WEALTH BUILDING FUNDAMENTALS

thing i think is budgeting is extremely underrated when it comes to financial planning for individuals i always say like if you look at a corporation um budgeting is like the major thing that they do like i mean like apple knows every dollar that comes in and comes out like they pay accountants millions of dollars they have a whole team of accounting to keep track of the books and budgeting is like that's everything budgeting is everything but it's like most entrepreneurs and most regular people that just have jobs have no idea of the budget like they don't have any idea of how much money comes in they have no idea of how much money goes out they're just winging it and um just you know spending money whenever you know they need to and the money comes in and it just goes to the bank and that's kind of like how most people run not only their business but their life so budgeting budgeting 101 right for somebody that has never budgeted before um but they first and foremost why why is budgeting essential and then we'll go into like some different hacks that can help people to to get better with budgeting so budgeting is essential because it is a physical picture of what your money is doing right so if you have kids and you're in the other room and your two-year-old is quiet you're like wait what the hell are they breaking because you know they can hear cutting up putting you know putting the knife enough in the socket whatever you know and so um it's the same thing with your money like you you have to be on top of your money i would say like your money is like a bad two-year-old like if you leave it to its own devices it's going to be breaking up i can curse right so you want to be on it when it comes to your money and and be present you are the adult you decide what your money does and so that's what a budget allows you to do it allows you to be the adult of your of your life and so it's it's important you know i don't care how much money you make you can outspend like great wealth there are people who have been millionaires and even billionaires and have been left penniless so i think sometimes people think like well if i had 10 million dollars i was like emc hammer okay you're like who's that okay uh tony braxton right alan iverson so many people have outspent their wealth it is more than possible so what kind of all right so what are the different strategies for budgeting right like if someone okay i realize that budgeting is important i want to do it so how do i go about it is it spreadsheet software like is there formulas that you should use because some people say like your housing should only be like 20 or 30 percent of your total budget so yeah what should what's your philosophy as far as like the 101 the person realized they need to budget now they actually want to start a budget so let's just start super super easy because i mean yes i use the spreadsheet all that stuff but most people are not going to do that to start it's the difference between i want to lose some weight and so tomorrow like you're going to run you know 10 miles you're not going to win 10 miles you might the first day then the second day you're going to go back to the couch so i want you to start off walking so for someone who's like i don't budget i never stuck to a budget first things first is start with having separate bank accounts right so i believe in having a bills account to pay your bills and having a spend account to spend from your bills account should not have a debit card attached to it that's a debit card is a choice i don't think people realize that the bank issues you a debit card but you could be like nah i'm good so my bills account does not have a debit card my spend account is both these are checking accounts at the same bank has a debit card and then you want at least one savings account not at that bank so you want at least one savings account at an online only bank and so what it looks like is that your money comes in some of it goes into your your i like to call it my deposit account slash your spend account so that's where your money lands some of it goes into your bills account to pay bills and you know how much to go into your bills account by what bills are due and then some of it goes into your savings so in the beginning you're not gonna have the math perfect you might just be like i don't care if ten dollars goes into your savings when i was at my broker's i was literally transferring two dollars you know just to con just to have the habit of saving you never you never want to get out of the habit of putting something away in your savings account that's important so what i did for my husband for example he's not going to sit down and spreadsheet that's just not happening he's like what brick city though so what we do instead now is we budget for him anyway because i like the spreadsheet we budget before his money even gets there i said babe go to hr choose what you're going to tell them hey before you give me my money some of it goes into his retirement account check some of it goes into his into his spend account that deposit account where things are deposited right check like his direct deposit account right some of it goes into our joint bills account check some goes into his personal savings check and some goes into our joint savings so he basically his budget is done automatically through hr so it lands and all he has to think about is when it comes to his personal savings whatever you want to do with that that's your business as tabitha would say the vegan vegan chef everybody loves right now that's your business right and um