RPF0657-Mental_Money_Games_to_Change_Your_Behavior_for_the_Better
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00:00:30.620 | Welcome to Radical Personal Finance,
00:00:32.120 | a show dedicated to providing you with the knowledge,
00:00:33.820 | skills, insight, and encouragement you need
00:00:35.960 | to live a rich and meaningful life now
00:00:38.200 | while building a plan for financial freedom
00:00:39.860 | in 10 years or less.
00:00:41.540 | Today on the show, we're gonna talk about some money games
00:00:43.540 | that you can play to help you achieve that goal
00:00:45.980 | of financial freedom in less time,
00:00:48.000 | hopefully 10 years or less.
00:00:49.540 | And no, when I say money game,
00:00:50.540 | I'm not talking about Monopoly or Cash Flow Quadrant,
00:00:52.720 | although that's a useful topic,
00:00:54.020 | perhaps that's a worthy topic for another day.
00:00:56.140 | Today on the show,
00:00:57.320 | everything I ever learned about wealth building,
00:00:58.960 | I learned from playing Monopoly when I was a child.
00:01:01.960 | That's true.
00:01:02.800 | But we're not talking about board games today.
00:01:05.560 | No, we're gonna talk about some psychological games
00:01:08.060 | that you can play with yourself to change your behavior.
00:01:12.640 | There's a real balance in life
00:01:14.140 | between knowledge, information, and behavior.
00:01:17.680 | You need to know, but at the end of the day,
00:01:20.180 | it's changing behavior that makes a difference.
00:01:23.380 | It's action that makes a difference.
00:01:25.580 | You can sit around and dream all you want
00:01:27.980 | about checks floating into your life
00:01:29.920 | and money flowing into your mailbox,
00:01:32.080 | but unless those dreams and those visions
00:01:34.520 | actually change your behavior,
00:01:35.960 | nothing will actually change.
00:01:38.200 | Now, the paradox is this.
00:01:39.520 | If you can change your thoughts,
00:01:40.720 | if you can change your information,
00:01:41.920 | if you can change the ideas that you hold in your head,
00:01:44.160 | then you can naturally change your behavior a little bit.
00:01:46.840 | But it goes the other way too.
00:01:47.900 | Sometimes you can just change your behavior.
00:01:49.700 | You can change the ideas, you can change the thoughts,
00:01:51.980 | you can change the things that are in your head.
00:01:53.680 | You can change your ability to believe in the future.
00:01:56.120 | So these two things function together.
00:01:57.920 | But I wanna focus today on little behavioral tricks,
00:02:01.180 | behavioral games that you can play with money.
00:02:04.020 | And my hope is that these little games
00:02:05.860 | will help you to make changes.
00:02:08.520 | At the end of the day, for most of us,
00:02:11.420 | our money is generally not a matter of life or death.
00:02:16.300 | Very few of us are at death's door
00:02:18.900 | where a quarter misspent is going to make a difference.
00:02:22.440 | We're just not at that level.
00:02:24.440 | Some people are, but you and I are not at that level.
00:02:27.740 | And so it can be hard to keep your focus
00:02:30.200 | on actually behaviors that matter,
00:02:33.320 | keeping engaged in those behaviors that matter,
00:02:36.400 | if you don't have some fun games.
00:02:38.920 | And the reality is, without games, without benchmarks,
00:02:41.640 | it's harder to stay the course over years and decades
00:02:45.700 | that it may take you for you to get out of debt,
00:02:49.800 | for you to save money,
00:02:51.520 | for you to become financially independent.
00:02:54.140 | So you need games.
00:02:55.600 | And you'll see this if you study a little bit
00:02:57.480 | about design, modern design.
00:02:59.360 | You'll find that most people who are designing
00:03:01.200 | some form of financial program
00:03:03.320 | or some form of really any kind of app now,
00:03:07.520 | it's kind of standard for application development
00:03:09.520 | for a mobile device,
00:03:10.360 | there's gotta be some game associated with it.
00:03:12.300 | That's why when you're driving around
00:03:13.560 | using your GPS program,
00:03:14.780 | if you're using a program like Waze,
00:03:16.560 | you've gotta collect candy as you drive
00:03:18.680 | or get points for helping certain things.
00:03:20.520 | This is called the gamification of life.
00:03:22.520 | Basically, let's have levels,
00:03:23.960 | let's have benchmarks.
00:03:25.000 | And you can see this in successful
00:03:26.440 | personal financial advice as well.
00:03:28.360 | You see this in Dave Ramsey's Baby Steps.
00:03:31.000 | You gotta have these benchmarks that you can reach.
00:03:32.920 | You see it in the stages of financial independence
00:03:34.960 | that I espouse and that I teach.
00:03:36.800 | All of these benchmarks really can make a big difference
00:03:40.640 | in time and in your life.
00:03:42.860 | But some of them are just too big.
00:03:45.500 | And some of them are not everyday.
00:03:47.480 | So today I wanna give you some everyday games
00:03:49.960 | that you can play.
00:03:52.160 | I generally like to start with income,
00:03:53.920 | but for this show,
00:03:54.800 | I'm gonna start with expenses.
00:03:56.800 | And more importantly,
00:03:58.080 | I'm going to start with debt repayment.
00:04:01.600 | And let's flip the order a little bit
00:04:03.200 | because most of my games
00:04:05.400 | really are on the expense side and the debt repayment.
00:04:08.320 | I have a few on the income side,
00:04:09.920 | but it's a little harder
00:04:10.800 | to keep this concept running through.
00:04:12.460 | So let's begin with that.
00:04:14.460 | So first, let's assume that you are in debt.
00:04:18.400 | If you are in debt,
00:04:19.600 | and if you are working to get out of debt,
00:04:22.480 | which is a majorly important component
00:04:26.020 | of gaining your freedom.
00:04:28.320 | As an individual,
00:04:29.480 | if you are an individual
00:04:30.620 | that does not owe anybody any money,
00:04:33.160 | you will have huge amounts of personal freedom
00:04:37.800 | as compared to another person who does owe people money.
00:04:42.160 | If you owe a house
00:04:43.640 | and you don't have any mortgage payment on it,
00:04:46.600 | you will be much easier,
00:04:48.840 | it'll be much easier for you to move
00:04:50.800 | from where you live now
00:04:51.920 | to a place that you'd like to live
00:04:53.640 | than it will if somebody has a house
00:04:56.020 | that has a mortgage payment on it.
00:04:58.000 | Why?
00:04:58.840 | Well, if you don't have a mortgage payment,
00:05:00.800 | you can keep your current house empty
00:05:02.600 | while you put it on the market,
00:05:04.000 | and you can go and buy another house.
00:05:05.840 | It's even better, of course, if you're renting,
00:05:07.240 | if you don't have any debt there
00:05:08.300 | where you have to even sell the house.
00:05:09.760 | But the point is, if you don't have debt,
00:05:11.120 | you have more flexibility.
00:05:12.760 | If you don't have credit card debt,
00:05:14.920 | then you have tremendous flexibility
00:05:17.320 | with your ability to downsize your income,
00:05:20.080 | change your location, change your job, et cetera,
00:05:22.880 | if you don't have a lot of expenses being pulled out
00:05:25.360 | to make credit card payments from previous overspending.
00:05:28.560 | If you have no payments,
00:05:30.420 | no required payments,
00:05:34.320 | you can maintain tremendous flexibility in your life.
00:05:38.160 | If you don't have a house payment,
00:05:40.640 | if you don't have a car payment,
00:05:42.200 | if you don't have a credit card payment,
00:05:44.800 | you can go and you can hike the Appalachian Trail,
00:05:47.200 | you can go and backpack around South America,
00:05:50.180 | you can go and start a new business,
00:05:51.880 | because you could probably get by
00:05:53.240 | on what you can earn minimum wage.
00:05:54.960 | So, being free of debt is a massive step
00:05:59.860 | in your goal of achieving financial freedom.
00:06:04.620 | But often, if you've been deeply in debt,
00:06:07.320 | as I sure have in my life,
00:06:09.000 | you find that it's a long, hard slog.
00:06:12.160 | And you probably have found that it's hard
00:06:15.560 | to stay focused on getting out of debt.
00:06:18.280 | So let me give you some games that I have played
00:06:20.560 | and that I recommend when you are getting out of debt.
00:06:23.840 | Let's start with credit card debt.
00:06:25.400 | The first game that I like to play
00:06:27.640 | if I have credit card debt and I wanna get rid of it,
00:06:30.200 | is I like to keep it front of mind.
00:06:32.000 | And I like to make sure that I make progress
00:06:34.720 | on paying off that credit card debt every single day.
00:06:39.280 | And this is really easy in the modern world.
00:06:41.880 | It's much easier than if you were writing out a check
00:06:43.760 | in the old world, paper-based world.
