- Hey, what is going on you guys?
Welcome back to the channel.
So, today we're gonna be talking about
the five steps you need to follow
when you get paid.
So, we got the bank behind me here,
we're gonna go ahead and pretend it's payday,
and so, the very first step that most people follow
is they go to the bank, and they cash their paycheck.
And we're gonna talk about the five things
that you should be doing
immediately after that.
All right guys, so the very first step
that you wanna follow when you get paid
actually comes from this book right here.
It's called "The Richest Man in Babylon,"
which is one of the best books I've ever read out there,
just on basic money skills.
I'll go ahead and link up to it
in the description below
if you guys wanna check it out.
But, this is a concept called pay yourself first.
And where people go wrong when they get paid
is they oftentimes immediately
start paying everybody else except for themselves.
They pay the cable company,
they pay the utility company,
they pay for their mortgage,
and I'm not saying don't pay for these things,
because obviously you have to,
but what I'm saying instead is, on payday,
you immediately take a portion of your paycheck out
from your total paycheck, and you set that aside
in your savings.
Now, you don't have to go crazy with this at first.
In fact, you could start with
just 1% or 2% of your paycheck.
But you wanna get in this habit of, on payday,
taking a chunk of that money
and setting it aside for yourself.
Now most experts out there recommend
saving and investing anywhere
from 5% to 20% of your paycheck,
and I know that's a lot of money for most people.
So again, you can just start with just 1% or 2%,
but I definitely recommend working your way up from there.
And one thing I will recommend is you take this money,
and you're gonna put it in a separate savings account.
There's a number of different
online savings accounts out there,
I'll actually link up to one in the description
that currently pays about a 2% APY,
which is a lot higher interest
than you're gonna get from a traditional bank out there.
But your gonna put that in a separate savings account,
that way you don't confuse it
with any other money out there.
This is going to be your emergency fund
or your rainy day fund.
And the first goal you should have for yourself
is to save up $1,000 in this account
that will serve as your emergency fund.
So, just to recap here, step number one, when you get paid
is to pay yourself first,
and if you don't have it already,
begin building up that emergency fund.
All right, so step number two when you get paid
is a simple one, but a lot of people don't think of it,
and that is to go to the gas station
and fill your car up with gas.
So, a lot of people don't think of this,
and this what they end up doing.
They get their paycheck on Friday,
they cash that paycheck,
they go out and blow money all weekend,
and then Monday morning comes around,
they're rushing to work, and they realize
that they have no gas.
So they end up going to the gas station
and filling up their gas tank
using their credit card.
So, on Friday, on payday, right after you pay yourself,
the next step is go to the gas station,
and fill your tank up with gas,
because you're going to need it anyway.
All right, so step number three
when you get paid is a simple one,
but that is to go to the grocery store.
So, I wanted to show you guys
just how much more money you spend
by buying fast food versus making stuff
from the grocery store,
so I actually just ran through Dunkin' Donuts,
and I bought a basic breakfast sandwich and a coffee,
and now we're gonna buy those exact same supplies
at the grocery store,
and compare the cost of both of these.
All right guys, so we went ahead
and prepared our replica breakfast sandwich here
of the one that we just bought at Dunkin' Donuts.
Just to recap for you guys,
we ended up spending $6.83
for a Dunkin' Donuts breakfast sandwich
and a medium coffee.
And that price broke down
to $3.99 for the breakfast sandwich you see here,
which is obviously ham, egg and cheese
on an English muffin,
and then it was $2.39 for the coffee.
So, we were able to stock up
on a number of different items
while we were at the grocery store.
For example, English muffins
were actually buy one, get two free,
so we ended up getting 18 of those,
and you can literally just pop those extra English muffins
in the freezer, and they're gonna be good for a lot longer,
you just thaw them as needed for the week.
So we spent $4.49 on 18 English muffins,
which works out to 25 cents per English muffin,
per breakfast sandwich.
We also picked up a dozen eggs for $1.49,
which ends up being a price of about 12 cents per egg.
