00:00:00
if you spend $5 on a morning coffee on
00:00:02
your way to work $15 on a nice lunch
00:00:05
from the Food Truck $4 on overpriced
00:00:09
transport $2 on a sweet treat and $140
00:00:14
on unwanted subscriptions every day then
00:00:16
that's the same as spending
00:00:19
$10,000 every single year this is the
00:00:21
reality for most people as soon as they
00:00:24
get paid the money just seems to
00:00:26
disappear and that's because they don't
00:00:28
have a paycheck routine this is so
00:00:30
important because being careful with my
00:00:32
money in my late teens and early 20s was
00:00:34
the thing that enabled me to become the
00:00:36
first millionaire in my family so in
00:00:38
this video I'm going to be talking about
00:00:40
the five things I did every time I got
00:00:43
paid so you can apply them too and
00:00:45
hopefully achieve even better results
00:00:47
this will not only help you save extra
00:00:49
money but also build your wealth and the
00:00:52
beauty of all of this you won't have to
00:00:54
work any harder than you currently do
00:00:55
right let's imagine you've just been
00:00:57
paid the first thing you should do is
00:00:59
separate your wants and needs believe it
00:01:02
or not this is one of the hardest things
00:01:04
for people even though it sounds simple
00:01:06
especially nowadays most people are used
00:01:09
to such a high standard of living that
00:01:11
they find it hard to cut down on their
00:01:13
little pleasures these might seem small
00:01:15
and insignificant but in the long term
00:01:18
these little pleasures are actually
00:01:19
robbing you of your Financial Freedom
00:01:21
even if you think this doesn't apply to
00:01:23
you I still want you to do this exercise
00:01:26
you might surprise yourself with the
00:01:27
things you uncover that are draining
00:01:29
your your money so grab a pen and a
00:01:32
piece of paper and split it into two
00:01:34
columns so you've got wants and needs
00:01:39
now get some of your recent bank
00:01:40
statements it's probably best to get
00:01:42
around 6 months worth and start
00:01:44
highlighting all the things you
00:01:46
repeatedly spend money on every month
00:01:49
for now let's ignore the one-off
00:01:51
purchases unless you're repeatedly
00:01:53
buying a lot of random stuff then this
00:01:55
shouldn't be a huge issue I'm more
00:01:56
interested in focusing on those little
00:01:58
purchases that stack up over time once
00:02:01
you finish doing that it's time to sort
00:02:03
them into the correct column needs
00:02:05
should be things like rent Insurance
00:02:07
bills and other utilities the rule is if
00:02:10
you can survive without them then it's
00:02:12
not a need your want should be all the
00:02:14
fun stuff like nights out restaurants
00:02:17
Bowling golf whatever floats your boat
00:02:20
once you completed both sides then it's
00:02:22
time to figure out how much each column
00:02:24
cost per month let's start with needs
00:02:27
let's say your rent Insurance bills and
00:02:29
util ities add up to
00:02:33
$1,200 a month this is the bare minimum
00:02:36
you need to get by each month also known
00:02:39
as your financial Baseline once you know
00:02:41
your Baseline subtract it from your
00:02:43
monthly income to see how much you've
00:02:45
got left over many people say your
00:02:47
financial Baseline should be under 50%
00:02:50
of your total income but to be
00:02:52
completely honest with you I think it
00:02:54
should be closer to 25% now don't treat
00:02:58
this needs column as something you can't
00:03:00
change as there are things you can do to
00:03:02
bring down the costs but still meet all
00:03:04
your basic needs you might need a car
00:03:06
for example but it's worth asking
00:03:08
yourself do you need a car that costs so
00:03:11
much the same goes for where you live
00:03:14
some apartments can be Mega expensive
00:03:16
nowadays especially in city locations
00:03:19
but this is where you need to start
00:03:20
weighing things up would it be cheaper
00:03:23
to commute each day probably so consider
00:03:25
moving somewhere that you can actually
00:03:27
afford I mean if you can share a house
