The Idiots Guide
Sometimes it's about "ADULTING" enough for the day, and other times it's about Keeping a job, Feeding the family, Educating the kids, and Buying the stuff.
Most of us were taught how to read, write, and math good.
But never taught how to file taxes, change a tire, or cook a meal.
How in the world have we survived?
Well, have no fear, the Idiots are here to guide you.
We don't know much more about all the stuff but we might be just a little further down the road than you.
Make no mistake, most of our advice is more like don't try this at home.
Hope it helps!
The Idiots Guide
From Paycheck to Prosperity: An Intro to Beginner Adulting Ep63 TIG
Discover the secrets to stepping into adulthood with financial confidence! Join me, Adam Richardson, the Profit Hacker, and my insightful guest, Joe Haslam, as we guide you through the exhilarating journey of earning your first paycheck and managing the expenses that follow. Learn how taxes play a crucial role in funding essential services like education and infrastructure, and grasp the significance of your contributions to society. This episode is your roadmap to making informed financial choices as you navigate the beginnings of your adult life.
Unlock practical spending strategies tailored for young adults facing financial challenges such as college costs and rent. Together, Joe and I share our best budgeting tips that transform the concept of a budget from a restrictive chore to a flexible and empowering tool. With actionable advice like meal planning around grocery store deals and using coupons, we help you stretch your food budget without compromising on quality. These financial habits, developed early, not only ease current financial pressures but also pave the way for a secure future.
Navigate the realm of credit cards with confidence using the 40-30-20-10 spending guideline as your compass. Joe and I emphasize the importance of adapting financial strategies as your life evolves and demonstrate the power of responsible credit card usage to build a strong financial foundation. We explore how to make the most of promotional offers and how strategic savings can pay off balances efficiently. By understanding the impact of compounding financial decisions, you'll be equipped to make choices that lead to long-term prosperity. Get ready to embark on your financial journey with clarity and assurance.
Today on the Idiot's Guide. So you're 18 years old, officially an adult, probably more like a beginner adult, which means you've got freedom and bills Surprise, Whether it's your first real job or side hustle while juggling college. It's time to talk money, honey. College. It's time to talk money, honey. Now. Why the look? So how do you keep the paycheck from vanishing faster than free pizza at the college event? We're diving into all things money for beginners, of course, how to handle cash like a pro save for the future. And still, of course, how to handle cash like a pro save for the future. And still, of course, have fun. So if you're ready to crush adulting without going broke, stick around. In this episode it's got everything you need to know to keep your wallet happy. I'm your host, adam Richardson, aka the Profit Hacker, and I'm joined by the man in charge, mr Joe Haslam. Welcome to the Idiot's Guide. So welcome to your first adult job.
Speaker 1:Now I don't want to say that too cheeky, but when I was 18, one of the things I really looked forward to was working 40 hours. I don't know why. It was one of my favorite things. I was so excited I got a job working at a bank. I graduated early from high school just so I could work full time at a bank and honestly, there's nothing fancy about it, nothing at all. So so it's really kind of one of those things that's like you know, I, I, I guess about. The only thing that's fancy about it is it's like your first. You know you're earning grownup moneyup money like and I. There's no difference really, other than you know now you have bills and your tax rate is higher, you know you're making twice as much, you're spending twice as much.
Speaker 1:That's how it goes, so I guess you know, like in in in the last episode, one of the things we talked about as a 15-year-old is, you know the taxes and really those tax brackets, but I think you know what do you feel like? Is the difference now other than more? So, yeah, I mean, is it a higher percentage that's taken out, or is it just kind of?
Speaker 2:It's a little bit of a higher percentage. Now. The F? Fica taxes we talked about what those were on the last one, but those are your social security, your medicare. That's a set percentage at 7.65 percent, uh, so that's not going to change, uh, but the withholding taxes are going to be just a little bit higher because you're making more money, okay, so it might actually start coming out of your paycheck At this point. I generally recommend so on our stage one of teenage making money. Stage two of financial life Beginner adult. Beginner adult stage this I generally recommend thinking 25%. So a quarter of your paycheck is going to go away to taxes.
