How to Manage Your Money So You Never Go Broke

Ladies and gentlemen, damas y caballeros, if you give me 10 to 15 minutes of your time today, I can show you how to manage your money so you will never go broke again. If you can pause what you're doing out of your busy schedule and just give me your attention, I can show you how to manage your money so you will never have to worry about your car breaking down, paying bills on time, or losing your job. And I'm not even going to ask you anything in exchange, just that one penny for watching those five second ads in this video. Deal? Maybe even watch it two times and pay me two pennies. But anyways, in this video, I want to share a five step plan in order to break away from the paycheck to paycheck life, a plan where you can take control over your finances and don't have to worry constantly about money. And this is not a get rich quick side hustle video where I tell you to befriend an old person online. No, this is actually a practical video where you can apply everything I say in your life. And over time, if you manage your money this way, you will never have to worry about going broke again. So here is my five step plan to managing your money so you will never go broke again. Step one, understand exactly why people are living paycheck to paycheck. I want to start this video off just by saying that money isn't random. It isn't evil. It's not out to get you. Money is just basic math. And I am sure that you understand basic math. So I just want to start by getting you to understand exactly why people are living paycheck to paycheck, because it's so simple. Now, 99% of people in this world will trade their knowledge, skills, and labor at a job in exchange for a paycheck. Then they use that paycheck for the first round of spending on big payments like bills, rent, and groceries. And after that, there's a much smaller amount of money left over. That smaller amount of money goes through a second round of spending on extra things like Amazon, eating out, and ice cream. And after all that spending, there is no money left over. So they have to do it over again. Work, make money, first round of spending, smaller amount of money, second round of spending, no money. Over and over, most people live their lives this way. Most people don't understand that this is not a sustainable way to live. Because for example, what happens if you lose your job? Well, money stops coming in and the entire thing collapses. And even if you have a tenured job where you think you never have to worry about losing your job, it's just a vicious circle where things never get easier and there's no light at the end of the tunnel. You can't live your life this way. This is just existing. It is not living. You need to get out of this way of thinking and develop a more sustainable plan. So now I want to talk about exactly how to develop that plan. And let's start with the basics. Step two, adopt a frugal mindset. One thing that I preach over and over again in my channel is that being frugal is not about pinching pennies and depriving yourself, but frugality is managing your money in a way where you're not depriving yourself nor wasting anything. Most people could save so much money and create a much more sustainable lifestyle if they just adopted frugal habits and cut their wasteful spending. So let's go back to the chart I just showed you and adopt some frugal habits and see how it changes the flow. So just like before, they work, make money, but now they've adopted more frugal mindset and they choose to move to a smaller house where they don't have a bunch of extra space. They get a cheaper car with a smaller payment and they take steps to lower some of their bills. Well, because they did that, they now have more money left over in the second round. So they use their superhuman frugal habits and cut out wasteful spending on the smaller expenses, like stop eating out so much, cut down their Amazon shopping, and only get ice cream three times a week. And in the end, they have some money left over. You see how much of an impact the tiny decision of being frugal and cutting wasteful spending made on the flow? Because they were making intentional decisions to lower their expenses at the end of the cycle. They even had a little bit of money left over before the next paycheck. And this step alone isn't going to change your life, but it's a good place to start. It's the first step in getting out of the paycheck to paycheck life. So now that we talked about this basic thing, let's go in a little bit more detail and move on to the third step. Step three, begin establishing the emergency fund. All right, although you adopted some frugal habits that made you in a better financial position, you can't just depend on frugality in order to have a healthy relationship with money. You have to develop a plan where you're not one paycheck away from catastrophic disaster like 58% of Americans are. So let's go back to the chart and I'm going to show you exactly how to do this. Now, just like before, you work, make money, but this time, before you start the first round of spending, take a small amount of money out, whatever you can afford, and put it in a savings account. This is called paying yourself first. And we're going to put it towards the emergency fund. And you need to do this to set aside a specific amount of money, every single paycheck for this emergency fund, because what happens if your car breaks down or you lose your job, you're going to need some money. In Santa Claus, he ain't coming to town. So you put the money in the emergency fund and you never use it unless there's emergency. Got it? All right, back to the chart. You work, make money, pay yourself first, then do the rest. And over time, slowly, if you are consistent, this will grow. And ideally, the rule of thumb is this should be six to 12 months of living expenses in case you lose your job or something expensive