Why paying yourself first can lead to financial growth for EVERYONE | Transcription

Transcription for the video titled "Why paying yourself first can lead to financial growth for EVERYONE".


Note: This transcription is split and grouped by topics and subtopics. You can navigate through the Table of Contents on the left. It's interactive. All paragraphs are timed to the original video. Click on the time (e.g., 01:53) to jump to the specific portion of the video.


Intro (00:00)

This is 15 Minutes of Freedom. I'm your host, Elite Life Optimization Coach Ryan Neidell, and today is day two in the quadrant of life referred to as finances. So yesterday we covered high level, I'll say creating an internal balance sheet for your life. Auditing exactly what it is that you have going on fiscally so that you can make more responsible decisions. I.e. another way to say this is we got really clear on the facts of your life. We got clear on how much you're spending. We got clear on how much you have in the bank. We got clear on exactly how much you're making. And then we added 20% to the expense structure of your life to make certain you had room. Room for the things that come up that we don't plan on. When the dog gets sick. When you have an unplanned medical expense. When your car needs repaired. Budget, budget, budget. But what we didn't cover yesterday was something I refer to as paying yourself first. didn't cover yesterday was something I refer to as paying yourself first. Nowhere on yesterday's podcast do we discuss what that really means. And so that's what today is, paying yourself first. Because what I've found is typically we think of all the people that we have to pay prior to ourselves, but I'm guilty of expressing that to you yesterday.

Financial Principles And Habits

Pay Yourself First (01:48)

You have to pay your mortgage, utilities, your car payment, your insurances, all the way down the checklist, right? Internet, cable, whatever the things are. But what about you? What about investing in yourself? What about investing in yourself not only fiscally, but also earmarking money for the emotional investments? And what I mean by that is what if you took 10% of every dollar that lands in your bank account and you moved it to the side to be able to do something for yourself with that money? Right? You take the 10% for, we'll say, you want to get blood work done, to truly dial in the variables of your life, to really, really optimize the efficiency inside your body. Well, how would you do that? Of course, you have to go to the doctor and you might have co-pays, you might have all these things. And if there's not money set aside for that, there's a decent chance you might be apprehensive to do it. But why? but why? Why would you be afraid to do it? You deserve it. You're certainly worth the investment in yourself. It would be my belief system that the greatest investment that you ever can make is in yourself. Right, I inherently, again, I am no financial advisor. I am no fiduciary. I am not qualified, but I'm going to share my opinion. It's my belief system, if you're a small business owner, mid-sized business owner, that the largest return on investment would be the strategic growth of yourself and your corporation, because your return is going to be higher. Right now, of course, it's not compounding, and I know there's some things here. I know this is a triggering conversation for many. Let's say you are an entrepreneur and you do own your own business, and you're so happy to have that 401k IRA, the investment strategy that you have, and you're putting 8% to 10% away, and you're putting 8% to 10% away and it's growing 8% to 10% a year. I must ask you in the same amount of time, how much has your business grown? Seriously, year over year, month over month, what sort of success has your business seen to the bottom line? What sort of success has your business seen to the bottom line? What would happen if you could get more strategic there? What happened if you had more money sitting around to invest in higher efficiencies for the thing that drives the capital of your life? And I'm going to say the same thing, right? As you work inside of a company, I love a 401k, right? Low risk, fairly low return. And it's my belief that anytime a company will dollar match for you, you should absolutely invest in that, in that vehicle up until the dollar match for you, you should absolutely invest in that vehicle up until the dollar match stops. Every company has some sort of level that they cap out at. You run it right up to that level and then you figure out how to get more strategic with the rest of the capital, which in my opinion would be paying yourself first. We all need cash.