Speaker 1:I think one of the things you can understand, though, is like maybe not just understanding the amount that comes out, but when you're 15 years old, it may not matter as much. Now, even even up to now, my age, I think am I paying taxes for, and not just the obligatory? Like this is the taxes, but like what does it go to? If I'm paying taxes, what does it do?
Speaker 2:yeah, and a lot of that's like what?
Speaker 1:education, public roads, all that kind of stuff. It goes into, uh, those elements when we, when we talk, not just your FICA your FICA is specifically category but everything else yeah.
Speaker 2:So when we're talking about federal withholding and state withholding, so that's your income taxes. That's what everyone complains about. I have to file my taxes every year. Those are your income taxes and so what those go to from a federal level. You always hear the old guy on sitcoms my taxes pay your salary. Well, that's essentially what it does for certain people. So on a federal level, the military is paid for out of your taxes.
Speaker 2:The roads that we drive on are paid for out of your taxes. So any of the federal roads, those are the interstates. We are paying for. Anything of the federal roads, those are the interstates. We are paying for anything on the federal government side. So the people that keep the federal government running come out of our paycheck. So we're paying for all these things to have that facilitated. So that's, on the federal side, what our money pays for. On the state side, what we're paying for is essentially the same thing, but state. We're paying for public schools, so our local public schools Now, a portion of the federal taxes pay for that as well, but local we're paying for that. We're paying for the local roads, snow removal, so if you really like it, that those plows come through and clear the roads for you. That's what your taxes are being paid for, so we're not necessarily paying all this money in taxes and it's just going nowhere. We're getting a lot out of it right now, whether we want to go down the government waste side of it.
Speaker 2:there is a portion that will always have to be paid in taxes because things like, like I said, you know, if you want that park to look really nice and have a really grassy lawn for you to have your picnic in summer, someone's paying for that and that comes out of your taxes. So, to make sure that lawn is mowed, to make sure that we have everything that we need for every day If you want your mail to be delivered well, that's coming out of your taxes too.
Speaker 1:That's a government job, yeah.
Speaker 2:And so a lot of these things we're paying for. So that's what you're withholding taxes, as well as a whole lot of others. You can actually go online and if you look at your state's comptroller office, so most states have a comptroller that's C-O-M-P-T-R-O-L-L-E-R, so Comptroller, and you can actually download the budget.
Speaker 1:Today's word of the day is Comptroller.
Speaker 2:You can look at what the budget is for state as well as you can see what the federal budget is. Now, I wouldn't recommend looking at the federal budget, because that's just, you know, massive, but the state budget because that's just massive, but the state budget is actually a little bit more understandable, so you can go in and see what money is being spent for what, and so if you want to see what your taxes are being spent on, you can go there. But that's some examples FICA taxes, we talked about Social Security and Medicare. So Social Security is the money that you get after you turn a certain age for your retirement, hopefully so well, they've been saying it's going bankrupt for the last 50 years and they always say it's going to go bankrupt in the next 20 years. Well, we've passed that every year for the last 30 years at least. So as much as they say that, I have a hard time they would say it's gonna be gone in 20 years.
Speaker 1:For the last 50 years, exactly. Yes, that's exactly what I just said.
Speaker 2:Social Security will be there that helps. It's not 100% of your retirement fund. If you're only living on Social Security, that's a problem. You need other retirement, but that's kind of a uh, a forced retirement to make sure that you have what you need to meet the basic necessities in your retirement years. So that's just. It's social security, it's security for the general public to make sure that everyone is taken care of. Now there are some other things that that does for disabilities and other things. And then you've got your Medicare, which, if you don't have income, if you have other, also, when you turn over a certain age, you get government-funded health care. That's Medicare, yeah. And so you're paying into all these programs to help you long term. Now, when you're 18, do you need any of that?
Speaker 2:hopefully not no, you're just thinking I'm, I'm invincible, I can rule the world. I'm, I don't need plows, snow, uh, getting rid of the snow on the roads. I've got my car and I can go on that. And you're probably making those lines in the road that everyone hates.
Speaker 1:Well then, I imagine that you're that person that just slides into another car, your insurance rates hike up and you have to pay for damages on a vehicle, and it's just. The list is so much longer if you don't worry about these little things called taxes.