00:06:46.440 | But today, when you have a smartphone app
00:06:48.360 | or a computer connection to your credit card company,
00:06:51.500 | and they can do automatic transfers
00:06:52.940 | from your bank accounts,
00:06:54.560 | you can make little micro payments.
00:06:57.200 | And so, when I've been in credit card debt
00:06:58.920 | and wanted to get out, and this is my number one goal,
00:07:01.640 | for whatever reason, I use the credit card,
00:07:03.520 | I built up the balance,
00:07:04.360 | but now I'm getting out of credit card debt,
00:07:06.040 | then I make it a daily goal to every day owe less money.
00:07:11.280 | What I do is every single day,
00:07:14.320 | I make a micro payment on my credit cards.
00:07:17.720 | That micro payment might be $1.11,
00:07:21.320 | but I make a payment every single day.
00:07:24.200 | Now, in terms of the actual impact on your debt,
00:07:28.000 | it ain't much.
00:07:29.600 | $1.11 comes out to what, $30 something in a month?
00:07:33.360 | So it really doesn't make that big of a difference
00:07:36.240 | in terms of the numbers.
00:07:38.760 | But it makes a big difference in my psychology.
00:07:43.400 | It makes a big difference
00:07:44.520 | in my keeping that goal front and center.
00:07:48.080 | If I recognize my goal is to get rid of this debt,
00:07:52.000 | I'm gonna make a payment each and every day.
00:07:55.580 | Now, long-term listeners will, of course,
00:07:58.160 | recognize that this strategy might be in contradiction
00:08:02.200 | with another strategy that I've talked about,
00:08:04.560 | namely the value of accumulating money
00:08:08.120 | and having it available to you in a checking account
00:08:10.360 | or a savings account,
00:08:11.840 | and then making large lump sum payments on your debt.
00:08:15.900 | Both of these things, I think, can be true.
00:08:18.720 | Generally, how I have handled this in the past
00:08:21.320 | is I accumulate money in a separate account,
00:08:23.800 | but then when it's time to get rid of the credit card debt,
00:08:26.260 | then I just simply focus on it
00:08:27.920 | and I make a little payment every day.
00:08:29.760 | And by simply doing it literally every day,
00:08:32.600 | which only takes a couple of minutes,
00:08:34.840 | yeah, it can be a little annoying
00:08:35.960 | to have to open up the websites.
00:08:37.480 | It can be a little bit annoying,
00:08:38.320 | but it's easier if you put the applications on your phone
00:08:40.720 | for the financial institution
00:08:41.800 | and just make those micro-payments.
00:08:43.840 | But if you do it every day, it keeps it front and center.
00:08:47.000 | And any time that I've ever had debt
00:08:49.280 | and wanted to get rid of it,
00:08:50.280 | any time I've ever had credit card debt
00:08:52.080 | and needed to get it gone,
00:08:53.860 | that strategy is the thing that has always kept me focused.
00:08:58.400 | And it feels like you're winning.
00:09:01.000 | When you get into debt and you're trying to get out of debt,
00:09:03.620 | you're working your way out of debt,
00:09:05.900 | I think you face a situation wherein you look at it
00:09:10.200 | and you say, "This is enough.
00:09:12.320 | "This is too much.
00:09:13.160 | "For whatever reason I use these cards,
00:09:14.960 | "this is now time to get rid of these things."
00:09:17.600 | And then I make it a goal.
00:09:19.160 | Every single day, I'm going to owe less money
00:09:23.000 | than I did the day before.
00:09:24.820 | And you can do that.
00:09:27.400 | Now, the game I play is the day
00:09:28.820 | that minimum payment posts.
00:09:30.200 | I pay that big chunk then,
00:09:31.680 | and then you pay just bigger chunks along the way.
00:09:34.160 | A couple of practical tips,
00:09:35.900 | things I enjoy doing,
00:09:37.260 | is rounding out the numbers.
00:09:39.140 | And often, let's say that you owe $10,000
00:09:41.540 | on a credit card debt.
00:09:42.380 | You make $1.11 payment,
00:09:43.880 | payment of $1.11.
00:09:45.580 | Well, now, of course, your balance is $9,998.89.
00:09:50.580 | Well, that 89 cents is kind of annoying.
00:09:52.500 | So you make a payment of $1.89.
00:09:54.340 | Now, your balance is 9,7--
00:09:57.020 | 900, let me do my math right.
00:09:58.680 | $9,997.
00:10:02.100 | Then you look at that $7 and you think,
00:10:03.940 | "Dollar is just really silly.
00:10:06.000 | "I'm just going to go ahead and make a $7 payment."
00:10:08.360 | And you make a $7 payment.
00:10:09.840 | And then the next day you look at that and say,
00:10:11.740 | "I have a $9,990 balance.
00:10:14.840 | "That's annoying.
00:10:15.680 | "I'll make a $90 payment."
00:10:16.760 | And you make a $90 payment.
00:10:18.160 | And then you don't have any money left
00:10:19.520 | in your checking accounts.
00:10:20.360 | You make a $1.42 payment the next day.
00:10:22.400 | And then a $1.01, and then a $1.03.
00:10:24.280 | But every day you make a payment.
00:10:25.800 | And along the way, you just cut it down.
00:10:27.760 | Some days you pay a dollar.
00:10:28.860 | Some days you pay $4.13 to get it to an even number.
00:10:31.780 | Some days you pay $100.
00:10:33.240 | Some days you pay $900.
00:10:36.200 | But that daily focus on paying down the credit card debts
00:10:39.240 | a little bit every day has for me always been so motivating.
00:10:43.580 | So motivating.
00:10:45.000 | Just a practical tip for you.
00:10:46.520 | If you have multiple cards,
00:10:48.240 | I think generally anybody who,
00:10:50.640 | I always have, it's what I would teach.
00:10:53.200 | It's what I do teach.
00:10:54.040 | I have a whole course on this.
00:10:55.440 | But if you're using credit cards
00:10:56.760 | and you have multiple cards,
00:10:58.240 | a very practical way to handle the accounting of it
00:11:00.820 | is make sure that you always just use
00:11:02.080 | a slightly different number for each transaction
00:11:06.120 | so that you can identify what's actually coming in
00:11:08.800 | in your bank statements.
00:11:12.800 | Because you'll have so many payments posting,
00:11:15.400 | 'cause you're posting one every day,
00:11:16.720 | you'll be disconnecting.
00:11:18.120 | You don't know which is which,
00:11:19.160 | so you can reconcile everything in your bank account.
00:11:20.960 | So you make $1.01 on card A, $1.03 on card B,
00:11:25.960 | $1.05 on card C, $1.07 on card D.
00:11:30.400 | And then the next day when you make tomorrow's payments,
00:11:32.920 | you start at $1.11 on card A, $1.13 on card B,
00:11:37.480 | $1.15 on card C, $1.19 on card D.
00:11:41.280 | So when on Monday morning you have 15 transactions
00:11:44.360 | that all hit, you can reconcile everything very easily.
00:11:46.880 | So there's just a little practical tip.
00:11:48.720 | If you're trying to get out of debt
00:11:50.360 | and you're struggling or you're not making much progress,
00:11:52.800 | give my idea a try.
00:11:55.040 | Give it a shot.
00:11:55.960 | See if it is helpful to you.
00:11:58.680 | Because for me, it's always been something
00:12:01.800 | that has kept getting out of debt at the front of my mind.
00:12:05.400 | Now, I've been in debt, I've been out of debt.
00:12:08.400 | I prefer to stay out of debt,
00:12:10.320 | but there are situations when it just simply
00:12:11.800 | just makes sense to use debt.
00:12:13.520 | But I think when you're in that situation,
00:12:15.800 | if you've experienced the freedom and the joy
00:12:18.180 | of not owing any money,
00:12:19.400 | it's really nice to be debt-free on the other side.
00:12:22.480 | So give my strategy a try.
00:12:24.400 | See if it makes a difference in your behavior.
00:12:26.680 | Now let me couple that one
00:12:27.760 | with one that's also related to expenses.
00:12:30.940 | When you save money,
00:12:32.760 | and here I actually mean you save money by not spending it,
00:12:36.320 | not you save money by buying something that you don't need.
00:12:39.260 | But when you come to a financial decision
00:12:42.320 | and you decide not to spend money,
00:12:45.200 | I think you should reward yourself
00:12:46.760 | by actually making a transaction.
00:12:48.680 | So if I'm at the bookstore and there's a book for $19.99
00:12:53.360 | and I look at the book and I say,
00:12:55.400 | I'd really like to read this book
00:12:57.000 | and I really wanna own this book.
00:12:59.160 | But right now I'm focused on frugality.
00:13:02.240 | I'm gonna choose not to buy this book for $19.99.
00:13:06.240 | I'm gonna wait and I'm gonna put it on a list.
00:13:08.880 | What I recommend you do is pull out your phone
00:13:12.160 | and make a micro transfer of $19.99
00:13:16.080 | out of your checking account
00:13:17.680 | into whatever your highest financial goal is.
