Money Management 101 - What They Should Have Taught Us in School

Hi family, welcome back. Thank you for being here. Today is Freedom Friday and I wanted to talk about money management. This is something that I feel like it's super important but isn't taught in schools. It's rarely taught in the home. I mean, I wasn't taught it and so by the time I became an adult, free to do as I please, I ended up falling into a lot of traps like debt, overspending, not understanding how to leverage my money and manage it. So that is why I want to talk to you about this today because I think if you can have a really good foundation of money management, it will really help you set off in the right direction and make things way easier. So I've followed a bunch of different types of approaches and the thing that really worked well for me was David Ramsey's approach. I forget what his book is. He's got a best-selling book but if you know what it is, stick it in the comments below. And what I'm going to do is go over a few simple steps that you can start right now to head in the right direction or at least to understand what I went through and hopefully it just helps you better your situation if that's what you're looking for. So step one is really balance sheet. Balance your income and expenses. I know this is not an accounting class but it's really super simple. You take all your income that comes in and make sure that it can cover all your expenses. Now if you're in debt or if you owe something or you want to work towards something like saving for a house or leveraging some money for investments or business, it's super important that that income can cover your expenses and then some. So a lot of people like to say that you want to save at least 10 to 20 percent of your income for leveraging or savings. I personally like 50 percent. It's not something that I always get to do or that I'm really good at but if I can, that is my ideal goal is that 50 percent of my income would cover my cost of living and all of my expenses so that the other 50 percent can go into savings or leveraging business and other things. If you're not in that position, this is a time where you would cancel anything extra that you might have and believe me there is a lot of extra. If you really write down every single penny, just do it for a month. Look through your credit card statements, your bank statements, or keep track of all of your receipts and really write down every little bit that you spend. You will realize that there is some place in some category, maybe a few, where you actually overspend or could cut back on. Some of these things are subscriptions. If you dig into your cell phone bills or some of the things that you've subscribed to, a lot of these things have extra subscriptions that they tack on as a monthly fee that you don't even realize and it's something really simple but my car insurance was like oh for three bucks a month you can get this free rental car thing where if something happens we'll give you a rental car for fifty dollars a day and i was like um no thank you i don't want to pay an extra thirty six dollars a year thank you very much so it's little things like that that begin to add up and i know at first it sounds like really silly oh it's only thirty six dollars but imagine if you have only thirty six dollars here and another thirty six dollars for iCloud and another thirty six dollars a year for something else some little phone insurance that you have on your phone all of a sudden you're paying an extra over a hundred dollars a year for all these little three dollar a month services that you never really knew about so it's super important to write that down at least be aware once in a while and this is something that i recommend doing monthly but if you don't have the time doing it two or three or four times a year is a really good practice to have once you have your income and your expenses all set to go you're at a place where your income covers the expenses you have a little extra pay down your and don't just pay minimum payments this is assuming you have debt david ramsey talks about paying down your debt from the smallest debt to the biggest debt going forward that's totally how i started off so if you owe your brother or your friend 20 bucks throw 20 bucks his way then pay down your first smallest debt it might be like say 500 on a credit card and then continue to pay up and this is not just credit card debt or people and things you owe this also comes down to payments like car payments house payments you really want to try as much as possible to get out of debt and be debt free so once you're out of debt i know i felt like freedom at last you don't have any more credit card payments or car payments and all of a sudden your income versus expenses have like shifted this way you have way more income than expenses and it's really easy to want to blow through all that cash and buy a bunch of stuff but guess what you are still in a really precarious position because if something happens to you or you lose your job how are you going to afford to pay your bills and buy your food and keep the electricity on you can't unless you have a savings or what we call an emergency fund you can start off by trying to save a thousand dollars and just have that in case you need new tires or in case you have a little extra emergency room bill that comes up but at the end of the day you really want to have a minimum of six months that means that if your rent and your food and your expenses and everything costs you five thousand dollars to live you want to save thirty thousand dollars of accessible cash to be able to dip into in case something happens to your income for whatever