Transcript of The Best Financial Strategies by Income Level: $35k, $75k, $100k+

I've lived on less than $50,000 a year I've lived on less than $100,000 a year and I've made millions of dollars in a single year and I've helped millions of people get their finances in order and while the basic principles around Building Wealth don't really change I've learned that the best strategies change depending on your income bracket today I'm going to talk you through the top three strategies I recommend for three of the most common income brackets 35k 75k and over 100K starting with Tier 1 35k the strategy here is to get breathing room now I didn't grow up wealthy during the first few months out of college I only made $1,000 working on my own company and my salary only increased modestly over the next few years so I can tell you from experience that a lot of people in this income bracket 30 to 40K don't have a lot of financial room to breathe if you make $35,000 your take-home pay is about 2500 per month at the time I was living in a room in a shared house with four other guys and even though my expenses were low with no dependence I had to monitor my money pretty carefully debt repayments and Essentials like rent food bills and transportation can easily eat up all of your income and that means any unexpected expense like a car repair or a medical bill can derail your entire Financial life and that can often force you to take out short-term loans with horrific interest rates just to paper over the damage this is why you need to take drastic action if you are in this situation the first and the most important step is to save at least 5 to 10% of your take-home pay and then to use that to gradually build an emergency fund of roughly 1 to 2 months worth of essential expenses for example saving a hundred bucks even $50 a month until you hit $2500 now it might seem impossible to save that but you would be surprised that if you have that money automatically set aside you often can learn to live on a little bit of less so the next time you run into an unexpected emergency it's not unexpected and you can pay in cash instead of having to take drastic action let's speedrun how to save that 5 to 10% per month first make spending cuts review your last 1 to two months of spending identify areas where you can make small Cuts we're talking about unused subscriptions canceling those negotiating bills like internet or phone downsizing discretionary spending listen I'm not the guy who goes around telling people to cancel Netflix and stop spending money on lattes this is a temporary measure to get you to a safer Financial spot call your creditors and providers negotiate lower interest rates or hardship payment plans a lot of companies actually will work with you if you reach out proactively optimize your current job this is a big one ask for overtime extra shifts or respon responsibilities that lead to a raise consider a new job entirely but let's say your emergency fund gets wiped out by an unexpected cost maybe you needed the cash for a medical bill my suggestion is to start rebuilding that fund as soon as you can this fund is like a shock absorber it'll smooth out the unexpected bumps in your life once you've built that fund it's time to shift to a bigger long-term priority crushing your Consumer Debt people at every income bracket can get into serious debt but it is especially easy at 35k where it's often hard to pay for basic necessities a $500 debt can snowball into thousands of dollars when you don't have a bunch of disposable income to pay it down so attacking highin debt should be a top priority along with building an emergency fund here's how to do it first get organized list out all your debts credit card personal loans car loans write down the interest rate and balances for each one please know that 90% of people do not do this they just pay what's in front of them which is often one of the main reasons they are stuck next choose your debt payoff strategy you can do the Avalanche method which means you pay off debts starting with the highest interest rate this is really the best mathematical option especially for spreadsheet nerds like me because it saves you the most money in the long run or the snowball method start with the smallest balance why because quick wins feel good and those wins can give you the motivation and momentum to tackle your bigger debts honestly pick whatever method you'll stick to that is the best strategy then celebrate your Milestones each time you pay off a credit card celebrate give yourself a high five have a nice modest dinner you've earned it the third and maybe most powerful strategy I'd recommend at the 35k income level is increasing your earning power let's get real you can only cut expenses so much you you can cut back on delivery you can cut back on subscriptions and those will help you build your emergency fund but if you want to radically change the way that you interact with money you probably need to increase your income how do you do that well by understanding these three critical things Supply demand and how to put yourself in the right room here's an example let's meet Jessica she was working a customer service job making 35k a year Jessica realized that companies are hungry for people with ux or user experience design skills she didn't have a degree in it she started taking an online course in the evenings she applied what she learned in small freelance gigs and she networked her way into Tech meetups within 2 years she landed a full-time ux role paying 85k Jessica did not wait for her current job to hand her a massive raise she went and created one the takeaway here your income is not fixed now let's be clear I wish all of us had an easier way of making a living wage I don't think it's fair that how housing is so expensive or that you are basically required to have