00:03:29
for year to save up some money that you
00:03:32
can invest which could help you buy your
00:03:34
dream home why wouldn't you look maybe
00:03:37
you don't want to cut back anymore and
00:03:39
that's completely fine but it's worth
00:03:41
seeing if there are some areas you can
00:03:42
save money without impacting the quality
00:03:45
of your life too much if you can't
00:03:47
reduce your bills you're going to have
00:03:48
to increase your income which is
00:03:50
completely possible by getting a
00:03:52
promotion or starting a side hustle
00:03:55
remember your earning potential is
00:03:57
always higher than your saving potential
00:03:59
IAL I know making your needs cost less
00:04:02
than 25% of your paycheck might sound a
00:04:04
bit impossible right now and how it
00:04:06
might sound coming from a boomer
00:04:08
millionaire but I really do understand
00:04:10
what it's like to earn very little I
00:04:12
didn't grow up wealthy and it took me a
00:04:15
considerable amount of time to boost my
00:04:17
income to hit a financial Baseline of
00:04:19
25% of my salary but trust me if I can
00:04:23
do it so can you especially with all the
00:04:25
online side hustle opportunities you can
00:04:28
take advantage of so don't don't think
00:04:30
I'm just saying if you're poor then just
00:04:32
earn more money I understand there is
00:04:34
much more to it than that just treat my
00:04:37
25% r as a Target to work towards now
00:04:40
for the wants column add them all up and
00:04:43
subtract them from your wage ideally
00:04:45
this should be below 25% of your
00:04:47
paycheck because we need a decent amount
00:04:50
of money for the next steps to start
00:04:51
getting you ahead the second place your
00:04:53
money should be going is into a highin
00:04:56
savings account so in an Ideal World
00:04:58
you'll have about 50% of your paycheck
00:05:01
left at this point most people would
00:05:03
just tell you to save all of it however
00:05:05
that's not going to help you build your
00:05:07
wealth instead I recommend sending 20%
00:05:10
into a highin savings account it's best
00:05:13
to use a different bank to your everyday
00:05:15
account as otherwise it's just too
00:05:17
tempting to spend it some great options
00:05:19
are Chase in the UK an ally Bank in
00:05:22
America I say high interest but that's
00:05:25
all dependent on when you're watching
00:05:27
this video currently my Sav account gets
00:05:30
around 4% interest a year which is
00:05:32
definitely better than my current
00:05:34
account which is around
00:05:36
0.05% I know some of you are already
00:05:39
commenting I know a bank account with 7%
00:05:42
interest don't get me wrong this is
00:05:44
great as long as you don't have to lock
00:05:46
away your money for a set amount of time
00:05:48
and the bank is reliable the whole
00:05:50
purpose of this savings account is to
00:05:52
act as a safety net that you can
00:05:53
withdraw money from in an emergency it's
00:05:56
not there to make you money so locking
00:05:58
it away for a certain amount of time
00:05:59
actually completely goes against the
00:06:01
point of doing this I can't even begin
00:06:03
to tell you how important it is to have
00:06:05
a safety net now I know you've probably
00:06:08
heard this a thousand times but that's
00:06:10
because it's great advice life isn't
00:06:12
smooth sailing and at some point an
00:06:15
emergency will come your way this pot of
00:06:17
gold will always be there for you when
00:06:19
you need it so say you got sick and
00:06:21
couldn't work or the car broke down
00:06:24
you'd be able to cope with this
00:06:25
situation just fine I must reiterate
00:06:28
that this money is only to be used in
00:06:30
serious situations and not just
00:06:32
something to dip into when you're
00:06:34
running low and want that extra pint of
00:06:36
beer it's just shocking to me as of May
00:06:38
2023 one in five Americans have no
00:06:41
emergency fund at all so if something
00:06:43
went wrong which it will they have no
00:06:45
way of coping with it and would most
00:06:47
likely have to take out a loan which
00:06:49
most of the time ends up with them
