Transcription
Most people don't struggle with money because they're bad at math, but because they usually don't have a plan. Figuring out how to come up with a plan can be a scary thing. There's so much information and strategies being shared out there, it's hard to know what to pay attention to.
So, that's why I created this video. So, in this video, I'm going to give you a 90-day plan to reset your finances, step by step. So, by the end of this, you'll have a system for building your wealth and having a jump start to your financial journey. We're going to cover topics like investing, the prioritization of your money after you get paid, and how to save money on some of the biggest expenses of your life.
All right, so let's get started. 90 days is roughly 12 and a half weeks or so, so I thought it would be easier to just break up this video and what you should do every single week.
Week one is all about reviewing where you currently stand. So, before we can fix anything with your money, we need to get super honest about where our money is going and how much money we have coming in. Every successful business I know that runs in this world has a sense of how much money they bring in, AKA their revenue, and how much they are spending, also known as their expenses. If you go to a local McDonald's, you better believe that they know intimately what their profit, expenses, and revenue look like on a daily basis.
So, in week one, what I want to focus on is getting our lives to be coming as close to a successful business as possible. And the simple action that we can take here is the following. We're going to pull up our last 3 months of statements. So, anywhere you've spent money in the past 3 months, you want to pull these up on tabs on your computer. That means your bank accounts, your credit card statements, your debt payments, any other discretionary expenses you've ever made. Try to pull that up somewhere so that you can see them visually.
After that, you want to categorize every expense. And I would do so in the three major categories. Number one is fixed expenses. So, these are going to be expenses that you have to pay every single month. Things like rent, utilities, car payments, subscriptions, and groceries. Number two are discretionary expenses. So, these are your wants. So, for example, eating out, traveling, shopping, anything that isn't necessary for you to run your life, but it's still fun to spend money on. And number three, any debt payments you might have, like student loans or credit cards.
Now, ideally, you log every expense and categorize every expense in a spreadsheet, and you have a good sense of what categories you are overspending in versus what categories perhaps you aren't spending enough in. What we really want to find out at the end of week one is what our average spend is per category on a monthly basis. Then, if we're able to know how much money we have coming in due to our income, then it's really easy to figure out what our savings rate is as a percentage. In the business analogy, we're figuring out how our expenses are broken out. We know what our revenue is coming in, since that's our income, but now we're just trying to figure out what money do we have left over, AKA our net profit.
I promise that if you're able to do this exercise, it will really open up a ton of insights about what your spending habits are. You might even realize you might be spending too much money on certain categories. Perhaps you spend too much money on Uber, or you might be wasting money on a forgotten subscription. So, do this exercise in week one, and you're going to set yourself up very well for week number two.
And week number two is all about cutting the fat. And by that, what I mean is we want to focus on the lowest hanging fruit in order to save the most amount of money. So, what I would do is go through and sort your expenses from largest to smallest. And I'm going to give you guys an example right here. I'll put it up on the screen. As you can see, this person spends about $4,650 total on all of these categories, including rent, car insurance payments, groceries, eating out, shopping, Ubers, utilities, subscriptions, bars, and coffee.
You're going to then analyze each and every category and just simply ask yourself if there's something that you can do about that certain expense to reduce it 10 to 30% over the next 90 days. In other words, for this example that we have on the screen right here, is it possible to get our total spend down $400 to $1,200 a month?
So, with rent, it might be pretty hard to do that. It's the biggest expense on this list, but it might not be easy to find a new place that's say $200 or $300 less per month. And while you can negotiate with your landlord, I would say in general, most people aren't going to be doing that just straight up, to be honest. Um, you can also move locations to be somewhere further away or in a less competitive neighborhood, but I also acknowledge not everyone wants to do that either.
But let's look around this hypothetical list some more. Where can we find some cost savings? So, right here, there's $225 being spent on Ubers every single month. I would personally ask myself, why am I spending money on Ubers? Is it because when I go out on the weekends, I might be feeling a little bit too lazy to walk to my destination, so therefore I call an Uber? You want to try to identify the root habits that make you spend money. So, in the case of Uber, perhaps this person just had no idea that they were spending that much on Ubers in the first place. In that case, it's probably really easy to cut down on this category by at least $100 a month. You could even eliminate it all together if you really focus on just traveling everywhere by foot or by public transportation, and you'd probably save closer to $225 a month.
When it comes to the car and insurance payment here at $750 a month, that's another easy place to reduce your spend. Most people don't call around to different insurance providers looking at different offers, but if you're able to compare insurance offers across different providers, that could be another easy way to save around $100 a month. I will link an insurance comparison website down below in the description where you can easily check to see some of the offers in your area and see if you can save some money that way.