a car in every city in America but I live in a reality of what is the fact is if you're making $355,000 a year the biggest thing you can do to change your financial reality is to make more money so that is what we are going to talk about here's some lowcost ways that you can increase your skills and increase your earnings you can learn marketable skills for free they platforms like YouTube KH Academy or if you have a unique talent figure out how to monetize it as a side hustle you can put yourself in the right rooms attending meetups even joining linked in groups because those may be more convenient if you're taking care of kids for example and especially sending cold messages to somebody who has your dream job ask him for a 15minute zoom chat one conversation can change your career whatever you do don't wait for the perfect moment Jessica didn't have a ux degree she just had a desire she had Drive she built moment momentum she picked a skill started small and she built as she went next up tier 2 at 75k but before we get to that I want to recommend something else that feels great which is having your personal data removed from online search results most people aren't aware that the personal data they share in their daily lives like visiting a website shopping at a grocery store is being harvested and sold by Third parties for profit by data Brokers unfortunately data Brokers can't usually control how the data they share ends up being used if you don't believe me just Google yourself in your city you'll see your name phone number address family members names and more I hate this thankfully our partners at delete me can help delete me is a subscription service that will remove your personal information that's being sold online by data Brokers here's how it works you sign up and submit your information for removal delete me experts search for and start removing your personal information and in 7 days you will receive a detailed delete me report with what they found so far look at this it even shows you what data each broker has of you like your name past addresses relatives name and more then delete me continues to scan and remove your personal information regularly all year long delete me is a service I personally use and love so if you want to get your personal information removed from search results on the web go to join delet me.com srit for 20% off a plan for you or your entire family or click the link in the description below now let's move on to tier 2 75k 75k is an interesting spot you've got some Breathing Room bills are paid you might even have some savings but what I see at this level is some people take that number and they go ah I'm making more money than I ever thought I would I'm good and other people go oh okay I can see how this feels better than it used to but I can also see that the type of life I want requires re Ires a higher income so 75k is where you have a pivotal decision to make and I think 75k is where you have the best opportunity to set yourself up for massive growth assuming you've built your emergency fund and you are paying off your debt consistently your priority should be to build systems that take advantage of the extra opportunities you have because of your higher income and we're going to start with taking the free money at 75k and above you likely have access to employer benefits such as a 401K with company match you probably have some extra income to contribute some percentage to a tax advantaged account like a Roth IRA or equivalent if you don't live in the US tax advantaged accounts are like the cheat codes that you hear everyone talking about the rich have secret access to all these Investments forget all that you have access to incredible tax advantaged accounts that will Fast Track your way to building true wealth so use them here's how to take full advantage max out your employer match if you can for example if your employer matches 100% of your 401k contributions up to 5% of your salary that's an automatic 5% raise plus you get an immediate benefit by lowering the amount of taxes you pay on your paycheck meaning you get to keep more of your money so set it and forget it next open up a Roth IRA any money you pay into a Roth IRA grows taxfree which is incredible for decades this is especially valuable if you're in a low lower tax bracket now and you expect to be in a higher one later now there are limits to how much you can contribute you can search for Roth IRA contribution limits to see this year's limit so once you've matched your 401k employer contribution max out your Roth IRA as much as you possibly can next automate your finances automating your finances one of the most profitable decisions you can ever make and it's particularly important to set up once you have more disposable income and you're not forced to track every single dollar for example if you do manual transfers every month you're relying on a very weak combination of willpower memory and your own time the fact is your system's going to break one month you're going to get sick another month you're going to travel one month you're just going to be unmotivated a lot of times extra money just sits in the bank losing interest or it just gets spent so instead of saying I'll transfer the money later or I'm going to try to save more don't do that set up a system of automated bank transfers where your system helps your money go exactly where it needs to automatically let's use Jason as an example Jason is a software developer who lives in Austin Texas here's how his money flows seamlessly every single month his 401k before his paycheck even hits his account at the end of the month 6% goes directly to his 401k with a company match the rest lands in his checking account via direct deposit do you already see how that money has been invested he doesn't even see it but it's growing invisibly and