7 Steps to Become Great with Money

Hey, what's up everyone and welcome to the School of Personal Finance. In today's video, we're going to talk about seven steps to become great with money. So now the term become great with money, that is actually the slogan or the tagline for the School of Personal Finance. And the reason for that is over the course of my 20 plus year career in financial services, I have heard so many people say that they are just not good with money. So that has been the motivating driver for me starting the School of Personal Finance and the Education Center because I have a passion around helping people become great with money. So in this video, I'm going to walk you through seven things that you could start doing to help you along that journey. All right, let's get to it. All right, so now I'm going to be referencing the Education Center over at the School of Personal Finance throughout this video. I would love for you to come and join me over there. I just opened it up for a soft launch as I build the content out. So currently it's $97 for lifetime access. So go check it out. All right, so the first step to becoming great with money, and this should not surprise you, and it is to educate yourself. To focus on learning about all of these things. I promise you, it is not that hard. Money is a very intimidating topic and people tend to ignore it when they don't really understand it or feel comfortable talking about it. Anybody who makes it sound like it's impossible to learn or impossible for you to do yourself, they're probably trying to sell you something. So start small, start learning about it. It's just too important for you to ignore. Unfortunately, money is very highly correlated with happiness in this world and having less stress in our lives. So get started educating yourself today. All right, and then number two, and I talk about this all the time, I refer to it as turning the lights on, and that is to understand your current financial situation. And the way that you do this is through two documents, through your net worth statement and your cash flow statement. And I walk you through exactly how to do this in one of my courses in the education center called Master Your Family's Finances in 30 Days. So now a net worth statement, all it is, is you're writing down all of your assets, all of the things that you own, like your house or your car, your brokerage account, your IRAs, your 401ks, and then your liabilities. That is a list of all the people that you owe money to. So your mortgage, your car loans, student loans, credit cards, all the debt that you have outstanding. And then you take your liabilities, you subtract it out from your assets, and what is left, that is your net worth. So your net worth statement, that is the first piece to turning the lights on. And then the second piece is your cash flow statement. That's where you look at all of your income, all of the money coming in each and every month, and then you look at all of your monthly expenditures. So your mortgage payment, your car payment, your groceries, everything that you spend money on every single month, and you get to that final number, hopefully it's a positive number, and that is your cash flow statement. So by doing this, you are turning the lights on. You are looking at everything that you have going on in your financial life, and this is always the first step whenever I work with somebody so I can see what their current financial situation is, so we can then make decisions going forward. And then number three is to focus your energy on increasing your income. Now most of us, when things get tight, we look for things to cut, right? We need to cut our spending in order to make it work, but I challenge you to instead focus on increasing your income. If that means getting a second job or getting a side hustle, putting the pieces in place to get your income to go higher, you're going to be happy. I always refer to it as the happy gap, the difference between your net income and your monthly expenses. The wider that difference is, the happier you're going to be. And investing in yourself, in education, growing that income, that is the best way to do it. If you don't earn more than you spend, then you're going to find yourself going into credit card debt, and eventually you could face bankruptcy if you stay in that position for long enough. So focus on increasing that income. Be happy. And then number four is to eliminate all bad debt from your life. Now in order to become great with money, you can't carry credit card balances. You can't be paying high double-digit interest rates on loans or credit cards. It just doesn't make any sense. It's just not the right financial thing to do. Now I understand that life happens and sometimes you find yourself in a bind and you need to float yourself for a while to get through that period. I've been there before as well, but you just have to have that mindset that you could really never carry a credit card balance. And in the Education Center, I do have a course, I call it the Credit Card Master Class, where I walk through how credit cards work, how to calculate the interest, and everything that you really need to know about using credit cards. So I think that you might find that one helpful. But overall, bad debt, anything that you're paying over like 6% on these days, I would consider bad debt that you want to eliminate. Now I also do believe in good debt and carrying good debt on assets, on mortgages, on rental properties and things like that. So there is a difference between the two that you need to educate yourself on. But carrying bad debt, it just has to be a mindset shift where it's just not even an option because eventually it'll bury you and it takes away from you being able to invest and save for your future. So eliminating bad debt from your life, that is definitely a big step towards becoming great with money. And now number five is to become an investor, to think of yourself as an investor. Realize that investing is the way that you achieve financial freedom in this world. You can't let the fear of losing money hold you back, especially when you are investing for the long term. You have to be able to live with the ups and downs. And now when I say invest in things, I mean like stocks and real estate and commodities and crypto, and most importantly, investing in yourself. So think of yourself as an investor, realize that you need to invest if you want to hit financial freedom in your life. I'm also in the process of creating a course on how to invest in real estate and also how to create your portfolio in your investment accounts, and I'll be adding those to the educational center once they are completed as well. And then number six is to focus your spending on things that make you happy. Now happiness is always more important than money, but reality is the two of them are very highly correlated. So it's very hard to be happy when you are completely broke because then that brings on a whole new level of stress and struggle. But it is also important to spend your money on things that actually bring you happiness and not just waste it on crap. It's very hard and important to not get caught up in the comparison game. We live in a world where everything on social media, you see everybody's vacations and what they're spending all their money on, and it brings up feelings of jealousy. You really have to try to get away from that and just focus on you and what is important to you and spend your money accordingly. And then number seven is to just understand the importance of getting started and how important it is to understand how the time value of money works or compounding interest. Two more topics that I will be creating courses on and adding them to the education center. But the truth is, is that when you start with very small amounts of money, as long as you start early and you are consistent, those small amounts, they could turn into very, very large amounts later on. Now, we all want instant gratification and we want to have everything now, but the truth is that it takes a while for you to reach that financial freedom point. So by just getting started and getting rolling, it starts to add momentum and you could see things building throughout time. But understanding and being able to run numbers and throw projections out there where like, for example, if I contribute $500 a month to my Roth IRA, which is $6,000 a year and I can do it for the next 35 years of my life, I could have over a million dollars of tax-free money. And that isn't that big of a sacrifice if you think about it. $6,000 a year to invest for your retirement is not that crazy. That might only be a piece of your retirement plan. But just think about it. That's the effect of compounding. If you could earn an 8% rate of return, which is not unrealistic if you invest that in the stock market, then having a million dollars tax-free in retirement, that is a big number. But it's small amounts that grew over time that got you to that big number. Or real estate. By just getting started and buying that first property, it'll lead to more down the road and you'll understand. You'll see how it works. I know that real estate prices are crazy right now and it's very hard to get started with it. But the first step, again, is educating yourself and getting you to the point that you could pull the trigger if the time comes. But you're going to need to save money to be able to do that well. So putting all those steps into place, it is a process and you're not going to have everything figured out right away. The point is to just get started. Start becoming an investor. Start educating yourself and getting yourself set up for a better future. For a better life. For success with your finances. Alright everyone, that is it for this one. I hope that you found it helpful. Head over to The Education Center over at SchoolOfPersonalFinance.com. Come join me. I would love to have you in there. We're going to have a lot of fun in there. There's going to be a ton of content. My whole goal is to help you become great with money. So go check it out. Alright, I will see you again in the next video. Thanks.