00:13:21.160 | If you're saving money for a goal,
00:13:22.800 | just make a $19.99 transfer into the account
00:13:25.860 | that's earmarked for that goal
00:13:28.040 | because all your accounts really in my opinion
00:13:30.520 | should be earmarked for specific goals.
00:13:32.600 | Or if you're getting out of debt,
00:13:33.640 | pull out your phone and make a $19.99 transaction,
00:13:37.680 | pay an extra $19.99 towards your credit card
00:13:41.140 | or towards your car payment or towards your mortgage,
00:13:43.580 | something like that.
00:13:44.880 | To just pull it out and actually make the transfer.
00:13:47.560 | Or let's say that you are going out to dinner
00:13:50.120 | and have been in this situation so many times.
00:13:52.360 | You go out to dinner, you wanna have a glass of wine
00:13:55.400 | or you wanna have the dessert.
00:13:57.000 | You look at it and you say, "I don't really need it.
00:13:58.640 | "I'm already having a nice experience here.
00:14:00.300 | "Do I really wanna spend the extra $7.99
00:14:03.600 | "or the extra $12 on this thing?
00:14:06.460 | "I don't really need it."
00:14:08.080 | Now of course if you wanna spend it
00:14:09.440 | and you decided that's worth it to you
00:14:10.800 | and you can afford it, fine, go for it.
00:14:12.720 | But when you make those decisions,
00:14:14.240 | you look at it and say, "I'm not gonna do it."
00:14:15.580 | Reward yourself by funding a goal that you have.
00:14:18.380 | If you've got a travel account
00:14:19.800 | and you're saving for a big trip,
00:14:21.320 | go ahead and make a $7.99 transfer into that account.
00:14:24.880 | And then that way when you're drinking a glass of wine
00:14:27.280 | in Florence instead of drinking a glass of wine in Missoula,
00:14:31.200 | then you have the opportunity to say,
00:14:32.960 | "Hey, I'm glad that I said no in Missoula
00:14:35.380 | "so that I could have this glass of wine in Florence."
00:14:38.440 | So just reward yourself by actually making a transfer.
00:14:43.040 | Next, you can do this with other debts as well.
00:14:47.760 | So what about a car payment?
00:14:50.140 | Well, try to make an extra payment.
00:14:52.480 | And here, the strategy is the same
00:14:54.800 | with a car payment and/or with a mortgage payment.
00:14:57.800 | The mortgage payment is a little bit more feasible.
00:15:00.720 | But here's what I recommend.
00:15:02.800 | Create an amortization schedule for your mortgage.
00:15:07.760 | And if you don't have,
00:15:09.360 | if you didn't do one right at the beginning
00:15:10.900 | when you had your first monthly payment,
00:15:12.840 | then just start wherever you are.
00:15:14.640 | But create an amortization schedule
00:15:16.400 | and calculate how much of each month's payment
00:15:20.180 | is going to the principal of the mortgage
00:15:23.600 | versus going to interest of the mortgage
00:15:26.240 | and create the amortization schedule.
00:15:28.760 | And then what I do is simply make two payments.
00:15:33.360 | And make your normal payment,
00:15:34.760 | let's say your normal mortgage payment is $1,500.
00:15:38.000 | But your principal payment for next month is $232.75.
00:15:43.000 | Or write two checks.
00:15:46.240 | Write your $1,500 check
00:15:48.080 | and write your $232.75 check.
00:15:51.960 | Now it would be really hard for you
00:15:54.540 | to make two $1,500 checks.
00:15:57.120 | But it's not that hard for you to make a $1,500 check
00:16:00.680 | and a $232.75 check.
00:16:04.080 | It's not that hard.
00:16:05.200 | But yet that makes a massive difference
00:16:08.440 | in your timeline of paying off your mortgage.
00:16:12.160 | And it makes a massive difference
00:16:14.480 | in your overall interest costs, et cetera.
00:16:19.000 | And because you can create the amortization schedule
00:16:21.400 | and because in the beginning of having a debt payment,
00:16:24.080 | so little is going to principal,
00:16:25.320 | you can make those extra checks.
00:16:26.520 | And once you get in the habit of it,
00:16:28.800 | then you just keep it up.
00:16:32.000 | And if you run an amortization schedule,
00:16:33.860 | if your normal monthly payment is $1,500 a month,
00:16:37.040 | yes, because you're paying your principal,
00:16:39.840 | your interest, your taxes, and then your insurance,
00:16:42.800 | your total bills will be $18,000 in that year,
00:16:47.800 | in your first year.
00:16:50.320 | But your total cost of making those extra principal payments
00:16:54.180 | will be less than $3,000.
00:16:56.960 | So with an extra $3,000,
00:16:59.080 | you can cut a year off of your mortgage.
00:17:01.600 | And so you wind up naturally paying a 30-year mortgage
00:17:04.760 | like a 15 or whatever your personal term is.
00:17:08.120 | Those little extra payments go into making a big difference.
00:17:13.120 | But because they're small and they're weird numbers and such,
00:17:16.040 | you can fit them in.
00:17:17.000 | You can fit in an extra $232,
00:17:19.480 | but you'll thank yourself decades down the road.
00:17:22.440 | Any kind of debt that you have,
00:17:25.160 | make it a game and try to pay a little bit extra,
00:17:28.040 | and you'll be out of debt much more quickly.
00:17:31.080 | This has become, to make these micropayments,
00:17:35.360 | for most of us, it has become largely really free
00:17:39.960 | to do it to you.
00:17:41.240 | If you, I think most of us would do this,
00:17:44.760 | but if you use electronic access to your bank,
00:17:47.840 | electronic credit card payments,
00:17:50.120 | if you use some sort of electronic bill pay,
00:17:52.680 | then you can do this for free,
00:17:54.960 | and you can play these games with these micropayments.
00:17:58.100 | Will your mortgage company really want to receive
00:18:01.040 | 22 different checks in a month?
00:18:05.540 | Probably not, but that's not your problem.
00:18:10.400 | Let them figure it out.
00:18:12.160 | So the way that I do this
00:18:13.840 | is I use an automatic bill pay service
00:18:16.400 | from my bank.
00:18:18.680 | I personally prefer to initiate all payments
00:18:22.320 | to debts except credit cards.
00:18:24.920 | So what I teach, even in my credit card course,
00:18:27.240 | I think credit cards should always,
00:18:29.120 | credit card payments, a minimum monthly payment,
00:18:31.440 | should always be initiated by the credit card company.
00:18:35.300 | That way you make sure that,
00:18:38.400 | and it should go to a separate account
00:18:40.000 | that's just for credit card payments.
00:18:41.200 | That way you make sure that you never,
00:18:43.400 | ever, ever miss a payment,
00:18:45.160 | because you know that no matter what,
00:18:47.120 | a minimum payment is gonna be paid
00:18:48.960 | on every single one of your credit cards.
00:18:51.600 | So I believe that's a superior strategy
00:18:53.760 | than you manually paying credit cards,
00:18:56.080 | because it's a danger that,
00:18:59.400 | especially if you have a lot of credit cards
00:19:01.040 | and a lot of payments,
00:19:01.880 | and minimum payments due here and there
00:19:03.520 | throughout the month,
00:19:04.480 | it's just too big of a danger
00:19:06.040 | that it would harm your credit score
00:19:07.240 | to ever be late on a payment.
00:19:08.680 | And so the goal is never be late on a single payment.
00:19:11.880 | And you can do it.
00:19:12.720 | If you're someone who's struggled
00:19:13.680 | with being late in the past,
00:19:14.960 | you can do it.
00:19:16.000 | I am in my mid-30s.
00:19:17.640 | I have had credit accounts
00:19:19.600 | since I was 18 years old on my 18th birthday.
00:19:22.480 | And to date, I have never been a day late
00:19:25.320 | on a single payment in my life.
00:19:28.120 | And that helps massively on your credit score.
00:19:31.080 | It's one of the most important things.
00:19:32.840 | Well, it's not that hard to do.
00:19:34.160 | You just sit down and you analyze the problem
00:19:36.280 | and say, "I can never afford to be late on this."
00:19:38.320 | So either need a really good tickler file,
00:19:40.200 | maybe you have a 43 folder system
00:19:41.940 | or something like that,
00:19:42.780 | that you actually sit down and use.
00:19:44.360 | But my observation, very few people are that diligent.
00:19:46.920 | Very few people sit on a desk every single day.
00:19:48.980 | Very few people have a good paper system.
00:19:51.880 | So if that's not you,
00:19:52.920 | if you're not gonna become that kind of hardcore nerd,
00:19:55.700 | set up an electronic system that works for you.
00:19:57.920 | So with your credit card payments,
00:19:59.920 | make sure that every credit card
00:20:01.480 | always has an automatic bill pay
00:20:05.680 | so that you never miss a payment.