it's going to turn into a lot of money over the long term savings and Investments his Roth IRA pulls 5% for retirement and automatically allocates that money or buys his Investments another 5% is pulled into separate savings accounts 3% for a home down payment 1% for his emergency fund 1% for a dream trip to Italy bills and fixed costs now most bills like rent Insurance streaming are paid via his credit card Jason spends 10 minutes reviewing his credit card statement but it's Auto paid in full every month utilities and Loans are autop paid from his checking account and that's it Jason logs in once a month to make sure the system is running smoothly and then he goes back to eating bagels and chilling that's it he's living his rich life and you can do exactly the same you don't need to try harder you need to set up the right systems so build these automatic systems with your money to hand handle your savings your Investments and your spending and you will make faster progress than you ever thought before strategy stop asking $3 questions you know a lot of people obsess over tiny financial decisions should I skip my daily coffee I'm so bad can I save $5 on groceries I don't know these pickles are on sale should I switch to a cheaper streaming service this is so crazy they increased it by 85 these are what I call $3 questions tiny tiny choices that make make almost no difference in your financial life but they drive people insane they take up so much time and energy saving $3 here and $3 there that matters when you are on a very very tight budget and you're trying to build an emergency fund and you're talking about the difference between $25 and $35 a month but once you are financially stable once you're making over $75,000 a year focusing on those $3 questions becomes a major distraction because you're not paying attention to what's actually important instead of the $3 questions I want you to start asking $30,000 questions strategic high impact questions that can transform your financial future for example how can I negotiate a $115,000 raise at work should I increase my investment rate by 1% every year how much would that make me over the next 10 20 30 years how is my money being invested am I paying too much in fees each of those can be worth hundreds of thousands of dollars over the long term and more importantly you're shifting away from playing small the fact is if you want to live a rich life you have to know when to turn the page and stop worrying about what happened in the last chapter and start looking forward yes I know you finance nerds love to rate Chase oh my God Chase Bank is giving me .01% higher stop it and another reminder for all you finance nerds click subscribe turn on notifications so that I can continue making fun of you and also you can be the first to know when we drop a the new video tier 3 100K plus and this advice applies to 200k 300K 400k a year plus strategy get clear on what Rich means you know I know a lot of high income people sometimes I want to shake them and say what the f is wrong with you you're making all this money you're still worrying about the price of onions why are we talking about this but then I remember RIT be nice you're supposed to have turned a new page the fact that I have to remind myself every single week on these videos tells you that this is a real constant struggle for me A lot of high-income people are terrible at defining what they want to do with their money how to live their rich life this is why a bunch of people online love to go I believe in Independence I believe in Freedom and I go oh really uh what's your idea of freedom and they go I want to buy a three-bedroom house with a white pickup fence in Suburbia where I'm formally required uh to follow restrictions and buy too expensive automobile I go what the how is it possible that your exact idea of freedom just happens to be what everyone else's idea of freedom is in America is that a coincidence I wonder this is how people making 100 or 200k can be drowning in debt I talk to them all the time on my podcast they buy a truck they don't know how to calculate if they can afford it when I ask them why they go oh so I can tow my trailer what what is your rich life is it to spend all your money on debt there's also others there's highly paid professionals with millions of dollars in their account the business coach making 300K but complaining that she's living paycheck to paycheck I find all of these equally tragic money is meant to help you live your rich life and you don't get a prize for living smaller life than you have to this is why defining the things that really make you happy is important at this stage so ask yourself do you want Financial Independence and what does that mean please do not say I want to do what I want to do can we please go one step deeper for the freaking biggest question of our life what do you want to do do you want an international life of luxury you want to take first class flights you want to stay in the world's best hotels okay fine if you want to do that you can make a plan on how to achieve that do you want to be incredibly generous what does that mean how would that show up are you tipping 50% are you donating 1,000 2,000 50,000 a year to charity these are questions that I want you to get specific about why because defining your rich life suddenly makes all your money have a purpose strategy fire chat the more money you make the higher the chances that at some point you acquired a neighborhood friend named Chad Chad is your friendly money guy and this friendly person charges you a 1% fee for managing your Investment Portfolio and you don't really know how much he charges cuz you don't really talk about it but if you feels good because you have a guy somebody who's looking over your money while I'm here to say your relationship with Chad may be over why