00:06:51
paying crazy interest rates and falling
00:06:54
even further behind so how much should
00:06:56
your emergency fund be well I'd say your
00:06:58
emergency fund should be 3 to 5 months
00:07:01
of your Baseline figure that we
00:07:03
discussed earlier even better if you can
00:07:05
stretch that to 6 months so once you've
00:07:08
put by 20% of your paycheck for enough
00:07:11
months to hit this figure then you can
00:07:13
allocate more money to the next places
00:07:15
we're going to be talking about in an
00:07:17
ideal world you should have 30% of your
00:07:19
paycheck left by this point so where
00:07:22
should you put the rest well next is the
00:07:24
only place you'll ever get a guaranteed
00:07:26
return on investment let me explain
00:07:29
normally if someone tells you they can
00:07:30
make you a guaranteed profit then I'd
00:07:33
say run away as fast as you can it's
00:07:35
normally the grifter feeding people this
00:07:37
garbage however in this instance it's
00:07:40
100% true as I'm talking about paying
00:07:43
down your high interest debt I mean why
00:07:46
bother investing in stocks for a
00:07:48
possible 8 to 10% return when you can
00:07:50
have a guaranteed 25% return by paying
00:07:54
off the debt that's constantly eating
00:07:56
into your wealth every single day it's
00:07:58
kind of like someone asking you what the
00:08:00
best foods are to eat and exercise
00:08:02
routines to follow while knowly having a
00:08:05
parasite inside their body sucking away
00:08:07
all the nutrients of course a doctor's
00:08:10
main priority is getting rid of that
00:08:12
parasite as it's pretty much guaranteed
00:08:14
that you'll feel better so if you have
00:08:16
highin interest debt then I'd recommend
00:08:18
putting the remaining 30% of your
00:08:20
paycheck towards paying it off there are
00:08:22
two really common methods that you can
00:08:24
use to pay down your debts the first way
00:08:26
is the Avalanche method and this is the
00:08:29
most logical way to tackle debt because
00:08:31
you pay off the debt with the highest
00:08:33
interest rate first so let's see how
00:08:35
this will work in the real world Imagine
00:08:37
you've got three different debts debt A
00:08:39
is for your credit card and it's $5,000
00:08:42
with an interest rate of 20% debt B is a
00:08:45
loan from your family of
00:08:47
$1,500 with no interest rate and debt C
00:08:50
is a car loan for
00:08:52
$2,500 at an interest rate of 15% if you
00:08:56
decide to pay $500 per month to W your
00:08:59
debts using the Avalanche method this
00:09:02
would firstly all go towards debt a
00:09:04
until it's paid off as it's the highest
00:09:06
interest rate this would take around 13
00:09:09
months and you'll end up paying
00:09:12
$515 122 of Interest after this your
00:09:15
$500 payments would go into debt C and
00:09:18
it would take a fur of five months to
00:09:20
pay off that which would include
00:09:24
$98.3 of Interest then it would finally
00:09:26
be time to attack debt b as your family
00:09:28
are probably getting a bit impatient for
00:09:30
their money this would take 3 months and
00:09:32
obviously you'd pay no interest so with
00:09:35
the Avalanche method you'd be debt three
00:09:37
in 21 months and pay approximately
00:09:40
$613 in interest the second option is
00:09:43
the snowball method this is the
00:09:45
psychological way to tackle debt because
00:09:48
you pay off the smallest debts first the
00:09:50
thinking behind this is it makes you
00:09:52
feel like you're making faster progress
00:09:54
so you'd pay debt B first followed by
00:09:57
debt C and then finally debt a however
00:09:59
if you use this method it would take you
00:10:01
around 23 months and cost approximately
00:10:05
$1,700 in interest payments that's 2
00:10:08
months and over $1,000 more than using
00:10:11
the Avalanche method so if you can stick
00:10:14
to the logical approach it'll be worth
00:10:16
it in the long run once you finish
00:10:18
building your safety net and paid off
00:10:19
any highin debts you can put that
00:10:22
combined 50% towards growing your wealth
00:10:25
that's why place number four is a tax
