Thinking through personal finance problems isn't always the easiest. In this episode we break down three tips and tricks around saving, credit card debt, and managing your cash flow. If you're looking to take some good steps forward with personal finance in 2023, these tips and tricks might help you out!
Thinking through personal finance problems isn't always the easiest. In this episode we break down three tips and tricks around saving, credit card debt, and managing your cash flow. If you're looking to take some good steps forward with personal finance in 2023, these tips and tricks might help you out!
Hey guys, what is going on? Welcome to another episode of The Life finance and in between podcast, I'm your host, Eddie Thomas. And as always, this is brought to you by wealth management services in Hershey, Pennsylvania. We're diving into personal finance tips, and I don't think I've ever made a video like this. Specifically going over personal finance Tips, How To Strix things to think about, I'm going to try to do more of it, I feel like might resonate a bit more, just to kind of hear these things, if someone if you're in this situation, that kind of go over or if you're thinking through these things, and it might give you something, some food for thought and going forward and just kind of, I don't know, give you a little bit of my own my own opinion on things. So like, always, guys, there's a disclaimer at the end of these podcasts. But I want to make this disclaimer. Now for all three of the tips I'm going to go through today. None of this is personal advice at all, every single situation is different, every single situation is different. What I'm going to do is I'm going to give general themes or ideas that someone could potentially think about using and their personal life, if it works, and if it's best fit. Obviously, have that conversation with professional have that conversation with myself if you'd like before kind of putting these into play a little more personal. But just making sure that you know that these this is not personal advice, everyone's situation is different. And this is themes and things to think about. But obviously just food for thought and something to kind of take forward with you going forward. So without further ado, let's jump into it. What are the three things we're going to be talking about? today? We're gonna be talking three tips, or three, I guess personal finance topics that I think kind of now more than ever, are pretty, pretty prevalent and pretty important. First one is, how important is an emergency fund? Should I have an emergency fund? And if so, what should that look like? That'll be number one. Number two, if I have credit card debt, how should I pay that off? Slash? Should I pay that off? And three? How do I measure cashflow month over month? So if you had the first two things tackled, how do I how do I measure what's coming in? versus what's going out? To have a really good understanding of my personal cash flow? What is left at the end of the month, if anything? And obviously the conversation evolves from there and what I should be doing for that, with that money if anything's left over, but if not, why not? And how can I just kind of alter some things if I need to? So let's jump into number one. Again, should I have an emergency fund? If so, how much isn't important, etc, etc. And the overwhelming answer, in my opinion to this question is yes, everyone should absolutely have some sort of emergency fund. And when I say emergency fund, I mean extra cash in a savings account or checking account that is easily accessible, you don't have to wait any days to get it there's no transferring, there's no way it's just easily accessible, right? When you need it you have it needs to be completely liquid, all cash don't have an emergency fund and your favorite stock, don't have it in a bond fund. Don't have it sitting in a high yield savings account. You need this emergency fund and completely liquid ready at that moment cash and not stuffed under your pillow or blanket. If that's how you do it on your mattress. That's fine. But I mean in a checking account that we can readily get to how important is that? It's incredibly important. It's incredibly important. I know, when you think about investing and saving, well, that cash isn't doing anything for me. It's not earning anything, it's losing out to inflation. Yeah, both of those things are true right now. And inflation is a percent losing a percent of your purchasing power. With that cash. You're not investing so you're not getting any return in the long run. So why exactly would we even have it? Well, a lot of finance and a lot of personal finance comes down to one thing and that is peace of mind. And whether you know it or not, whether you think it or not. And a lot of people including myself think Why would I need so much cash on the sidelines, nothing's gonna pop up and happen. things pop up and happen. And having that emergency fund is pivotal, pivotal to being able to kind of weather those storms and make sure you're okay and make sure you're not losing sleep at night. Say the furnace breaks in the middle of winter and you need money to get that fixed you can heat your house you need emergency fund for that car breaks down need to get a fix need emergency fund for that there's a million things that you can use it for or need it for. And therefore you or potentially even worst case scenario, lose your job and you need to kind of bridge yourself from that job to your next kind of opportunity. You need funds in the meantime to make sure you're able to do so without without ideally dipping into any retirement savings or only investing. emergency funds are really good for that. So how much of one and how long should it last? This this is definitely up to everyone's own personal kind of preferences. My opinion on In this and I use this for myself as well, is at least three months of an emergency fund. That means if something if you lost your job tomorrow, we lost anybody lost your job tomorrow, you have three months of expenses tucked away in cash that you know you're good for at least three months, at least three months. The sweeter spot that I kind of see work better for myself and some people have conversations with is six months, you typically have within six months, you have some options, you have some ability to kind of make