Use This Paycheck Routine EVERY Time You Get Paid
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- เผยแพร่เมื่อ 2 มิ.ย. 2024
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Every time you get a paycheck - it’s important to know what to do with that money - here are 7 easy steps you can take to maximize and optimize your payday routine.
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WHO AM I?
Hello 👋 I’m Humphrey, I used to be a financial advisor, worked in gaming/tech, and started my own eCommerce business. I make practical, rational content on investing, personal finance, the news, and much more with a data-backed approach. My goal is to help you with financial literacy and creating wealth.
PS: I am no longer a current Financial Advisor, any investment commentary are my opinions only. Some of the links in this description are affiliate links that I do receive a commission for & they help support the channel!
⏱️ Timestamps:
0:00 - Start Here
0:31 - Step 1
2:35 - Step 2
3:51 - Step 3
5:53 - Step 4
7:49 - Step 5
9:51 - Step 6
13:32 - Step 7
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@humphrey excellent video: What do you use to automate your account?
Haven’t you already done this video?
The snowball method is what worked for me. Each time I knocked out a debt, it fired me up to continue attacking the next one with a vengeance. That was seven years ago and the peace of mind that comes from being debt free is priceless--will never go into debt again!
Same - I had some debt I felt really *guilty* about, too (small, but to family), and clearing that early on came with a huge lifting of emotional weight that just made it easier to think practically about the rest of the debt. There was no interest, so it would have been last with the avalanche approach, but it felt amazing to pay it off.
Ditto. 7 years ago was -15k net worth. Today the Fidelity account cracked 75k.
I think people can figure out what to do with their money but don’t have the dedication and discipline to manage it.
For sure, by now, these kinds of content are just very repetitive already. It really comes down to discipline
I think this can be helpful for people. Not everyone knows this. The education on finance is very bad in the American school system overall. It doesn't help that it is harder for people to pass down money wisdom if they don't know how to. While I am fortunate to have parents who are good teachers on this, I also learned a lot on TH-cam on budgeting
Discipline is a must but most people have too many excuses to not to
@@suwats7555 having a good upbringing, home life, and genetics accounts for 99% of this
Totally agree
There's a mental mindset shift that needs to happen as well. People should treat investments, savings, etc. as "Costs" that need to get paid, so once the money is gone and moved... it's gone. You shouldn't consider that money still there and something you can touch (unless it's a true emergency).
So many times I've seen people touch their savings and investments to buy a new computer or new car that they didn't truly need.
thanks Steve!!!
Yes, former banker here. People treat their Roths like a glorified savings account.
got married recently and paid off my wife's remaining car loan. It docked her credit nearly 50 points. apparently paying off debts in total can have a negative effect on your credit score. pffff so wild
Thanks to your channel I feel like I’m way ahead of other people my age (22 going on 23). I recently opened a Roth IRA and HYSA. I also set up automatic transfers to each of those as well as my student loan debt. Thanks, Humphrey! 🙏🏽
Financial management is such a mental game. After watching a few channels and reading a few books it totally changed my perspective over just a year or two.
Been waiting for this !! Thanks Humphrey
Hope you enjoy it - you're welcome!
Perfect timing, thank you sir!
Me: Sounds great. Gonna get back on track
Next Payday: * completely ignores advice *
You are awesome:) thankyou for putting all this solid information in a good understanding point.
Actually, I implemented both methods in the beginning I needed the psychological motivation to attack my debts head-on. However, after paying off the smaller amounts I switched to the avalanche method because I was frustrated with the amount of interest that I was paying in comparison to how much money was being actually applied to the debt. I think each person has to come to terms with what works best for them and their situation.
Thank you Humphreys for always making personal finance entertaining and simple. I learned so much from you and always look forward to your videos. Thank you
Great information and I love the graphics❤
Thank you for this wonderful video!
Glad you enjoyed it!
I love the new graphics Humphreys. your videos are easy to understand and entertaining . I am 53 and retired at 50.
Super helpful video and I totally agree with everything you said. Currently using similar strategies and I’m happy to hear I’m on the right track! Love your content always
Glad it was helpful!
Just what I needed, subbing
Awesome Video Humphrey!❤
Notifications of a new Humphrey video brings a smile to my face 😁
For us 9-5ers you can also just direct deposit whatever you plan on saving to your savings & investment account(s) (HYSA, Roth, etc.) instead of having everything go to your checking and then automatically transferring afterwards. It just saves a step. For me, it helps that the cash is out of sight & out of mind from my paycheck, so I only touch what goes into my checking account.
