Ultimate Money Flow System (12 Easy Steps)
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- เผยแพร่เมื่อ 18 มิ.ย. 2024
- I’m a big fan of simplifying and automating our money as much as possible. When we can automate most of our finances, not only are we saving valuable time, it tends to work better because we are removing ourselves from the process. So in this video, I want to walk you through step by step how to set up your own ultimate money flow system.
Timecodes:
0:00 - Intro
0:40 - Enroll 401k Match
1:27 - Enroll in FSA
2:23 - Direct Deposit to Checking
3:03 - Automate Essential Bills
3:37 - Automate Credit Card Bills
4:37 - Automate Roth IRA Contribution
5:19 - Automate Savings Transfer
5:52 - Automate HSA Contribution.
6:47 - Automate 529 Contribution.
7:31 - Automate Brokerage Contribution.
8:07 - Low-Interest Debt
8:48 - Maintenance
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DISCLAIMER: I am not a financial adviser. These videos are for educational and entertainment purposes only. I am merely sharing my personal opinion. Please seek professional help when needed.
Great stuff Tae. As someone with 0 financial literacy at 21, you have really been a great help.
A couple others I would recommend looking into are Dave Ramsey and The Money Guy. Dave's pretty firm on his exact approach, and you can mathematically do better (like The Money Guy), but establishing financially responsible behaviors are Dave's calling card, and that's a valuable piece of the formula to create financial success. I've combined a Dave Ramsey "gazelle mode" debt management strategy to pay off well into six figures of student debt with The Money Guy's financial order of operations (slightly larger starter emergency fund, take a 401k match first, debt avalanche, slow down on low interest debts like undergrad debt for me, and then start dollar cost averaging into the S&P500, starting with tax advantaged accounts like roth IRA and maxing out 401k). That will help you get a serious head start in life while everyone else is paying less attention to the numbers and just trying to live their lives (don't forget to live your life a bit too in the process though!)
I appreciate you breaking down things that people assume we all know “like a match”
Awesome video Tae! Really appreciate the realistic advice.
I’ve been watching all your videos and learning so much! Thank you for putting these out there. Happy Financial Literacy month!
This is a great video and thank you for your content. Really helpful!
I love your stuff. Keep it coming.
Tae is, of course, correct. After getting the "free money" that comes from making the minimum contribution to your 401(k) account necessary to receive the maximum match, paying off high-interest (e.g., credit card) debt is the best use of your money. If you are carrying a balance on a credit card that charges 18%, paying it off is like getting a risk-free18% return on your investment, tax-free. You'll never find a comparable financial return elsewhere.
If you decide that you want to pay off your mortgage early, you could do Time Value of Money (TVM) calculations and work out how much your payment would have to be in order to have the mortgage paid off by the date that you are targeting.
PSA regarding HSAs & FSAs!
First-off, great video! Obviously you can't cover every nuance, but I want to flag one, easy-to-miss trap with an FSA/HSA: The tax code prohibits any person or married couple from having both an FSA and HSA in the same tax year (unless it's a limited expense FSA)!
With only one person/working spouse, your employer probably won't let you enroll in both. But you need to be careful if you and your spouse both work and receive benefits from their jobs. One year I enrolled in an HSA and my wife enrolled in an FSA. Luckily, I learned this was prohibited before my taxes were due and could take steps to avoid paying any penalties. But it was a huge headache to unwind (filing special forms to withdraw excess contributions from my HSA, requesting a corrected W-2 from my employer, etc.). The tax-advantaged vehicles are powerful and great, but you need to be super careful not to accidentally break any rules.
Such a good duo!
Great info 👍 👌 👏 😀
Thank you Tae for the simplicity! I have questions about how much I should think about the saving for kid college, the 529 funds. Nowadays the college expense can be so various. Also what 529 plan you will recommend? Thank you!
Thanks!
Awesome video. I recently moved my banking to USAA since it also lowered my insurance payments (bundling my house, car and banking). I have an HSA instead of using a FSA because I plan to carry it year by year and can invest it in a Vanguard fund. I dont know if this is bad, but I look at my banking accounts daily.
Thanks so much Tae!
I had a question regarding your opinion on fidelity's cash management account, which effectively allows me to directly use money market fund as my savings account, while still allowing me to write checks/have debit card transactions out of it. I was wondering if this strategy makes sense for myself in starting my emergency fund in this instead of something like a HY savings account
Thanks again!
A fellow medical student pointed me to your channel and I love it!
Also - would love to see a video on spousal IRAs! :)
Good stuff for me getting the 401k match and maxing out a Roth IRA is enough as far as investing.
Interesting idea about the monthly roth ira contribution. I normally lump it in, but obviously that means Ive had it sitting around or just liquidated assets. Maybe liquidating assets immediately when I can make the contribution is ideal. Or when the tax year rolls over
I think I would add a caveat and put the HSA up with a matching 401k in a flow system as some companies match HSA contributions.
Been watching for a few months (since we're about the same age and financial philosophy) and just for funsies I typed "tae kim" instead of "financial tortoise" to find your recent videos. FIRST result was "Tae Kim Japanese." When did Kim become a Nihongo surname?! I'm of Scandinavian ancestry (born in Japan but parents moved back Stateside when I was 5) and weep for my country when "Tae Kim Money" or "Tae Kim personal finance" didn't even show up on the search list.