Speaker 2:When you're 18, you think about that and it is so far away that you would rather just not. But remember, you've got to take the time to think and realize that it's not just about today but it's about the future. We talked a lot about the investing future in our stage one uh or phase one uh podcast. But when you're, when you're looking at your first adulting job, you're going to see a little bit more taken out, but you're going to get the reward of a lot of those services.
Speaker 1:Yeah, and we're not saying like we're, we're unfunding everything, like it's definitely, like we want you to have fun, we want you to know you're like we.
Speaker 1:It's not, it's not up to us, but you know like it's you know, have fun with it, say, you know, save a little bit, spend a little bit, and no one's saying like, just give it all, give up all the fun and make sure that you do this. Just just have a little bit of more balance to what you're doing so that your payday doesn't become payday gone day, so that you're just, you know in one. And that's where the term paycheck to paycheck it's really easy how quickly you can get into that kind of a scenario when you aren't implementing some better habits right out of the gate. So, um, one of those things is like as, as you're 18 years old, you're kind of just starting to figure out how chaotic it can become. Or it is in just the amount of things like costs for college, uh, rent food, pizza at 3am. You know it's, it's, it's all of that all at the same time and everyone else wants money. And then you get a phone bill. You know it's just it, it doesn't matter because it's, it's not going to shut off. You can't run away because it's part of being in existence in a first world country. You know, but but it's, it's.
Speaker 1:How do we navigate that and make sure that our dollars don't just bleed dry before we even get the get paid. You know, I get a paycheck and I already know the check. The check's gone. I've been there, I've been that person that's like man, this sucks. I don't want to like, I don't even want to put this money in, but I know if I don't then my account's going to look far worse in the morning. So you know, I might as well put it in there in the account and know that there's not a penny in there that is going to be able to. I'm going to hold on to, because that check is gone and I didn't even get to do anything fun. So I want I want to maybe speak to the sense of how do we avoid that?
Speaker 2:Yeah, and I think everyone hates the word budget, and I think it's because there's a misnomer on what budget means in this context. When I say budget, I'm not talking about restrict your spending. I'm not saying live within this belt-tightening, restriction world. That's the worst way to live. You cannot restrict yourself into a successful and happy life. It will not happen. You will end up restricting yourself and that belt will break and you will overspend. Yeah, that is a. It is not a sustainable lifestyle.
Speaker 2:What you have to do is you create a budget. A budget just says this is how much I'm going to spend, and so you set aside. I'm going to set aside 10% for fun. I'm going to set aside 20% for savings. I'm going to set aside percent for savings. I'm going to set aside five percent for investing. I'm going to put that in a 401k. I'm going to put that in a stock fund I wouldn't recommend that but I'm going to put this five percent into any number of things. And all you're doing is you're just saying this is where my money's going to go, and then you've got X amount left over for rent, for food. You've got X amount left over for for rent, for food, for all that, and then you find a good place to rent. So it's maybe Kind of run down, but you're setting aside money for the future.
Speaker 2:Yeah and so you're gonna live in a little bit of a rundown place now, but you're gonna be able to afford a much nicer place in the future and you know, in regards to even a basic budget, ramen for food entirely is not budgeting, just so you guys know like that is not healthy for you.
Speaker 1:Nor is it the equivalent of a good budget, because if all you do is just buy ramen and everything else is out the window, then you're going to lose money even faster. So it's just yeah, you can put ramen in your, in your grocery list, sure, but make sure that, like, it's not the basic, you know, the basis of your, your budgeting skills so what you want to do is is look at, I mean, and and ramen as a treat is great, yeah, but not every day.
Speaker 2:You, you can't limit yourself to that. But you're looking at, okay, how much do I have to spend for food? And if you, you've got, say, $100 for two weeks worth of food and you're looking at building out that budget for this is what I have left over for food, or this is what I've built into my budget for food $50 a week which is pretty reasonable Then you look at how do I make that last as long as possible, how do I stretch that out? Number one look for coupons.
Speaker 1:Yeah, coupons. Coupons are great Discounts, deals.