Thank you @humphrey for your informative videos. Would like to see one on MAGI (in the context of Roth IRA). Please try to do.
I really dig your new visuals, especially the emoji type ones. They’re super easy to look at (other than just text on screen) and easy to understand. Great editor/editing!!
I wish there was an in between the avalanche and snowball. The highest interest rate isn’t necessarily accruing the most interest PER MONTH.
Edit: also, you can certainly hold your own for financial advice and don’t need Jimmy Kimmel or whatever the co-hosts name is for DR.
Glad you like them!
You can use that hybrid method if it works for you.
Can you do this video again for independent contractors and single member business owners?
Dude, what an awesome video!
I like a combo of snowball and avalanche…it insures the # of debt accounts decreases but also satisfies my need to avoid paying a lot of interest…also balance transfers are a life saver!
Thanks this was a great video, i generally use an excel sheet which i created to suite my needs to track my cashflows. And that way really gives a good picture of my accounts health.
I’ve seen this type of video made 10 different ways and this is now my favorite.
Lets go!
Thanks for sharing i like the snowball method
Thanks for the Canadian consideration!!
Our pleasure!!
Thanks for sharing
Love your content! Have you covered the topic of late starters yet?
Hey Humphrey, long time viewer who just subscribed! You mentioned CD's not being a liquid asset. Different banks may have unique terms on their CD accounts however in my experience you can readily access your cash in a CD for a minimal penalty on interest earned. What makes you consider the CD a non-liquid asset?
CA tax rates are higher than what you mentioned. Assuming no dependents. Just speaking from personal/anecdotal exp. I make more than "Kelly" but net is less
These videos really help. Thank you👍🏾👏🏾💯
Glad to hear it!!
I'd prefer the snowball method since paying off the smallest debts first does create confidence and momentum, as well as endorphins and serotonin, which compounds into more confidence allowing the individual to tackle more debts. This is similar to sports such as MMA or basketball(your kobe shot 😅), and the points do add up eventually for the victory.
Exactly staying in debt is a mental problem a lack of discipline and thus it's not a math problem it is a behavior problem if you attack the problem at the source you will destroy it and have a better chance of it staying gone
PSA: CDs in some banks allow you to cancel the CD relatively quickly (within a week) without risking principal. You just give up up to 90 days worth of dividends.
So read your bank's CD contracts. If they do allow you to cancel it, then by all means, use the CD. The whole *point* of emergency funds is that we don't really intend to need to dip into them unless the unexpected occurs, so as long as the principle isn't at risk and we can access it within 2-3 weeks (realistically, within a month and a half -- before your credit card starts bearing interest), then CD's are perfectly safe.
Yeah but you lose money. The time that that money spent in the CD could have been spent in a hysa and getting basically the same apy
This is a very useful video.
❤ this video. Very helpful.
Glad it was helpful!
I feel like everyone always leaves out the concept of motivation when discussing avalanche vs. snowball. Everyone and their mother already knows that higher interest = bad, but the snowball method helps motivate you to get out of debt quicker because you can actually visualize progress and complete milestones. The best method, though, is a combination of both methods - especially if high interest debts have lower balances.
I always recommend to pay off the high interest loans first. Its a huge money saver.
I like to think that alternating between snowball and avalanche is most comfortable. First smallest debt, then the one with biggest interest, then smallest again, etc. this way you see progress and do a wise thing with interest
Thanks for the video.i also have a cd😊
I'm not saying that there's a right way to do debt, but if there's a significant difference between the snowball and avalanche methods, something's gone very wrong. The interest rate you're paying should generally be inversely proportional to the amount you're borrowing, so your highest interest rates should only ever be on the smallest balances.
Humphrey, when I was younger I thought like you that I would do individual stocks in my Roth with the hope of out performing the market, but I’m over 50 now and am really regretting that I didn’t just mimic the S&P in that account.
I prefer the avalanche method for me, but I also focus on seeing the balance and the monthly interest go down. Seeing the companies make less money on me every month keeps me as motivated as seeing the balance decrease.
Hey Humphrey, what do you think about rules about saving, for example the 75 10 15? I'm a new sub, congrats and more power to you and the channel.