moves, whether it's getting a new job, whether it's getting something fixed, within six months, that stuff's kind of most most of the time dealt with, there's obviously outliers. And then if you're if you want to be super, super safe, you have a year built up one year of expenses. Again, that's a year is a very, very long time, six months is a long time, here's a very long time if nothing were to change. But if that's where you're comfortable at, I'm not going to tell you not to because having that emergency fund where you sleep well at night, is the importance cannot be put into words of how much peace of mind that gives you whether it's whether you need it or not. What it comes down to that's why it's called an emergency fund. So like I said, at least three months, in my opinion, shooting for six, ideally, I will you know, you can kind of deal with anything in the short term, middle term here. And then max one year, anything outside of that, outside of one year, again, personal preference, but anything outside of one year for me, you can kind of tap into your investments at that point potentially or look some other routes, but at least like I said, three, six, ideally, one year of expenses put away at the max. And I've said it a couple times, but it's peace of mind. You have that completely liquid you know it's dealt with, you know, you can deal with anything lacrosse that comes across your life, monetary wise, and you give yourself some time to kind of get yourself back on your feet if you need to. So that's one down how important is emergency fund? How much of one was it do for you? That's it right there. Easy peasy. Number two, should slash how, if I have credit card debt, should I pay it off? How should I pay it off? What should I do? This one's a little more complicated, it's not as straightforward as number one. But when we take a look at it, you need to really focus in on a couple different things. How many cards is the debt spread across? So do we have one credit card with a ton of debt? Do we have 357 Credit cards with a ton of debt? If we have one, we know that one goal, pay that card off, if we have three to five, nice are looking at some different things. Well, you need to start looking at if you have multiple credit cards with debt on them is two things. One, one is, what's the interest rate on each, there's gonna be varying interest rates for each credit card, you have to what is the balance on each credit card, they're probably not gonna all be the same number of balance on each credit card. So we need to, we need to really check in on what is the balance and interest rate on each of my cards. And then this is where your personal preference comes into play. Because there's really no one size fits all, you have different options at this point. If you have one credit card again, pay off that one credit card as quickly as you can. If you have three to five, multiple any multiple number, you either pay off the highest card first or put any extra money you have towards a higher card first, always always keeping in mind you're paying off your minimums no matter what month a month, the bare minimum is to pay off those monthly minimums of payments. So you're not getting hit with any sort of penalties or charges. But we have that settle we have that taken care of we're paying the minimums. Any extra cash you have at the end of the month has to either go towards the one with the highest value, the highest amount of debt on it. So we can get that out of the way. Once we have that one paid off, we pay the next one with the highest amount, get that other way. Next one and just keep working your way down the list. Or you choose the one with the highest interest rate. And just get that out of the way. Because you know, month over month, so there's a balance there, you're getting penalized, you're not getting penalized, you're gonna hit with that interest charge month over month over month. And if it's the highest one, it can add up pretty quick. So again, that's personal preference, whatever helps you sleep better at night. And I'm going to say that a ton, but that's really what personal finances is making sure you sleep better at night. And when you're paying off credit cards when you have credit card debt, you're absolutely not alone. credit card data is abundant the United States, some does better than others. Some people have different levels of debt, but there's always a path that path out of it. And it's just looking at all of your cards all of your accounts and saying Okay, which one's the highest interest rate, which one's the highest balance? Which one do I want to attack first? And that's where the really, really personal type of advice comes into play. And Master stuff I can't do on this podcast I can't give because it's difficult, but that's where you have a conversation with professional to help but those are your two options. There's another option, definitely recommend talking to somebody about. But a potential avenue that people have taken and potentially abused to somebody is finding a introduction credit card somewhere that has 0% interest, because sometimes what credit card company will do to entice you to use their cards or be a member, and sign up is they'll give you an introduction, percentage fee of either very low or even zero sometimes. And what you could do is you could try to consolidate all of your credit card debt onto that 0% card, so you know that you're wiping out any interest rates that you're gonna have to pay. Now, every credit card has a different term for that interest rate, introductory interest rate, so make sure you read the fine print for that. But if you get to a point where instead of having the 15 to 20% 25% interest on your credit cards, excuse me, you're able to go to zero, or two, or five or whatever it is much lower, you're able to try to pay off your debt quicker and not get hit with as many interest charges month over month. Now, again, this depends on what that interest rate is how long you have that for, and is even feasible to pay off all your debt within the timeframe that you kind of want yourself when you go through one of these introductory cards and introductory interest rates. But that's another one just consolidating your all of your debt onto one card, that's a much lower interest rate that you could try to pay off quickly. Now there's going to be charges