Fiscally (05:28)

We need things set aside for retirement. We need things to make sure that when we want to stop working, we have that ability. But what does that really mean? In some capacity, we can't predict exactly what that's going to take. And certainly there's ideas, there's plans, there's things. I am, again, last time I'll say it, I'm not a financial advisor. Go find one. Go find a great one. Email me and I have some I can introduce you to. Brilliant individuals that inevitably will tell me that I'm wrong with all of this. But it's my opinion when you start looking at things like certain life insurance policies that you can invest into, have them throw off yields, right? They'll throw off a return for you. Plus you can borrow against the cash that you put in, in an interest free and tax free manner, that effectively keeps more money in your pocket. Because especially if you own your own business, you can contribute to plans such as that at a very specific rate as part of your compensation that has its own tax structure to it. But most of us don't think that way. Right, I was guilty of that. If I go back to when I was working in quote-unquote corporate America, running car dealerships and selling cars and the things that I did, it's just like I'm going to just invest in this 401k and money's going to come out of every check and it's going to go in there. And I had no strategy. It was just put money there and then I quit. And then I changed jobs. I go to another dealership. It takes a better part of 18 months to get the money moved around and transferred around. And it was great. There was something like 25 grand sitting there. Money I didn't even plan on. But as my life took its twists and turns, as you may or may not know, and I went through my financial hardships, I had to cash that out, right? I had to take the cash. And so all of a sudden that 25 grand, by the time you pay the taxes, the penalties, all the things that go into it, you get a check for 16. Which is still a lot of money, but 9 grand disappears overnight based off of putting things in a financial instrument or financial vehicle that I couldn't ultimately control. But I'm going to move that aside for a second. Let's not go too deep down the rabbit hole of how to invest your money. Let's talk about what you do when the money comes into your bank account and why I believe you should move a certain portion of a side like you don't even have it. Because if taxes increased, you would certainly have to just pay the tax. You would have no choice, right? So if you tax yourself 10% and you're diligent about it, think of all the money that you would have, right? We came up with this example yesterday where maybe you bring home $8,000 a month, you and the family. example yesterday where maybe you bring home $8,000 a month, you and the family. So $800 a month would get pushed to the side. You never even have it. Over the course of a year, $9,600 to get strategic with. Now, who knows what strategic could mean for you. Maybe, again, it means blood panels because you want to invest in your health and longevity. Maybe it means an insurance plan. Maybe it means going and joining a mastermind or a coaching protocol. Maybe it means going to a therapist, a psychologist.

Continue thinking idealist. (09:22)

But things that you would not inherently do based off your current spending habits because you put yourself last right it's all the way at the bottom it's okay if the mortgage gets paid and the car gets paid and the insurance gets paid and the cell phone gets paid and then we eat as a family and we do all these other things if there's any money left over then i can consider what if you put yourself above the mortgage If there's any money left over, then I can consider. What if you put yourself above the mortgage? And what if you built your debt structure around that sort of methodology? What if you didn't assume any more liabilities? What could that look like for you? Now granted, this is coming to you from a 35-year-old perspective that is much different than my 25-year-old perspective because I had accumulated some level of wealth and then lost it all. So maybe I'm a little more conservative, maybe I'm more aggressive. It really depends on how you want to look at it. But I inherently at this point in life believe that if I can't pay cash for it, I shouldn't own it. Some of that is out of necessity. Right? When what I will call the bankruptcy happens, when I'm hemorrhaging cash and my debt load is much higher than the amount of money I'm bringing in. Truck repossession. Almost home in foreclosure. No money left in the bank account. My credit gets shot. And so I don't have the choice of going and swiping with a credit card to bail myself out. It's cash only. And I can't go get a loan for a car anymore. I have to pay cash for it. And in those moments five years ago was frustrating because you think our entire society lives off some form of credit. But as I have adapted and grown accustomed to that, I think it is a beautiful way to live. I've worked to reestablish credit and repair and rebuild, and it's still an ongoing process. And right now I could probably go out and afford a vehicle and get financing for it. But why? Why should I pay the 6, 7, 8% interest? 3, 4% interest? Why should I just wait until I can pay cash for it? I also don't believe that a new vehicle is all that intelligent of a purchase. Unless you're structuring things through a business and you can write off depreciation. Whole other side of things. If it's just consistency, if you're someone that gets in and out of cars fairly often, you're someone that's basically, you're equating that into your monthly operating budget. And so you want to figure out what those dollars and cents are, and you want to stick with them. And for me, I like having my monthly operating budget be zero for an automobile. Of course, gas insurance, things like that. How about I drive a truck? I was able to find the right vehicle, write a check for it. Fully realizing if you think a vehicle is an asset, I would encourage you to reframe that possibility. I look at it personally as a liability. It's a liability because very, very rarely does the car that you drive gain value. Every mile you put on it, it loses money. Every mile you put on it, it's going to need something additional in maintenance. Cars are not investments. They're a depreciating asset that is also a liability. And so you treat them as so. In my opinion, you hedge your bet the best you can. Why would you pay 6% to 7% interest for a vanity product that's losing 10% to 20% value year over year. Those numbers are growing far apart from each other. They're not lining up towards the same thing. These are all strategies, tactics, ideas that could best be discussed with a qualified financial advisor. Not with me. This is nothing more than bouncing ideas off you right now. Because I feel like with a certain level of thinking about at least what could be possible for you, you're going to be able to make better decisions. Maybe you've never thought about using a life insurance policy as a financial vehicle before. Maybe you've never thought about not investing much over what a dollar match could be inside of a 401k.