What are your thoughts on holding reits in Roth IRA? I heard that if you drip the dividends from the reits you can collect them there tax free.. is this true?
Both Paychecks
Pension contributions and governmental 457b = 1,406 pre tax per month.
1st paycheck
500 to taxable brokerage - 80/20 VIT/VXUS
2nd paycheck
Max roth contribution
400-500 of my leftover cash goes into my HYSA, leaving the leftover cash for needs/wants.
Roughly 30k invested and 5k deposited in a HYSA every year.
Now I won't need to eat ice soup 😂
Oh yup bossman has returned
Automation is a bit difficult where I live because bills come out as direct debits. That means that the money coming out of my account every month is unpredictable because it depends what the cost of my monthly services will be due to varying usage. I guess everything in the US is post-pay and you can use credit cards but due to finance laws where I live, generally we can't pay for utility or mortgage bills with credit cards. They get directly taken from our bank accounts. It's to encourage responsible spending and so that the necessities you need can be paid for with "cash" over credit.
Your friend Kelly got a great deal on her rent! I also live in LA and my rent is a couple hundred dollars more - and based on where I am, that’s still a bargain! 😅
Also, with 401(k)s, an option for emergency funds, if you really need the money, is to take out a loan against it. It’s not ideal, but at least you’re borrowing from yourself and not some bank.
Do you review your automations periodically? Or the goals? I was thinking about setting up a quarterly reminder to go through my accounts and my spending. Would love to see a video on that.
If you don't have "crippling debt" the snowball method for clearing debt is the best way in my opinion. As you said, finances are a behavioural issue and when you clear a debt, it gives you motivation to keep going and clear the next one. You will end up paying a little more overall but the avalanche method will see more failure rate. When trying to tackle the biggest debt earning the most interest first, it can be disheartening because it takes a while and sometime you feel you're not getting anywhere. At least with the snowball you get that satisfaction of achieving a goal quicker which motivates you to tackle the next debt.
Do employers also match contributions to Roth IRA's that are done through companies, like Fidelity, or so those funds need to be transferred over? Pardon my current lack of understanding of this topic, I'm really eager to learn how to continuously build my family's wealth.
as for avalanche vs snowball, a lot of people can't wrap their head around the numbers. So unless you had a month to month spreadsheet showing all the savings by the end of the payoff they just can't conceptualize it.
Where its easy to see progress in the Snowball.
And it seems that people that struggle with their finances that would need these methods, often they are living paycheck to paycheck and doing the snowball method to knock out a smaller debt, will at the very least make it easier to make the payments on the other debts and not get penalized.
here in Chile, my basic necessities cost me about 70% of my incomes. It is freaking high to live here even with a good salary, and if I hadn't be living with my boyfriend I should come back to my parents house
How do you prepare for tax season?
I would love to see a video on the steps you would recommend one take if they’re already in a deep financial hole and most of their income is spent on paying off what feels like never ending debt. It’s at a point where I’m literally only spending on necessities and debt, I can’t see a light at the end of the tunnel, and I just want to give up. My hobbies are tv and video games because I cant afford to go out and spend money on anything else.
Nice shout out to the NSYNC CD!
When offered a Roth 401k with the company matching in Roth would you take that or use the traditional 401k? current income is 140k, and both would be maxed out.
Nice vid! Do you have a video for retirement info for ppl who dont qualify for Roth IRA?
I end the day with close to 0 in the bank. Every single dollar is put to work. Helps cut down on wasteful spending too.
Is it really better to contribute to index funds by taxable investment accounts rather tham roth IRA?
thoughts on Roth 401K? would you recommend over Roth IRA since you get the company match?
Could you make a video going over information on a roth 401k?
Debt free and not getting caught in credit card ,for rewards cards are only good for those who spend a lot and pay the full amount rather than monthly
I loved the Hancock reference 😂
Im using sort of a combo method for getting out of debt. Im currently paying down the highest interest rate debt because its only 3k, then im going to the smallest debt because its the one i see the most often, then back to avalanche for the rest of the debts because they are all large anyway so snowball doesnt matter.
Her baseline cost is probably way more than 60% even with the side hustle, when you include gas, (especially with la traffic) car insurance, health insurance, utilities, and car licensing
Great video
Could the current T-bill market be used in place of a CD? There have term lengths as short as 4 weeks and minimum purchases of $100.