The next categories that seem a little easier to tackle are shopping and eating out. So, can you just do a little bit less of each of these categories per month? You might be able to save between $50 to $100 in each of these categories on a monthly basis, and that'll give you another $100 to $200 of monthly savings. For subscriptions, cancel any subscriptions that you barely use. And then you can see that as we go down this list, if we simply pay attention to where our money is going throughout the month, we're probably able to cut out unnecessary expenses, so long as we ask ourselves the important questions. Questions like, "Hey, is this an important and necessary expense in my life?" And if the answer is no to that question, perhaps we can just hold off on that expense and save ourselves some money in the long run.
If you're able to cut out $400 a month, that's $4,800 that you can save in a year, which can either compound really nicely for you in the future, or it's an extra flight to Europe, or perhaps a Roth IRA contribution, or even more money that you can put towards debt.
So, week one and two are all about reducing our spend and knowing intimately what our spend is, but week three is all about automation. I would also call this paying yourself first. The first thing I do here is open up a high-yield savings account for short-term savings and make sure you're getting the competitive market rates out there. So, right now, as of recording, it's between 3.8 to 4%. This will serve as the main place you save your short-term cash, anything you're holding for 1 to 5 years. As an example, $10,000 in a high-yield account earning 4% is an extra $400 per year. So, that's free additional money you can unlock for an easy 5 to 10 minutes of setting up an account.
All right, then you're going to set up automatic transfers so that whenever you get paid, certain percentages of your pay goes automatically towards your goals. And this simple act of automating your finances is going to be one of the most single important things you do because it's going to take out all the hassle and friction of managing your money.
So, here's what I do personally. I get paid once a month on the 21st, and when that happens, the money gets deposited into my main checking account. All my usual spending for the month will come out of that checking account, so that includes my bills, necessities, and discretionary spending. But here's the genius of automation, because in my online banking, I set up two automatic transfers whenever I get paid to move a preset portion of my paycheck into other accounts before I even get a chance to spend it. You can decide what this percentage looks like for you, but I find that if you can automate at least 10% of your take-home pay into your high-yield savings account and an investment account, so perhaps 5% to each one, that it's going to be super beneficial for you in the long run, and you'll be doing way better than most Americans.
Now, psychologically, this works because you won't be tempted to spend the money because it automatically gets deducted before it even hits your checking account. It's kind of like having a 401k. You never see that you're investing in the 401k, so you never touch that money.
All right, week four is here, and you're about one-third of the way through this 90-day program. And the goal for week four is to have a plan for any consumer debt. So, if you have high-interest rate debt like credit card debt, we need to figure out how much the total is and have a plan to pay it off as soon as possible. If you go online and search for a credit card calculator, you can input your credit card balance and what you pay every single month. If you pay an extra $50, $75, or even $100 per month, you can save a lot of money on your total interest payments, as well as reduce your payoff date by a lot. In this example alone right here on the screen, we would save eight months of our payments if we're able to increase our payment per month by $75 on a $2,500 credit card balance. You can set up automatic payments when it comes to debt payoff so that you can kill it off as quickly as possible as well.
Another big action item if you have credit card debt is that I will always encourage you to call your credit card company and ask them if they can lower the interest rate on your card, even if it's just for a short period of time. You can bring up that other credit cards have competitive interest rates and that you've been a really loyal customer. Often times, the credit issuer will just lower your interest rate, even if it's just for a temporary period, because they want to keep your business. But this can also save you hundreds, if not thousands, of dollars in interest alone. The worst case is that they say no, and that's okay, but you won't know until you ask, and this will literally take 5 minutes and could save you a lot of money. The average credit card APR is over 21% these days, so either making payments on this debt or getting your debt interest rate lowered is going to be an instant return on your investment.
All right, now in week five, your goals start to change. And the week five goal is going to be getting your emergency fund to $1,000. $1,000 is a significant number because it's when your bank account actually crosses the four-digit barrier, which psychologically should make you feel pretty good. Consider that 59% of Americans can't even afford a $1,000 emergency expense. That means it's probably a good goal to aim for. If you already have $1,000 in your emergency fund and you're watching this video, then your goal for this week should be to get your emergency fund to 3 to 6 months of living expenses saved up, or at least have a plan to do so.
For the majority of people, though, the first step of getting to that $1,000 is a huge psychological win, and it also gives you that peace of mind. In order to get there faster, you can sell things you don't use, like old electronics, clothes, or furniture, or you can pick up a side hustle for extra cash. Another way to do it is that based on your expenses from Week 1 and Week 2, you can redirect any savings that you made towards your emergency fund. Lastly, just make sure that the emergency fund is being held in a high-yield savings account so that it earns interest for you. Some of my favorites include Wealthfront, SoFi, or Ally.
