Are you ready to take control of your financial future and maximize your paycheck with smart money management?
In this episode, I delve into the critical steps you need to take when you receive your paycheck. I guide you through creating a cash resource plan, understanding your needs, wants, and deletes, and share strategies to manage your money effectively.
From setting up a comfort fund to automating your investment contributions, I'll equip you with the tools to make the most of every dollar you earn.
If you're ready to accelerate your path to financial freedom and build your money machine, don't miss this episode!
IN TODAY’S EPISODE, I DISCUSS:
- Creating a cash resource plan to allocate every dollar a job description
- Understanding your needs, wants, and deletes to manage your financial flow effectively
- The wealth priority ladder and how to automate your investment contributions
RECOMMENDED EPISODES FOR YOU
If you liked this episode, you'll love these ones:
RECOMMENDED VIDEOS FOR YOU
If you liked this video, you'll love these ones:
TAKE THE FINANCIAL FREEDOM QUIZ:
Take this free quiz to see where you are on the path to financial freedom and what your next steps are to move you to a new financial destiny at http://www.YourFinancialFreedomQuiz.com
OTHER RESOURCES:
7-Day Money Plan Workshop: https://www.TheMoneyPlanWorkshop.com
Affluent Entrepreneurs Private Facebook Group https://www.melabraham.com/group/
CONNECT WITH ME:
Website: MelAbraham.com
YouTube: MelAbraham.com/tube
Instagram (@melabraham9): MelAbraham.com/ig
Facebook Group: MelAbraham.com/group/
TikTok: https://www.tiktok.com/@melhabraham
GET MY BOOK:
“The Entrepreneur's Solution The Modern Millionaire's Path to More Profit, Fans, & Freedom” –
Are you ready to take control of your financial future and maximize your paycheck with smart money management?
In this episode, I delve into the critical steps you need to take when you receive your paycheck. I guide you through creating a cash resource plan, understanding your needs, wants, and deletes, and share strategies to manage your money effectively.
From setting up a comfort fund to automating your investment contributions, I'll equip you with the tools to make the most of every dollar you earn.
If you're ready to accelerate your path to financial freedom and build your money machine, don't miss this episode!
IN TODAY’S EPISODE, I DISCUSS:
- Creating a cash resource plan to allocate every dollar a job description
- Understanding your needs, wants, and deletes to manage your financial flow effectively
- The wealth priority ladder and how to automate your investment contributions
RECOMMENDED EPISODES FOR YOU
If you liked this episode, you'll love these ones:
RECOMMENDED VIDEOS FOR YOU
If you liked this video, you'll love these ones:
TAKE THE FINANCIAL FREEDOM QUIZ:
Take this free quiz to see where you are on the path to financial freedom and what your next steps are to move you to a new financial destiny at http://www.YourFinancialFreedomQuiz.com
OTHER RESOURCES:
7-Day Money Plan Workshop: https://www.TheMoneyPlanWorkshop.com
Affluent Entrepreneurs Private Facebook Group https://www.melabraham.com/group/
CONNECT WITH ME:
Website: MelAbraham.com
YouTube: MelAbraham.com/tube
Instagram (@melabraham9): MelAbraham.com/ig
Facebook Group: MelAbraham.com/group/
TikTok: https://www.tiktok.com/@melhabraham
GET MY BOOK:
“The Entrepreneur's Solution The Modern Millionaire's Path to More Profit, Fans, & Freedom” –
This is the affluent entrepreneur show for entrepreneurs that want to operate at a high level and achieve financial liberation. I'm your host, Mel Abraham, and I'll be sharing with you what it takes to create success beyond wealth so you can have a richer, more fulfilling lifestyle. In this show, you'll learn how business and money intersect so you can scale your business, scale your money and scale your life while creating a deeper impact and living with complete freedom, because that's what it really means to be an athlete entrepreneur. All right, so let's just talk about what do you do when you get paid? Because here's what we know, all right? You're making money. In fact, I talk about this in my book that you need to build an earnings machine. In fact, that's the way we were raised. Get a good job, build a good business. And all we're doing is saying create an earnings machine. How do you earn money? But what we don't do is the second machine, the money machine. What do you do with the money that you earn? That's the reason. Well, I'm going to grab it right here. That's the reason my upcoming book is. Called building your money machine. And so I want to help you understand what to do with every dollar. Every week that you get paid. Every two weeks you get paid. Whenever you get paid from your business, from your company. How do you make sure that you're maximizing the use of that dollar and accelerating your path to financial freedom? And in this episode, this is what I wanted to talk about. Now I'm going to jump back and. Forth to my iPad because I want to write this out for you so you understand exactly what to do with each dollar. Now, the first thing that needs to. Happen before you ever get paid, before you ever get paid, is that what I want you to make sure you have is what I call a cash resource plan. This is something that maybe people will think of. Oh, you're talking about a budget. No, you can call it what you want. But what I really want to do is give every dollar a job description. Every dollar a Job description before