24. Pay Yourself First (Saving, Budgeting, Investing)

Feb 9, 2024

Discover the best strategies for financial independence with insightful discussions on budgeting, savings, and investments. Learn the importance of building an emergency fund and prioritizing high-interest debt before diving into investments. Explore the advantages of Health Savings Accounts and the nuances between retirement and taxable accounts. Understand how to maximize company benefits and the right order of financial priorities as life changes. Plus, insightful tips for freelancers managing variable incomes!

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ADVICE

Prioritize An Emergency Cushion

Build an emergency fund in an accessible, low-risk vehicle like high-yield savings or short-term T-bills.
Aim for three to six months of expenses but adjust by life stage and liquidity needs.

ADVICE

Grab Your 401(k) Match

Contribute at least enough to your 401(k) to capture the full company match.
Treat the match as free money and prioritize it before other investing steps.

ADVICE

Attack High-Interest Debt First

Prioritize paying down high-interest credit card balances before heavy investing.
If debt is large, still put a small amount toward savings to keep forward momentum.

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Do I add money to my emergency account before maxing out my IRA?

When do I put my funds into a taxable account?

What makes the most sense for ME?

In this episode, we cover the order of events of how to pay yourself -- and some of the nuances you may want to consider as you enter various life stages. This is not a one size fits all formula. We'll help you think through that!

We do discuss the importance of budgeting and what happens when you have excess income: paying yourself. We cover topics like saving for a rainy day, maxing out company benefits, paying down credit card debt, and high-interest rate loans. We also explore the benefits of health savings accounts (HSAs) and the importance of maxing out IRAs and 401(k)s. Additionally, we discuss the value of saving for children's future financial needs. Financial independence is a personal journey that requires regular evaluation and adjustment. We talk about the importance of understanding the differences between retirement accounts and taxable accounts, and the flexibility and freedom that comes with taxable accounts.

Takeaways:

Save for a rainy day by building an emergency fund.
Maximize your company benefits, such as 401(k) matching.
Prioritize paying down high-interest rate debt, such as credit card debt.
Consider the benefits of health savings accounts (HSAs) for medical expenses.
Max out your contributions to IRAs and 401(k)s for retirement savings.
Save for your children's future financial needs. Understand the differences between retirement accounts and taxable accounts
Consider the flexibility and freedom of taxable accounts
Start investing as early as possible, but it's never too late to start
Create a plan for excess income and be mindful of money mindset and habits

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