I took the last two days off from work because I caught some bug (not Wuhan Flu) and didn’t want to wind up knocking out half the people at work by giving it to them. I very seldom take Paid Time Off (PTO) so I’ve accrued a hundred or so hours of PTO that I can use. And I accrue another five hours every pay period. SO…taking yesterday and today off.
One of the things I did with the time was update my personal finance stuff. I’ve been using the same budget and spending plan since 2017. Hey, if it works, it works. But I needed to clean it up and streamline it a bit to reflect that I earn a bit more money now than I did seven years ago.
Succinctly, I live on about 45% of my income. The rest is immediately whisked off to various little hides. 15% goes into retirement investing, %15 goes into savings, %10 goes into an emergency fund, 10% goes into land fund, and %5 goes into my HSA. I very much understand that this is quite a departure from how most people live. Because of the way I live, I have a pretty small amount of living expenses. I don’t have a house payment, car payment, student loan payment, credit card payment, kids, or anything like that. My property rental covers my property taxes and insurance. My actual out-of-pocket living expenses are about $675 a month. That 45% of my paycheck covers that nut pretty quickly and leaves me a bunch left over for pretty much whatever I want. I don’t have the latest and greatest, and I’m using a ten year old computer (mostly for sentimental reasons), but ‘keeping up with the Joneses’ was never a thing with me.
What’s interesting, though, is that I have learned (the hard way) what the expression ‘pay yourself first’ means. I know most of us here are old-timers who have made way, way too many trips around the sun but for the younger crowd who maybe never had someone explain it to them, now might be a good time.
When I was younger, I had always heard the expression ‘pay yourself first’ when it came to money. I had no idea what that meant. I just got my paycheck, doesn’t that mean I got paid? Pay myself what?
You are the main character in your life’s story. No one, and nothing, is more important than you. Ford financing, the electric company, Krogers, the local ISP, and the kid who mows your lawn are not more important than you. When you get your paycheck (or any other income…be it lottery winnings, a gift, or $20 found in your winter coat pocket) the first person on the list of ‘where does this money go’ is you. You pull out the money that is earmarked for your savings, your investment, your ‘just in case’. Once that money is pulled out and safely stowed, then everyone else gets paid. That’s it.
Why is it so important? Because, as I have repeatedly hammered into the blogosphere, you will need $50 bills far more often in life than you will need .50 BMG. You will have job losses, personal losses, medical issues, sick kids, bad transmissions, leaky water heaters, broken pipes, emergency travel needs, desperate loved ones, and a million other emergencies that will magically be downgraded to ‘inconveniences’ because you were able to just Write. A. Check.
It doesn’t matter how much you earn…calculate a dollar value or a percentage value and that’s the amount you take off the top, first thing, every time. Large amount or small amount, doesn’t matter as long as its something. To paraphrase Shepherd Book: “I don’t care how much you save, just save it.”
Ten years ago I made so little money it was ridiculous, and that lack of earning wound up costing me a lot . When my head cleared, I looked for a career path that would provide better for me, I worked my way though the necessary education, and now I do okay for myself. I’m not rich, and I still make less than many people, (but my net worth, on the other hand….) but at the end of the month I have money in the bank, a roof over my head, food in the fridge, hot water in the pipes, and the security of knowing I have the financial resources to cover emergencies.
Part of preparedness includes being prepared in case the world doesn’t end. That starts with paying yourself first.
If your employer offers a Roth 401K option, take advantage of it. No taxes due on withdrawals and no minimum distributions. You can also hold rental properties, farmland and precious metals inside of your Roth accounts with no taxes due on gains, income and withdrawals.
Always take the match. I am amazed at he amount of people who just leave that money on the table.
Amen.
Financial decisions made in youth can haunt your “golden years”. Putting off funding retirement. Not buying life insurance if you have a family. Using retirement savings to fund lifestyle impulses like RV purchases or vacations. Relying on credit cards to cover your ass in emergencies.
And…my latest favorite…not buying a $25 run capacitor and a $25 contacter off Amazon to use as spares for your heat pump (and watching YouTube to learn the very simple install) BEFORE they fail and instead paying an HVAC tech $400 to handle a failure the two most common failed components.
match=free money!!!
The employer matching was automatic for me on every ‘dollar’ I contributed. I put in 30-40 percent and they matched 6% of every dollar.
Hmm. Mine is just a flat 4% of the entire paycheck, not just the amount I contribute to the retirement.
Never heard of that matching plan, does your employer offer a pension? Mine offered full pension with lump-sum payment or annuity option.
Nope. Just the match. I kick in 15% of my paycheck, they add in 4% of the total paycheck amount.
We don’t get a whole lot of choice in the investments. About 30 different funds. I was hoping they’d just put the 4% into my self-directed Roth at ETrade, but no.
Let me take a quick look and see where its invested…..
Washington Mutual Investors Fund-R5e 34.42%
The Income Fund Of America-R5e 32.12%
The Growth Fund Of America-R5e 11.63%
EuroPacific Growth Fund-R5e 11.02%
Smallcap World Fund-R5e 10.81%
My most recent employer takes back any matching they contributed if you didn’t stay for more than three years. They fired me before two years. It’s not like they took what I contributed, but something to keep in mind.