All right, breezing right along into week six. The goal of week six is to set up your investments. Investing in stocks has produced the best returns over the past 100 years compared to other assets and commodities. So, I'm going to put up on the screen one of my favorite short videos by Max Clco, in which he goes to Wall Street and asks people what they think the top 10 investments are over the past 100 years in terms of their return. Crypto and equities? Is that what you're looking for? Number one is stocks with 5.2%. You can see that stocks has the highest average annual return compared to other investments like treasury bonds, fine art, and other commodities like precious metals like gold. Real estate, surprisingly, comes in at number 10 at 3%.
Over the long term, stocks have the most potential to transform your life because they have the highest chances of capital gains. And whenever I interview or talk to someone with a very high net worth, they all agree that in order to build your wealth, you need to concentrate the money you do have into appreciating assets. So, for our 90-day reset plan, we'll want to start investing in the S&P 500 via index funds and ETFs. An S&P 500 ETF gives you exposure to a diversified portfolio of hundreds of the top US companies with one single purchase. This is a passive strategy. You just set it and forget it, and you basically are relying on the market's historical average returns of 8 to 10% over time.
You can invest in the S&P 500 ETF by opening up a brokerage account at Vanguard, Fidelity, Schwab, or Robinhood, etc. And then you want to allocate a portion of your automated savings to go into these brokerage accounts and then make sure you're just simply buying an S&P 500 ETF on a regular basis. This is a very low-cost way to get invested and it's simple because all you have to do is invest in that one fund. Look at this table of investing. You can see that if you invest $100, $500, or $1,000 per month, what your final balances will be by just getting the average market returns of 8%. Investing $1,000 a month for 30 years, for example, will get you a final balance of $1.49 million after all is said and done. The most important thing when it comes to having an investing plan is to stay consistent with it and trust the process, and over time, your money will grow upon itself, and that's the beauty of it.
Okay, in week number seven, we're going to find ways to level up our income. In this video, we've talked a lot about cutting expenses and automating what you make already, but another thing we want to really make sure we're focusing on is increasing our income. And there are a few options that you can consider when it comes to this. So, number one, you could simply ask for a raise. This is especially true if you haven't gotten a raise in over a year, and now if it's been longer than 2 years, you definitely need to say something to your employer because the rate of inflation has just been reducing your purchasing power this whole time. You can research salaries online and just present your case, and even if you don't get it, at least you asked. But still, you want to make sure you're getting paid what you're worth. I've even made a YouTube video about how job hopping every two years or so can make you 30 to 40% more of your salary every time you switch. Obviously, this is very situational, but if it does apply to you, it could be another way to increase your income very fast.
The second way I would try to increase my income is to start a side hustle. You could freelance, you could flip stuff on Facebook Marketplace, or you can do a service-based side hustle like watching dogs or perhaps DoorDash. And a third option to consider is to learn a high-income skill like coding, video editing, sales, or design. The point of week seven is that you are focused on growth rather than just cutting costs. You can only cut a certain amount of cost, but there's no limit on how much you can earn. So, by the end of week seven, we should be able to identify one thing that can help us make more money moving forward.
In the next few weeks, all right, in week eight, we want to define and write down a savings goal for the rest of the year. We've talked about many different goals in today's video already, like having a stocked emergency fund, having an investing account, and paying off debt. You could have other goals for saving, like perhaps you save for a down payment on a house or save money for a wedding. Whatever your goal is, in week eight, you want to write down this savings goal along with how much you think you would need to hit that goal. So, for example, if you want to have $8,000 in your emergency fund and you're currently at $1,000, you would need the difference of $7,000 over the next year or so. That means every month for the next year, you would need to save $583 towards your emergency fund to hit that goal, which may or may not be possible depending on your situation.
But the mere existence of writing down your goal will increase the likelihood you achieve it by 42%. That stat comes from a study by a psychology professor who found that the people who wrote down their goals, made a plan, and shared them with a friend were significantly more likely to accomplish them compared to those who only thought about their goals. So, after you write down your savings goal, tell your parents, tell your friends, tell the internet. That way, you're more likely to hit that goal in the future.
All right, so that was week eight, but let's talk about week nine now. Week nine is a little bit different because we're talking about credit cards. Credit cards are a dangerous double-edged sword because it's the one category of personal finance where you need to know yourself very intimately. So, let's talk about whether or not you should be using a credit card.
So, if you are somebody who has a lot of self-control, then the dream scenario is that you get a credit card and you run all of your purchases through it every single month. You pay that off in full, and that's the best-case scenario. And if you're able to do this every single month, you will get rewarded handsomely for it. You'll get cash back, points for spending, hotel upgrades, lounge access, and the list of perks continues. So, if you do have self-control, then you are literally going to be getting free money from these credit card issuers because they try to make money on those that are less disciplined.