Anywho, great content on the channel! Just had to rant about 'the melting pot' when the majority of us can't even be bothered to learn about each other.
Tae, what do you classify as "high interest debt"? I have two types of debt that aren't currently accruing interest, how should I prioritize those?
Can you make a video on financial budgeting software please?
If a company offers 403b Roth option, with match, would this be equivalent/preferable to Roth IRA or is there something better with Roth IRA? Thanks, Tae! 🐢
Can you please go over HYSA vs MMA and if there’s a benefit using one over the other; also multiple ways to save for children’s college fund.
If I am planning a home purchase/upgrade 4 to 5 years from now, do you think it would be more fruitful to add money over that time to a high-interest savings account (3.5 - 4%) or a brokerage account? I had been planning on growing this down payment money through a brokerage fund, but you suggest otherwise. Is that due to the higher risk nature of a brokerage especially given the shorter time frame?
Appreciate the content, but some caveats that were missing:
- HSA contribution limit includes both individual and company limits so if your company contributes, you need to lower your individual contributions
- income limits for Roth IRA contributions so really bad to automate that if you need to perform after-tax contributions and then convert. Ideally you would do this once a year
Do you suggest navy federal or USAA for direct deposit?
Hi I watch your videos all the time, and I really appreciate the work you are doing. I learned a lot about stock investing through your channel. Could you please make a video about commodity trading. Compare commodity investing and stock investing including risks and profits. Thanks in advance
I just realized one of my old IRAs from previous employers is traditional, trying to weigh the pros and cons of converting this to Roth. It seems like investing in this account will be problematic longer term because I have to keep track of everything tax status :\
Can you go over the difference between an HSA and an FSA? It sounds like they have a similar function. Why would you contribute to the FSA prior to the HSA?
FSA can cover more things, like daycare.
Its VERY different FSA is use it or lose it.
For a 401k, should I only contribute enough to max out the company match? Maybe put the rest in a Roth IRA and index fund?
Yes I would. But you need to make sure how much you have to invest inorder for them to match you in the 401K
You're the dad I never had 😅
Can you contribute to both a Roth 401k and a Roth IRA? Also note, that you can't contribute to a Roth IRA if your gross income is over 153k! There are restrictions on the traditional IRA as well.
Back door Roth IRA is a way to get more money into a Roth if you make alot
고맙습니다 만 #2 and #8 are in conflict. You can’t contribute to both an FSA and HSA in the same year; it’s one or the other.
Love your take on personal finance subject but loss on this money flow system.
I get organization and steps. Don't get the sequence and relevance/ priority. For example, the simplest organization would be a checking and savings account, and the first step has to be to organize debt on a list and to save and grow an emergency fund.
If you can't do that, anything else is mute. In order to save and start an emergency fund, one must have more income than debt. In that use case, I don't see a 401K contribution being first, even if it is free money. Free money is not free if you are not free to take it.
I am a tortoise as well. My motorcycle riding name in Ninja Turtle
Why would I invest in a Roth IRA when I plan on having a lower tax rate in retirement?
If you plan to be in a lower tax bracket/have a lower tax rate, then yes, a traditional IRA/401k makes more sense. There are more things you can consider though: will taxes be higher or lower in the future, do you want to be forced to withdraw the money via RMDs, and do you need the tax savings now or in retirement?
Watch out on the 529… if the 529 is in their name it may count against the child for FASFA. It’s better to open a 529 account under a grandparent as their assets are not considered when doing a FASFA.
I feel like your take on Roth is misleading.
a. Some companies offer both Roth and pre-tax 401K, and matching works the same even if you contriubte only to Roth. If you prefer roth, you should first maximize the 401K (as the limits are higher) before you get into IRA. (Correct me if I'm wrong and I miss something.
b. Roth is better only if 1. You will retire inside the US and 2. If you believe tax brackets will be higher in your retirement (which is a speculation, not a fact). Even if you have the same income in retirement, giving the same barckets, you would pay less taxes if you pick pretax compared to Roth. That's because the tax you pay for putting money in Roth is going to be closer to your marginal tax bracket, not your effective tax bracket.
Because of this I believe that advising people to automatically go to Roth is a mistake.
DO NOT start automatic bill pay!!! If you lose your job, or you don't have enough money in your account for whatever reason, you will be charged $25 or more for overdraft fee. And if you are paying automatically with a lot of bills it could be difficult to keep track of your money and how much has been withdrawn, you might think you have enough money but sometimes the payments don't post right away and you might think you have enough but you don't and you get charged overdraft fees of $25 or more....auto pay is good for people who already have plenty of money and have a high paying job or cash flow so they don't have to worry about if they have enough money in the account. But for someone who is just barely able to pay their bills it's not a good idea to do auto pay. Just pay ithe bills yourself when you get paid and manage your money yourself.
Is he copying Humphrey Yang ? Dude just release a video yesterday with the same-ish content...
If anything this video is the same video he made 4 months ago "optimal order to invest your money."
Execpt also adding set up automatic contributions after he explains what the accounts are.