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  • This video is sponsored by skillshare!

  • You probably spent a fortune on gifts on new year eve especially when a week before that,

  • it was Christmas.

  • How do I know that?

  • well, Americans on average spend over a thousand dollars on gifts, goodies, and travel.

  • That might not look like a fortune but when you look at the other data that says 60 percent

  • of Americans can't cover unexpected thousand dollar bill, it gets sad because emergencies

  • happen and they are full of surprises, it might be unexpected doctor visit, your car

  • breaks down or something else that could prevent you from

  • leading your normal life.

  • There is nothing wrong about buying gifts and having fun but when our holiday spendings

  • keep going up year after year while we stop saving and getting into debt more and more,

  • it starts getting scary!

  • So here in this video, we are going to take a look at where exactly your money should

  • go once you get paid?

  • what steps should you take once you receive that paycheck so that when you are faced with

  • that unexpected thousand bills again, you don't have to get into debt because you have

  • been planning your cash flow pretty well!

  • Allocate your necessities

  • the first thing you should do is to have a list of your necessities, what are the things

  • you literally can't live without, your house, groceries, transport.

  • Whether you like it not, you have to pay your bills every month otherwise you will end up

  • in the streets.

  • But here is the problem.

  • A lot of people can't differentiate between their needs and wants, your Starbucks coffee

  • might be important but its definitely not a need but rather a want.

  • The reason why this is important is that a lot of people complain that their income is

  • not enough, that's why they are living paycheck to paycheck.

  • I am not gonna argue against that, you are probably underpaid, maybe not, but that doesn't

  • mean, you can't manage your cash a bit more effectively at least.

  • Especially if you want to get out of this desperate financial position, you definitely

  • need to be much more responsible with your paycheck.

  • denying yourself some of the pleasures might be difficult but at least, you know that you

  • aren't going to be broke soon, you don't have to spend every penny in your pocket to

  • make till the next of the month.

  • 2.

  • Emergency fund

  • Once you are done with that, you should start building your emergency fund.

  • a lot of people would say that you should have at least a thousand dollars or maybe

  • even a few thousand dollars in case if things go south, and they have a point.

  • that makes sense

  • but I don't like complicating things.

  • Your emergency fund should be your savings fund as well.

  • Before you throw me your comments, let me explain why.

  • here is how it suppose to work.

  • once you are done with the first step, you should have a clear idea of how much exactly

  • you need to live decently a month.

  • Take that amount and multiply it by 6, that's your number, that's how much your emergency

  • fund should have at any point.

  • Of course, you cant build that fund in a month or two, it might take you an entire year to

  • do that if not longer.

  • There isn't an exact percentage of your income you should allocate to that, because it will

  • highly depend on your income.

  • If you hardly making enough to make till the end of the month, you might consider a small

  • percentage, if you are making much more than you possibly need, then you probably will

  • build your emergency fund faster.

  • Maybe you should not be having an emergency fund at all, because you are hardly making

  • ends meet.

  • what's the point of saving money when you barely pay your rent, in this case, you should

  • forget about this fund and focus on increasing your income first.

  • It might not be easy, but there are plenty of ways to do that.

  • When you have multiple accounts to save money, it starts consuming a lot of time, which means

  • you probably won't stick to it.

  • You will do it once or maybe twice and then you are going to forget about it.

  • That's why I do my best to simplify everything as much as possible.

  • And secondly, there is no point in saving a lot of money, you gotta do something with

  • that money to keep it growing, but let's not get ahead of us, we will talk about that

  • in a moment.

  • 3.

  • Entertainment

  • Now, let's move to my favorite part, entertainment.

  • This is the part where you initially plan to spend the least amount of money but then

  • your entertainment spendings even exceed your rent bill.

  • Come on, be honest about it!

  • how many times did it happen! probably every single time.

  • No matter how disciplined you think you are going to be, most of you won't be able to

  • spend the entire month without spending on entertainment, it's just part of our life.

