1 00:00:00,401 --> 00:00:03,166 Speaker 1: Hi, I'm Stacey and I'm back for another episode of 2 00:00:03,226 --> 00:00:08,202 Better Financial Health in 15 minutes or less, and what I want 3 00:00:08,202 --> 00:00:14,785 to talk about today is 1% how to nudge your finances along by 4 00:00:14,824 --> 00:00:20,634 making sort of small moves that just move you in the right 5 00:00:20,653 --> 00:00:21,214 direction. 6 00:00:21,214 --> 00:00:26,111 Oftentimes, we think that we need to get everything perfect. 7 00:00:26,111 --> 00:00:27,282 We need the home run. 8 00:00:27,282 --> 00:00:30,347 We should have bought NVIDIA three years ago. 9 00:00:30,347 --> 00:00:32,713 We should have bought Apple in 2004. 10 00:00:32,713 --> 00:00:35,868 And we're looking for the perfect house at the perfect 11 00:00:35,908 --> 00:00:38,716 price or the perfect job. 12 00:00:38,716 --> 00:00:42,868 What we really need to be thinking about, and what we have 13 00:00:42,868 --> 00:00:47,841 discovered in working with hundreds upon hundreds of 14 00:00:48,021 --> 00:00:53,130 retirees, is that these millionaire next doors have 15 00:00:53,250 --> 00:00:57,601 built their wealth not by swinging for the fences, but by 16 00:00:57,701 --> 00:01:00,686 doing the little things along the way. 17 00:01:00,686 --> 00:01:05,594 Or, to use a baseball term, they've hit a lot of singles, 18 00:01:05,980 --> 00:01:09,064 they haven't hit a lot of home runs, but just over time, that's 19 00:01:09,064 --> 00:01:14,328 compounded, and compound interest is a powerful, powerful 20 00:01:14,328 --> 00:01:21,025 tool, and so what I wanna do is talk about how that can work 21 00:01:21,125 --> 00:01:24,781 for you, whether you're in your 20s and 30s and you're just 22 00:01:24,841 --> 00:01:28,722 starting out, or if you're already retired, how you can use 23 00:01:28,722 --> 00:01:31,168 the power of 1% to really help you. 24 00:01:31,168 --> 00:01:35,844 So, for our younger listeners, the thing I would encourage you 25 00:01:35,905 --> 00:01:40,709 to do is, if you have a 401k or a 403b available to you, 26 00:01:41,560 --> 00:01:43,929 increase your savings rate by 1% . 27 00:01:43,929 --> 00:01:50,501 So if you make $60,000 a year, that is an extra $600 a year, 28 00:01:50,581 --> 00:01:57,852 $50 a month and over time that could lead to that $600 in a 29 00:01:57,953 --> 00:02:03,387 year could lead to 50 or $60,000 by the time you hit retirement. 30 00:02:03,387 --> 00:02:07,153 So it's not a big change coming out of your pocket. 31 00:02:07,153 --> 00:02:08,802 It's certainly not going to break you. 32 00:02:08,802 --> 00:02:12,651 But that little change can have a big impact. 33 00:02:12,651 --> 00:02:16,342 What if you don't have a 401k? 34 00:02:16,342 --> 00:02:20,467 Or you're like, okay, I've already saved. 35 00:02:20,467 --> 00:02:23,389 You know I'm already at 15% in my 401k. 36 00:02:23,389 --> 00:02:28,056 Well then, consider maybe canceling one subscription 37 00:02:28,096 --> 00:02:34,609 service and taking that savings say $10 a month and putting that 38 00:02:34,609 --> 00:02:37,092 into a Roth IRA. 39 00:02:37,092 --> 00:02:39,055 So that's $120 a year. 40 00:02:39,055 --> 00:02:42,144 That also is going to build over time and build you a 41 00:02:42,204 --> 00:02:43,385 tax-free bucket. 42 00:02:43,385 --> 00:02:48,431 So these are some small things that you can do that will really 43 00:02:48,431 --> 00:02:51,783 have outside benefits for you down the road. 44 00:02:52,486 --> 00:02:55,340 The other thing that you can do is if you've got a savings 45 00:02:55,460 --> 00:03:00,131 account at the bank or you're carrying more than $5,000 in 46 00:03:00,151 --> 00:03:03,706 your checking account, I'd really encourage you to look at 47 00:03:03,907 --> 00:03:07,883 either a high yield savings or a money market account not at the 48 00:03:07,883 --> 00:03:10,651 bank, because a money market account at a bank is not really 49 00:03:10,670 --> 00:03:15,032 a money market fund but a money market account at a large 50 00:03:15,152 --> 00:03:19,562 brokerage firm such as Fidelity or Vanguard or Charles Schwab. 51 00:03:19,562 --> 00:03:24,729 Those are going to earn you over four percent% and over time 52 00:03:24,729 --> 00:03:29,322 that's sort of free money that you picked up and earned on 53 00:03:29,361 --> 00:03:32,129 money that was just sitting there waiting for a rainy day 54 00:03:32,250 --> 00:03:32,671 anyway. 