WEBVTT 00:00:00.401 --> 00:00:21.214 Hi, I'm Stacey and I'm back for another episode of Better Financial Health in 15 minutes or less, and what I want to talk about today is 1% how to nudge your finances along by making sort of small moves that just move you in the right direction. 00:00:21.214 --> 00:00:26.111 Oftentimes, we think that we need to get everything perfect. 00:00:26.111 --> 00:00:27.282 We need the home run. 00:00:27.282 --> 00:00:30.347 We should have bought NVIDIA three years ago. 00:00:30.347 --> 00:00:32.713 We should have bought Apple in 2004. 00:00:32.713 --> 00:00:38.716 And we're looking for the perfect house at the perfect price or the perfect job. 00:00:38.716 --> 00:01:00.686 What we really need to be thinking about, and what we have discovered in working with hundreds upon hundreds of retirees, is that these millionaire next doors have built their wealth not by swinging for the fences, but by doing the little things along the way. 00:01:00.686 --> 00:01:31.168 Or, to use a baseball term, they've hit a lot of singles, they haven't hit a lot of home runs, but just over time, that's compounded, and compound interest is a powerful, powerful tool, and so what I wanna do is talk about how that can work for you, whether you're in your 20s and 30s and you're just starting out, or if you're already retired, how you can use the power of 1% to really help you. 00:01:31.168 --> 00:01:43.929 So, for our younger listeners, the thing I would encourage you to do is, if you have a 401k or a 403b available to you, increase your savings rate by 1%. 00:01:43.929 --> 00:02:03.387 So if you make $60,000 a year, that is an extra $600 a year, $50 a month and over time that could lead to that $600 in a year could lead to 50 or $60,000 by the time you hit retirement. 00:02:03.387 --> 00:02:07.153 So it's not a big change coming out of your pocket. 00:02:07.153 --> 00:02:08.802 It's certainly not going to break you. 00:02:08.802 --> 00:02:12.651 But that little change can have a big impact. 00:02:12.651 --> 00:02:16.342 What if you don't have a 401k? 00:02:16.342 --> 00:02:20.467 Or you're like, okay, I've already saved. 00:02:20.467 --> 00:02:23.389 You know I'm already at 15% in my 401k. 00:02:23.389 --> 00:02:37.092 Well then, consider maybe canceling one subscription service and taking that savings say $10 a month and putting that into a Roth IRA. 00:02:37.092 --> 00:02:39.055 So that's $120 a year. 00:02:39.055 --> 00:02:43.385 That also is going to build over time and build you a tax-free bucket. 00:02:43.385 --> 00:02:51.783 So these are some small things that you can do that will really have outside benefits for you down the road. 00:02:52.486 --> 00:03:19.562 The other thing that you can do is if you've got a savings account at the bank or you're carrying more than $5,000 in your checking account, I'd really encourage you to look at either a high yield savings or a money market account not at the bank, because a money market account at a bank is not really a money market fund but a money market account at a large brokerage firm such as Fidelity or Vanguard or Charles Schwab. 00:03:19.562 --> 00:03:32.671 Those are going to earn you over four percent% and over time that's sort of free money that you picked up and earned on money that was just sitting there waiting for a rainy day anyway. 00:03:32.671 --> 00:03:55.342 And so if you've got, if you look at that and you say, okay, I was earning nothing on that money, on that $10,000, but now I'm earning $400 a year, well, that can go a long way toward offsetting the cost of a vacation or even making one of your car payments for you. 00:03:55.342 --> 00:04:03.907 So those are some little changes you can make there that can have outsized benefits to you longer term. 00:04:03.907 --> 00:04:05.871 What if you're already retired? 00:04:05.871 --> 00:04:08.683 You can also apply the 1% rule. 00:04:08.683 --> 00:04:20.384 That's, for example, if you're pulling out $60,000 out of your portfolio a year to live on, if you reduce that by 1%, that's $600. 00:04:20.384 --> 00:04:31.161 That's going to stay in there and grow over time and potentially make it easier for you down the road when a big expense comes up, because that's there. 00:04:31.910 --> 00:04:36.189 The other thing that you can do is to be a little tax smarter. 00:04:36.189 --> 00:04:48.954 If you're making charitable contributions and you're 70 and a half or older and you have money in a pre-tax IRA, you can pull that money out from the IRA. 00:04:48.954 --> 00:04:54.531 The check has to be made payable to the charity, but that money comes out of your IRA. 00:04:54.531 --> 00:04:56.173 You never pay tax on that money. 00:04:56.173 --> 00:05:02.324 It goes directly to the charity and they get full benefit from it. 00:05:02.324 --> 00:05:05.920 They don't pay tax on that money because they're a charitable organization. 00:05:05.920 --> 00:05:09.019 That's called a qualified charitable distribution. 00:05:09.019 --> 00:05:11.257 So that's something that you can do. 00:05:11.257 --> 00:05:16.562 You're still making the same charitable contributions, but instead of pulling it out. 00:05:16.562 --> 00:05:22.862 Still making the same charitable contributions but instead of pulling it out and, since the standard deduction is so high, not getting any tax benefits for your giving. 00:05:23.603 --> 00:05:29.639 If you do do it through your IRA, you can't do it if your money's in a 401k. 00:05:29.639 --> 00:05:32.310 It has to be an IRA to be able to do this. 00:05:32.310 --> 00:05:34.274 That's another way you can do it. 00:05:34.274 --> 00:05:41.956 The savings account thing and interest earnings also applies to you if you're retired. 00:05:41.956 --> 00:05:53.221 So that's also something that you can do, because what we're really trying to do is to just focus on that small changes that we can do better. 00:05:53.221 --> 00:06:02.141 It's the same way that we get in better shape we start going to a class and we just show up every day and then all of a sudden they're close, but a little bit better. 00:06:02.141 --> 00:06:10.863 So those are some small things that you can do that will enhance your overall financial wellness over time. 00:06:10.863 --> 00:06:16.298 You don't have to hit a home run, just make one small step. 00:06:16.298 --> 00:06:26.925 So I challenge you what is going to be the 1% thing you try to do this week or this month to enhance your financial wellness? 00:06:26.925 --> 00:06:28.634 Thanks for tuning in. 00:06:28.634 --> 00:06:32.711 This has been another episode of Better Financial Health in 15 minutes or less.