Happy Friday to all of our Financial Time Travelers out there! I know it has been a couple of weeks since my last #Friday5 post, but I can explain. My Wife gave birth to our THIRD child! Crazy right?!? He is super healthy, and momma is making her recovery in the speediest way, so things are finally going back to the predictably unpredictable daily routine.
Back on August 5th, I wrote a #Friday5 titled, Workflow: Friday 5 – Podcasts You Can’t Afford to Miss, where I highlighted my favorite podcasts during that month. It has been one of our most read posts to date and is continuing to get hits every day due to the SEO machine. Mostly everyone I mentioned in the post wrote me back (except for Lewis Howes… where are you at bro? haha!), and Barry Ritholtz was kind enough to feature the post on HIS blog! That meant a lot to me as I look up to Barry A LOT!
Anyways, the coolest part, hands down, was the connection I made with Joe Saul-Sehy of The Stacking Benjamins Podcast. Long story short, after some back-and-forth on Twitter, Joe snagged my email and eventually asked me to be a guest on his award-winning podcast. This is an excellent example of creating something from nothing. I was simply a fan who wrote about the show, which then turned into being featured on the very show I am a fan of!
We recorded the podcast (which is now available for listening here), in a roundtable format where Joe, Greg McFarlane, and I had a discussion about money habits that waste your time… hence the title of the episode. Being that it is the last weekday, and I wanted to post another #Friday5, I figured why not piggyback off of the podcast and create my very own list of money tricks I have learned from the savviest investors in the universe? Some of these should seem straightforward, but you would be surprised how many people I have met with that have not implemented any of these ideas. If that’s you, it’s OK! I am glad you’re reading this article!
KNOW YOU GOALS AND REVERSE ENGINEER YOUR BUDGET FROM THERE
When I meet with a corporation and its employees to speak about the magic of compound interest and deferring taxes as long as possible, I always get the same question, “how much should I contribute?” Immediately the question asker is telling me something; they have no clue what their goals are and how much money and resources it will take to achieve them. Not everyone wants to be a billionaire, and not everyone wants to live a modest life either. Both choices are fine by if that’s what makes you happy. But if you don’t define that magic number you are shooting for… all those fancy retirement calculators, investment, and budgeting apps are mostly useless. Why take more risk than you have to? Know your goals people, and know them in specifics! Have a vision for exactly how you want your life to be, and then we can have a conversation about the various strategies to achieve them!
KNOW YOUR BUDGET AND INVEST AS MUCH AS POSSIBLE AS EARLY AS POSSIBLE
Do you want to become a 401k millionaire? Well, first you can start by listening to our podcast of the same name here, and second, take a look at this graphic I made.
As you can see, the earlier you start investing, the more well off you will be at a future date. This directly contradicts our #FOMO or #YOLO society where we have been conditioned to care more about the NOW than any future time. In fact, social scientists have completed numerous studies around the concept of “time preference” and have concluded that our biological impulse is to put “now” at the top of our value list, and each day after that slowly diminishes in value over time. This is why we procrastinate! We think that some future date has less value than now, so we throw our to-do-list on that day, but when the day finally arrives, we realize it now has the same value as the original date. We can save ourselves a lot of hurt by only granting every future date the same rights we grant today!
GET YOUR CREDIT UNDER YOUR CONTROL, NOT THEIR CONTROL
The credit industry is a controversial topic in my household. It has always struck me as odd that if you pay off all your debts and have great savings, your credit can be negatively impacted. When we go to finance a home or car, then we realize how important our credit is! My recommendation is always to pay down the highest interest rate first, consolidate the total amount to one account using tools such as Magnify Money, and take control of your future! I forget who said this regarding credit card debt, but it went something like, “I would rather kill a monster when it’s a baby then when it outgrows my closet and destroys to the town.” So yeah, take the monster down ASAP and keep your credit use below 30% of total available.
SHOP SMARTER, NOT HARDER
Impulse buying is at an all-time-high. Not only do we have department stores that sell anything from livestock to computers, but we also can price check them on our phone. What happens when we price check with our phone? Big brother, that’s what! Now you are going to get recommendations on what to buy digitally as well as physically. To make things worse, when you do buy the physical product from a box store, they will mail you coupons to buy products that you most routinely shop. Why? They know that if they get you in the door to buy the one item you want from them, you will end up consolidating the rest of your errands into one trip and buy everything else you need too. We need to be incredibly mindful with our money as even coupons are masquerading discounts when in reality it’s big data hoping to attach itself to your buying habits permanently. Some easy tricks: measure cost per use, shop solo, spend on what you are – not what you want to be one day. That last point hits home for me, how many times have I come home with a new hobby only to resell it in perfect condition on craigslist? Too many!
PREDICT THE UNPREDICTABLE
When I evaluate people’s bank statements with them, something very predictable happens. Nine times out of ten there are three to four big ticket purchases that were completely unpredictable. Examples being, my radiator broke; the A/C Unit went out; a rat chewed through the electrical; I broke my leg snowboarding, etc., etc. The fact is that these unpredictable events are quite easily predictable from a cost perspective. That’s why it is imperative to make savings a piece of your monthly post-tax budget (don’t include retirement contributions in your net), and then keep your savings out of your checking account. Some people even prefer to have their savings at another bank, such as a credit union who has lower fees and better savings rates.
Thanks for reading and make sure to check out our podcasts, videocasts, and other blogs right here at Financial Time Traveler. If you have any questions, leave them in the section below, and I will answer as soon as I can!