- A portion of this video is sponsored by Google Pay.
So, I made a lot of mistakes
with my own personal finances early in life.
I borrowed way too much money to cover my college tuition.
I spent money trying to impress people that I didn't like.
And I bought every single Limp Bizkit album,
instead of just downloading it from LimeWire.
But I was lucky
in that I got all of these mistakes out of my system,
early in life.
Most people don't,
they make the same exact mistakes with their money
from the time that they get their starting salary,
until they reach their peak income later in life
in their 40s or 50s.
And when it comes to money,
it doesn't matter how much you make.
It's all about how much you save.
And so in this video,
I wanna break down the four most common mistakes
that people make with money
and how you can reach financial freedom.
Mistake number one,
people don't confront the truth about their finances.
When we're struggling in the short term,
it's far easier and far less painful
to simply turn a blind eye to our own financial situation.
We've got endless credit card payments,
we've got massive student debt
and we're living paycheck to paycheck.
The problem seems so big, so scary
and so daunting that we'd rather simply live in ignorance
than to address the problem.
We might laugh at our own financial misfortunes
with friends,
but deep down we know the truth
that our own finances are terrible,
because of bad decisions we've made in the past.
And the fact that we haven't sat down to put together a plan
to correct these problems.
While it's easier and less painful
to ignore your problems today,
it's far more difficult and far less enjoyable,
if you put it off to the future.
So, I remember a turning point for me with my finances.
I sat down at my laptop
and I pulled together all of my banking
and finance information.
And so I collected my student loans,
I had about six of them at the time.
I got my car payment.
I got my business debit account,
my personal debit account as well as my credit card.
And I put them all into one spreadsheet
and I got a bird's eye view
for the first time of my finances.
For so long,
I had been putting this off,
because I was afraid of what I might find.
I was afraid of the truth.
And the truth was that I was in trouble.
My net worth sat at around negative $100,000.
And while this was a sobering realization,
each day from that moment got just a little bit better.
And that's because now I had a goal to become debt free.
And every step that I took towards reaching that goal
from bringing that negative $100,000 up to zero
was what fired me up and energized me to keep going.
Now, when I thought about my personal finances,
I thought about what my life would look like in the future.
I thought about the clients that I could now say no to,
because the work didn't fulfill me
or the client was a pain in the ass.
I thought about the weight being removed
from my shoulders
and above all,
I thought about the freedom that I would have
when I would finally become debt free.
So, if you're looking to get on top of your money problems,
start by organizing all your accounts
to get a bird's eye view
and then get clear on your goals
and why they're so important to you.
Stop hiding from the truth
and create a plan to turn your finances around.
What's gonna get you fired up
to make these changes in your life?
So, before I go any further,
I need to pay my own bills.
This portion of this video is brought to you by Google Pay.
Google Pay helps you to manage,
all of life's essential transactions
with a lot of helpful and unique features.
You can pull together your accounts to get a bird's eye view
of your personal finances
and you can track your spending over time
to see exactly where your money is going
and you have the ability to search transactions.
So, instead of going back through past banking statements,
looking for that transaction that you need,
you can simply search for it,
whether it's a book, coffee or a Squatty Potty.
Hey, I'm not judging.
Oh, and you have the ability
to make secure payments directly with your phone.
Download the Google Pay app from Google Play
or the App Store.
So, whenever you support the brands and products
that I endorse,
you're also supporting this channel.
So thank you.
And thanks to Google Pay
for sponsoring this portion of my video.
Alrighty,
now back to correcting your money mistakes.
Mistake number two,
people lease a luxury lifestyle.
One of the biggest lies that we've been told
is that in order to afford a car
or anything that we can't afford,
we should take out a loan.
But when it comes to something like owning a vehicle,
we don't need to spend tens of thousands of dollars
to find something that gets the job done.
That gets us from point A to point B.
But we see all of our friends driving brand new cars
with heated seats and beautiful leather trim.
And that gets in our head.
Now we're thinking more about the immediate gratification
of driving in that car
and we begin to rationalize the purchase.
I mean, it's only $300 a month
and it's definitely smarter to get a new car,
because it's gonna last me longer.
If I got an old car,
I'd have to put even more money into it
than I'd probably spend on a brand new car anyway.
And you know what?
If I spend an extra $50 a month,
I can get the top of the line model.
And it's not just cars.
People do this with every credit card purchase they make
and don't immediately pay off at the end of the month.
They essentially lease to own new furniture,
home decor and electronics.
This might feel good in the short term,
but the moment you drive that car off the lot
or mount the flat screen TV,
the good vibes begin to end.
You'll regret these purchases once you realize
that that luxury item isn't providing sustainable happiness
and it actually moved you that much further away
from reaching financial freedom.
Now I have nothing against buying really nice things
and spending money on things
that you value and that bring joy to you.
In fact,
I spend a lot of money on my own personal wellness,
fitness, health.
These are the areas in my life
where I spend openly and freely.
But up until the point when I was debt free,
I had a solid salary and savings in the bank.
I wouldn't spend that much money on things.
I was pretty frugal
and I really wanted to make sure that the purchases
that I was making served my long term goals,
they served that financial freedom
that I was working towards
and not just satisfying some immediate need
or immediate desire that I was feeling in that moment.
When you're faced with these kinds of purchases,
ask yourself the following questions,
"Can I actually afford this purchase?"
And if you need to put it on a credit card
then the answer is no.
"Am I making this purchase for myself or to impress others?
"Could I live without this item for another year?
"Do I need the high end version?
"Or could I get by with the basic version?
"Basically, do I have enough money to invest
"in West Elm right now
"or should I stick with Ikea,
"until I make more progress on my financial goals?"