Speaker 2:You set up your, your budgets, that you look for coupons, you set out your meal plan for the week based on what's for sale at the grocery store. You know, you look at, you know coupons usually come out well in advance. So you're looking at okay, I'm going to go out to eat on Friday night. That's in my budget, that's part of my grocery food budget of $50 a week. I'm going to go out to eat and so you look at okay, what coupons are there? Am I going to go to McDonald's because they're having a two for one deal this week, or am I going to go to a little bit nicer of a place because they've got a really good coupon with 50% off?
Speaker 1:And, honestly, if you learn that habit at 18 years old like it's going to pay dividends later when you have more like, if your future includes anyone else or making more people, then you know like all of that stuff is going to increase the need for finding valuable or finding discounts, finding coupons, utilizing that is an everyday, you know necessity in real life.
Speaker 2:And I'm not talking about taking this to extremes, where you look at every coupon in the book and you go and buy everything that has a coupon.
Speaker 1:No, because then you're still losing a lot of money exactly you look at.
Speaker 2:What do you like to spend money on? So let's say you want fruit as part of your weekly meal plan, and so you look in the grocery ads and are there any fruits for sale? And they may have apples or oranges or peaches or pears for sale that week.
Speaker 1:Perfect, that week I'm having pears as part of my fruit for my meal plan I remember I I didn't learn this until I was probably in my later 20s, but I, uh, I the the little like oh yeah, you can buy two of these cans for, you know, five dollars. Okay, so two dollars and fifty cents per whatever. It is like we can, can like, I guess, right now, today, that would be a can of soup, maybe, like if you're lucky, but I'm thinking like soda.
Speaker 1:That's about 50 cents to a dollar. So you know, like two cans of soup for five bucks okay, they're good, progressive or whatever they like, all right, so we're pretty good soup. But but, and the sign says two for five dollars. So if I bought two of them, then I get that discount, right. But I didn't realize until my late 20s that I didn't have to buy two of them to get the discount. If I wanted one can of soup because i'm't have to buy two of them to get the discount If I wanted one can of soup because I'm not going to eat two, I would get it for $2 and 50 cents, because that's the discount, yeah.
Speaker 1:But unless it says buy one, get one, yeah, but they even. Then that's a better deal. So so, like um, it's. It's one of those things that I struggled with for years and then I came across and I realized that I didn't need to buy both of them. It's a marketing ploy, it's just simple terminology, but it's something that really is out there and it's that idea about if I'm putting together my plan and there's a discount and I'm looking for that opportunity. That's just a little thing. That took me quite a few more years before I figured that out.
Speaker 2:And so what I recommend is because budget has such a bad term behind it, all I'm talking about and we're just going to call it something new instead of budgeting, we're just going to call it proactive spending, and so we are spending proactively, we're thinking about it before we do it, and so build a proactive spending, you hear that spend like a pro.
Speaker 2:It doesn't need to sound like you're professional, we're using proactively, but you know, yeah, spend like a pro so build a proactive spending plan, and that's a big thing that, as you start out adulting, that you're going to be able to build that proactive plan. Yeah.
Speaker 1:Hey guys, we're gaining momentum and it's all thanks to you, but we're not done yet. Let's keep the movement going by subscribing, hitting that like button, inviting others to join in with the excitement that's going on, because together we're going to make waves. That was bad. That's terrible. Yeah, it really is. I should have. I should have definitely read that before I put it on there. Okay, so we're going to move right along into the next part of this Spending smart and building good money habits. So I think each one of these, as we go through these phases, are going to be kind of similar in nature. They're just more mature in their nature as well. So in this phase, we're thinking about, like you know. So we're thinking about, like you know, you're thinking of budgeting right now, at 18 years old, for the 25 year other than you hope. You are still as agile and spry as you are in your 30s, as you are in the in when you're 18 and that is not the truth you won't be.
Speaker 2:you just won't trust me. The sad yes, but I used to climb mountains.