Next up, we picked up a good amount of ham
for $5.39.
Now, the smallest one we could find was about one pound,
and so we divided that out across five days,
which is about how long ham is good for,
and that ends up being $1.07 per serving
on our breakfast sandwich.
But if you wanted to be even cheaper,
you could definitely cut back on the ham.
And then finally, the big area where we're saving money
is making coffee at home.
We got about a pound of coffee
for $2.99, which we can actually make
68 servings of coffee with,
if we wanna be as frugal as possible,
which ends up being a price
of just four cents per cup of coffee,
versus $2.39 from Dunkin' Donuts.
So for this meal right here that you're looking at,
we're spending $1.48 per meal,
versus spending over four times more at Dunkin' Donuts,
which ends up costing $6.83 per meal.
So, the big thing that I like to do
is look at the savings over the course of one year.
And if you do this five days per week,
make your breakfast at home
rather than buying your breakfast out,
the exact savings is $1,391 per year
is what you can save by simply eating one meal at home
versus buying breakfast.
And not to mention, most people buy
both breakfast and lunch out of the house,
so you can easily double that savings by doing exactly this,
but also doing the same thing for lunch,
and bringing your own lunch to work.
All right, guys, so step number four when you get paid
is, in my opinion, one of the most important ones,
because this is an area where people totally just
blow all of their money,
and that is your entertainment expenses.
So what I actually recommend doing,
is not only having a budget for your entertainment expenses,
but actually take that money out of the bank,
and I'm a big fan of the envelope system,
and literally put that money inside an envelope
labeled entertainment expenses.
So, right here I have $100 cash.
Let's say, for example, that was my entertainment expenses
for the next two weeks.
Well, what you would do,
is when you're going out to the bar,
or when you're going out for a meal
with your girlfriend, or whatever,
you're gonna take that money out of this envelope.
And the key is, and this is where most people go wrong,
once the envelope is empty,
you don't spend any more money on entertainment
until you replenish that envelope
on your next payday.
So, figure out in advance what you're going to be spending
on entertainment,
if you get paid weekly or bi-weekly,
adjust accordingly,
and then set that money aside,
put it in an envelope labeled entertainment,
and only spend what it is that you have here.
And as an advantage, if you want to,
you could definitely save that money for a couple of weeks
and let it accumulate,
and then spend your money on a larger entertainment expense.
All right, guys, and number five,
the fifth and final step when you get paid,
after you've followed the steps prior,
is to start paying off some of your debt.
Now, a lot of people may argue with me on this one,
as far as should you be saving money
before you start paying off debt,
and I think you should have a $1,000 cash cushion
saved up as a minimum
before you start paying off your debt.
Because, as good as it would be
to put the majority of your paycheck toward your debt,
well, if next week you turn around
and you have to swipe that credit card again,
you're gonna be in that exact same situation.
Now there's basically two schools of thought
when it comes to paying down your debt.
Number one is to pay simply pay off
the highest interest debt first,
which is what makes most sense financially.
But the strategy a lot of people
actually like to follow these days
is to pay off the smallest dollar amount first.
So let's say you had, maybe, a $200 Wal Mart credit card,
maybe you would pay that off first,
because you can knock that right out pretty easily,
and establish that momentum.
But, that's up to you guys,
whatever strategy makes more sense to you,
but once you follow these other steps,
and you have that emergency fund in place,
it's now time to begin paying off that debt,
and eventually getting to a point
where you don't have any of that bad debt.
The credit card debt, or the medical bills,
or things like that.
But anyways guys, that's gonna wrap up this video.
Those are the five steps
that I recommend taking when you get paid.
Let me know what you think down
in the comments section below.
Do you agree with these steps, or do you disagree,
I'm curious what you guys think about that.
And if you're new to this channel,
and you're looking for more tips and advice
about money saving and investing
and things related to that nature,
make sure you subscribe and hit that bell
for notifications of future uploads.
But thanks so much for watching this video,
I hope you enjoyed it,
and I will see you in the next one.