00:10:27
advantage investing account when you get
00:10:29
your paycheck income taxx gets taken out
00:10:32
of it right away go to the store and buy
00:10:34
something and you run into sales tax if
00:10:36
you own a property you'll pay property
00:10:39
taxes every year even when you invest
00:10:42
and eventually make a profit you'll be
00:10:44
hit with capital gains tax unfortunately
00:10:47
I can't help you with most of them but
00:10:49
luckily there's a legal way to avoid
00:10:51
paying capital gains tax on your
00:10:53
Investments if you're in the UK you're
00:10:55
going to want to get yourself a stocks
00:10:56
and shares Isa and if you're in the US
00:10:59
you should get the equivalent which is a
00:11:01
rth IRA they both have different rules
00:11:03
which I've discussed in past videos but
00:11:05
the bottom line is both these accounts
00:11:08
allow you to invest without worrying
00:11:10
about taxes if I were you I'd put 35 to
00:11:13
40% of your excess money into one of
00:11:15
these accounts and invest it in a
00:11:17
lowcost Index Fund like the S&P 500 over
00:11:20
the years this has made me on average
00:11:23
around about 8 to 10% taxfree per year
00:11:26
of course I'm not a financial advisor
00:11:28
and this shouldn't be taken as Financial
00:11:30
advice stocks can go down as well as up
00:11:33
so it's important to understand the
00:11:35
risks involved just imagine if you
00:11:38
invested
00:11:39
$250 per month then assuming an 8%
00:11:42
average annual return you'll have 1.3
00:11:45
million in 45 years time completely
00:11:49
taxfree feel free to head over to the
00:11:51
compound interest calculator website to
00:11:53
do the Maths for yourself I understand
00:11:56
it's a pretty slow way to build wealth
00:11:58
however if if you're consistent then
00:12:00
historically it's proven a very
00:12:02
successful strategy one of my favorite
00:12:04
investing platforms is trading 212 as
00:12:07
they offer stocks and shares Isa since I
00:12:09
was planning to talk about their app
00:12:11
anyway I reached out to them to see if
00:12:13
they'd be interested in sponsoring this
00:12:15
portion of the video they agreed and are
00:12:17
also offering a free fractional share
00:12:19
worth up to £100 to anyone that uses the
00:12:22
code tilb when they create an account
00:12:25
plus you can get more free fractional
00:12:26
shares by inviting your friends both of
00:12:28
you get a free share as long as they
00:12:30
fund their account I found the best way
00:12:32
to invest is set things up on autopilot
00:12:35
the aim is to reduce as much of the
00:12:37
friction as possible between you and
00:12:39
your Investments we just get in the way
00:12:42
of ourselves most of the time that's why
00:12:44
it's best to just set up Auto investing
00:12:46
it gets the money away from you and most
00:12:48
of the time you don't even notice it's
00:12:50
gone until you check your investing
00:12:52
account and have a nice surprise my son
00:12:54
has actually been doing an experiment on
00:12:56
trading 212 he started investing in £5 a
00:13:00
day which is about
00:13:01
$65 which is the average price of a
00:13:04
coffee a day into the S&P 500 it's now
00:13:08
been almost exactly a year since he
00:13:10
started its experiment and as you can
00:13:12
see he's actually invested
00:13:16
1,53 and his investment is now worth £
00:13:20
1,77 which is a
00:13:22
13.68% return on investment what's even
00:13:26
more amazing is that he completely
00:13:28
forgot about this EXP experiment until
00:13:29
the other day when I asked him about it
00:13:31
it was a lovely surprise if you want to
00:13:33
set something like this up too then it's
00:13:35
really simple I'll walk we through it
00:13:37
now once you've opened an account and
00:13:39
used the code Tilbury to get your free
00:13:41
fractional share worth up to £100 just
00:13:44
head over to the portfolio icon and then
00:13:46
click on pies and finally create a pie
00:13:50
if you just want to copy what my son's
00:13:52
been doing then click on build a custom
00:13:54
pie add instruments and then search for
00:13:58
SMP p500 there are lots of different
