about
three short years here to make our next big move financially and significantly
accelerate our net worth. So let's talk about what
that looks like now. So now, as I'm sure you guessed here, guys the next goal is to save up more money for another rental property. That is the number one option that most people have available to them to build wealth in the United States. You can continue doing
some stock market stuff. You can continue doing other stuff but real estate is your ticket here guys because it allows you to leverage up on an asset in a safe manner. You don't have to know what that means for the scope of this video guys. But if you're looking
to learn more about that that is something that
you may want to explore. So that being said, you
wanna have the goal now of saving up about $120,000 for your next rental property, where you're essentially gonna do the same thing all over again another 20% down conventional loan on another property. So from age 27 to 30, as we said you're aiming to save at a rate of around $28,000 per year. Based on what we talked about earlier we also know that you should
have around $35,000 leftover of just liquid assets from your emergency fund after your refinance at 27 years old. And so essentially you're
just going to sit that leave that money there. And from 27 to 30, just
add that to the pile. Maybe, following that pie
that we talked about earlier where some of that goes to
emergency fund, some of it goes to passive and some of it
goes to active that way. Your money's not just sitting
there not growing whatsoever. Your goal here is to save up $120,000 for the purchase of your
next rental property. You should be able to
accomplish this by 30 based on this rate of savings right here. However, if you're getting
a raise from your job or you're doing really well in the stock market or something. There's a potential to this even sooner, the goal is to get about 120 grand for your next purchase of another property. So then once you have
another $120,000 saved up over about a three-year period it's time for another
real estate purchase here and you're gonna buy another
three to four unit property. However, the difference
is rather than residing in one of these units you're
gonna rent the entire place out and you're gonna make a lot more money. So once again, let's go through
these numbers right here with this new property you're gonna be doing
conventional 20% down. Let's assume it's gonna be $500,000 which means you're gonna
have about a hundred K down. And then you're gonna have
about 10 K in closing costs. As we said, that's kind
of, throw away money. You're not gonna see much of that. Going back into your pocket. A lot of it is it's just taxes and fees associated with a refinance. Then you're going to have this
new property that's bringing in additional monthly cashflow. So at this point, let's go ahead and talk about
what your net worth would be. Now you're 30 years old. Let's talk about what your net
worth is likely going to be. You have your original house hack that's still getting paid down. You're living in one
of those units for free actually getting paid to live there. You also have your 401k maybe some savings and some
stock investments as well. And you just bought
another three to four unit rental property, 20% down, no PMI. That's massively cashflow positive 'cause you're not paying PMI
and you're not living there. So all of those units can be rented out. At this point guys all you would do is rinse
and repeat this strategy. That's how people truly become
rich buying more houses. This is how people end up owning thousands of different units. You just start with one
and then you keep going. But even if you just have two guys let's talk about now what
your net worth would be as this 30 year old individual. Alrighty guys, so here we
are now you're 30 years old. Let's talk about what your net worth is what your savings rate is and what the rest of your life
looks like at this point. Because I mean it, when I say guys this plan that I was going to follow literally sets you up for success for the rest of your life, okay? As long as you're not an idiot. And if you already followed
this plan for 12 years I know you're not an idiot. Otherwise you wouldn't be able to do this. So this is just something
I'm so passionate about guys. I want, I really do. I want you to follow a
plan like this yourself that you come up with that allows you to not
have to worry about money. And so if you have found any value in this video so far guys there's probably about 10
hours of research in this. All that I ask is that you drop a like and subscribe and maybe leave me a comment and let me know what you
think of this so far, that being said guys let's get into the final
reveal here of these numbers. All right? So you're 30 years old. Let's calculate your net worth first. Well, first of all that brand new rental property
that you just purchased you now have about a hundred dollars of equity in that property, right after your closing. The closing costs, those
are those kind of go away. So you've got a hundred grand of equity. Your house hack on the other hand, over that period where
you're saving up money for your new rental property here you were still having
that mortgage paid down by your tenants. So now, you would have $150,000 of equity in that property since every single month that
mortgage is getting lower and lower and not even mentioning that this is still going up in value. In the 401k, we're assuming
you'd have around $80,000 based on continued contributions and dividends and asset appreciation. You also have some liquid
savings of around $20,000. And guys, these numbers are
not just coming out of my butt. This is based on the annual savings rate based on what we're gonna
cover over here shortly. So all of these numbers work out. If you wanna test my math
on it, go ahead, guys. I literally spent hours, writing this plan out on the plane myself. So I know all these numbers check out. Anyway, when we add
all this together guys, this gives you a net worth of around $350,000 at age 30 which is just so incredible to have done that at age 30 when most people are just
starting to think about things like 401k, buying a house you're already worth more than
a quarter million dollars. That's just so exciting to me, that being said guys this is your net worth at 30. If you know, this is the
plan I was going to follow let's now talk about how
much money this enables you to save every single year while you're still saving 50%
of the income from your job. Assuming again that you have
not had a raise in nine years which is very unlikely, but we're gonna just do those numbers just to be conservative. That means you're able
to save that 18K per year your original house hack just
from not paying rent alone means you're able to save
around $6,000 per year since you just live for free. After the refi and getting rid of PMI that property should
now be cashflow positive which should result in an
additional $4,000 per year of cashflow. After factoring principal pay down. That should be the amount
of money you're getting from not paying PMI. The difference between that refinance lowering that mortgage. The second property on the other hand is totally cashflow
positive 'cause you rent out all of those units and conservatively guys I'm saying that's gonna
bring in around $12,000 per year of rental income, which is just $1,000 per month. That probably in reality
would be significantly higher. You add all this together here guys. And this means that the amount of money you'd make per year is $40,000, or I'm sorry that's the amount you're saving every single
year not just making, but what's cool about this guys is now the majority of this
money is coming from things that you're not working for because only 18K is coming from your job. The other 22K is coming from your assets not to mention guys at
this point in your life you would now own at least a million dollars
worth of real estate between the two properties. And even though they're not fully paid off you own those properties. And if they go up in value
that's money in your pocket we know that real estate
tends to go up at around 5% per year as a conservative estimate. So just from that property, just from those two
properties going up in value, you should have an additional 50K per year of just asset appreciation
from those properties. And if you wanna access this money all you have to do is
refinance that property. So there you have it guys that is the step-by-step plan
that I was going to follow to go from $0 as an 18 year old to being worth over a quarter million by age 30. And if I had followed this plan I would have been a 30 year old living for free actually making
money to live in my house with a cashflow positive
property that I owned around the corner. And I'd be making about even beyond my salary with that all factored in, I would be saving about 40K per year and making around 50K
per year doing nothing just by owning these properties. That's how you set yourself up
for success financially guys that is the plan I was going to follow but YouTube largely accelerated this by increasing my earnings significantly. So I basically just did everything that you saw here much sooner. So anyways guys, there, you have it. I hope you enjoyed this video. If you made it to the very end make sure you drop a comment down below and just say something funny
about my shirt or something. I always love to see how
many people stick around for these marathon videos. I hope this provided you
with a tremendous amount of value here guys. And again, not here to sell you anything, if you wanna use some
of my affiliate links in my other videos you're
more than welcome to, but I just want to show you guys the plan
that I came up with here when I was younger, I followed
it for about five years. Then I kind of deviated with the YouTube channel, but this right here was my exact financial plan when I was just 18 years old. So I appreciate you guys for watching. If you haven't already subscribe and hit that bell for notifications and I will see you in the next video.