People often spend money that they don't have.
They try to prove to the world that they're successful,
but I'd so much rather sleep on an Ikea mattress
than lease a lifestyle that's outside of my means.
Mistake number three, people never plan ahead.
There are expenses both big and small
that are coming our way that are in our future
that we're currently ignoring,
because we haven't done that work
to actually get a bird's eye view of our finances
and to see what might lie ahead.
And when it comes to those unexpected expenses,
which we can actually totally expect.
There are those things that are small,
the parking tickets, the broken water heater,
the midnight emergency trip to the dentist.
That's why every reputable financial expert,
will encourage you to build an emergency fund.
You can start with a modest $1,000 to plan
for the unplannable expenses,
but eventually it's smart
to build an even bigger buffer of six months
or more of expenses.
Since I started my own business right out of college,
I have literally never had the comfort of a steady paycheck
and that's actually the best thing to happen to me.
And I think it's a mindset
that everybody should be applying to their life,
whether they run their own business
or they work a nine to five.
You have to start asking questions of yourself,
"What would I do if my income wasn't guaranteed?"
And by the way,
even if you have a full time job,
it's not guaranteed.
"What if I didn't think I'd be able to get work,
"over the next couple months?
"How much more conservative would I be with my spending?
"What would it feel like
"if I had an entire year of expenses in the bank?"
Now, when your car breaks down or a pipe burst in your house
it will still be a pain in the ass,
but it won't ruin you financially.
And it won't put as much pressure on your day-to-day.
Life is hard enough,
getting on top of your finances,
can make things feel a lot less stressful.
So, we talked about all the small things,
but now we need to talk about the big things,
those big items, those big ticket purchases
that we know are lying in our future,
the wedding, the house, the baby, the retirement,
the second baby,
without putting a plan together
for these things will almost always come up short
and stressed out.
So, plan out a budget for your wedding and then double it,
because that's likely gonna be a lot closer
to how much it's actually gonna cost.
And then begin to plan for other things like your home
or retirement.
Let's say you retire at 65 years old
and don't kick the bucket until you're 95 years old.
If you need $50,000 a year to retire comfortably,
you're gonna need $1.5 million at retirement age.
By the way, this figure of $1.5 million is fully attainable
if you get started on your retirement fund early on
and start investing anywhere
from five to $6,000 every year into it.
And that $1.5 million in retirement
is even a bit of a conservative estimate,
because you're still gonna be earning compound interest
on that lump sum in your retirement years.
And so the big thing is when you're planning for retirement,
get started early, start investing into your 401(k)
and take advantage of the power of compound interest.
It's not nearly as boring or intimidating
as you might think it would be.
And personally,
I'd so much rather see you have a great 401(k)
that's fully funded than a brand new BMW
that's gonna give you limited satisfaction,
over the next couple years.
Of course, another way to save money
is to question these expenses to begin with.
Do you really want a big wedding?
How about a house?
I'll let you and your partner work this out,
but I encourage you to question the status quo
and question those big purchases
that are often seen as obvious.
When it comes to personal finance,
most people overestimate the progress
that they can make in a month
and underestimate how much progress
they can see over the next five years.
That certainly has been my own personal experience.
In the beginning I was very impatient,
I wanted to see all that progress right away,
but as I stuck through with it,
as I continued to work towards my goals,
I saw that I was able to pay off all of my own student debt
and become financially free in four years,
a goal that I never thought was possible
when I had gotten started.
And so I encourage you to take the marathoners approach,
instead of the sprint.
It takes time,
but trust me, it's worth it.
People think personal finance is all about numbers.
Most people think that in order to be good with money,
you need to be good with numbers.
When in fact you actually need to be better
at behavior change.
Most of us are running on autopilot.
We're taking advice from our parents
who are terrible with money.
We're looking at what our friends are doing,
who are also terrible with money.
And we're falling for slick ads by marketers
who want us to be terrible with our money.
We have a negative relationship with money
and it's affecting the way that we spend and save.
Apart from sheer ignorance,
it's the reason for all the mistakes I've already mentioned.
You don't need to be smart to be good with money.
Trust me, I'm an idiot.
And I was able to get out of debt
and become financially free.
All you need is a blueprint for how to manage your finances
and also to heal your relationship with money.
What's causing you to binge shop on Amazon?
Why do you recklessly spend money
on tech gadgets without thinking about it?
Why do you need every phone upgrade that comes out?
And why do you need to constantly lease that new car?
When you pause, reflect and ask yourself why,
you can begin to find the answers.
But don't get me wrong,
understanding the numbers, your income, your expenses
and your saving goals are all important things,
but it's more important to understand
your emotional relationship with money.
Why you keep making the same mistakes over and over again
than it is about the numbers themselves.
If I can leave you with one thing,
it's that your worth does not equal your net worth.
Just because you're not doing well,
you're struggling right now,
your finances are in rough shape,
doesn't mean that you are dumb, you are stupid
or you're a bad person.
If I can get my financial shit together,
so can you.
It really does take those small steps each day.
And so if you're looking for more information
or more of a blueprint for how to turn your finances around,
I've linked some resources down in the pin comment below,
a couple videos that I've made about personal finances,
as well as a couple books that I've really enjoyed,
about finances.
I always, and I've said this many times
in the channel before,
but I try to read one personal finance book of the year,
even if it's information that I've already digested
and that I know I need that refresher and that reminder,
because I know it's more about the behavior change.
I know that it's not about understanding the information,
it's about getting clear on the direction
that you're heading
and having those reminders along the way
to stay true to your goals.
And so hope those help
and I hope that you like my mustache,
because I'm gonna keep it.