00:14:01
ones that pop up as there are different
00:14:02
companies that offer essentially the
00:14:04
same thing I personally like Vanguard
00:14:06
the best as they're one of the oldest
00:14:08
and most trustworthy companies in the
00:14:10
game your grandad will probably even
00:14:12
know about them I also prefer the
00:14:14
accumulation fund which is this one here
00:14:17
as it automatically reinvests your
00:14:19
dividends which is essentially a reward
00:14:21
the company gives you for holding their
00:14:23
stock so just click on the fund add to
00:14:27
Pi and then this little arrow next and
00:14:31
then make sure to select auto invest
00:14:33
before pressing next again here you can
00:14:36
choose how many years you want to
00:14:37
automatically invest for how often you'd
00:14:40
like to invest and how much you can
00:14:42
afford the longer you can keep this
00:14:44
going the better you won't always make a
00:14:46
profit however you have a better chance
00:14:48
if you keep your money invested for over
00:14:50
10 years it also gives you a core value
00:14:52
projection based on actual stats my
00:14:55
son's actually outperforming his at the
00:14:57
moment but of course take it with a
00:14:59
grain of salt that's nobody can actually
00:15:01
predict what the stock market is going
00:15:03
to do you can build out more complicated
00:15:06
pies with many different stocks however
00:15:08
I think for 99% of people it's much
00:15:11
better to just keep it simple I used to
00:15:13
think of this style of investing like my
00:15:15
insurance even though your capital is
00:15:17
always at risk when you're investing
00:15:19
that's just how I saw it I knew I wanted
00:15:21
to be a millionaire one day and in my
00:15:23
worst case scenario I'd have to wait
00:15:25
until I was old and great of course I
00:15:28
managed to make make my first million a
00:15:30
lot sooner through different businesses
00:15:32
but that didn't stop me from investing
00:15:34
for the long term at the same time as
00:15:36
building those businesses the fifth
00:15:38
place you can put your money is in high
00:15:40
risk High reward plays now this isn't
00:15:43
for everyone so if you're happy waiting
00:15:45
years to make your first million then
00:15:47
that's absolutely fine however if you're
00:15:49
anything like me when I was younger then
00:15:51
you'll want to make it a bit quicker
00:15:53
most people online will either teach you
00:15:55
the slow lane of getting rich which is
00:15:58
the investing St we just discussed all
00:16:00
the fast lane which involves taking more
00:16:02
risk in the hopes of getting greater
00:16:04
rewards I honestly sit in the middle as
00:16:07
I've traveled down both of these paths
00:16:09
so if I were you I put 5 to 10% of my
00:16:12
paycheck towards starting a side hustle
00:16:14
or full-blown business you may think
00:16:17
that doesn't sound enough and that you
00:16:19
should skip the investing and put all
00:16:21
your money into this but I have a
00:16:23
different opinion when you have less
00:16:25
money to play with especially in the
00:16:27
early days of starting a side hustle you
00:16:29
actually become more creative with how
00:16:31
you use it which lets you find gaps in
00:16:34
the market that most people with money
00:16:36
just can't see now with the final 5% I'd
00:16:40
make the riskiest investment of them all
00:16:43
cryptocurrency I've avoided talking
00:16:45
about this in my videos for a long time
00:16:48
however it's undeniable that it's
00:16:50
gaining popularity year after year I've
00:16:52
got about 5% of my Investment Portfolio
00:16:55
in Bitcoin and ethereum as I believe in
00:16:57
the long-term potential
00:16:59
however I'm very aware this is very
00:17:02
risky and it could all go to zero at any
00:17:04
point so as long as you're okay with
00:17:06
that then it's worth considering if you
00:17:08
want to know why net worth goes crazy
00:17:10
after you save 100K then you can watch
00:17:12
this video next but don't click on it
00:17:14
just yet make sure to subscribe if you
00:17:16
want to grow your wealth okay I'll see
00:17:18
you over there