Speaker 1:Now I when I move in my chair, but this idea when you still are at a point where you're kind of beginning the process of responsibilities, beginning that process of building out a successful future. Building out a successful future so, when you're thinking about this idea of better ways, like maybe building some good habits. That's probably, I think, really essential, instead of just spending all your money on eating ramen or eating noodles, whatever it is, if your ramen's not your preference, but you're wondering where all the cash went. There's a couple different hacks or ways about being able to do this, and this is just kind of a cheat code, and I know, joe, one of your favorite things is to know the code. So it's. There's so many codes that I've had an opportunity to be able to hear from Joe. So, joe, what is the cheat code for building good money habits?
Speaker 2:All right, so there's no number one best way to be a proactive spender, so your proactive spending plan. There is no one guaranteed way that works for everyone, because everyone's different. Okay, everyone has different priorities. Everyone has different values.
Speaker 1:We guarantee. There's no guarantees Exactly.
Speaker 2:The general best one in air quotes is the 40-30-20-10. Okay, so it's easy to remember because it's just 40-30-20-10. 4-3-2-1. Exactly All right, okay. 40, 30, 20, 10, 4, 3, 2, 1. Exactly all right, okay. So the way that that works is you spend 40 percent of what you make on your necessities. So that's, that's food. That is, uh, your utilities. Uh, cell phones, the the necessities. And yes, cell phones today are necessities. Yes, they haven't always been. Now they are, because you can't function in today's world without. Yes, cell phones today are necessities. Yes, they haven't always been. Now they are, because you can't function in today's world without those cell phones.
Speaker 1:uh, in varying degrees I told somebody the other day that I would rather not wear pants.
Speaker 2:Then forget my phone I would rather you wear pants and forget it's a preference thing, joe. Yes, it is very much a preference on my end that I would rather use your pants, um. So 40 on those necessities, 30 on housing. So 30 goes towards your rent, your house, whatever it may be. Now, if you can get away with less than that, great, because that means you can put that money to either the 40, the 20 or the 10 but, 30 is the general and then you're going to spend 20% on your savings and debt pay down.
Speaker 2:So hopefully, if you started with a really good phase one in your teenage years, you don't have a lot of debt right now. But if you've come into this beginning adult phase with some debt school debt, anything like that you're going to start paying that down with that 20%. And then 10% is for fun 10% of your budget to have fun. So if you're making $400 a week, you are setting aside 40% of your fund for fun. That's going to the movies. That's going. I don't know, I'm old. Movies is the only fun thing I can think of anymore. But that's doing the fun thing. That's going on dates. That's fun. Go into the batting cages.
Speaker 1:All right kids.
Speaker 2:That's your season tickets for sporting events. Um, yeah, I go to concerts. Concerts, I mean there there's a lot of things you can do without 40. I'm older than you, geez, although if you're going to a t-swift concert, you're going to get a lot more than that 10% for those, but 10% for fun, 20% for savings and pay down If you don't have any debt.
Speaker 2:That's a huge amount of saving for the future to be able to buy that house, to buy that nice car to be able to do a lot with. So set aside that 20%, 30% for housing In any of these areas, except for that 20%, if you can reduce that at all. So if one week you don't do anything fun just because you're busy or whatever, take that money, you can either roll it over into the next week or put that into your 20% savings, and so now you've got an even bigger savings. Yeah, 30% for housing If you're able to get a good deal on rent or if you're able to buy a house at the right time. So the interest rates are low, housing prices are low, so you're paying less than 30 percent. Win great, uh. And then 40 for all the others, uh. And that's where you know if you can get that lower, you know, by being uh better with your food, being able to make food at home instead of uh eating out or uh buying pre-made food, uh, then you're able to reduce that even more, and more of that can go into fun or into savings and so anywhere around there.
Speaker 2:That's just a general guideline, not written in stone. There is, again, no definitive proactive spending plan that works for everyone. You have to find what works best for you. The 40-30-20-10 is just a general starting out guideline to help you in this phase to learn what works best for you, to see where your money is best spent and what your priorities and your values are. You will modify that and adjust it as you get older, but starting out in phase two beginner, adult that's a really good way to start out and build that proactive spending plan.
Speaker 1:So 40, 30, 20, 10. One size fits most.
Speaker 2:One size fits none. You have to adjust it to you. That is just a starting out guideline. It's a guideline. It is not the path to always walk.