also all he has to worry about too is his basically his allowance in his deposit account in his spending account so whatever's in his spending account if i see my husband with some new js on back in the day i still be like oh that's what we're doing we're buying jordan's with the bread money now it's not my business no more right because i know one thing he didn't take it from the bills account he didn't take it from our joint savings so if he took it from his personal savings or his spending account that's fine and so like if you don't know how to do anything else if you just have at least those three accounts and have your money automatically split from really four because you want to have a retirement account and have your money split from work then you will be ahead of the game and so for people who want to go a little bit deeper for me you know like i like i said i like to have spreadsheet i like to know how much we're spending on on on groceries how much we're spending on gas so i keep track of that i just the tool i like to use best is just excel so i like to keep track of that there but you don't necessarily have to you set aside a you know an allowance for yourself typically things are led by bill so ideally you want to be setting aside 12 to 15 for your retirement and you probably are saying like i can't afford to lose 12 to 15 of my pay well to start with one percent and every six months you boost it up start with a half percent and every six months you boost it up start with something toward retirement and then your bills i like to do bills every two weeks so the money i have transferred to the bills account you ask yourself okay how much are my bills from the first to the 15th and how much are my bills from the 15th to the 30th and that's how you know how much should be going into the bills account you know so it might be or you might just have a select number you might say well my bills are around 3 000 a month so every paycheck or every pay period my bi-weekly um or my bi-monthly pay period 1500 is going to go into my bills account and having your bills account pay bills automatically for you is really going to be like clutch like i i don't pay bills bills paid themselves so it lands in my bills account and then my bills already know pay my um pay the electric bill pay the water bill pay these bills for me automatically and like i said what's left in my spend account is attached to my debit card and i can spend and when that money is done so i'm on what's really important too about a budget is is this the savings account i don't want you to save at your regular bank because it makes it easy to transfer we've all been there at target right and been like oh man like i really want whatever this thing is this blender this dress this shirt and you look at check in you know damn well you ain't got the money and checking but you know who got money though savings and then you're in line making that transfer like and happy about it too like making a transfer even though you're like that was supposed to be for paris you're like parents can wait you sure can't make that transfer and you're like dang later you're like that's why i'll never go nowhere cause i'm always at target to buy toilet tissue and then i leave with 300 worth of stuff if you put your savings in an online only savings account though then you're going to have to wait at least 24 to 72 hours for your savings at your online only savings account to transfer back to your checking to your to your your spend account and so what that means is it makes your money inconvenient and inconvenient money gets saved so i like this website called magnifymoney.com to look for an online only savings account because they grade savings accounts from a to f so you're gonna look for an a account that's one two you're gonna look for an account that's fdic insured that's two three you're gonna look for an account that's gonna give the highest interest rate because your your big bank is not gonna give you much of an interest rate so um online only savings accounts don't have um as much overhead so they pass that on to you and you earn a higher interest and then four you're going to look for a bank that has um low deposit requirement so that means in order to open up the bank account maybe you have to you have to put in a dollar and also too in order to maintain and get that interest you don't want them to say you have to have ten thousand dollars in the bank account in order for you to earn um the interest that they've advertised so those are the four components you're going to look for in your online savings account so i hate to say like oh 20 here 30 there unless you have an irregular income you don't have to live by percentages you you would live by amounts so a hundred dollars here three hundred dollars there four hundred dollars here that's what you're that's the split that you should be doing regularly every month if your money it fluctuates because you have an irregular income then you would might say you know uh 40 goes into my bills um you know five percent goes into spending but you have to work backwards like how much are your bills unless you're starting from scratch and you're 21 you're just moving out then you can force your bills to fit within that percentage but it's easy for people to say oh 70 30 yeah but like so what are your bills actually though your bills might be 70 of your income right now you know so if that's so you have to pay your bills and you're i'm not worried about the percentage just now like how much you actually need to pay bills put that in the bills account okay how much ideally do you