[00:00:00] There y'all, I'm Adrian and I just used a self-directed IRA to buy shares in my buddy's
[00:00:04] tech startup.
[00:00:05] Behold Adrian, not your typical retirement planner.
[00:00:09] I just wanted to diversify and invest in local companies.
[00:00:12] OMG!
[00:00:13] Adrian invested pre IPO!
[00:00:15] Yeah, new direction trust company helped me open an account and I directed the investment
[00:00:20] myself.
[00:00:21] Freedom!
[00:00:22] Exactly!
[00:00:23] Can your IRA invest in private equity?
[00:00:25] At New Direction, the answer is yes.
[00:00:27] Learn more at NDTCO.com
[00:00:29] Dreaming of a better sleep, tossing in turn is not your destiny.
[00:00:36] And Ali is here to help.
[00:00:38] Ali invites you to sink into sweet, sweet slumber, to improve your mental and physical
[00:00:43] health and overall wellness.
[00:00:45] More than just melatonin, Ali's ingredients help you wind your mind for a delightfully
[00:00:50] dreamy drift off.
[00:00:53] Sleep is on the way at Ali.com.
[00:00:55] That's olly.com
[00:01:00] This is Optimal Finance Daily, Episode 2661.
[00:01:05] Three unconventional ways to supercharge your savings by Paul Apanth of a Ford Anything
[00:01:10] dot com.
[00:01:11] And I'm your host and personal finance enthusiast, Diana Merriam.
[00:01:16] We're going to get right to today's post and start optimizing your life.
[00:01:23] Three unconventional ways to supercharge your savings by Paul Apanth of a Ford Anything
[00:01:29] dot com.
[00:01:31] Finish the following sentence.
[00:01:34] My dream is maybe you want to buy a house or backpack you're up or retire early, no
[00:01:41] matter what you want, having a big ol' heap of savings makes each of these goals a million
[00:01:46] times easier.
[00:01:48] Gee, thanks Captain Obvious.
[00:01:50] You're probably thinking easier said than done.
[00:01:54] Do you think saving money is hard?
[00:01:56] You might be listening to the wrong advice.
[00:01:59] If you're trying to nickel and dime your way into savings, then sure you've got a grueling
[00:02:04] slog ahead.
[00:02:06] Imagine all the mental bandwidth that it takes to stack 50 cent orange juice coupons on
[00:02:11] top of 75 cent manufactured coupons, tracking the expiration dates and appropriate stores
[00:02:17] for each item on your grocery list.
[00:02:20] Okay, we'll get bread and milk from Store X but yogurt and meat from Store Y, we have
[00:02:25] to go to Store X sometime between Sunday through Wednesday and we can hit Store Y anytime
[00:02:30] between Tuesday and Friday.
[00:02:32] Oh yeah, and let's stand in the snow at 3 a.m. on Black Friday to save $80 on a plasma
[00:02:37] TV.
[00:02:39] This is appealing as running a marathon in flip flops.
[00:02:43] If this is saving money, count me out.
[00:02:46] Fortunately there's a better choice.
[00:02:48] What happens when you toss out conventional wisdom and focus on the actions that pack
[00:02:52] the most powerful punch?
[00:02:54] Let's explore.
[00:02:56] Number 1.
[00:02:57] Quit trying a budget.
[00:02:59] What's the single most overplayed nugget of financial advice?
[00:03:03] Make a budget.
[00:03:05] We should also floss, wear sunscreen daily and drive exactly the speed limit and avoid
[00:03:09] that extra slice of cheesecake at the holiday party.
[00:03:12] Yeah, right.
[00:03:14] She says with a mouthful of cheesecake?
[00:03:17] We all know what we should do.
[00:03:19] Lack of knowledge isn't our problem but that doesn't mean we're going to act on this
[00:03:23] great advice.
[00:03:25] Humans are busy and lazy and when we're presented with two options we're prone to take the
[00:03:30] easy route.
[00:03:32] Some people suggest that willpower, just do it is the most effective solution.
[00:03:38] Force yourself to budget.
[00:03:39] Don't eat cookies.
[00:03:41] But decades of data show that willpower sucks at changing our lives.
[00:03:46] If you want to moralize you can admonish people for lack of willpower but if you want
[00:03:50] actual results you should work with human nature rather than fight against it.
[00:03:55] In other words embrace your inner sloth.
[00:03:59] So back to budgeting.
