For the millions of Americans who work a nine-to-five job it's not Thursday or
Friday that's the best day of the week no the best day of the week is payday
but sadly many people make critical mistakes when that special day comes
around and miss managing your paycheck is one of the reasons why so many
Americans are currently living paycheck to paycheck
luckily boss in this video I will share with you exactly what you should do as
soon as you get paid and if you're new to the channel then hit the subscribe
button below for more life-changing content I'll be the first to admit that
getting paid feels absolutely great but unfortunately many people simply have no
idea what to do with their money when they receive it and as you probably
guessed without a plan this more often than not leads to the money being spent
on frivolous items but even with a budget in place proper spending can be
tough according to a new poll Americans admit to spending seven thousand four
hundred twenty nine dollars and twenty four cents over their budget every year
in fact the research found that we'll only three in four Americans or 74% say
that they have some type of budget 79% of those still hub troubles keeping
themselves within their own parameters despite their best efforts sadly over
half of those polled say they even have a meticulously planned out budget but
still Americans spend a hundred and forty two dollars and 87 cents over
budget each and every week altogether the average weekly budget of those
polled equates to one hundred ninety seven dollars and 31 cents but that
number it turns out is optimistic efest in reality Americans surveyed spend
closer to three hundred forty dollars and 18 cents every week which explains
why only ten percent of the survey respondents were able to say that they
think sticking to a budget is easy well Americans are clearly overspending each
and every month another problem is what they are
spending their money on the average adult in the United States spends a
thousand four hundred ninety seven dollars a month and on essential items
according to a recent study all told that's roughly eighteen thousand dollars
a year on things we can all do without and that's a lot of money considering
the extent to which Americans are letting their savings and other crucial
goals fall by the wayside the top three non-essential expenses
that are crippling these savings efforts Americans include eating out at
restaurants buying drinks and ordering takeout as you can see there is a lot of
progress that can be made when it comes to the management of money in the United
States and one of the first steps to better financial health is having a
reliable plan that you can use when you get paid given that many people either
don't have a budget in place or don't find the one they use effective I want
to start from scratch when explaining exactly how you should allocate your
money when you get paid and later in this video I will go over three money
management tricks I use every month to ensure I hid my money goals when you get
paid it is important to allocate your money towards the different types of
financial commitments you have and one method I recommend people use is the
percentage model if you're unfamiliar with the percentage model it is
essentially a breakdown of where your income should be allocated on a monthly
basis the percentage model is split into four categories saving variable expenses
fixed expenses and housing while housing is usually a fixed expense given that it
makes up a significant portion of the average person's total monthly expenses
I find a bed and fishel for it to have its own category in the model now in
order to use this money management tool properly you need to understand what
cost should be incorporated into each of the four categories so let's first start
with savings your savings category will include contributing to your savings or
investment account paying down debt or supplementing your emergency fund until
you've achieved anywhere from six months to a years worth of a reserve of living
expenses as you will see this category makes up these smallest proportion of
your income allocation however it is by far the most important you see the other
three categories require you to expend money on items that will keep you afloat
on a day to day basis but money allocated to your savings category helps
you improve your financial situation by reducing interest payments or helping or
else grow by investing more money into your investing portfolio the next
category includes your variable expenses and this can include anything from food
and drinks gas and clothing now as I already mentioned Americans
spend a lot of money on non-essential items and this is the category that is
responsible for these unneeded purchases as a result it is imperative to stick to
the amount you've set up for yourself when spending money on this category
every single month the third category are your fixed expenses and this
includes things like your car payment utilities bill and life insurance as you
can tell by the name these are the types of expenses that don't very much by
month which certainly helps when keeping the money spent on these items under
control the final category in this percentage model is housing for the
majority of people this cost exists in the form of either a rent or mortgage
payment and while you would think that sixpence would be hard to mismanage the
mistake actually takes place before you ever spend a single dollar on this type
of expense you see so many people take on a more expensive apartment or bigger
home than they need which can then leave them cash-strapped
trying to afford the monthly payments but just how bad is the situation gotten
overtime study suggests that the median footage of a new home is now 2687 square
feet which is an increase of nearly a thousand square feet in the last four
decades on the flip side the average household size meaning the number of
people living in the home has actually decreased from three point zero one