On my budget list I have investments and savings above fixed costs and discretionary spending so each time I get a raise I go down the list and increase investment/savings first. By the time I reach discretionary spending I don’t have much left lol
Hi Humphrey! What if for Step 4 I have a Roth 401K account at work (Post-Tax Salary) and choose to do a 10% contribution, should I do a Roth IRA on top of it as Step 6? Or is Step 6 only for those who are only offered a Traditional 401K (Pre-Tax Salary)?
Automatic pays paid by your banks bill pay scheduled to pay day before it's due
You mentioned 3 accounts at the end of the video- checking, savings and emergency funds. Should both the saving and emergency account be hysa?
yes, ideally!
In a country that doesn’t allow interest, how would your plan work?
I own 3 rental properties and the home I'm living in. Rental properties are all positive cashflow. I'm able to aquire all of these assets because I never had a car payment. Ever.
Your base line is missing health insurance. Pretty big expense that is missing in this breakdown
Is Robinhood the only system where I can buy stocks with there being an automatic withdrawal from my accounts?
your friend paying under 2k for rent in LA is probably the biggest plot twist ive ever seen 😂😂 great video! 🤙🏽🍻
I think the easiest way to save is to make it automatic so you won’t see it or miss that money 💴 to begin with. Knowing your exact amount of expenditures is key 🔑 including leisure spending. Great book 📚 is the “The Automatic Millionaire” by David Bach
If the company that you work for does not offer retirement accounts, what do you suggest? I am currently just saving as much as I can per month in a HYA. Would you start a 401k on your own or would you just go straight to an IRA?
I would recommend keeping aside 70% for investment and the rest for necessities or lower.
Why would you pay off high interest debt after investing in retirement accounts, especially if the interest rate on the debt is higher than 8%?
There is a ROTH 401K as well so if you don’t want to manage a separate account you can just make your 401k a Roth and keep contributing to that.
I prefer the snowball method
Awesome videos like always Humphrey!
I had a suggestion for a video. One thing I struggle with understanding how taxes work post retirement. For example, like how can I predict what tax bracket I'll be in and how much in taxes I would pay on my 401K. Could you create a video in the future with a simple example, where you compare how taxes work pre-retirement and then once you retire, how much you would pay then.
I struggle with finding a simplified video where someone walks me through a concrete, but simplified example.
Thank you!
I just started this year. Its april and i knocked out 2 accounts. (Total 3,000$) 4 more to go (9,000$) i swear i wake up every morning ready to knock the next one out…
Newbie here: does buying and holding an index fund or ETF for more than one year in a taxable brokerage account mean that upon selling it whatever gains you realized will be taxed at long term capital gains rates? Or does the LT rate only apply when you buy and hold individual stocks?
Could you have both a Roth and traditional? What about a deferred 457
I like the avalanche method better because you’d actually save more on interest.
I’m actually saving a lot on interest by doing the avalanche method on steroids.
Here’s what I mean. On my lower interest credit cards I look at the section where it says how long it’d take to payoff if I pay the minimum and how long it’d take if I pay the recommended.
I take the recommended amount and round it up to the next $25 amount example:if it says $62 I round up to $75
My situation cant even handle snowball or avalanche method.😅
I am paying student loan every month about $56. It is interest free.
Then I have to pay off a backlog for my land 800 until June. To pay off faster i will try to pay the amount of $800 until December.
I am not making enough so i have a side hustle that also dont pay enough...but better then nothing at all. I make is between $200-$300 from side hustle. It all depends on hours i work..
I am hoping to get another job with more pay so I can become financially çomfortable. Right now my budget is very tight. I have to persevere and have a lot of patience.
I have my normal rent to pay. Internet, groceries ofcource tithe is a must. It is frustrating but I know God will help me further.
Hello. Roth IRA question. If contribution limit is 7000 in 2024.. can I contribute more than that, let’s say 15,000 in total, then before tax year ends, withdraw the 8k contribution without penalties? Does that affect anything at all in my tax filing?
Minimum credit card debt payment is not advisable due to the outrageous APR on credit cards
wonderful video
Many thanks
Wondering how Kelly is able to put food on the table
Living 100% necessities
I work for a city government. what can I do about retirement. The city doesn't match.
You can stop a CD with no penalty. You just don’t get the interest you would have gained.