because I'm going to tell you how much you're actually paying that 1% fee seems harmless in fact let's just say you have $100,000 in your portfolio and you're earning an average 7% real annual return over 30 years here's what happens if you paid no fee your 100K would grow to $761,000 but if you're paying a 1% fee that 100K grows to only $574,000 that tiny little 1% fee actually cost you $186,000 in fees that is 25% of your returns gone in fees and this isn't just math and a bunch of big numbers this is your retirement your rich life your Financial Freedom being paid in fees and here's the kicker most of these advisers underperform simple index funds which track the market and charge practically nothing also there can be good reasons to hire an advisor such as behavioral coaching accountability you have a complex financial situation but there are different ways to pay advisors not a percentage but rather a flat fee or hourly fee you can do much much better here's what I tell my friends and my family when they ask about investing number one invest in a Target date fund this is the simplest way to get started investing they are lowcost they are reliable and they automatically become more conservative over time they are as easy as it possibly gets hire a financial adviser on a project basis if you need one please no I'm not saying all advisers are bad I've hired a financial adviser if you have a complex situation a large portfolio if you have a pivotal moment that you are planning for such as Retirement paying for your kids college hire fiduciary on a flat fee hourly fee or project basis and pay them pay them well you pay them for their expertise and that's it no ongoing percentage fees eating away at your future if you want to put them on retainer you can do that I would choose to pay an hourly or flat fee any day over a 1% fee and now my final piece of advice might be a little bit controversial especially for people making 100K or more strategy you do not have to buy a house I know the American dream everybody tells you you need to buy a house because that's how you build equity and of course that's what successful people do right wrong that's what people do because other people do it and almost nobody runs the freaking numbers on the biggest purchese of their life I am an example I could go buy a house today and I don't why why is the I will teach you to be rich guy renting isn't he just throwing his money away once you get to 100 K or above it is expected that you buy a house in America but at this income bracket there's a whole list of reasons that you should consider carefully before spending hundreds of thousands of dollars renting can mean flexibility when you rent you're not throwing money away you're actually paying for Freedom or optionality if you get a better higher paying job you can move if you decide you want to travel for 6 months or you want to live in a newer building building or a different location no problem homeowners are locked in now there's a benefit to that as well if you know you're going to be in the same place for 10 plus years it can make a lot of sense but what I want for you is to really think am I sure I'm going to be in this place for 10 years because that is pretty much how long we need to live here in order to amortize those transaction costs smooth them out if not maybe renting is a good decision for Us hidden costs of home ownership very few people talk about this buying a house does not just mean paying the mortgage you've got taxes which can go up you've got maintenance costs which will go up new roof HVAC you need money and typically quite a bit of money finally there's interest on your mortgage I know that a lot of people go around saying at least they're building Equity but if you pull up something called an amortization calculator you just plug in the basic calculation for your mortgage you will see that in the first roughly 20 years of paying your mortgage most of the money is going towards interest so you know that phrase renters are throwing money away we might more accurately say homeowners are throwing money away on interest again something for you to consider a renter pays a flat fee for their rental apartment like me and if something goes wrong something breaks I text the landlord it's not my problem then we have opportunity cost this is a really important idea that is rarely considered with home ownership take the apartment that I live in right now if I were to buy this apartment I would pay more than twice as much as I'm paying for rent yes that's crazy but that is the reality of the math so the fact that I'm paying half of what I would pay to own guess what I'm doing with the extra money I'm investing it in index funds that tend to give me about a 7% real return and this is what a lot of people get wrong about rent versus buy don't just compare home ownership monthly price to renting price and then blowing all your money on dinners you've got to get more nuanced you've got to consider how much money you would have put for a down payment now take all that money and invest it you've got to consider how much the difference is between renting and owning every month factoring in all maintenance and irregular expenses and then what would it be like to invest some or all of that now remember most people don't do this this is why I want you to understand the math cuz it will change what you decide to do with your money your rich life is yours if you want to buy a house I hope you do just run the numbers first if you decide you want to rent for the next 2 years 5 years or the foreseeable future also fine but run the numbers that is how you become strategic with your money whatever income bracket you're in I hope you take this advice to heart and if you want to double check that you're doing all of your financial Basics right watch this video right here