00:20:08.520 | Now, with other things,
00:20:11.080 | sometimes generally mortgage companies,
00:20:13.040 | you have to initiate the check.
00:20:14.880 | So when there's a debt that's on your credit report,
00:20:18.000 | make sure that debt gets paid no matter what.
00:20:20.600 | So it's good for you to have
00:20:22.120 | a standing automatic mortgage payment.
00:20:24.680 | But generally, if that's your only other debt,
00:20:27.660 | you can remember that.
00:20:28.780 | But if you have a car payment or whatever,
00:20:30.900 | make sure that your bank initiates sending of a check.
00:20:35.460 | It's a little safer in any kind of debtor situation
00:20:37.800 | for you to keep all the control
00:20:39.120 | and use your bank's functionality
00:20:40.800 | of sending out a check or sending out a payment
00:20:42.880 | than to give your creditor electronic access
00:20:45.360 | to your checking account.
00:20:47.200 | I concede the argument that it's not perfectly safe
00:20:51.120 | to let a credit card company access your checking account
00:20:54.720 | on their end automatically.
00:20:56.140 | That's not perfectly safe.
00:20:57.880 | But I think the benefits outweigh the risk
00:21:00.880 | in terms of the benefits of making sure
00:21:02.560 | that you can juggle multiple credit cards
00:21:04.760 | and never be behind or be late on a payment.
00:21:08.320 | You feel free to run your own finances as you like.
00:21:12.360 | But in these situations, given bank bill pay, et cetera,
00:21:16.120 | you can use your bank service,
00:21:18.160 | and most banks don't charge for bill pay.
00:21:20.480 | They want you to use the service.
00:21:22.040 | So here's what I do.
00:21:23.320 | Set up an automatic bill pay for your standard account.
00:21:28.320 | Let's say you're paying your mortgage,
00:21:31.000 | and your standard mortgage payment is $1,500 a month.
00:21:33.440 | Set that up so it goes out automatically
00:21:35.120 | on the first of the month for $1,500 a month.
00:21:37.880 | But then set up a second biller
00:21:40.360 | that just clearly, where your checks
00:21:42.000 | are clearly gonna be labeled principal payments.
00:21:44.320 | And then feel free to make micro payments to your account.
00:21:48.920 | Super easy.
00:21:49.920 | You save $200 by not buying something.
00:21:53.320 | You decide, I'm gonna pay off my mortgage,
00:21:54.960 | and I'm putting a little bit of extra money
00:21:56.760 | towards my mortgage payment.
00:21:58.720 | Pull out your phone, click that second option
00:22:02.060 | for the second bill pay entry.
00:22:04.000 | Put $200, click send right away.
00:22:06.240 | Your bank will mail a checkout to your mortgage company.
00:22:09.300 | It'll go out in a day or two,
00:22:10.720 | and so what if your mortgage company
00:22:12.900 | has to process 10 different principal checks?
00:22:15.080 | That's their problem, not yours.
00:22:17.200 | Won't cost you any money,
00:22:18.560 | but it will help you get out of debt faster.
00:22:20.860 | I want to again reemphasize that what I'm describing to you,
00:22:26.360 | the system that I'm describing here,
00:22:28.320 | contradicts advice that I have frequently given
00:22:31.360 | not to make small extra payments
00:22:34.240 | on something like a mortgage.
00:22:38.040 | The assumption here is that you've decided
00:22:40.300 | that at this stage in your financial life,
00:22:42.700 | it makes more sense for you to pay off the mortgage.
00:22:45.900 | The assumption is that you have cash,
00:22:47.700 | and the assumption is that you're in the kind of situation
00:22:49.740 | where you have a regular income.
00:22:51.560 | If I didn't have a regular income,
00:22:53.340 | and if I hadn't decided to pay extra on a mortgage,
00:22:55.940 | I wouldn't do that,
00:22:56.760 | and we'll talk about games of saving money in just a moment.
00:23:00.520 | But I still think this is worth discussing,
00:23:02.700 | because first, there is big benefit in being out of debt.
00:23:05.780 | People who are in a stable income situation
00:23:08.120 | do benefit by making payments on,
00:23:10.200 | on extra payments on debt.
00:23:12.160 | And in this,
00:23:13.800 | by using these games,
00:23:17.280 | you can change your actual spending behavior.
00:23:21.000 | There is a question that we always face in personal finance.
00:23:24.720 | Is it better to pay off debt or invest?
00:23:27.800 | Well, there are, the answer to that question is mathematical.
00:23:31.800 | I've done an hour and a half show on it,
00:23:34.060 | so I'm gonna skip, refer you back to the archives
00:23:36.760 | for that hour and a half show.
00:23:38.160 | But the answer is mathematical.
00:23:39.920 | Whichever option gives you a higher rate of return
00:23:43.560 | is the superior option.
00:23:45.600 | So in general, if your debt is at a low interest rate,
00:23:48.820 | such as 0% credit cards,
00:23:50.880 | such as low mortgage rates, et cetera,
00:23:54.040 | kind of good, safe debt that's at low interest rates,
00:23:56.320 | well-financed, in general,
00:23:57.760 | you're better off investing than you are paying off debt.
00:24:03.040 | Unless, in my opinion,
00:24:05.400 | unless there's a behavioral change
00:24:08.600 | that you can make because of the nearness
00:24:12.520 | of being able to pay off debt.
00:24:14.560 | And unless you can gain benefits of being debt-free
00:24:19.280 | that you can't gain with having extra money in the bank.
00:24:22.480 | So being out of credit card debt
00:24:24.600 | can give psychological benefits that are very motivating.
00:24:28.020 | Not having a home mortgage
00:24:29.360 | can give psychological benefits that are very motivating.
00:24:32.960 | There are some people
00:24:34.160 | who are very comfortable with investing
00:24:36.160 | who won't have any behavioral change
00:24:39.240 | if they have a $200,000 mortgage
00:24:41.160 | and $200,000 in their investment account.
00:24:43.680 | And they'd rather invest the money
00:24:45.240 | than pay off the mortgage.
00:24:46.920 | Those people exist.
00:24:48.900 | My guess is you're probably not one of them.
00:24:51.520 | Because I think, maybe if I make it up a percentage,
00:24:54.980 | maybe 20%.
00:24:55.920 | 80% of people, I think, would be far happier,
00:24:58.760 | far more confident if they had no mortgage.
00:25:01.760 | And then they were just a little bit behind
00:25:03.240 | in building up their investment account again.
00:25:05.680 | Now back to modifying behavior.
00:25:09.280 | If getting out of debt is such a pressing,
00:25:13.180 | close personal goal
00:25:14.800 | that it causes you to change your behavior,
00:25:17.480 | it's worth pursuing it.
00:25:19.400 | When you look at the success of the gazelle intensity
00:25:22.760 | that Dave Ramsey teaches,
00:25:24.160 | and you look at the millions of dollars of debt
00:25:27.600 | that have been paid off,
00:25:29.000 | it comes not because of the mathematics
00:25:31.580 | of paying off debt being superior
00:25:33.800 | to the mathematics of investing.
00:25:37.600 | It comes because of the change of behavior.
00:25:40.860 | When somebody grabs onto a short-term goal,
00:25:44.040 | such as, I'm gonna get out of debt,
00:25:46.120 | and if that goal is within an appropriate timeline,
00:25:49.220 | a year, two years, something like that,
00:25:50.880 | where they can grasp it and they can believe it,
00:25:53.040 | then it changes,
00:25:53.960 | it has the opportunity to change the behavior.
00:25:56.560 | So it has the opportunity to cause a person to work more,
00:25:59.960 | so that they earn more.
00:26:00.880 | It has the cause of a person to spend less,
00:26:02.700 | so they can pay extra on debts.
00:26:04.960 | And it seems to be much more motivating
00:26:08.400 | than the people who change their behavior
00:26:10.620 | to just put more money in their 401k.
00:26:13.460 | Now the trick that you can use if you are investing,
00:26:16.420 | let's move now to investing.
00:26:18.260 | The trick that you can use if you're investing
00:26:19.900 | is try to make your goals very close at hand,
00:26:23.780 | and try to always take and put a game for yourself
00:26:27.460 | where you believe you'll be able to,
00:26:30.300 | so that you'll be able to achieve a certain goal
00:26:35.300 | within a measurable timeframe.
00:26:37.980 | Make sure those goals are not so big
00:26:42.520 | that it's gonna take you 10 years to reach them,
00:26:44.800 | and make sure that there's a reward associated with them.
00:26:48.780 | For some people, spending rewards are appropriate.
00:26:52.020 | For example, if I can save $10,000
00:26:56.000 | towards my financial freedom,
00:26:58.220 | and I can put it in this account here,
00:27:00.100 | towards my big Fi account,
00:27:02.220 | and I can do that by June 1st,
00:27:04.940 | then I'm going to allow myself
00:27:07.500 | to spend this money on this thing
00:27:10.480 | that I really would like,
00:27:11.920 | but I don't really need it over here.