want to save once those bills are paid i want to save a hundred dollars a month well make that a bill now that hundred dollars a month is automatically put into that savings account directly from your job and then what's left over like i said is your spending money you know you might tell yourself i'm going to give myself 50 um every two weeks for spending okay great and for whatever reason if there's not enough money that you take care of bills you say i guess i can't save this month and i guess i can't um i don't have spending spending uh money this month for like you know spending money for things that are like you know like hair nails grooming this and that you know so sometimes you don't have it and that's okay so there are times when i didn't have it but i had to pay bills and even sometimes i didn't have enough for bills and i had to say well i have to pay my noodle budget bills my essential bills verizon can wait verizon is not going to shoot you if you don't pay yes will affect your credit score but credit scores are things that you can you can you can increase later i'd much rather you take care of things that are going to make you happy i mean healthy and safe so i was just thinking about that because one of the things the powerful things you talk about is identifying ifs like we can have anything we want if we just identify our ifs and control them so that we can budget right like so if um i want to save 400 maybe i don't uh go to the barbershop twice a week right so can you talk about the importance of identifying the ifs and how they can translate to having more money in your budget absolutely there are four questions you should ask yourself before you spend any money do i need it do i love it do i like it do i want it need it love it like it want it need it love it [Laughter] right um so your needs come first that's food shelter clothing water the absolute necessities you must have to stay healthy and safe you pay for those first most of us adhere to that that's why you're alive then your loves are those things that enhance your life what are things five ten years from now that still add value even though that thing might not be there right so if you had oprah's bank account i always tell people what would you do or do more of so a lot of people say travel maybe they'd start a business maybe they go back to school maybe the philanthropy whatever that is so those are your loves those are things that give you long-term joy even when that thing is not physically there right and then your likes are short-term joy so you know that's your that's your target run that's your um that's that dress that you're like oh this is super cute um you know that might be i don't know eating out with friends or eating out my friends might be a love because you might be like yo i'm such a foodie five years from now i'm remembering that restaurant so there's no judgment you get to decide but likes are short-term joy and wants are just things to get i really try to stay away from just frivolous spending which is what wants are it doesn't mean i never do it but it doesn't make sense to trick up your money and wants when you can have more things from loves and and your needs and so what i try to do is i try to live in the second half the first half of life my needs and my loves because that's an enriched fulfilled life so i'm not really a foodie although my belly would suggest otherwise but all right i'm not really a foodie but i used to go eat brunch every weekend with my friends and then one day i was like why the hell am i going to brunch i have not been on vacation in like two years so i stopped going they're like yo tim you're so cheap right and i'm like i'm not cheap it's just that like i don't want to spend my money on brunch anymore i want to spend 30 a week eating brunch and so i started saving my brunch money that i made it a game every time they asked me to go to brunch i would put i would transfer 30 to my savings account and then within a few months i had enough money i went for my first solo travel trip i went to albuquerque new mexico because i had on my bucket list i wanted to ride in a hot air balloon in albuquerque new mexico is the hot air balloon capital of the world who knew now you do right and so i was like okay so i remember my friend called me um tawanna she was like hey girl we're about to have we're gonna have brunch tomorrow but i know you and your cheat behind you ain't going i was like cause i was like slight flex well actually major flex i was like oh girl i'm about to get a hot air balloon the captain said i gotta turn off my phone can i call you later she was like i had an air balloon in newark i'm like no girl new mexico that's what i do with my brunch money mic drop okay so now i don't i stop telling my friends i don't say i don't say no to brunch i'll tell them like ah nah girl i can't go right now because i'm saying yes to paris i'm saying yes to istanbul i'm saying yes to santorini these are places i've been i'm saying yes to morocco and so i started to decide for myself what my needs and my loves were so i'm not against spending money i'm against spending money on things that don't matter to you prioritize what your more is like some of us are spending our whole life spending money on someone else's idea more tawana is a foodie not me that's her more that's less for me you know let her eat out with another foodie or she can come to my house and chill out for free and so that's really how you start to prioritize just to ask yourself like what does more of a life truly mean you know for me i don't want any you know your spending should be reflective