Speaker 1:Okay, so different for everyone. So to throw this wrench into it, let's talk about the opportunity, because you're going to get stuff in the mail. They're going to, they're going to track you down and they're going to send you these enticing letters that say we want to do this, we want to do that, and you know like it could be great and you could have access to you know, and they're going to tell you you can have a thousand million dollars, you know, and in that moment and you're only 18 years old, so, like in banking, I rarely ever saw this.
Speaker 1:Credit cards credit cards can be good, but usually at that age I would say it's a horrible idea generally across the board. But if you must, if you feel like, well, you know, you get that one financial consultant person that says you know what's really good to build your credit score so you could purchase a house. Um, then is is you get yourself a credit card? Or let's say, you've gotten yourself a credit card and you're trying to figure out how to manage that wisely. Okay, so I did this for for a period of time I was time I worked for a sales company that we talked about a budgeting program. It was a one-size-fits-most budgeting program, but one of the philosophies that we talked about in use for credit cards was about the only one that I would ever say is appropriate.
Speaker 1:If you have a budget to buy gasoline and you want to use a card to build your credit, only buy gasoline and then pay it back off again. Keep the balance to zero as often as possible. If there is an opportunity for you to purchase something with a zero interest rate for a period of time, okay, it's a gimmick, it gets you to use the balance on that card and sure. However, be very careful with that, because the moment you go over that period of time that you're trying to pay something off and you don't pay it off and say six months, zero interest paid off. So if you pay it off in that time, great. If you don't, you're looking at like 470 on that card. Just, and it is so unbelievably bad, just just don't do it, don't, don't, do it, don't, don't.
Speaker 2:It's. It is a promotional gimmick in order for the credit card company to make money, so don't give in to their tactics to do that. Just just don't do it. Um, getting a credit card is great to build your credit and I think at that age, getting a first credit card is actually a good thing. Yeah, and I always tell people to do the exact thing that you were just talking about Put your gas on it.
Speaker 1:Yep, you know, if you have a grocery budget and you use, you know this is how much you're going to spend and you go to that penny like no, nothing more, because you know that that amount is budgeted to go right back into that card. So you're not spending any well credit don't don't even do that.
Speaker 2:So anytime that you spend money on your credit card when you're at this stage, you are going to take an equal amount of your cash and put it into a savings account. So if you, you spend $53 on gas you're going to take it out of your bank account and put it into your savings account. Yeah, that $53 is over there. It's earning a little bit of interest, which is great. Not a ton, sure, um. But it's set aside over there to be able to be used.
Speaker 1:You're like this week, I got 0.004 cents.
Speaker 2:Hey, you know, week I got 0.004 cents. Hey, you know, a penny saved is a penny earned. Oh, man, and. And no joke that I mean. I know it's a really old adage, but it really does add up. And so you take that and let's say you go and do your groceries I wouldn't necessarily recommend groceries because that can add up to a lot but put your groceries on your credit card, take cash, put it on your savings account, okay, so that money is set aside. Now the reason you do this and you don't pay off your credit card right away is because credit card companies don't want to see that zero dollar balance and so you let that go to the end of the period so that builds your credit. Once you have a balance on there at the end of the cycle, that's what builds the credit. And then you're going to take that savings money and pay it off, and then you're going to start that cycle over again, but you're always putting that money aside so that it is there to be able to pay off.
Speaker 1:Yeah, you're never spending any money. In that sense, that isn't already yours, you are?
Speaker 2:only using it to build your credit. Now, later on in life, when you have a little bit more established, when you have an emergency fund established, when you have a lot of these more complex, more integrated saving systems, you can then use a credit card for, say, a very large purchase. So you want to go on a Disney vacation. So you're going to use your credit card, put all that on the disney vacation and then pay it off over the next, say, six months. So you've saved up for six months, paid for half of it and then you're going to pay it off over the next six months. You pay it off in a year for that one vacation.