00:27:14.240 | So some kind of trade-off like that.
00:27:17.880 | To game an investment strategy
00:27:20.340 | is gonna require a little bit more thought
00:27:22.980 | and some more personal application
00:27:26.060 | than as simple as paying off debt.
00:27:29.540 | But here are some thoughts,
00:27:30.620 | so some recommendations.
00:27:31.660 | First, it's relatively easy
00:27:33.460 | to have many different bank accounts in today's world.
00:27:37.060 | And I would recommend
00:27:37.900 | that you always name your bank accounts,
00:27:41.140 | especially if they are accumulation goals.
00:27:43.780 | So if you're saving for a house,
00:27:46.520 | make sure your bank account is named House Savings Fund.
00:27:49.860 | If you're saving for a car,
00:27:51.540 | make it Car Savings Fund, and keep that separate.
00:27:54.640 | Don't just have one account where everything is in there,
00:27:57.060 | unless you have, maybe you have a bookkeeping system
00:27:59.220 | where it's everything in one account,
00:28:01.460 | but you keep separate accounts
00:28:02.540 | in an artificial structure, that's fine.
00:28:04.900 | But make sure you have a separate account
00:28:06.260 | so you know how much is going in there.
00:28:07.740 | And then have a first and foremost goal.
00:28:11.700 | So if you're gonna change your behavior
00:28:13.340 | so that you can fund an investment account,
00:28:15.180 | you've gotta have a primary goal.
00:28:17.660 | Now you can put savings and investments on auto payment.
00:28:21.060 | If you have a regular income,
00:28:22.540 | and you say, I'm gonna put this money,
00:28:24.460 | defer this money into my 401k,
00:28:26.300 | I'm gonna automatically put aside $200 into this account,
00:28:29.860 | $300 into this account, and $1,000 into this account.
00:28:32.940 | But then have another account
00:28:35.460 | that you're going to play the game with yourself.
00:28:38.060 | Of if I don't spend this,
00:28:39.460 | I'm going to save this money into this other account.
00:28:42.300 | Probably that's an account that's fun for you.
00:28:46.300 | Something like travel,
00:28:47.620 | or something that you think is fun, giving account,
00:28:51.220 | I don't know.
00:28:52.340 | But have something where it's gonna be meaningful for you
00:28:56.500 | to defer that $20 expense to the future,
00:29:00.460 | and then simply put it into a certain account.
00:29:02.740 | And hopefully the account is at a scale
00:29:04.740 | where you can actually see it grow.
00:29:07.780 | That is the key.
00:29:09.500 | If you're having behavior modification,
00:29:11.620 | where you're forcing yourself to spend less
00:29:13.740 | so that you can accomplish something,
00:29:15.860 | now you can start to make some progress.
00:29:19.420 | The end of the day,
00:29:20.300 | most of the games that you are going to play
00:29:23.900 | are going to be related to having a reward
00:29:27.660 | for lowering your expenses.
00:29:30.740 | The goal with expenses is to get all the ones
00:29:33.440 | that there's not a positive benefit to as low as possible.
00:29:37.300 | There are categories of expenses
00:29:39.180 | that you gain a benefit from.
00:29:41.220 | Give you an example, that book example I used.
00:29:43.540 | 1999 at the bookstore.
00:29:47.420 | Should I spend the 1999 or not?
00:29:49.740 | Well, welcome to the wrestling of my life
00:29:51.740 | for the last, for all of my life.
00:29:53.620 | Do I spend the 1999?
00:29:55.260 | On the one hand, I probably don't need to spend the 1999
00:29:59.180 | because I've got plenty of books that I haven't read.
00:30:01.460 | I probably should read all those books first.
00:30:04.300 | And it adds up quick when you spend 20 bucks here,
00:30:07.060 | 20 bucks there, pretty soon you're talking real money.
00:30:09.860 | But on the flip side, the idea that may come
00:30:13.700 | from a 1999 book, or the motivation that may come
00:30:16.700 | from a 1999 book, could allow me to make $9,999 next month.
00:30:21.700 | It could allow me to save $900 this month
00:30:25.920 | because I learned some, I gained some benefit.
00:30:29.580 | So the way that I handle expenses like that
00:30:32.580 | is by trying to set a target and funding them.
00:30:35.620 | So for example, one of the fun games
00:30:37.420 | that I think you should make is set aside
00:30:39.380 | about 10% of your income and earmark that 10%
00:30:42.340 | of your income of always investing in yourself.
00:30:45.660 | Investing into developing yourself.
00:30:48.460 | Most of us are, we are the economic engines that drive us.
00:30:53.460 | And so we wanna invest first in ourselves.
00:30:56.300 | And so set aside a budget where you're just simply choosing
00:30:59.940 | a percentage of money that goes into this
00:31:03.060 | so that you can spend freely on things
00:31:04.940 | that you're investing in yourself.
00:31:07.060 | I think you pick the number, 5%, 10% is fine.
00:31:11.340 | But let's say 5%.
00:31:13.140 | Well, 5% of $50,000 is $2,500 a year,
00:31:18.140 | a little about $200 a month.
00:31:20.620 | Now, if you give yourself a self personal development budget
00:31:23.060 | of $200 a month, you can do really well.
00:31:25.740 | And now you always have an account
00:31:27.380 | so you can make that $1,999 purchase.
00:31:30.220 | You just simply look and say, do I have money left
00:31:31.900 | in my personal development account?
00:31:33.260 | Yeah, I do, so I'll buy the book
00:31:34.700 | and make sure it's earmarked under personal development.
00:31:37.540 | Expenses like that should be done intentionally.
00:31:40.180 | Think of it like research and development for a company.
00:31:43.120 | A company who's gonna grow
00:31:45.100 | and is gonna have a long-term future
00:31:46.620 | has to commit to spending money on research and development
00:31:50.220 | at every stage along the way,
00:31:52.060 | really regardless of how they're doing.
00:31:54.080 | If the company is doing poorly
00:31:55.780 | and they cut back on their research and development budget,
00:31:58.460 | are they really gonna start doing better?
00:32:00.660 | And if a company is doing well
00:32:02.460 | and they cut back on their research and development budget,
00:32:05.240 | are they going to keep doing well?
00:32:08.200 | Think of personal development
00:32:09.860 | as research and development for yourself.
00:32:12.140 | So you should always have an account.
00:32:13.600 | That's the account that you buy books out of.
00:32:15.340 | That's the account that you buy courses out of.
00:32:17.580 | That's the account that you buy conference tickets out of.
00:32:20.160 | That's the account that you pay consulting fees out of.
00:32:22.700 | This is all self-development, personal development.
00:32:25.620 | And what I do is I categorize those accounts
00:32:29.500 | based upon percentage.
00:32:30.900 | I'm gonna invest a percentage of my income.
00:32:32.500 | Now, as your income goes,
00:32:33.460 | it can be tough to spend the money, right?
00:32:35.460 | It's one thing to invest 5% into yourself
00:32:37.820 | when you are making $50,000 a year.
00:32:40.780 | That's really doable.
00:32:42.220 | Couple of conferences a year,
00:32:43.940 | couple of dozen books a year,
00:32:45.980 | audio course here or there,
00:32:47.460 | you've spent the money.
00:32:48.700 | It's a little harder to invest 5% in yourself
00:32:50.740 | when you're making half a million dollars a year.
00:32:53.100 | More than that.
00:32:55.180 | But the principle still holds the same.
00:32:58.720 | That's your research and development budget.
00:33:00.780 | Now, that's very different than an expense
00:33:03.780 | that's simply a consumption expense.
00:33:06.780 | So the glass of wine example at the nice dinner out,
00:33:10.100 | that's obviously a purely a consumption expense.
00:33:13.220 | Would it be pleasurable to have the glass of wine?
00:33:15.300 | Sure, probably.
00:33:16.900 | Could I save the money on it?
00:33:18.380 | Yeah, I do, I could.
00:33:19.800 | Is it gonna cost me anything
00:33:21.420 | if I don't drink the wine and save the $9?
00:33:23.780 | No, it's not gonna cost me anything.
00:33:25.540 | I can't make an argument that somehow
00:33:26.900 | I'm gonna be wealthier or happier
00:33:29.340 | because I had the wine.
00:33:30.660 | Yeah, you would enjoy it,
00:33:31.560 | but it's just one of those things.
00:33:33.380 | So expenses like that,
00:33:34.580 | you set it as a goal of saying,
00:33:35.940 | I'm gonna get this as low as possible.