The people that are less disciplined have a hard time with credit cards because they tend to overspend on them. If you overspend on a credit card and you don't have enough money to pay it off in full the next month, then the average interest rate on a card is going to be 21%. That means it's going to be very expensive to carry credit card debt, and the average American these days has credit card debt of $7,230. So, if you're not very disciplined, I would just stay away from credit cards in general.
One way to figure out if a credit card is right for you, though, is to get one with a low credit limit and just test it out for 3 to 6 months to decide whether or not you have the self-control. In this testing period, you're just kind of seeing what your self-control looks like. If you have no self-control, stay away from credit cards. If you have good self-control, maybe you level up your credit card usage.
The counterintuitive thing about credit cards is that they actually build credit, since every time you make a payment on time, that's counting towards your payment history, which makes up 35% of your total credit score. Using your credit card responsibly and paying it off each month shows lenders that you are a reliable borrower, and over time, this helps you qualify for better interest rates, higher credit limits, and even bigger financial opportunities like mortgages and business loans, where you could save thousands over the course of your life with an excellent credit score.
All right, in week 10, we want to start tracking our net worth. This is a practice I find pretty fun because as you age and start to make more money, you can see exactly how much your net worth is growing. To calculate your net worth, all you need to do is add up all your assets and subtract any debts and liabilities, and boom, there's your net worth. Let's use a hypothetical here. If you had a house worth $100,000, and then you had investing and bank balances totaling $25,000, but you owed $30,000 on your car, then your net worth is technically $100,000 for the house, $25,000 for the balances, and then minus $30,000 for the car, and therefore your total net worth is $95,000.
I like tracking my net worth on a monthly basis, but you can do it every single quarter or every single half year. That way, you're getting a good long-term view of how your financial picture is changing. So, I've created a net worth tracker, which I'll pull up on the screen, and this is going to be completely free to download. It'll be in the description below. It's currently set up for half-year increments right now, but if you want to go in and change it to monthly, quarterly, or yearly, you can adjust the columns as you see fit. In any case, you just keep track of your assets and your liabilities, and therefore your net worth. And as long as you're tracking it, I feel like if you keep an eye on it, it will slowly grow over time.
All right, in week 11, what we're going to do is something a little unorthodox. It's a little bit different, but we're going to review your spending for weeks 2 to 10. So, in week 11, it's been exactly 8 weeks since we analyzed our expenses in weeks 1 and 2. So, this week, it's imperative that we review our spending for the past two months or so and really understand if we're on track or if there are still some financial leaks that we might be blind to.
So, all you have to do for this week in week 11 is to reassess your spending. Take an hour and just really deep dive into how much you spent for the past two months. You're going to categorize your expenses again, figure out the average spend per month, and then compare it to what your spending was before you started this whole 90-day reset. In a perfect world, most of your expenses have not increased, but hopefully, they've stayed flat or they've even decreased. That's especially true for the categories that you've been trying to reduce your spending on. If you identify any leaks, make sure to patch them up before moving on to week 12.
All right, in week 12, you're basically at the end here. Congrats if you're still with me. Technically, 90 days is 12 and a half weeks, so really, we're going to take these last 7 to 10 days to really plan out our stretch goals into the future. Stretch goals are big, ambitious goals that go beyond just getting by. These are things like buying a home, paying off major debts, launching a business, or retiring early.
So, this week, you should really figure out: number one, what do you want to achieve in one year, five years, and 10 years? A one-year goal might be something like save $10,000. A five-year goal is much more of a stretch, so perhaps it's buying property, launching a business, or hitting a huge milestone of net worth like $100k, $250k, $500k, etc. And a 10-year goal might be to be financially independent, or perhaps you travel the world for a year, or you retire early.
Once you have these goals, you want to create an actionable roadmap that breaks them down into smaller, achievable steps. Let's say you want to buy a house in 5 years. How much would you need to save per month to get to your down payment? That's what you need to figure out and write down what that goal is. And then the last step of this critical week is to schedule a quarterly check-in with yourself a quarter from now. So, you want to set a reminder every single 3 months to review your progress financially, and this will help you stay on track and ensure that these past 90 days that you've been really working hard on resetting your financial life weren't for nothing. I personally like to review my finances at the end of every month and then at the end of every quarter, so March 31st, June 30th, September 30th, and December 31st.
All right, so if you're still with me after all this time, thank you for being here. I want you guys to drop a comment down below. What can I have you say? Maybe type the word "apple." If I see your comment and it's "apple," I'll make sure to heart it. This 90-day reset is not going to be easy by any means, but I promise that if you're able to get through it, that you should be well in control of your money by the end of it.
Now, remember, this is not just the beginning, though, because wealth is not built overnight. It's built through consistency, discipline, and having that long-term vision. If you got value out of this video, make sure to check out this video right here. It's going to show you how your net worth explodes after you hit $100k. I hope to see you guys in that video or a future one on this channel. Again, thank you so much for spending your time with me. I'll see you later. Bye.
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