comes up, you have the money ready. And because you did this simple thing, imagine if you suddenly lose your job. Well, because you have this emergency fund, you can just take money out of that in the meantime to pay your bills until you get a new job. And so at this point, you're no longer 100% reliant on a paycheck. You have this emergency fund to use in case something goes bad. And so you're slowly breaking out of this paycheck to paycheck life and developing a more sustainable way to live. You're no Elon Musk, but you're getting there. So now let's keep moving and move on to the fourth step. Step four, begin getting your money to work for you. Now, once you reach enough money in your emergency fund to cover six to 12 months of living expenses, you end up, congratulations, you don't need to add any more money into that because of a little thing called inflation. And you probably have heard of this before, but for some reason over time, the price of a Big Mac just keeps going up. There ain't no dollar menu anymore. And I don't know why this is, maybe greed, maybe selfishness, maybe corporate welfare. I am no economist, but this thing just happens over time. But once you finish your emergency fund, you start to get your money to work for you. You get your money to make you more money. And you do that by opening a brokerage account and investing in something called index funds. And I made a step-by-step video up here on how to do that. But let's go back to the chart and let me show you exactly how this works. You work, you make money, and since your emergency fund is complete, you stop putting money in. Instead, you begin putting the money into an investment account into the stock market. Then over time, that money will make more money. But the thing about making money from this is that when you make money, you don't spend it. You just let it keep growing and keep making you money without you doing anything. And this is called passive income. It's money that you're making without doing any work. And if you look at the chart, all you have to do is put the money in the stock market. Then over time, it'll make you more money. And then that money goes back into the stock market. And over time, it will make more money and so on. And you can go on YouTube and see all these people promising you that you can make $50,000 a month in passive income by doing these things. But in my opinion, index investing or investing in the stock market is one of the only true forms of passive income. The other source is you're going to have to work for like 10 years, and then it will eventually become passive income. So let's go back to this chart and watch the flow of this. So like always, you work, you make money, emergency fund's complete, you invest, and then continue on the rest. Work, make money, invest. Over and over. In index investing or investing in the stock market is not going to make you rich, but it is going to grow your money and help you fight inflation rather than just putting it in a savings account. And so if you look at the flow of this, it's a much more sustainable plan because if you lose your job, you now have the emergency fund to depend on and you have these investments. It's becoming much more sustainable. You don't have to worry about this vicious circle of living paycheck to paycheck and what's going to happen if you lose your job and you no longer have a paycheck. So now that you're becoming more financially secure, let's get a little bit creative and move on to the final step. Step five, get creative and continue expanding. When you become less dependent on a paycheck, by establishing an emergency fund and investing in the stock market, options start to open up because you're not as desperate anymore. Sure, you still need money, but you're always going to need money. And I think that you're always going to want to work too. It's more about doing work that you don't despise. And so at this point in our journey, you can be a little bit more creative. You can figure out new ways to generate income on your own terms. So let's look at the chart and see how this works. An extremely basic way is maybe a side hustle like being an Uber driver to bring income outside of your normal job. Or you can consider starting a business. For example, I make money from this YouTube channel, which I use as income. And in this day and age, there are an infinite amount of possibilities to make money. You don't need a small loan of a million dollars from daddy anymore. You just need to think outside the box. You have to be creative and figured out on your own. And I don't claim to be the successful millionaire that has it all figured out, but I'm learning a lot about this right now. It is very hard to figure out ways to make money outside of a paycheck. There's no instruction manual, but as tough as it is, it is very cool to make money without depending on a paycheck. And so that is the system of how to manage your money without ever running out. Most people's financial situation looks like this. A vicious circle of make money, spend money, and need to make more money. But a more sustainable plan looks like this. Adopt frugal habits to lower your expenses. Create your emergency fund. Start investing to grow your money. And start generating other forms of income. And so the system isn't dependent on one single source of income. You could afford to go without a paycheck every now and then because you have these other sources backing you up. And I could lie and tell you that I know how to make $50,000 in passive income and you could do it too, but that doesn't help out anybody. This actually works. It's slow. It's boring. But if you take steps in your life today to develop a more sustainable plan and get out of this paycheck to paycheck vicious circle, you will never have to worry about going broke again. And with that, muchas gracias. Que tenga un buen dia. Video 109. Nos vemos chico.