00:33:38.380 | Now, when you have a pressing goal
00:33:41.020 | and you can identify expenses
00:33:42.580 | that don't serve you in some way,
00:33:44.740 | it's not your vitamin budget
00:33:46.540 | or your nutritional supplement budget
00:33:48.580 | or your personal development budget,
00:33:51.320 | which needs to be managed in some way
00:33:53.420 | that really makes sense,
00:33:54.520 | but not put to the zero,
00:33:57.180 | then play the game.
00:33:58.780 | So you'll see people who are getting out of debt.
00:34:01.220 | They'll do things like not spending any money this week
00:34:03.740 | or not spending any money this weekend.
00:34:06.060 | If you are prone to thoughtless spending on a weekend,
00:34:10.780 | set yourself a goal of saying,
00:34:12.340 | how can I not spend any money this weekend?
00:34:16.060 | Doesn't mean you have to sit at home
00:34:18.060 | and can't do anything fun.
00:34:19.060 | It just means that you have to make different choices
00:34:20.980 | with the things that you do consume
00:34:22.300 | such that they don't cost you money.
00:34:24.380 | Or you say, I'm not gonna buy any new clothes
00:34:27.500 | during this year.
00:34:29.160 | I have plenty of clothes.
00:34:30.300 | If your weakness is something like clothes,
00:34:32.980 | I'm not gonna buy any new clothes this year.
00:34:36.580 | We're assuming you have enough clothes to look presentable
00:34:38.700 | and you do clothes spending
00:34:40.860 | because that's just something fun
00:34:42.620 | or if the guy is, I don't know,
00:34:43.460 | I'm not gonna buy any new guns this year.
00:34:45.500 | So, or whatever, I don't know, think up your own thing.
00:34:48.060 | But by setting a target that's long and stretch it out,
00:34:52.580 | you change your behavior.
00:34:55.020 | So I'm not gonna spend any money this month.
00:34:56.940 | We're not gonna buy food this month.
00:34:58.300 | We're gonna eat the pantry.
00:34:59.860 | And then make sure you save that quickly
00:35:02.060 | over into your savings.
00:35:04.780 | Or another thing, another game that I play with myself
00:35:07.340 | when I have an expense is, let's say I have an expense.
00:35:10.140 | This is not an expense that needs to be maximized
00:35:12.500 | like a personal development budget
00:35:13.940 | or an education budget, things like that.
00:35:15.500 | Rather, this is an expense that needs to be managed.
00:35:18.660 | Can I come up with a way to do this thing
00:35:21.500 | and not lose money on it?
00:35:24.460 | Assume for a moment that you would like to buy a new car.
00:35:28.300 | Well, calculate how if I bought this new car,
00:35:32.020 | could I make sure that I pay for this car
00:35:36.260 | exclusively from money that I earn with the car
00:35:40.580 | so that I don't lose money?
00:35:44.060 | You have a normal income, normal expenses,
00:35:46.380 | you're building wealth, you're saving money,
00:35:47.780 | but you'd like to buy the new car.
00:35:49.740 | Well, are you willing to drive the car
00:35:52.220 | at nights and on weekends, three or four days a week,
00:35:55.260 | to make money with Uber until you can pay for the car
00:35:57.780 | with your after-tax earnings from Uber?
00:36:00.820 | That would be the kind of game that changes your behavior.
00:36:05.220 | You wanted to buy a thing,
00:36:07.940 | but you didn't wanna spend money on it,
00:36:10.020 | so you changed your behavior and you worked more
00:36:13.020 | in order to buy the thing.
00:36:14.220 | Now, Uber is not a particularly
00:36:16.020 | financially productive thing.
00:36:17.700 | You're making six, seven bucks an hour, basically.
00:36:20.060 | Most people who drive for Uber
00:36:21.220 | don't know how to calculate true cost.
00:36:23.420 | So as a full-time thing,
00:36:25.700 | it doesn't actually work very well.
00:36:27.140 | But where it does work well
00:36:28.380 | is as just a part-time thing.
00:36:30.300 | So your monthly car payment is gonna be $300 a month,
00:36:33.140 | and your goal is to earn $300 every month
00:36:35.300 | driving on Uber here and there
00:36:36.860 | when it's convenient for you.
00:36:38.580 | There's a game.
00:36:39.540 | Now, you can justify to yourself your new car
00:36:43.900 | in a way that you couldn't before
00:36:45.340 | because you've changed your behavior.
00:36:47.820 | You can do this when you buy things.
00:36:49.620 | For example, you want to buy a boat.
00:36:52.340 | Can you find a boat that's such a good deal
00:36:55.060 | that you can buy it,
00:36:56.400 | use it for three or four years,
00:36:58.740 | and then sell it at the end of three or four years
00:37:01.620 | and not lose money on it?
00:37:03.900 | That's a real skill involved with that,
00:37:06.340 | but I think it's doable.
00:37:07.740 | I recently did this with my campers and trucks and things.
00:37:12.460 | I wound up buying a total of two campers and two trucks.
00:37:15.300 | I bought them all,
00:37:16.700 | used them all for about a year or so,
00:37:19.540 | put money into them, fixed them, et cetera.
00:37:21.820 | But at the end of the day,
00:37:22.660 | because I bought them right,
00:37:23.980 | I was able to eventually sell them all,
00:37:26.020 | and I didn't come out with any net loss.
00:37:28.680 | I didn't make money,
00:37:30.200 | but I didn't come out with any net loss of money.
00:37:32.680 | So I recouped all the money out of them.
00:37:34.720 | Was it a totally a win?
00:37:39.240 | No, I could have invested the money probably productively,
00:37:41.360 | but I wanted to have them.
00:37:42.200 | I wanted to use them.
00:37:43.040 | I did use them.
00:37:43.920 | And so the goal was simply,
00:37:45.560 | can I buy right and can I be really good
00:37:49.000 | with how I manage things
00:37:50.680 | such that I can sell them eventually and not lose money?
00:37:54.320 | Now, in my case,
00:37:55.140 | the only reason that worked out the way that it did
00:37:57.220 | was because one of my trucks got stolen
00:37:59.460 | and I negotiated pretty tough with the insurance company.
00:38:03.780 | And I got a very nice insurance settlement,
00:38:05.780 | which made up for some of the depreciation
00:38:07.700 | that I suffered on other things.
00:38:08.780 | But one of my campers,
00:38:09.820 | I bought it and doubled my money when I sold it,
00:38:11.300 | my truck camper.
00:38:12.140 | I bought it for half price,
00:38:13.060 | used it for six months,
00:38:15.140 | and then sold it for double my money.
00:38:17.380 | So it wasn't much money,
00:38:19.020 | but it's the game of it.
00:38:20.580 | It's the game of saying,
00:38:21.900 | okay, I wanna have this thing that I'd like to do.
00:38:24.440 | This is a consumptive expense.
00:38:26.280 | This is a bit of a luxury.
00:38:27.700 | How can I play a game so that I can justify this
00:38:32.020 | so that I'm changing my behavior?
00:38:34.700 | How can I adjust my behavior?
00:38:36.400 | Because if I just keep spending, spending, spending
00:38:38.400 | and buying all the fun things that I'd like to have,
00:38:40.560 | I won't have any money.
00:38:41.600 | I won't be financially independent.
00:38:43.000 | I won't be financially free.
00:38:43.920 | I have a lot of nice stuff,
00:38:45.360 | but I won't be financially free.
00:38:47.160 | I wanna be financially free,
00:38:48.840 | but I'd also like to have some fun.
00:38:50.320 | I don't wanna sit around and be a miser
00:38:51.680 | just stacking my gold coins up to the roof
00:38:53.780 | and never doing anything interesting.
00:38:55.780 | So is there a game I can play that allows me to do that?
00:39:00.200 | Can I come up with a way to buy this thing
00:39:01.920 | and not lose money?
00:39:02.920 | You're living in an apartment.
00:39:04.920 | You'd like to buy a house,
00:39:06.120 | but you can't justify it.
00:39:07.420 | Well, what's your game?
00:39:09.220 | Buy the house and get two or three roommates.
00:39:11.320 | Are you willing to have the two or three roommates
00:39:13.000 | in your house paying your mortgage for you?
00:39:14.760 | Go for it if so.
00:39:16.000 | Now you can play a game that makes you enjoy
00:39:19.680 | having your own pool and your own big kitchen
00:39:21.680 | and your own garage and your own things
00:39:23.440 | that you can entertain or do whatever you want with,
00:39:26.240 | and your roommates pay the mortgage payment for you.
00:39:28.600 | That's the kind of game that makes a difference.
00:39:31.000 | Notice that every example that I've given you so far
00:39:34.640 | is changing your behavior in some way
00:39:38.080 | so that you can actually make progress.
00:39:43.240 | With investing, I did a whole show
00:39:45.040 | on get a little bit richer every single day.
00:39:47.680 | Make it a goal to get a little bit richer every single day.
00:39:50.480 | Well, how do you do that?