55 00:03:32,671 --> 00:03:40,381 And so if you've got, if you look at that and you say, okay, 56 00:03:40,983 --> 00:03:44,781 I was earning nothing on that money, on that $10,000, but now 57 00:03:44,820 --> 00:03:49,743 I'm earning $400 a year, well, that can go a long way toward 58 00:03:49,884 --> 00:03:53,872 offsetting the cost of a vacation or even making one of 59 00:03:53,939 --> 00:03:55,342 your car payments for you. 60 00:03:55,342 --> 00:03:59,891 So those are some little changes you can make there that 61 00:04:00,673 --> 00:04:03,907 can have outsized benefits to you longer term. 62 00:04:03,907 --> 00:04:05,871 What if you're already retired? 63 00:04:05,871 --> 00:04:08,683 You can also apply the 1% rule. 64 00:04:08,683 --> 00:04:14,092 That's, for example, if you're pulling out $60,000 out of your 65 00:04:14,133 --> 00:04:19,423 portfolio a year to live on, if you reduce that by 1%, that's 66 00:04:19,483 --> 00:04:20,384 $600. 67 00:04:20,384 --> 00:04:24,978 That's going to stay in there and grow over time and 68 00:04:25,038 --> 00:04:28,995 potentially make it easier for you down the road when a big 69 00:04:29,055 --> 00:04:31,161 expense comes up, because that's there. 70 00:04:31,910 --> 00:04:36,189 The other thing that you can do is to be a little tax smarter. 71 00:04:36,189 --> 00:04:40,615 If you're making charitable contributions and you're 70 and 72 00:04:40,634 --> 00:04:45,788 a half or older and you have money in a pre-tax IRA, you can 73 00:04:45,827 --> 00:04:48,954 pull that money out from the IRA . 74 00:04:48,954 --> 00:04:52,961 The check has to be made payable to the charity, but that 75 00:04:52,961 --> 00:04:54,531 money comes out of your IRA. 76 00:04:54,531 --> 00:04:56,173 You never pay tax on that money . 77 00:04:56,173 --> 00:05:02,223 It goes directly to the charity and they get full benefit from 78 00:05:02,264 --> 00:05:02,324 it. 79 00:05:02,324 --> 00:05:04,697 They don't pay tax on that money because they're a 80 00:05:04,716 --> 00:05:05,920 charitable organization. 81 00:05:05,920 --> 00:05:09,019 That's called a qualified charitable distribution. 82 00:05:09,019 --> 00:05:11,257 So that's something that you can do. 83 00:05:11,257 --> 00:05:15,098 You're still making the same charitable contributions, but 84 00:05:15,178 --> 00:05:16,562 instead of pulling it out. 85 00:05:16,562 --> 00:05:19,572 Still making the same charitable contributions but 86 00:05:19,593 --> 00:05:20,877 instead of pulling it out and, since the standard deduction is 87 00:05:20,896 --> 00:05:22,862 so high, not getting any tax benefits for your giving. 88 00:05:23,603 --> 00:05:28,276 If you do do it through your IRA , you can't do it if your 89 00:05:28,297 --> 00:05:29,639 money's in a 401k. 90 00:05:29,639 --> 00:05:32,310 It has to be an IRA to be able to do this. 91 00:05:32,310 --> 00:05:34,274 That's another way you can do it. 92 00:05:34,274 --> 00:05:39,824 The savings account thing and interest earnings also applies 93 00:05:39,930 --> 00:05:41,956 to you if you're retired. 94 00:05:41,956 --> 00:05:45,987 So that's also something that you can do, because what we're 95 00:05:46,028 --> 00:05:52,360 really trying to do is to just focus on that small changes that 96 00:05:52,360 --> 00:05:53,221 we can do better. 97 00:05:53,221 --> 00:05:57,156 It's the same way that we get in better shape we start going 98 00:05:57,197 --> 00:06:00,396 to a class and we just show up every day and then all of a 99 00:06:00,437 --> 00:06:02,141 sudden they're close, but a little bit better. 100 00:06:02,141 --> 00:06:06,855 So those are some small things that you can do that will 101 00:06:06,915 --> 00:06:10,863 enhance your overall financial wellness over time. 102 00:06:10,863 --> 00:06:16,298 You don't have to hit a home run, just make one small step. 103 00:06:16,298 --> 00:06:22,295 So I challenge you what is going to be the 1% thing you try 104 00:06:22,295 --> 00:06:26,524 to do this week or this month to enhance your financial 105 00:06:26,564 --> 00:06:26,925 wellness? 106 00:06:26,925 --> 00:06:28,634 Thanks for tuning in. 107 00:06:28,634 --> 00:06:32,048 This has been another episode of Better Financial Health in 15 108 00:06:32,048 --> 00:06:32,711 minutes or less.