of your values and how you want your life to go so you said it on hunting with the online savings that was a good point i tell people all the time like you got to treat your savings like a bill like how you have your bill your car bill like you can't afford to not pay your car bill you can't afford to not pay your cell phone bill so savings like you said no matter how much it is it should be a line item and a bill i think um but i wanted to touch on i had a few questions so first when you had mentioned with your husband with hr so i didn't even know that was possible so somebody's paycheck can be split into different um bank accounts for direct deposit typically up to four so most mid-sized so like even my company i don't have some huge company but we're able to do that so typically up to four splits and so if you're if you're a single ready to mingle um i would say your bills account um a like and your savings account in your spending account so i would do the three right um so but if you are um in a relationship where you're like sharing expenses then i would have four i believe that you should have some autonomy over your finances as well as responsibility because you're with someone so that would be a personal savings each person a joint savings um a and joint bills and um and and then your own spending account so two checking two savings so one of the checking one of the savings is yours and the other checking the other savings is someone else's i'm well belongs to collectively to the whole um all you have to do is just go to hr and it's like a form like the regular direct deposit form that you fill out but it's just like you can just add different bank accounts to it yes and tell them this is the amount like what like you know my check is five thousand dollars you know let's just say a pay period a thousand goes here a thousand goes here a thousand goes here and so now like the other day because my because because it's online only savings we don't look at all the time my husband is like yo babe i got mad money in my savings i'm like okay you're welcome i upgrade right but he was like yo i never had this much saved because he doesn't think about it it's been like the last two or three years that money would just land so my husband is the type maybe this is all men with their boys so you know your boys be like yo yo you could let me hold 30 dollars you would let me know you know so he would always be like yo babe such and such as you know such a struggle can we and i'd be like who tone i believe i like tone right but like you know so now because we would have to be talking back and forth to take money out of our joint pot so now there's none of that because one you have your own allowance money and you have your own savings you want to give tone all your savings how you want to live your life go ahead you know just don't touch this joint account exactly i'm looking at the um the joint savings and the doorbell okay long i'll see no tone bill in that so it allows you you know so everyone to feel like you're part of this community where you're all contributing but it allows you to have autonomy like he can do whatever he wants with well not whatever he wants but you know what i mean like with his money he can decide and so i think that works best for um if you're in a significant relationship with someone and another thing the last question showed the online savings like i said i i believe the same thing you said as far as it's good to have it not with the bank like i ch i have chase for my business and my personal bank account but i have capital one my online savings and um you know the reason is that it's not it's a whole hassle to get the money you got to wait like three days so psychologically it's like out of sight out of mind when you when you when i log on to chase app i don't see it i even forget about i was just thinking about just now like i forgot about i have i forgot about it i haven't really been you know what i'm saying so but what do you have any top banks that you're recommending like or like interest rates that we should because i think i forget what my interest rate is i know it's slightly higher like you said because online banks don't have the same brick-and-mortar expenses as regular traditional banks do so it's always good to have an online bank for the higher interest rate but are there any ones in particular right now that's paying higher interest rates than others um there was so here's the thing like one i'm like these banks don't pay my bills people always right no but honestly so the reason why i tell people like i i'm currently with allie bank a-l-l-y right but here's the thing allied bank back in the day they had the best um they had the best interest rate they don't anymore um their interest rate is okay i think last night check it was like well 1.5 but there are banks out there there was a credit union when i looked at magnifying money the other day that was given two percent so i definitely say go for the bank that's giving the highest interest rate there's also um goldman sachs has a has a bank account called like marcus my goldman sachs you know that's another one um so you know i say that there isn't a best bank if the bank is fdic insured and they're paying you the highest interest rate that's the best bank um like i said i like ally but i'm only there now because i signed up with them originally but best believe go with the coins are you you ain't got to be loyal to your um bank they're not loyal to you yeah you know go with whoever giving you them coins yeah one of the things you said about having a joint account you know i