[00:04:01] If you're already in the habit of sticking to a written budget, awesome.
[00:04:05] If you're struggling to maintain a budget though here's an easier path just shave your savings
[00:04:10] off the top, spend the rest.
[00:04:13] I call this the 80-20 budget since I recommend that people save at least 20% of their take
[00:04:18] home pay.
[00:04:19] That's enough to protect you against succumbing to credit card debt the next time your
[00:04:22] car's engine explodes.
[00:04:25] If you want the ditch the cubicle become a millionaire party in France money more of this into the
[00:04:30] 50-50 budget, shoot for a 50% or greater savings rate.
[00:04:35] Don't bother tracking every cent just trim your savings off the top stick it in your escape
[00:04:40] fund go wild with the rest.
[00:04:44] Number 2.
[00:04:45] Left jab earn more.
[00:04:48] I can hear your objections already but I only make 40 grand a year you might be thinking
[00:04:53] there's no way that I could save 50% of my income on that type of salary.
[00:04:58] I agree you should earn more.
[00:05:01] Pick up extra gigs during the evenings and weekends, freelancing, consulting, babysitting,
[00:05:06] home renovating, tutoring, lawn mowing, snow shoveling, dog walking, pizza delivery.
[00:05:12] Earning extra money and saving every dime of that excess income is the single fastest
[00:05:17] and best way to supercharger savings rate.
[00:05:20] Why?
[00:05:21] In one word, habit.
[00:05:24] It's hard to break habits and you've adjusted to your current standard of living but you're
[00:05:29] not used to earning extra money.
[00:05:31] It's easy to pour every dime of this into savings, you'll never miss it because you've
[00:05:35] never experienced having it in the first place.
[00:05:38] How massive of a punch can this make?
[00:05:41] Let's assume that during your 9-5 job you earn a take home income of 35 grand per year.
[00:05:48] Your savings rate is 20% so your total savings is $7,000 per year.
[00:05:52] Next, let's imagine that you pick up gigs as a web designer or babysitter or French
[00:05:57] tutor.
[00:05:58] You earn $20 an hour and work an extra 20 hours per week.
[00:06:03] From 7 to 9 pm every Monday through Friday plus 10 am to 4 pm every Saturday and Sunday.
[00:06:10] Gig money.
[00:06:11] Gross income $20,800.
[00:06:14] Taxes at 28% $5,824.
[00:06:19] Your extra net income $14,976.
[00:06:24] You save every dime.
[00:06:26] That brings your total savings to $21,976.
[00:06:30] Boom!
[00:06:31] You've more than tripled your savings.
[00:06:34] That's the epic power of earning more.
[00:06:38] And number three, right punch.
[00:06:41] Find earth shattering savings.
[00:06:43] Wait, can you take this a step further?
[00:06:46] Let's see if you can cut back on your biggest ticket expenses.
[00:06:50] Take the cost of your housing for example.
[00:06:53] Can you stick a roommate in there?
[00:06:55] No way, I hate living with roommates.
[00:06:57] They leave dirty dishes in the sink and they never vacuum and besides I need a guest
[00:07:01] room for when Aunt Millie comes to visit which happens twice a year.
[00:07:05] Right.
[00:07:06] Okay, let me rephrase this.
[00:07:09] Do you $500 per month?
[00:07:11] Hate living with roommates.
[00:07:13] Your cost of renting a room in your home into that sentence.
[00:07:16] Do you $6,000 per year?
[00:07:19] Hate living with roommates.
[00:07:21] If you're buried in credit card debt, multiply $6,000 by the interest rate on your loan.
[00:07:26] At 14% APR, you're paying $6,840 per year for that vacant guest room.
[00:07:34] Sounds different now, doesn't it?
[00:07:36] Let's try again.
[00:07:37] Can you and your spouse consolidate into a one car household?
[00:07:41] Can you carpool to work?
[00:07:43] No way, what about the weekends?
[00:07:45] I want to be able to go out with my friends while he's at the gym.
[00:07:48] Okay, let me rephrase.
[00:07:50] Do you $300 per month want that flexibility?
[00:07:55] Would you be willing to get paid $3,600 per year to coordinate your schedules?
[00:08:01] Let me be clear, there's nothing wrong with keeping a vacant guest bedroom or maintaining
[00:08:05] multiple cars if you're willing to pay the price.
[00:08:09] The price tag may be higher than you expect.