reason now i like to say go as far as up to 12 months if not more it's always more comforting to know that you have an extra year to get your feet back up on the ground and get things started and for me that feels a lot more comfortable because we do run our own business and so many things can go haywire so it all depends on where you're starting and i know at first you're like oh my gosh i have to save like 20 or 30 thousand dollars it sounds really crazy but if you pay down your debt and your income is now much higher than your expenses just putting as much as you can away you'll realize it only takes a year or two before you have a sizable amount of stashed savings and it's super important because it gets you prepared for the next step which is saving for investments business or leveraging your money see it's really easy to compare ourselves to people who make like tons and tons tens of millions of dollars all these celebrities on these reality tv shows have these amazing homes when i look at the value of the homes there are like 10 to 20 million dollars they're driving cars that cost similarly and a lot of us work our butts off to finance or lease a car that is way out of our range of our income scheme it's super important to get realistic in ratio with how much we make and how much we spend these people are making like 50 million dollars a year of course they can afford stuff like that and it's really easy to want stuff like that but the real secret to wealth or to success or to having the income to do what it is that you want and to leverage in the future is to really be able to decipher or distinguish what is truly important to spend on now or what can wait to later it doesn't mean if you love cars don't buy the car of your dreams but it's really easy to get sucked into not being able to afford the entire lifestyle you want if you love cars and brand name clothes and a beautiful house and a sailboat and eating out at fancy foods and drinking fancy wine all of that stuff begins to accumulate so if you do spoil yourself spoil yourself on maybe one thing that you really like for us that's like cameras and computer equipment because obviously we enjoy doing our work and it also helps us with our work so that's where i'm going to leave us off for money management 101 at the moment it might seem like overwhelming and crazy or like it would take a really long time but if you really take the time to be meticulous about each step you'll most likely come out sooner than you would later as long as you stay really consistent consistency is key to winning in the money game if that's something that you're interested in or just solidifying where your disposition is a lot of us have this yolo kind of fomo type thing going on which is like you live in the moment don't need to think about the future just think about the present i don't want to miss out so i'm just going to have fun and do it right now but you know once you really think about it at least in my age i don't want to sound old i'm not even old but like as a mom with kids who's looking at college funds and watching my mom and my grandparents try to retire i realize that's not kind of the situation that i want to fall into 30 to 40 years from now so it's something that i think can be talked about more no matter how much taboo there is i know a lot of people like oh it's not all about money but you know we live in a society where money matters money is how we be responsible to earn it and to pay for our bills and the things that keep us alive keep the roof over our head keep food on our plate and eventually you know if you learn to manage money really good it becomes something that you are able to gift to others that you are able to leverage because you have money to have more time or you have money to give people jobs or money to help those in need so money is not a bad thing it just depends on how you use it and like i said in last week's video i really think that money is not a solution to your problems it literally magnifies what you already have so going through these steps and learning how to manage your money now allows you to have a really good foundation to be able to manage money as it gets bigger as they say most lottery winners end up dead or broke within the first five years of winning their lottery money and that's not because money is a bad thing it's because it literally magnifies the problems they already had if they were broke to begin with they would necessarily be what we call broke rich people and this is something just theoretically or philosophically that i want to share with you just because somebody has a nice house or a nice car doesn't mean they're rich they can be broke at a higher level if they don't have all this foundation in place and they lose their job which i've seen many people do especially in the last crash of the market in 2008-2009 they end up going bankrupt foreclosing all their properties losing everything and it's a really tough spot to be in so it's a really important perspective to get into your mind that it is not about materialistic accumulation it really is about net worth or the disposition that you're in to be comfortable and to continue to live your lifestyle whether the stock market crashes whether you lose your job are disabled or something cataclysmic happens and that's the idea or the ideal to work towards so hopefully we can work towards that together if you guys have any questions or any more thoughts on this or any more tips on money management stick it in the comments below also give this video a thumbs up if you want to hear more about this topic i love you guys so much thank you for being here and i hope you guys enjoy your weekend ciao