I make it. See, where we get in trouble is when we have the money in our hands and then we decide what we want to do with it. This is going to force you to decide what you're going to do with the dollar before you ever receive the dollar. So you're going to know that you have X dollars that have to go to the mortgage, X dollars that have to go towards food, X dollars that are going to, for transportation, for fun for retirement. For all of that, it is your permission to spend. Quite frankly, this is how you sit back and you can have guilt free spending because you already know that it's planned for, and you do everything based upon a cash resource plan. All right? So that's the very first thing, is to make sure that you have a plan in place to make it happen. Now, there's a couple of things that I want you to understand about the plan. If you realize, like I said, this is about you having permission to spend, okay? But the next piece of this is for you to start to look at. What are your needs, wants, and deletes. Here's the deal. The fact of the matter is that if we're not measuring it, if we're not tracking it, if we're not looking at it, we can't manage it. And getting really clear on what your wants, needs, and deletes are is really important because it allows you the opportunity to find leaks in your financial flow. Now, let me be really clear. Needs, needs are your survival. It's like the lowest level of Maslow's hierarchy of needs. It is survival. It is the food that you have to eat. It is the clothes on your back. It is the roof over your head. It is transportation. It is healthcare. It isn't Netflix. It isn't Manipetti's. It isn't crazy technology. It isn't any of that. Those are wants. Now, you may think that you need them, but I just want to make sure that I understand and you understand. What's the bare necessities for your survival. Those are the needs. The rest are wants. Now, the deletes are things that you look at and go, heck, I haven't used this. Why am I paying for it? Software subscriptions, other subscriptions, gym memberships. Although you should be going to the gym, all right, all those things that you're paying on a regular basis that you think, well, it's only$10. $10 over time can add up, because. If you have a bunch of those, oh, it's only $10, all of a sudden it's $100. And that can end up to be. Hundreds of thousands of dollars over time if you just have that to invest. So it's important for you to look at needs, wants, and deletes as you're creating the cash resource plan. And here's a metric for you to. Kind of measure by, and that is. This is that I want your needs. Your absolute base needs to be less than 50% of the cash resource plan. 50% now you have the cash resource plan. So we have that in place. Now we can go to. What do we need to do? So the first thing is this. I want to be clear. We're going to talk about investing. I'm going to talk about the hierarchy and the structure of investing. But there are some ways to invest that actually come out before you get paid. For instance, putting something into a 401. So that might already get taken care of before you ever get your check. But before we get to all of that, let's just talk in general, what's going to happen. The next piece of this is you. Have the plan in place. The next piece is that you're going to transfer your check or direct deposit or something to your spending account. This is going to be your checking account, in most cases, just a checking account. Now there's going to be a portion. Of it that you need, that you. Want to go towards investing towards other things. And so what you're going to do is transfer the percentage that you are going to invest if it's not invested before you get paid. We'll talk about that in a moment to the accounts that you need. Now, some of these accounts that are important will be, for instance, if you're not an employee, you might have a tax account. Whether you're an employee or not, you might have some big project. It's a down payment of a house. It's a wedding. It's something. So you'll have a separate sinking fund where you're just going to put money away. So it's out of sight, out of mind. And you're putting it away in a way that allows you to build for something that is a big purchase down in the future. And part of this is also going to be any additional investing funds that you have now. All of these will either permanently or. Temporarily be in what I call the. High yield savings account. I want you to earn something on it. High yield savings accounts right now at the date of this filming, is about five, five and a half percent. So you're going to move the money from, you're going to put your check, it might be direct deposit, whatever, put it in the account, and then you're going to separate it out. You're going to take those things out for sinking funds, taxes and investing and put it into a separate account. Out of sight, out of mind. You don't want it tempting you to say, well, I got money in the account. All right. Now we start to really get to what's the allocation, what's the job description for each dollar bill. And the way we do this is. We follow something called the wealth priority ladder. And this is the thing that I work from with all of my clients in the affluence blueprint in my book. We talk through it, but it is a hierarchy of what do you do with each dollar as to when it comes through. Now, you'll see there's other people out there. They have their own know. Dave Ramsey has his baby steps. This