associated with this, there's going to be charges with moving your debt from one car to another. Every company is different, please look into that stuff. This is that's more of a complicated solution with a complicated plan that you kind of need to dig into. And it's all personal. But that's another option you have is to consolidate as much as possible. So if I'm really breaking that question down, as to how are should I pay off credit card debt? The answer is yes, you should pay off credit card debt, use a credit card to build your credit score, make sure you pay it off, don't carry any debt. And when you are paying off the debt, if you get to a point where you need to, it's in no particular order between these two is, am I paying off a loan with the highest balance or the highest interest? Once you decide on that? Do that all the while paying off the minimums each month on each card you have. And if I need to, can I consolidate it onto one introductory credit card with a 0% interest or very low percent interest? And then pay that off as you go? Keeping in mind there's going to be fees associated with all of that. But those are your kind of options. But overwhelmingly, yes, try to get your credit card debt down to a manageable level if you're if you find yourself with too much. So that's number two. And then number three, the last personal finance tip I'm gonna have today personal finance question I'm gonna have today is how to measure your cash flow each month and put in another way. It's what is your income per month? Where are you spending your money per month. I don't like the word budget. So I'm not going to use the word budget, other than saying it right there. But it's cashflow, it's what comes in versus what goes out. And when I'm when I'm working, I don't care where that money goes, as long as you have positive cash flow as long as we have enough to cover what we need to and then save and invest. And the other side of that as well if we if that's the stage of life we're in. But you really got to, we have to find a way to kind of monitor that. And it's funny, because going back to your second My second tip, don't carry credit card debt. But an easy way to kind of do this, depending on if you think you could pay it off is for three to four months. Just use one credit card for every single expense you can possibly put on there. groceries, bills, buying stuff, just restaurants, bar, whatever it is anything that you can use, spend your money on, try to put it on a credit card for three to four months, make sure you could pay it off. But what it gives you is a really good idea of what exactly our expenses are. Because you'll see that number between the first of the month or the 31st of the month, you're always going to see the number of of what you spent and you know that your expenses. Now if that remains consistent for three to four months, you know, that's pretty much where you're at. So you know your expenses, of course, you're going to know your income coming in monthly, whether you get paid monthly, bi weekly, weekly, whatever it is. And you just have to see how they measure up and see what kind of changes and tweaks you have to make. And if you're running that pretty thin, you're not comfortable. Look through your credit card statement and what you're spending money on and change some things maybe don't go out to eat as much. Maybe don't buy stuff just kind of willy nilly on a whim. Or if you see yourself having a lot of money leftover and you can't really you don't know where to put it. Maybe buy yourself treat yourself some more. Go buy something out of store, go buy go out to eat again. No one's telling you not to it's just at a comfortable level for you. And try not to carry any debt over month a month. So that's one way you can use a credit card. The way I like doing it as I use a credit card method. The other way I like doing it is I have a tool that I use and is open to anybody that works with me. That's called E money. And what you do is you put in any debit cards and credit cards you have. So you don't need to focus on just one car, taking up all the expenses, but making sure in your profile that you have all these cards built out in there. And what it'll do is it'll show you your monthly spend on all of those cards as upkeep updates daily. So when you spend money on something today, tomorrow and your E money account, it's going to filter into the system and showed that you spent money somewhere. And then you could take a look in our down track forever as long as you want it to. And you'll take a look at okay, what are my expenses month over month. And the other cool thing that you money does is it tracks your income to see us when you get a paycheck. So that's a really easy way just to see this was my income for the month, these are my expenses broken down on day and category, what am I spending my most money in? And where where am I getting my money from and how much what's left over. Like I said, I've used a credit card method. And I've used the E money method. There's other apps out there that track your income and expenses. And there's other methods out there that might work better for other people. It's just the two I use and I'm most familiar with. So I don't want to give you any tips where I haven't potentially done or looked into it myself. That's kind of where I'm at. I'll do more videos on these in the future. I'll write some blog posts on in the future. So I'm gonna try to do more personal finance tips and tricks like this in the future as well, most definitely because I feel like it's a big part of what I can provide content wise that people can really pick up and use. And so I just kind of want to do that and help people as much as possible. So I appreciate you listening and like always, and until next time, Stay happy, stay healthy, and I'll see you Securities offered through securities America Inc. Member FINRA slash SIPC. advisory services offered through securities America advisors Inc. Wealth Management Services and securities America are separate entities. The opinions and forecasts expressed are those of the author and may not actually come to pass. This information is subject to change at anytime based on market and other conditions and should not be construed as a recommendation of any specific security or investment plan. Past performance does not guarantee future results.