00:39:52.400 | It can be difficult,
00:39:53.720 | depending on the swings of your investment accounts
00:39:55.960 | if you're tracking your net worth on a daily basis,
00:39:58.320 | but in general, it just simply means
00:39:59.520 | saving money every single day.
00:40:01.720 | So if you're committed to getting a little bit richer
00:40:03.600 | every single day,
00:40:05.160 | just make sure that you save money every single day.
00:40:09.000 | Many people do this with the simplest and lowest of budgets
00:40:12.060 | with regard to how they manage their cash.
00:40:14.480 | Knew a guy one time,
00:40:16.320 | he was using the strategy of funding a vacation.
00:40:18.880 | He wanted to fund a vacation.
00:40:19.920 | So his rule was anytime he got a $5 bill, he had to save it.
00:40:24.500 | You got a $5 bill, given it and change,
00:40:26.800 | $5 bill went into saving every single day.
00:40:29.480 | Well, if you do that,
00:40:30.600 | and if you spend cash and go here and there,
00:40:32.360 | I mean, it adds up pretty quickly.
00:40:34.040 | He needed a few hundred dollars so he could go on vacation,
00:40:36.280 | and his way of playing his game
00:40:38.520 | to get it out of his budget
00:40:40.160 | was anytime there was a $5 bill in his wallet,
00:40:42.460 | that was saved.
00:40:43.840 | I think it's a good game, a really good game.
00:40:46.380 | You can play this with rounding up.
00:40:48.040 | Some people do it with,
00:40:49.120 | if you ever get coins as change,
00:40:50.840 | they always save the coins.
00:40:52.440 | Or some banks offer this program where you spend $1.62,
00:40:55.940 | they'll round it up and put 38 cents into a savings account.
00:40:59.560 | I say do it with an automatic transfer.
00:41:01.920 | Set up an automatic transfer every single day
00:41:04.820 | into your wealth building account,
00:41:06.720 | where every day, a dollar goes from your checking account
00:41:10.120 | into your savings account.
00:41:11.240 | And then set yourself a goal of once a month doubling it.
00:41:15.920 | Things like that, where it's a mental game,
00:41:17.880 | where every month I'm gonna double this.
00:41:19.560 | I'm gonna start with a dollar a day,
00:41:21.160 | but then a month from now I'm gonna do $2 a day.
00:41:23.240 | Then another month I'm gonna do $4 a day.
00:41:26.440 | Then another month I'm gonna do $8 a day.
00:41:28.640 | Well, how much are you saving
00:41:30.060 | if you can play that kind of game with yourself
00:41:32.200 | at the end of a month?
00:41:33.320 | Sorry, I meant at the end of a year.
00:41:35.760 | Well, it's a couple thousand dollars, too much.
00:41:37.880 | So the game, probably that's unbelievable for many people
00:41:42.880 | that they could actually do it.
00:41:44.200 | So set a more reasonable game, 10% increase.
00:41:46.680 | That might be a better thing.
00:41:47.600 | I'm gonna save a dollar a day,
00:41:49.000 | and then I'm gonna increase it by 10% every month.
00:41:51.280 | That's probably a more reasonable way.
00:41:52.840 | So at the end of the month, you're saving hundreds of dollars.
00:41:55.680 | These games, where you really commit to it,
00:41:57.840 | make a big, big difference.
00:41:59.520 | Now, let's talk about income.
00:42:01.200 | Income, I think, is a harder game to play
00:42:04.200 | depending on how your income is structured.
00:42:06.600 | But what I would say is set yourself some kind of target.
00:42:11.240 | If you are in a game,
00:42:13.080 | if you're in an income-creating situation
00:42:15.280 | where there's a direct connection
00:42:17.280 | between your activities and your income, like sales.
00:42:19.600 | If I do a certain number of sales calls,
00:42:21.200 | I'll generate a certain number of transactions
00:42:22.920 | in the fullness of time.
00:42:24.280 | So I'm gonna make a game
00:42:25.840 | of doing this number of transactions.
00:42:27.340 | That's easier to play games with your income.
00:42:30.100 | But you could still set it.
00:42:31.320 | Set yourself a target of a certain size of bonus.
00:42:33.720 | Set yourself a target of increasing your income
00:42:35.560 | by a certain amount.
00:42:36.760 | If you've got something that you'd like to do,
00:42:39.080 | some kind of frivolous experience,
00:42:41.440 | I'll give you one of mine.
00:42:42.760 | There's a company that makes leather bags
00:42:44.640 | called Saddleback Leather.
00:42:46.040 | They're super cool if you like leather bags.
00:42:50.480 | I do.
00:42:51.320 | They last forever, blah, blah, blah.
00:42:52.520 | It's a luxury item.
00:42:53.560 | I cannot justify it whatsoever.
00:42:56.200 | I just think they're super, super cool.
00:42:59.000 | They're not particularly practical, but they're beautiful,
00:43:01.260 | and they fit my, I like it.
00:43:04.000 | I like the guy who started the company
00:43:05.440 | and his family live in tents,
00:43:06.640 | which I think is pretty cool.
00:43:07.840 | Tents in, safari tents in Texas.
00:43:10.440 | But this kind of thing, that's one of my rewards,
00:43:13.160 | I have an income goal.
00:43:14.220 | When I reach this certain income goal,
00:43:15.760 | I'll go ahead and buy the Saddleback Leather bag
00:43:18.080 | that I want.
00:43:19.080 | Now, I can't justify, it's certainly not a,
00:43:23.000 | it's certainly not an expense that I can defend.
00:43:26.800 | It's not something that I can say this has to be done.
00:43:30.600 | But it motivates me,
00:43:31.800 | and it's a token of a certain level of financial income
00:43:36.320 | that I'd like to create.
00:43:37.600 | Now, your token may vary.
00:43:38.800 | Your token might be to go ahead and buy the Maserati.
00:43:41.720 | Your token might be to go ahead and buy the Beach House.
00:43:44.760 | Your token might be to go ahead and buy
00:43:47.080 | the new pair of shoes.
00:43:48.980 | We all would have different tokens.
00:43:51.520 | But the point is, if the token is causing you
00:43:55.320 | to make a change, it's not actually an expense,
00:43:59.560 | it's an expense that you can justify
00:44:01.120 | from the business perspective.
00:44:02.560 | Let's say your goal is to buy the Maserati.
00:44:04.880 | Well, you set yourself the goal.
00:44:06.480 | When I get the job, earning this amount of money,
00:44:10.040 | then I'll go ahead and buy the Maserati.
00:44:12.480 | If the Maserati is motivating to you,
00:44:14.680 | then it actually is having a behavioral change on you,
00:44:19.160 | and you do the steps needed to get the certain kind of job.
00:44:22.800 | And so that's how I like to justify
00:44:25.120 | kind of frivolous expenses.
00:44:28.000 | I would never justify a silly leather bag
00:44:30.920 | as making a difference,
00:44:32.160 | but because it's one of those frivolous things
00:44:34.080 | that I'd like to have, well, how am I gonna justify it?
00:44:37.960 | Can't justify it, just say I have the money.
00:44:39.560 | Of course I have the money.
00:44:40.520 | Could go and do it any time.
00:44:42.080 | You could go buy the Maserati.
00:44:44.580 | But when you justify it and say,
00:44:46.160 | how can I change my performance,
00:44:49.160 | then there's, you can, the game is afoot.
00:44:53.440 | It really works.
00:44:54.880 | I'm gonna change my performance
00:44:56.280 | in order to get this certain outcome,
00:44:57.960 | and then with this certain outcome,
00:44:59.600 | then I'll go ahead and get this thing.
00:45:01.680 | So that's the best I've got with income.
00:45:03.480 | I struggle to know other things,
00:45:05.360 | I guess other than to say this.
00:45:06.960 | One of the things, I think I did a show on this.
00:45:09.160 | If not, it's still on my list,
00:45:10.500 | but of changing expenses to a very reasonable level
00:45:14.600 | of expenses that you can understand.
00:45:16.000 | In my case, it's daily expenses.
00:45:18.040 | For example, if you're starting a business
00:45:19.440 | and you want a digital business
00:45:21.760 | that has a certain level of recurring revenue
00:45:23.640 | that comes in every single day,
00:45:25.800 | well, set yourself a goal.
00:45:26.960 | First goal is to earn a dollar a day.
00:45:29.100 | That's doable.
00:45:31.220 | Once you earn a dollar a day, you can go to $10 a day.
00:45:34.160 | And once you go from $10 a day to $100 a day,
00:45:36.040 | now you can afford to live on your recurring income.
00:45:39.120 | And so the money game is just simply daily.
00:45:42.000 | How can I build a system where I have $100 a day
00:45:44.200 | coming in every day?
00:45:46.480 | I'm selling something, doing something, whatever it is.
00:45:49.320 | And that $100 a day is more valuable to you
00:45:53.320 | than the $100,000 a year job,
00:45:55.520 | because the $100 a day comes in without your direct effort.