[00:08:12] willing to fork over those funds?
[00:08:14] Great, but if you're trying to save a big ol' heap of cash, remember, you must ruthlessly
[00:08:20] slash everything that doesn't matter, especially the big ticket stuff.
[00:08:25] Let's imagine that you get a roommate.
[00:08:27] You also make some small-scale changes.
[00:08:29] You grow some veggies in your backyard, replace your halogen-like bulbs with LEDs, negotiate
[00:08:34] your insurance rates, and wear the same few outfits again and again.
[00:08:38] How strong of a punch does this pack?
[00:08:41] Extra savings.
[00:08:43] Remate $500 a month.
[00:08:44] Veggies $30 a month.
[00:08:47] Energy $30 a month.
[00:08:49] Insurance $30 a month.
[00:08:50] Close $20 a month.
[00:08:53] Total savings $610 a month, which is $7,320 a year.
[00:08:59] The vast majority of that $6,000 per year out of that $7,320 came from the big ticket
[00:09:07] item.
[00:09:08] Add this to your $21,976 savings rate made possible by extra income.
[00:09:16] Your new total savings is $36,784.
[00:09:22] You're saving more money than your base take home salary thanks to the one-two punch
[00:09:27] of earning more and cutting back on the big ticket items.
[00:09:32] With those type of turbocharged savings, you can escape the cubicle by a house or backpack
[00:09:37] you're up sooner than you might expect.
[00:09:44] You just listen to the post titled Three Unconventional Ways to Supercharger Savings by Paul
[00:09:50] Epant of affordanything.com and I'll be right back with my commentary.
[00:09:55] It's no secret that something always comes up when you're running a small business.
[00:09:59] It's time to take the pain out of payroll benefits and HR and put the joy back in running
[00:10:04] your business with gusto.
[00:10:07] Gusto's payroll and HR services can make it a little easier.
[00:10:11] Gusto was designed for you, the small business owner.
[00:10:14] They take the pain out of running a business, automatically calculating paychecks, filing payroll
[00:10:19] taxes, setting up open enrollment, Gusto does it all.
[00:10:23] Want more?
[00:10:24] Time tracking, health insurance, 401k, onboarding, commuter benefits, offer letters, access
[00:10:30] to HR experts, you get the idea.
[00:10:34] With Gusto, you can focus on the joy of running your business.
[00:10:37] It's super easy to set up and get started.
[00:10:39] If you're moving from another provider, Gusto can transfer all your data for you.
[00:10:44] It's no surprise 94% of customers are likely to recommend Gusto.
[00:10:49] 94.
[00:10:50] Here's the best part because you're a listener, you get 3 months totally free.
[00:10:55] All you have to do is go to gusto.com slash OFT.
[00:10:58] Again that's gusto.com slash OFT.
[00:11:01] I'm telling you, you're going to love Gusto.
[00:11:04] Get started today.
[00:11:06] What I like about Paula's recommendations in this article is that she encourages people
[00:11:11] to focus on the big changes that are going to make the biggest difference in once finances.
[00:11:17] When it comes to optimizing your expenses, if you focus on the big 3 of housing, transportation
[00:11:23] and food, you really don't have to sweat most other small purchases.
[00:11:28] This has worked out so well for my family that we no longer budget or stress about tracking
[00:11:33] every dollar we spend.
[00:11:35] Our mortgage is $600 per month because we live in a lower cost of living area and I
[00:11:40] bought a house well below my means.
[00:11:43] We drive too fully paid off reliable cars and have set up our lives in a way that we don't
[00:11:47] do all that much driving.
[00:11:49] And I cook most of the meals we eat mainly because I enjoy it but also because it allows
[00:11:54] us to eat better than we would if we ate out all the time and as an added bonus, it saves
[00:11:59] money.
[00:12:00] We also have the benefit of not being very materialistic, which certainly helps.
[00:12:05] But I think our focus on optimizing our spending on the big 3 allows us to not really think
[00:12:11] about the rest of our spending.
[00:12:13] We certainly have moments where we feel like we're going a little crazy so we take a look.
[00:12:18] And without fail, we see that our net worth has continued to increase because we don't
[00:12:23] have debt dragging us down and most of our money is making more money in the stock market.
[00:12:29] That should do it for today, have a great rest of your day and I'll be here reading to
[00:12:32] you tomorrow.
[00:12:33] We are Optimal AFO8's.