is the way I've done it. The reason I do it this way is I have found that this is the way to not only keep you out of the hole, but also to build the mountain. And my job is to help you build the mountain, not just get you out of the hole. I want you out of the hole, and I want you building the mountain. I want you in financial freedom. So the way this works is that I'm going to give you a couple of the first steps. We won't go through the whole thing, but I want you to just understand the first steps to really understand where the priority of your money goes each month, each paycheck, each week, each, every other week, whenever you get paid in doing that. So the first is, this is I want you to have what we call a comfort fund. This is typically $1,500 or one month's expenses. This is not your emergency fund. This is. I am not going to put my car into a chasm because something happened. There are statistics out there that show that the majority of people cannot sustain themselves if they got $1,000 unexpected expense. Well, we don't want to have that. Happen because it can derail your whole finances. If all of a sudden something unexpected comes in, transmission breaks. Okay, you got a leak in the house, something happens, a medical, and you have these big deductibles. Whatever it is, we want to make sure that we don't end up in the canyon. So this is a way for you to make sure that you keep yourself safe. It's called a comfort fund because it's to give you the comfort of knowing that if, God forbid, something unexpected happens. You have some cushion there. I want it to be one month or $1,500 if you don't have it, or you're not saving it from your check, look around your house. My guess is you could sell some stuff on Facebook, marketplace, or whatever and bring in some cash and make sure. That'S sitting there so you don't have to go into debt to make it happen. That's the comfort fund that we do to do that. The second thing is that once that is in place now we start to really dig into the next phase. And the next phase is really about you getting involved with creating what I call a peace of mind fund. And this is the emergency fund. Now, most people were going to tell. You three to six months. I don't think three to six months is enough. In fact, the pandemic proved that out. And I was saying it well before the pandemic. I think you need to be pushing nine to twelve months. And depending on your circumstances, if you have a job that you cannot recreate, or it's hard to get a job, and if you had to replace a job, it may take you longer and you're the sole income Earner, the family's depending on you, then you might need more. If you're older and you're not in your working years anymore, you might need more. So you got to adjust it. It's not a hard and fast rule, but let's just assume that for now it's going to be nine months. So there's two things I want you to do at this stage. Your peace of mind fund and any destructive debt. I want you to tip both of. These at the same time. I'm not one of those that says. Get yourself completely out of debt before you start building wealth. I truly believe that your wealth creation. Muscle is different than your debt management muscle. And so I want to work both muscles at the same time. Otherwise you're like that dude that goes. Into the gym and he works, only. His upper body doesn't work. His lower body, which he looks fine, but when he's in shorts, then you have this big upper body on toothpick legs. I don't want that for you. I think that we can do both. Is it going to delay you getting out of debt? Yes, it is, but we can change it. The whole idea is I want you to get into a wealth creation behavior and the debt management behavior. I'm not worried about the numbers as much. So you could be literally putting money. Towards some of this at$5, $10. Just to do the behavior. But let's just look at some numbers so you understand what I'm getting at. Let's assume that you had an extra$500 here. You can put$200 towards the peace. Of mind fund to get you there, and the other 300 towards paying off debt, or you can do it any other way. Now let's just talk a moment about destructive debt. Destructive debt is that debt that is financing your current lifestyle for consumables I. Don'T think that all debt is the devil, okay? But I also know that all debt have certain characteristics. In other words, debt will always cost, always called interest, and debt will always stress, okay, on your financial situation. The burden of debt will always stress you. But some debt is destructive debt. That debt is the stuff that you are financing for consumables, things that will go away and there is no future value and there is no real growth in value. There is productive debt, in my opinion, that will allow you to increase your cash flows or increase your net worth over time. Productive debt could be financing a piece of equipment for more profitability or productivity in a business. It could be buying a piece of real estate, buying it, right. Not over leveraging it, because that's going to create additional cash flow. But it is not buying a big screen tv. It is not some luxurious vacation that you can't afford to pay cash for. That's destructive debt. So what I want to do is I want to, in this stage, I want you to start to take money and put it towards making sure that you have an emergency fund in place while you're also paying down the debt. If you have no destructive debt in. Place, in other words, you have got the debt