Paying Yourself First (14:23)

Maybe you've never thought about paying yourself first and sweeping money to the side and admittedly living below your means. But I like, think back in the 80s, and there's a chance you may not have been born then. Interest rates on mortgages were 12 to 16%. Automobiles were even higher. What that meant was you couldn't go out and buy more than you could afford. And the cash had an actual reason to exist. But our greed and our incessant need to prove how well we are doing causes most of us to overindulge, overextend, and live past our means.

First Credit Card (15:13)

And unfortunately for most of us, we do this at a very young age. It's almost predatory. I think of the college campuses I was on. Every major credit card company would come, be in a common area, offer some sort of gift or gift card or something for applying for a credit card. You'd get approved. It was a $500 to $1,000 limit. We were never taught much about finances, so you get it, and then you just make the minimum payments, or don't. much about finances, so you get it and then you just make the minimum payments or don't. Then enough time passes by and when you really need credit, right, you get out of college and you're ready to get your first house, buy your first car. You can't. Your score is bad. And like you didn't need the credit card in college. You needed to work hard and save up some cash and pay for things in cash. And if you can't afford it, you shouldn't buy it. But it's a novel concept that I was not able to understand until I was 30 or 31.

Financial Wheels On The Bus (16:22)

I was not able to understand until I was 30 or 31. I was a king of looking at the cash flow in my life and saying, a $1,500 or $1,600 car payment is no big deal. Proportionality-wise, I'm making $40,000 a month. Clearing $28,000. Oh man, that's less than 5%. Not quite less, but that's 5%. And I go back in my mind to, well, I was making 60 grand a year.

Basic Financial Strategies

Simplest Rule (16:51)

I didn't think any big deal to have a $300 a month car payment. Yeah, this makes sense. It doesn't make any sense at all.

Understanding Interest Rate

Great Interest Rate (17:02)

I think of all the things I could have done with that money that just threw it away in a car and I even had a great interest rate back then right 1.9 through BMW financial services just like man if I could have just slowed down if someone if I would have been receptive to hearing what I am sharing now maybe things could have been different but if they had been different, then I wouldn't be able to share it with you now, so everything happened in the order it needed to. So my encouragement for you today, in this financial sector of our conversation, the fourth quadrant of the foundational aspects of which I look we should live our lives, I want you to consider just paying yourself first. What that can really mean for you. No matter how good or how bad you think your financial strategy is currently. I don't care what it is. I don't care if you're paycheck to paycheck. Find someone that will sit down and go over things with you so you can see a different possibility. It's never too early or too late to become educated on what's possible. Because when you heighten your awareness and heighten your education, you can make better decisions. And as you make better decisions, you'll find out going forward that every day you're able to get shit done. you

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