  • Hanging out with friends, going to a bar at night or going for a movie with your homies,

  • it's just part of modern life.

  • just a little advice, never ever go into debt for entertainment!

  • no matter how badly you want that! borrowing money to have fun is the dumbest financial

  • decision you will make!

  • You can somehow justify your student debt, mortgage, rent, or any other necessity, but

  • not entrainment!

  • So for god's sake! do not disappoint me!

  • Let's try to be a little bit specific, what do we mean with entertainment?

  • I consider entertainment everything else that's not considered as a necessity.

  • that Starbucks coffee, casual eating out with friends, that new hoodie you bought but you

  • don't need.

  • Of course, you cant break down your spending habits into little small parts and micromanage

  • it.

  • From my experience, micromanagement doesn't really help unless you are a real nerd. after

  • a few days or maybe even a week you will just dump your plan and start spending randomly.

  • So do not underestimate your entertainment spending and set a realistic amount.

  • 4.

  • Investing Finally, Invest the rest!

  • many of you might disagree with me because I am not making investing as the first priority.

  • you might think it should be on the top of the list, and I am not gonna disagree with

  • you.

  • You have got a point!

  • But from my experience, I would say, what's the point of investing when you barely cover

  • your necessities.

  • Talking about investing is a lot different than actually putting your money at stake.

  • you invest only when you make enough money after covering your basic bills at least.

  • But enough doesn't mean millions of dollars, not even hundreds of thousands.

  • Once you start making a little bit more than you need to make ends meet and you have some

  • basic savings, you can consider investing.

  • Of course, that might mean, working harder, or getting a second job or maybe hustling

  • on the side, it's going to be different for everybody.

  • But that's probably the only way.

  • What I would do is focus on building the emergency fund first, because when you invest your money,

  • it's not always easy to quickly liquidate it in case if things go sought, of course,

  • it depends on the nature of your investment but you don't want to pull out at the wrong

  • time and make a loss when you were intending to grow your money.

  • Isn't that the purpose of investing?

  • 5.

  • redefine your purpose

  • However, I would always say, redefine your why, before you spend even a single penny

  • out of your paycheck.

  • The payday should be the day when you shouldn't be bothering yourself with all of that nonsense

  • but if you do not revisit your purpose of saving money or leaving some cash on the side

  • to invest, you are going to procrastinate and eventually would do it when it's too late.

  • it's easy to blow your money at the beginning of the month once you are paid since you have

  • been waiting for this moment for weeks already.

  • It supposes to be the first thing you should be doing when you are paid because it's really

  • difficult to put aside some of your cash when you don't have a clear why in your mind.

  • However, investing isn't like throw your money here and there and boom, your money is growing

  • like a tree.

  • It's a bit more complicated than that, let's take an example of the stock market, from

  • outside it looks like a world filled with complicated charts, but each of these charts

  • represents something.

  • I would like to talk about that but  This video has to, unfortunately, end here

  • but that doesn't mean you aren't going to learn more about the stock market because

  • this class on skillshare is going to teach you all the basics of the stock market in

  • a simple and an animated way.

  • What is a stock, whats a broker?

  • what its an index fund?

  • why do companies go public in the first place? and a lot of other cool things.

  • I have taken the entire class a while ago and I can confidently tell you that it worth

  • your time.

  • over 24 thousand people haven this class, so should you!

  • Skillshare is an online learning community for creatives, where millions come together

  • to take the next step in their creative journey.”

  • Skillshare offers thousands of inspiring classes for creative and curious people, on

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  • Make 2020 a year where you explore new skills, deepen existing passions, and get lost in

  • creativity, with Skillshare's online classes.

  • What you find just might surprise and inspire you.

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  • Thanks, guys

  • for watching and I will see you in the next one!

This video is sponsored by skillshare!

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5 Steps When You Get Paid

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    Summer posted on 2020/07/30
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