under control. You're still working on the emergency fund. Then you replace the consumer debt, the destructive debt, with investing. So I can start investing. If I don't have the consumer debt or if I have the peace of. Mind fund in place, I get a chance to start putting money away. If either one of those are completely taken care of, then I replace it. And I start investing. Where do I invest? Here's where you have a couple of different things. I'm going to give you the process that I think is the most effective and way to maximize the things that are going on. The first place to invest is to. Make sure if you're working for a company that has a put money in. Up to the 401 match, because if. Your company is going to match the first 4% and you put in $1,000. They'Re going to match that first 4%. And they're basically going to give you free money. I want to make sure that I capture that match. It's free money. So the first place I want you to do is I want to take. That money and put it into a. If you are in a company like. My wife is where they have special. Stock purchase plans where you can buy things for a discount, then I want you to maximize your buying. These are called ESPPs employee stock purchase plans. And the thing is that what happens here is a lot of times you can buy it at ten to 15% discount. So if you notice what these are, this is where you're going to get some free money. You're going to get some free money because they're giving you a discount. And I want to maximize that free money. And so that's the first place that I'm going to invest. Now, if I have more money left. Over that I want to invest, I'm. Going to move outside of this and go to a Roth IRA, assuming I qualify. There's income limitations, so you may not be able to do a Roth IRA. And if you don't, you skip the step. Then I come back and I max out the 401. This year, you can go$23,000, and. If you're over 50, you can add another $7,500 to it, so you can go to 30,500. All told, I want this to be 20% to 25% of your income, ultimately. Now I get this. I'm throwing a lot at you and telling you to move the money all over the place. Let's make this easy. You're working for a company. I want to make sure that the first thing you do is that you are putting enough into your capture 100% of the company's match. That's the first thing you do. Then you can look at that cash resource plan and your spending plan and say, okay, do I have a comfort fund in place? Do I have a peace of mind fund in place? Do I have consumer debt? Then we use the money to get those in place. Anything left over, we will then come back and say, hey, let me put. It into either a Roth IRA or maximize my. What we really want to do is make sure that we get 20% to. 25% of your income going away for the future. Your future self is going to thank you for this. And there's one last step that we need to do after this. Step four, automate it. Make it automatic. Make it automatic. Here's what I know. The reason that credit card companies give you credit cards is not to facilitate. You buying stuff on payments. It's to remove the friction from your buying decisions. It's easy. You can just tap your phone now and buy. You can just swipe a card and buy. Tap a card and buy. That's it. See, they get it. The less friction there is in buying something, the more you're going to buy. Well, what we need to do is flip that. We want to put as much friction in buying something and take the friction out of investing. And the way you take the friction. Out of investing is to make it automatic, automatically contribute to the beyond. If you have it in you automatically, the money comes into your checking account and moves to these high yield savings accounts so you can use it for the proper job description. You gave it automatically. If you're putting it into a Roth IRA, you're putting it into Roth automatically. If you decide to max the 401k, it's on automatic. No thinking, no buttons to push, no nothing. Okay, so if you're an employer and. You'Re an employee, what you need to. Do is sit down with your HR and say, how do I make this. All automatic in my account? The 401K contribution, maxing the 401k. If there's an employee stock purchase plan. How do I just put it on autopilot? Out of sight, out of mind, no temptation. If you're going to do a Roth IRA or something outside the employer, then you're going to have that money transferred. They're going to direct deposit the net check. You will work with the bank and. You'Ll talk to your bank and say, I need this amount every month transferred from my checking account to this other account. And if you want to be really safe, make that other account at a different bank. That's the way we do it. Four steps. Cash resource plan. It's your permission to spend. Make sure that you're putting the money in the spending account. Follow the wealth priority ladder, at least the segments that we talked about. Your target is 20% to 25% of your income invested. Automate it. That's the game. You do it every paycheck and I. Promise you your financial future will thank you. I hope you found this of value. If you got questions, if you've got comments, do me a favor, leave them below. And I can't wait to see you on another episode of the affluent entrepreneur show. Cheers. Thank you for listening to the affluent entrepreneur show with me, your host, Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the affluent entrepreneur Facebook group now by going to forward Slash group, and. I'll see you there.