00:45:59.160 | The $100 a day comes in no matter where in the world you are
00:46:02.600 | and now with that $100 a day,
00:46:04.320 | you can achieve your first level of financial freedom.
00:46:07.120 | That's the type of game you can play with income
00:46:09.120 | that's really powerful, really effective,
00:46:12.500 | and it'll change your behavior.
00:46:14.040 | Your behavior is gonna be, how do I build the business?
00:46:16.120 | How do I automate the business, et cetera?
00:46:18.240 | Make up your own games.
00:46:20.760 | I think there are other percentages
00:46:22.440 | or something that I think a lot about.
00:46:24.100 | For example, a game I always used to recommend to clients.
00:46:27.600 | When you make a raise, save half, spend half.
00:46:30.520 | Save half, spend half.
00:46:32.520 | It's simple, it's intuitive, and it's a game.
00:46:35.880 | Anytime you get a raise in income,
00:46:37.720 | before you get the first paycheck,
00:46:39.200 | set up a new automatic transfer of half of the raise,
00:46:42.120 | half of the increased paycheck
00:46:43.720 | to your most important savings goal.
00:46:46.640 | Or simply with levels of expenses.
00:46:48.920 | How do you do it with levels of expenses?
00:46:50.560 | Really good one is save half.
00:46:52.820 | If you always save half of your expenses
00:46:54.840 | and set that to be the goal,
00:46:56.360 | then if you wanna increase your lifestyle
00:46:58.400 | and spend more money to have other luxury things
00:47:01.560 | that you care about, well, you can do it.
00:47:04.160 | It's not like you have to save everything
00:47:05.880 | of the increased money.
00:47:07.060 | Just always save half and spend half.
00:47:08.960 | And you'll automatically achieve your goal
00:47:10.800 | of financial independence while also simultaneously
00:47:13.320 | automatically achieving your goal
00:47:16.340 | of luxury lifestyle and luxury living.
00:47:18.820 | Those are some ideas to get you started.
00:47:22.240 | The most important game is gonna be the game
00:47:24.400 | that makes sense to you.
00:47:26.460 | So whether it's putting a big glass jar on your desk
00:47:29.320 | and putting a dollar in it every single day
00:47:31.640 | into your financial freedom jar,
00:47:33.960 | whether it's paying a dollar and 11 cents every day
00:47:36.920 | on your credit card debt,
00:47:39.840 | whether it's setting a goal to earn a dollar a day
00:47:42.360 | in a way that doesn't require the hourly wage
00:47:45.000 | of your effort, in a way that is sustainable,
00:47:47.160 | that grows over time,
00:47:48.760 | your goals are the ones that are gonna matter.
00:47:51.360 | But if there's something that's motivating to you
00:47:54.080 | and you can connect it to a behavior modification,
00:47:59.080 | don't let anyone tell you it's dumb.
00:48:02.520 | It's hard for me to, in public,
00:48:07.440 | talk about making a dollar and 11 transfer to a credit card
00:48:11.240 | 'cause I concede it's dumb.
00:48:12.560 | It's a dollar 11.
00:48:13.840 | But you know what?
00:48:14.680 | It works.
00:48:15.800 | Has worked again and again and again.
00:48:17.440 | Every time I've needed it, it's always been there.
00:48:20.200 | It's brought confidence.
00:48:21.960 | It's hard for me to talk about,
00:48:24.400 | it's gonna be hard for you to talk about
00:48:25.800 | the things that are silly.
00:48:27.040 | But whatever your game is,
00:48:28.280 | if it's pulling the $5 bills out of your wallet
00:48:31.240 | and saving them up for vacation, do it.
00:48:34.640 | Do the thing that changes your behavior
00:48:38.800 | because if you can change your behavior,
00:48:40.320 | you change your outcomes in the fullness of time.
00:48:42.920 | Those are my ideas.
00:48:43.760 | I hope that you have enjoyed them.
00:48:45.160 | As I close, I will give you an ad for my credit card course.
00:48:48.560 | I have a course called How to Borrow Money Safely
00:48:50.920 | and Never Pay Interest Using Credit Cards.
00:48:54.320 | This course was created because I observed
00:48:59.040 | a not very helpful argument in the personal finance space
00:49:04.040 | where generally people in personal finance
00:49:08.160 | are pitted between two camps,
00:49:09.840 | either the maximized debt and maximized points
00:49:13.760 | or we don't use credit cards whatsoever.
00:49:17.200 | I don't have a beef with either of those positions.
00:49:20.120 | Frankly, I think for most people,
00:49:21.480 | if they just never use credit cards,
00:49:22.480 | they'd probably be better off.
00:49:24.120 | But the percentage of those of us who actually do that
00:49:27.240 | is very, very small.
00:49:28.640 | And I think there are huge benefits
00:49:30.560 | that credit cards specifically provide.
00:49:33.520 | And credit card lending, if understood how it works
00:49:36.680 | and exercised properly and carefully,
00:49:40.560 | provides for Americans and I think Canadians and Europeans,
00:49:45.160 | although I don't know how much my ideas translate
00:49:47.200 | into those economies,
00:49:49.800 | but credit cards provide the safest,
00:49:53.680 | most secure, lowest cost form of financing that exists.
00:49:58.680 | Now, whether you use it or not, that's up to you.
00:50:04.280 | But I do think it's silly not to have it as a backup plan.
00:50:07.120 | And I can list out as I do in the course,
00:50:09.080 | example after example.
00:50:10.600 | And it seems like a paradox.
00:50:12.840 | I don't like being in debt.
00:50:14.240 | I'll tell you what, I can tell you a bunch of times
00:50:17.040 | where I would go into debt, have been there, done that.
00:50:20.440 | I'd do it again if it meant a certain level of results.
00:50:24.680 | But to do it well and to do it right
00:50:26.400 | requires you to put in preparation
00:50:28.320 | long before you ever need it.
00:50:29.840 | A couple of days ago, I was working with a family
00:50:33.000 | who went through bankruptcy.
00:50:35.920 | And the details aren't important,
00:50:38.760 | but the point was that although they went through bankruptcy,
00:50:42.840 | they had to, in order to escape a very dangerous situation,
00:50:47.480 | they needed money.
00:50:49.120 | And the ability to access money using credit cards
00:50:53.720 | allowed them to escape a very dangerous situation
00:50:57.360 | so that they could keep their family intact
00:50:59.880 | so that they could then put things back together,
00:51:02.260 | satisfy their creditors, and solve the problems.
00:51:05.360 | But to do it well, you need to be prepared years in advance.
00:51:10.280 | Because the worst time to ever get a credit card
00:51:12.240 | is when you need one.
00:51:13.600 | The best time is when you don't need one,
00:51:15.320 | don't owe any money, et cetera.
00:51:16.680 | And you can do the stuff that I talk about in that course.
00:51:19.200 | If any of that piques your interest,
00:51:20.240 | I encourage you to go by radicalpersonalfinance.com/store,
00:51:23.520 | radicalpersonalfinance.com/store,
00:51:25.680 | and sign up for my "How to Borrow Money Safely"
00:51:28.080 | and never pay interest using credit cards.
00:51:30.640 | I have had many, many, many students,
00:51:34.760 | and thus far, I've only ever had one refund request
00:51:38.400 | for that course.
00:51:39.840 | Some of my other courses haven't gone so well.
00:51:41.360 | I've had other people who've said, "Ah, Josh, it was okay."
00:51:44.260 | But with the credit card course, I've only had,
00:51:48.520 | I'm just thinking, with my financial crisis course
00:51:52.700 | and the credit card course,
00:51:54.000 | I've only had a handful of requests for a refund.
00:51:57.440 | That tells you something about the quality of it.
00:52:00.040 | I've had more refund requests
00:52:01.080 | for my career and income course.
00:52:02.760 | I still think it's good,
00:52:03.920 | but certainly I've had many more refund requests
00:52:07.200 | for that one.
00:52:08.040 | The credit card course is very, very good.
00:52:10.240 | And the one refund request I've ever had for it
00:52:12.360 | was a guy who said, "Really good,
00:52:13.800 | I just already knew all this stuff."
00:52:15.680 | So you judge for yourself.
00:52:17.440 | Go to radicalpersonalfinance.com/store.
00:52:19.700 | It is money well spent.
00:52:22.680 | - If you are looking for an exciting role
00:52:24.440 | in customer service, food service, or retail,
00:52:27.600 | connect with a job at the airport.
00:52:29.680 | - Get started in a role that offers competitive wages,
00:52:32.720 | consistent schedules, and fast-tracked management
00:52:35.800 | while you work in a vibrant, exciting environment
00:52:38.400 | where security is a priority.
00:52:40.400 | - The airport has it all.
00:52:42.080 | - You can have it all too.
00:52:43.720 | - Visit cmhserviceindustry.com to learn more.