can attest to i think it's a great idea especially for married couples um i heard you preach about uh preparing to invest right so if you have that joint account what is something that couples could think about investing so this is great so people ask me like here's the steps to preparing tim that so you don't have to wait to invest for retirement so to be clear when i say retirement is an investment the purpose of retirement is not so you go you're not going to live on no private island in retirement unless you're living on a private island now retirement is so you can maintain your current lifestyle if you set aside 12 to 15 of your income now your gross income now and that's all you ever do what that will enable you to do is maintain your current lifestyle so if you don't see palm trees next to you now you ain't gonna see palm trees when you 80. right so then so you do that first and foremost because you must set aside for your future self it is your younger self job to look after your future self so that comes first then after you're doing that then you have to have a budget right you have to have some sort of physical plan of what your money is doing this much is going to bills this much is going to spending something so that's step two do you have a budget check before people say oh i want to invest i'm like slow down slow down son you killing them who filling them with octane you didn't know how far right so so that's two do you have a budget great now step number three right do you have savings right so are do you have emergency savings at minimum minimum during the session i say six months during a non-recession i say at least three months three months of your noodle budget meaning do you have three months of your essential bills saved because we already talked about if you were to lose your job you're going to drop down and get your noodle on you're not going to be living at the same you're not going to be living at your 3000 bus you're going to be living at your 2500 budget so do you have at least three months of your noodle budget saved that's important because that is going to help you if times get rough and tough do you have that great then number four do you have high interest um debt meaning how you gonna invest when you owe visa at 18 19 25 30 do you think you're going to get a return of 15 13 you know 30 no on average the market yields about seven to eight percent a year so what that means is you put your money in the market on average you're going to get back eight cents let's just say but because you have credit card debt you're losing 18 cents a month or year so you make it eight cents and losing 18 cents the best thing you can do is pay off the credit card debt the high interest credit card debt because you're losing more than you're likely to gain in the market so before you start investing you and your boo like get rid of that high interest credit card debt first and foremost so that's four so now you've done all those four things you're feeling cute okay you feeling spicy now we can leap into investing for wealth so investing for wealth if you are a couple um if you don't know how to do nothing else like you know so most people are like they're not really willing to do like everybody wants to like trade options they don't even know what that is they want to you know everybody wants to buy stock then you bought delta how's that working out for you right now it's doing terrible i can tell you because i have delta and so most people want to do that but truth is most people are not willing to do the work for investing that's okay so this is what i tell people that instead you can invest in a um a mutual fund i prefer target date funds because it's like super super i'm hand holding a target date fund is a mutual fund that you pick the target date the date you want to pull out that money so typically uh most target date funds are the date that you want to pull out that money typically is the date that you want to retire um so you might say 20 50 20 45 20 35 they're usually five years apart so you're gonna pick a mutual fund that's a target date fund right a mutual fund just so you know for those listening i'm sure you know but you never know it's a collection of of investments i like mutual funds that tend to be index funds so they follow a particular index like the s p 500 which is basically like the market so that means you're invested in a mutual fund that's an index fund and it follows the market and your money the reason why i like target date funds is that it rebalances like a true investor knows that they have to shift based upon how life like where they are in life most people don't do that so a target date fund does it for your target aid fund says you picked the target date of 2050. it is now 2020 we have 30 years we got time so we the target day fund is going to be invested more aggressively because you have 30 years the closer you get to 2050 the more conservative automatically your investment is going to be invested because the target aid fund is aware up 2050 is coming up so the closer we get if it's 20 49 then you're super you might be invested in in all cash accounts in in in bonds super super conservative investments right so you don't have to do anything else you can buy a mutual fund that that's that's um that follows an index fund like i said the s p 500 um typically you can you can follow you look for a mutual fund that's that's called a total market fund meaning that your fund mimics a particular market like i said the s p 500 100 so when the when the market goes up your money goes up when the market goes down your money goes