persons per household forty years ago to two point five for today this is all to
say that there is a lot of space being wasted which ultimately means wasted
money now that you have a good grasp on the four categories of the percentage
model you need to know how much of your after-tax income to allocate to each of
them every single month the model I recommend is the following fifteen
percent will be put towards savings 30 percent towards variable costs thirty
percent towards fixed expenses and finally 25 percent towards housing now
these percentages may vary over time depending on your money goals but for
someone just starting out in their journey to better financial health these
percentages will work for the majority of people from my personal experience
using the percentage model is a reliable way to ensure you make progress towards
your financial goals each and every month but I will admit that it does take
quite a bit of ongoing effort for me this effort meant spending less time
making money which is why after using the percentage model for awhile I
decided to hack the system to make it as hands-off as possible here are three
ways I made this money management technique nearly effortless step one
open up the right accounts the first step in simplifying the
percentage model and automating your financial management process is opening
up the right accounts when using this model most people will operate out of a
single checking or savings account but doing so only adds to the effort you
will have to spend on a monthly basis to make the strategy work besides the
standard checking and savings accounts where you store money you want to save
you will want to open an emergency fund a debt repayment account and an
investing account so that all the elements in your savings category are
covered number two set up automated deductions in the United States
eighty-two percent of workers are paid via direct deposit and if you make up
this majority then you are definitely able to leverage the power of automated
deductions to be frank one of the best things I have ever done for my finances
was setting up automated deductions for my pay with my employer in essence what
these deductions allow me to do is divide up my paycheck and send portions
of it into their respective accounts when I initially set up this process I
allocated 5% of my after-tax income to my savings account 5% to my investment
account and 5% to my emergency fund now as they have earned more money and have
fully funded my emergency fund I now split that 15% between my savings and
investment account and once you begin to employ this technique in your own
financial management plan you will realize that over time you will need to
allocate your income where your money can be best used now I think this
automation technique works for so many people for two main reasons first it
allows you to pinpoint exactly how much you want to save and invest as long as
you set up the deduction percentage properly you can rest assured that you
will be putting the correct amount of money into the respective accounts every
month second using automated deductions removes the need to constantly think
about your finances and in my case allow me to focus on other important things
like improving my skills in order to make more money so in order to
streamline part of your finances you should definitely be leveraging the
power of automated deductions number three
automate bills and credit card payments paying bills is a drag but trying to
remember to make timely payments only further adds to the pain as such you
should also use the power of automation to ensure your housing variable and
fixed expenses get paid in full and time now there are two ways you can set
up automated bill and credit card payments the first is to have creditors
automatically draw out the bill balance every month from either your checking or
savings account since you probably already have one of these two accounts
open all it will take is a few calls to your service providers and then
withdrawals will start on their own the second option is to open up a bank
account specifically for bills this approach has both pros and cons the
benefit of this approach is that it makes reviewing the bill amounts easier
since the account has been set up strictly for this type of expense
however the con is that you can risk going into overdraft and incurring
banking fees as a result you see if the creditor goes to pull a payment and you
don't have adequate funds in that account your bank will cover the
withdrawal amount and then charge you a fee for doing so this likely won't
happen when routing the deduction from your savings account since that's where
a large chunk of your free cash will be but it doesn't mean that you should
forget about using a bill payment account to mitigate this risk when you
first open your bill payment account put in one to two times your normal monthly
expense amount instead account while also ensuring that you have set up a
regular paycheck deduction with your employer to cover the ongoing
withdrawals over time once you have these three steps in place adhering to
the percentage model becomes a thousand times easier but there's one final point
that must be discussed when it comes to maximizing the benefit you realize from
using this money management technique one thing you must be aware of is that
just because you have set percentages assigned for your for spending
categories doesn't mean they can't be adjusted to suit your changing financial
goals for instance if you can lower your monthly housing costs or eliminate your
car payment there's no need to still spend as much money on that financial
category my recommendation is to funnel as much as you can into the savings
category which can be in the form of savings or investments ultimately the
more money you can allocate to this category and reduce the other three the
better off financially you will be thanks for watching if you want to go
from the life you have to the life you deserve then hit the subscribe button
now
you