Speaker 1:But you're still. I think the philosophy, even looking there, is to say that a good way of I like you, save for six months and then you, you put, put, put it on the card, um, thinking in the same sense of paying it off, is, you know, I, I would even go go farther and try, try to try to save more, so that you're it's not just like, oh, I've been saving for six months and then I'm going to have, you know, when I, when I go on that vacation, I have six more months of of payments I'm trying to make on card.
Speaker 2:I want to pay it off quickly and the idea behind that is because we budget for fun or we proactively plan for fun, and so when we're proactively planning for fun, we're setting aside the money to be able to say, okay, we want a really big event in the future, and if you just continually restrict yourself, then you're going to end up spending that before you have your big fun event, and so you're setting aside half of it in advance. That's your setting aside for fun. You go have the fun event and then you pay it all back over time. That's an appropriate use of a credit card. However, at this stage, at the early adulthood, beginning adulthood, what you're looking at is you don't have that background to be able to say I am disciplined enough to set aside this money and be able to have some big adventure. You only want to spend what you have, and so you are learning these skills.
Speaker 2:Don't run before you can walk, and so we talked about first phase. You're just learning to walk. You're learning, you're stumbling, you're making mistakes. This is where you're really getting that practice in walking. You are not running yet, and so you are setting aside all that money Anytime you spend on a credit card. You set it aside Later, when you're very skilled at using these techniques, then you can run, then you can go and do that really nice big Disney vacation and use a credit card for that. But right now you don't ever want to do that because it is going to hurt you so significantly in the long run.
Speaker 1:Yeah, so I don't know if you know this or not, but we have a Patreon, don't we? Joe, yes, and I knew that. Oh, okay, all right. So Hot Potato Finance that's the name of our YouTube channel that we're on, and the Idiot's Guide puts our videos on Hot Potato Finance, if you've looked. We're also elsewhere, if you want to just listen to us, but I want you to see our pretty face, and so that's why I want to send you to YouTube to be able to do that.
Speaker 2:I recommend just listening, great luck.
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Speaker 1:Patreoncom forward slash t-i-g underscore hpf. That's terrible. Okay, all right, that was. You know, honestly, that needs some work. Still it. It was a lot better. The first time we did that was just blech. So we talked about kind of the day-to-day We've talked about now good habits to instill as we get paid, spending money preparation from literally day-to-day, week-to-week. But what about the future? What about thinking about what we talked about. You know thinking about what we talked about credit cards and what that does. Why does why? Why does that matter? Now, if the difference between you know how I managed, if it's managed poorly or successfully, how I manage my credit cards, if I have a credit card, you know what is that going to do to me in the future it compounds.
Speaker 2:That's the problem, okay, and the benefit. So when you, when you make any positive or negative, uh financial decision, it compounds throughout the rest of your life. And so there's an old story that a grain merchant went to a sultan and he said or the sultan was, I can't remember the full story this individual, uh, that he told him that he would either give him, uh, the value of, uh, a million grains of rice or, uh. But the merchant came back and said I, I don't want that. What I want is one grain of rice on a chessboard, doubled for every piece on the chessboard, yeah. And the Sultan's thinking, oh, this is going to be great, this is, I'm not going to have to pay him anything, I'll take this deal.
Speaker 2:And then as you start going down the numbers so 1 to 2, 2 to 4, 4 to 8, 8 to 16, to 32, to 64, to to 128 to 256 you start seeing how, just across the chessboard, you get to more money than would ever be produced in the world. And that's compounding because it's just doubling every single time and it adds up. So you imagine, if you start out with just a dollar, and you've got two dollars, you've got four, and then you've got eight, and then it doubles every single time. You're going to be in the millions in no time. But then you think about it the opposite way. If you start with a dollar in debt, then you're $2 in debt, then $4 in debt, then $8, $16, $32, $164. And before you know it you're millions of dollars in debt without realizing it in debt.
Speaker 1:Yeah, without realizing it. That's the compounding problem. Um, yeah, like you have, you have it on, like you said it goes. It goes either way, like you can have the positive compounding. But you know the the unfortunate thing, as we talked about with credit cards, is it's not built to be in your favor. No, it is never designed for. There are other elements that you can look into that have, you know, even like higher yield savings accounts or you know different kinds of things that you can invest in.