down but we like we like i mentioned before on average the market yields about seven to eight percent a year so you will you will over the over the next 30 years you're going to see about a seven eight percent gain which is great you know even like that's for people who are like i don't wanna do nothing else like and so when you're looking for a um a target date fund or mutual fund you're looking for something called the expense ratio and that is the fee that that fund is charging you um the percentage of the money that you have invested with that fund and so right now like a vanguard they have one of the lowest expense ratios so um the brokerage accounts that have mutual funds and um target date funds and these total market funds are like vanguard fidelity charles schwab so you're going to google expense ratio for fidelity expense ratio for charles schwab i think like right now it's like the target fund for um a total market target date fund for um vanguard right now it's like 0.06 percent which is great right not even .006 percent which is like something ridiculous like a piece of a piece of a piece a piece of a penny um so that's great because the average financial advisor is going to charge you one percent of of the assets of your of your money that they've invested so the financial advisor's gonna charge you one percent vanguard's gonna charge you um a piece of a piece of a piece of one percent so you get to keep more of your money these are the biggest hindrance to earning money you know i'm not anti-financial advisor but you're spending a lot of money sometimes for for them to do automatically what some of these automatic funds can do unless you have other things your financial advisors doing for you if they're just investing your money bruh cis just put it in um in a target date fund and let the fund automatically balance for you and you can keep most of your money so if you're investing with your significant other what i love is that you can literally say hey vanguard want to open up a mutual fund would prefer a target date fund that's invested in index so do you have like i know vanguard literally has one called their total market for oh you have a total market fund okay open it up we're going to be putting 200 a month just you can have that transferred automatically from your savings account transfer your 200 bucks a month because you already have your three months of savings transfer your 300 bucks a month or 200 bucks a month into that account and let it grow you kind of set it and semi forget it so that's like the easiest possible way to start investing if you do that you will be better off than 99.9 most people um and just keep it really simple i think investing should be really simple unless like you really are interested in learning how to buy individual stocks but you have to when it comes to investing like in the traditional sense and like the market keep it simple and then you can also invest by starting a business you can invest by writing a book there's other ways to invest you can invest by real estate like i do all those things i i have residual investments where i have books that pay me a few thousand dollars a month from books i've written years ago i have a business that you know that's an investment as well i put money into that business and it yields money back um i also have real estate you know even in your primary your primary residence you have to think about that as an investment and you have to understand that the key with investing is you should make money on the buy not necessarily the sell so meaning this is that if you always make sure you make money on the buy you never lose when it's time to sell so bought this house i'm living in now cash slight flex but it was a foreclosure so it was worth at the time maybe 320 because it was kind of like a little bit beat up and we bought it for 180. so we made money on a buy even if nothing else we didn't fix it up we like you know we tired we ran out of money to fix it up we bought it for 180 a house that's worth 320. so we made money on the buy no matter what so even now they're talking about the market is going to drop i'm not worried about it it would have to drop a whole hell of a lot for a house worth 320 to drop down to 180. you know gotta have the win built in exactly so we should then we then we renovated the place so now i just got the house of praise we renovated it the house is now worth um 390. so it's like even if we never renovated it we was gonna win so same thing with stocks you know that like you you make money on the buy you know um i'm not necessarily like um you don't want to have to wait for the sale but not enough people do that they want to jump into the market right now because you know your your um neighbor is like oh i bought um oh you're not in beyond me oh oh you don't do bitcoin meanwhile you don't know about what they talk about don't jump in and lose your money like if you're not willing to do the research you're going to be broke get you a index fund you know invest in things that you're willing to do the research on or invest in semi-automated super simple investments and you'll be fine you don't have to have the your investments should honestly largely be boring you don't have to have the hottest stock my graduates from my school being forbes backdrop backdrop drop back drop [Applause]

Channel: Earn Your Leisure

Views: 18,791

Rating: 4.9898219 out of 5

Keywords: earn your leisure, business, finance, Money, Budgetnista, Investing, Invest, Retirement, Mutual funds, Stocks, Debt

Id: S5pAMu-acwU

Length: 30min 29sec (1829 seconds)

Published: Sat Sep 04 2021