Nobody really tells you what to do with your paycheck, people don’t know what you should and shouldn’t do so today’s episode deals exactly with that.
[2:9] Where are you putting your money Kate?
- Until recently (the last year) all of Kate’s money was kept in her bank account
- The money would rollover from a checking account from the savings account
- The big mistake with this is that it has an extremely low interest rate. Most investments are in the region of about 8%, savings accounts are typically below 1% and actually make you lose money as inflation is higher than the interest you’ll earn in a savings account
- Kate’s currently putting her money in mutual funds and stocks she uses her Robinhood account
- She makes sure that all her money is working for her
- There’s a common misconception that just because you have stock they aren’t liquid, but you can quickly sell them and convert them into cash
[6:59] A ton of people make the mistake that they aren’t responsible with their credit cards
- Lots of people live off their credit cards but they don’t pay them off in full
- Kate takes advantage of her credit cards to get points but she pays them off in full to avoid paying any interest
- Denis pays off his credit cards the moment he gets paid to avoid late fees and interest
[8:29] It takes some getting used to realizing that you can just liquidate your funds.
- Denis had a situation where he hadn’t been paying state tax all year, he wasn’t enrolled into state tax
- The mistake came about because he didn’t check his paystubs
- He was notified he had to pay 10 months’ worth of tax – 5.75% multiplied by your annual salary times 10/12
- When Denis was told he needed to pay the money, he was able to sell off stock he didn’t want anymore
[11:27] If you build up an emergency fund you can eventually start using the money for other reasons like putting money into an IRA
- There’s a common misconception that you aren’t saving because you can liquidate your portfolio, this isn’t true as most people still have separate savings accounts
- You should treat it as an account that you can’t draw from, it should be set aside for longer term things.
- You don’t have to have your money invested in the stock market just because it’s in a particular account.
If you are interested in opening up an investing account check out robinhood.