Just be aware that the feralgov can change the rules any time it wants.
This is why you must convert those digital ‘assets’ into tangible items and not leave them inside of those government sponsored accounts.
Remember the ‘haircut’ in Greece many years ago?
I could see .fedgov saying “All 401k’s/Roths will be taxed at x rate -except- for investments on govt bonds”.
Don’t trust .fedgov; just as the indians.
I suspect what is likely is that someone is going to float the idea of ‘pension bonds’….pension funds, which hold bazillioins of dollars, will be ‘encouraged’ to invest in these govt bonds. You could argue we already have that in the form of Treasury bonds that funds do invest in, but I’m betting something more specific…tailored to those huge state and private pension funds.
Having made it to officially being “old” and having followed (lead?) Zero’s advice for finance, I am pretty much at the point of “just write a check” for just about everything. And now? It’s “just find somebody willing to do the work” becasue so few are willing, ever since covid. It’s slowly getting better, I’ve had household jobs that I can’t do waiting for two years while the various businesses tell me they will do it “when they can get a crew” and “fit it in their schedule.”
Dave Ramsey. One doesn’t have to like the personality, but the method works and it is low-risk. Stick to it and the life dividends are…life-changing.
Spend less than you make is so hard for most everyone.
Recently had my second truck t-boned ,totaled. Had to go to the credit union to get some paperwork notarized. Bank employee said to me ” let us know if we can help on replacing you truck” I just smiled as I walked out! The money needed to replace the truck is already in the checking account even before I receive the settlement check.. l have the 50s, no 50 BMG yet !!!
Most of my discretionary spending is for items that I EXCHANGE $$$ for the item. In other words, I can recover the $$$ gone by trading or someone else paying me for it. Spending $$ on vacations, tickets to an event or a restaurant are consumed leave you with nothing but a good memory.
Living within your means is very important in the long run. As CZ says above, its those surprise expenses that a kick one in the kachungas if you happen to be short at the time.
Sound wisdom in your post Commander as always and comments also 🎯🗿
15% goes into retirement investing, %15 goes into savings, %10 goes into an emergency fund, 10% goes into land fund, and %5 goes into my HSA.
That is amazing. Good for you, seriously, that shows wisdom and discipline.
America’s founders believed that citizens who were financially independent could make unbiased decisions when voting. Seems like everything about government these days is designed to take away that financial independence. When asked why he gave so much of his money to the poor, Bob Marley replied he didn’t like people having to go to corrupt politicians with their hand out to get the money they they needed to live.
I wish everyone had your relationship with money. I am late 50’s and it has only been in the last few years that I have learned how money works; my family has never understood or taught this information. I wish I had learned much sooner, I would be rich by now. Thank you for teaching this information.
You still don’t know how ‘money’ works if you call that paper debt in your wallet money. Federal Reserve Notes are debt notes created by borrowing. MONEY is a measurement of gold and silver as defined in our Constitution, U.S. Code and the several Coinage Acts.
As long as people call debt ‘money’, the bankster’s have succeeded with their fraud, theft and looting of the world.
You should read Web of Debt. I think if you can understand what she is writing it will help you a lot in understanding money.
I will leave you with a few quotes on money by a couple of people who know a little bit about it:
“Gold is money, everything else is credit.” ~ J.P. Morgan
“Gold and silver is the only money in the world that can’t go bankrupt in a world going bankrupt”. ~ Bill Holter
Living in your mom’s basement and eating the food from her fridge allows you to believe whatever. Grownups have to pay their property taxes in USD, so it is valuable to have. Grownups have to buy their groceries with USD, so it is valuable to have. No matter what the currency is, gold, USD, bitcoin, there are always going to be big fish that eat small fish like you.
One thing people frequently miss is using loan payments to pay yourself. If you have had a car loan, home improvement loan, etc., when the last payment goes in a twinkle magically appears in the eyes because “now I have X dollars a month to spend on Y.”
Wrong answer.
Your budget has, for however many months, worked with that dollar amount “disappearing,” so keep making the payments but make them to yourself. Your budgeting remains the same but now you are accumulating money for you.
Sound advice for those who make payments.
Part of it is where you live. I was born and raised in NYC – lived there for 50 years. I made pretty good money and never really had any debt, but couldn’t really save very much because the city was a hole that I had to dump money into. 15 years ago I moved to a state with no income tax or sales tax. Everything is cheaper because the taxes got added on to everything you needed to live. There were fees on everything. Transit and other taxes and fees on your water, phone, electric and gas bills just as an example. My spending habits didn’t change, but I became flush with excess funds once I left that $#i+hole. I still have no debt, but my savings has EXPLODED!
Cannot imagine growing up in NYC with all those costs ‘built in’. That said, each state has its own peculiarities that others might find nonsensical or particularly corrupt. At least in many states we can see how we’re being ripped off and – in some cases – make lifestyle decisions that allow us to avoid some of those government fees.
Transparency is cool.
“you will need $50 bills far more often in life than you will need .50 BMG”
A wad of cash solves a whole lot of problems. Almost all the problems.
Survivalists ignore basic financial preparedness more than anything else beside maybe physical fitness.