Speaker 1:I don't want to be, I don't want to speak specifics because we're not advisors, so it's not something that we should, but you know it's not.
Speaker 1:It's not, it's not a bad idea to explore and also educate yourself about those things, because it's not going to be something that you know you like once you get to something that you feel like can be lucrative, I guess in the way that you will look for saving for your future, you know, the more you understand that, the more you are educated individually, you're, you're less reliant on somebody else teaching you along the way and you're also, more you know, more protected in the sense that there's a lot of shady people out there that are absolutely in that investment world that are just there to take your money and run with it, and so it's. I'm not saying everybody is, but they're that the the better educated you are, the easier it is for you to help dictate your financial success future because of the fact of what you know, as you're walking into things that you've selected as your investments you've selected as your investments, yeah, and, and, and that's the idea is, you want to avoid the deficits.
Speaker 2:You want to take advantage of the potential positives? Yeah, and so putting your money into anything, anything where you're going to get some kind of return, is going to benefit you in the long run because of compounding. So you're thinking about the future, and this is the earlier you start, the more you're going to make in the long run. That's just the way it is, and so the earlier you can start thinking about where can I put my money, where can I put this, you're going to have a better life in the future for doing that, and that's what this stage is all about. Future for doing that. And that's what this stage is all about. This stage the 18 to about mid twenties is all about working hard, having some fun, but thinking about the future, planning for the future and setting aside for the future so that you can enjoy so much more at that point so much more at that point.
Speaker 1:I think you know the idea that money and what you do in stealing good habits can be powerful, can be a powerful impact in both directions, depending on the kind of habit that you create. So if you have a negative habit, unfortunately money is going to run the same way. It's going to be a very potentially devastating thing, you know. But on the other side is, if you respect what it is and understand how that is and have good habits with your money, it it compounds in either directions. It's just the choice that you make on. Do you want that positive direction or are you choosing the negative direction? So it's keeping that in mind, but either way, it's a powerful habit. Money is very powerful in that way. Yeah, definitely. I wish like it's weird, because inside I have a conflict that I say money is powerful. It's true, though, like money has the ability to control people in ways that other things don't.
Speaker 2:Yeah, and part of it's because we give power to that. Yeah, because generally people live so poorly that any opportunity to get that money, they're going to do whatever it takes. Yeah, they're going to do whatever it takes. Yeah, but someone who is, who has started life being good with money, having the right habits, they don't need that they. The power of money no longer holds that because they have what they need, yeah and so. So it prevents people from being able to control you because of money. It prevents you from being able to, or from having to work harder later in life because you're desperate for money. You're doing jobs you may not like or may not want. It diminishes the power of money over time on you, while giving you more power to be able to do what you want to do. And so it's a weird switch that happens when you are good versus bad with money, and it all starts here.
Speaker 1:I think it's establishing a good balance and you know that's kind of an essential part of it, but still having fun and living your life. So it's just really kind of setting up your future, you for success. You know you plant a tree. So if I plant a tree right now, I mean I could water that thing like crazy and I'm going to see like just boop right out of the ground, that's it, you know. But if I think about if I can keep watering, that that's going to be. You know it's going to have a swing that I'm pushing my grandkids in, because that's how big that tree is going to get kids in, because that's how big that tree is going to get. So it's, it's it's. It's not about it's not necessarily right now, it's about what that will become because of the fact that I'm pouring into it, you know. So I don't know. Is there anything else you want to add?
Speaker 2:No, I just. You know, using the tree example. You know when you learn about doing this now, the tree example. You know when you learn about doing this now you can, instead of making a swing for your grandkids, it's going to have a swing for your kids, yeah, and so you're going to see that reward much earlier in life, the earlier you establish these patterns and habits.
Speaker 1:Yep so budgeting doesn't mean boring, just so you guys know. Know, that's an important part and we're not calling it budgeting.
Speaker 2:That's true, it's a proactive spending plan.
Speaker 1:Spending pro. There you go. That could really go wrong. Yeah, hey guys, we've reached the end of the show for today. Thanks for listening, thanks for watching. Don't forget to like and subscribe. Life's too short, so keep laughing and learning and remember idiots have way more fun. Check your shoes.