We need our ship to actually sail us to where we want it to go; the thing is, ships aren't free!

• So the goal for today's episode then is for you to be inspired to see how much you're currently saving towards you, towards yourself and if needed or possible, increase it so you can be on a faster pace to reach those goals. (01:33)
• So how much should you pay yourself every month? "How much am I worth?" I'd say the minimum is 5% of your gross income. (02:39)
• So what this says is that 36% of your gross monthly income, so before taxes, can be used for items specifically to you. (03:40)

Quote for the episode: "Pay towards you first, because you're important!" (06:14)

Securities offered through TFS Securities, Inc., and Advisory Services through TFS Advisory Services, an SEC Registered Investment Advisor Member FINRA/SIPC. TFS Securities, Inc., is located at 437 Newman Springs Road, Lincroft, NJ 07738 (732) 758-9300.

Welcome to the EnjoyMore30s Family Finance

podcast. The only podcast dedicated to making life more

enjoyable for young families by hitting on the financial topics

that tend to weigh on us, stress us out, and distract our focus

from simply enjoying life.

Hello, and welcome back to the second episode now

of our new year series, Set Your Compass For the New Year. As

always, if you like what you're hearing, please make sure to

subscribe, follow us on Apple podcasts wherever you listen.

Clicking that star leaving the review, it really helps us reach

quite literally the millions of other young families out there

that are just like you. Now last week, we discussed goals. So as

you get ready for this new year, how you should do this with your

spouse, questions to ask yourself to really focus on what

matters most, and how goal setting in general is to help

you achieve more things more quickly than you otherwise would

have. Not to make you feel like a failure. Remember, no one out

there hits 100% of their goals. That isn't the point. So if you

haven't checked out that episode yet, definitely do that soon.

Today's episode is titled Pay Yourself First!, which is an

easy, self explanatory title in many ways. But really something

that way too many people don't actually do. We set our compass

in that first episode with the goals. But we also need that

ship to actually sail us to where we want it to go. The

thing is, ships aren't free, they cost a lot of money. And we

likely need to save, pull funds together over time to be able to

really get the ship that we need to get to where we want to go.

So the goal for today's episode then is for you to be inspired

to see how much you're currently saving towards you, towards

yourself and if needed or possible, increase it so you can

be on a faster pace to reach those goals. Every month, you

pay the grocery store, you pay the heating company, you pay the

car dealership. You're taking your hard earned money and the

first thing people think too many times is what can I buy,

which translates into "who can I give my money away to?" Give

some to yourself every month. You are the most important

person there is. Paying yourself first means putting money aside

for you and for your goals. If you're trying to buy a new car

next year, that may be the bank. If that means a second home in 5

to 7 years down the road, that might mean a general investment

account. If it's retirement, that could be your 401(k) at

work or Roth IRA. So you get the idea. Where you put it kind of

depends on what it is and when you need it. But when you put it

into any of these accounts, you are at least putting it towards

you.

So how much should you pay yourself every month? "How much

am I worth?" I'd say the minimum is 5% of your gross income. So

if you earn $100,000 a year, then at least $5,000 a year at a

bare minimum. That's like if you don't really like yourself that

much almost. But 10% to 15% really is much more ideal

because you know, hey, you're really important, you deserve

more. We have clients that go you know as high as 20%. But it

needs to be something. You have to pay yourself something. You

are worth something. I'm not saying you need to just save as

much as possible and you know, eat cat food for dinner and take

no vacations. That's not the point of any of it. But you need

to treat yourself fairly. You need to save something material

towards you.

Now an exercise we've discussed before to help you see where you

are and what you could potentially save is the 36%

Ratio, what we call Backdoor BudgetingTM with our clients. So

what this says is that 36% of your gross monthly income, so

before taxes, can be used for items specifically to you. So

not taxes, not groceries, not cell phones, TVs, things like

that, that everyone has. I'm talking about things such as a

mortgage, or rent, car loans or leases, student loans, anything

you're currently saving towards yourself, maybe in a 401(k) or

you know, a savings account in the bank, something like that.

You know, these are things that some people have, and some

people don't. So if you make $120,000 a year just to keep it

easy, then that's $10,000 a month. Using that 36% ratio we

just spoke about, you get down to $3,600 a month for those

specific items. So $10,000 a month gross before tax times 36%

is $3,600 a month that you have to do something with the

specific to you items. So let's say that right now you're saving

nothing, you're paying yourself nothing, you give all your money

away to other people. But you have a mortgage of $2,000 a

month and a car loan of $600 a month let's say. So that's

$2,600 a month on the specific to you items list. Now the

difference between the $3,600 that we calculated, and the

$2,600 a month comes out to $1,000 a month. That's what's

left between those two numbers.

So this is what you should have additional available to save

towards you. It's the starting point. Might be a little bit

higher in your life, might be a little bit lower but on average,

that is what you should be able to save every month and likely

what you know, your bank accounts may be growing at. For

people that just kind of ignore this, and they're not really

looking at it and their bank accounts go up over time, when

we meet with them as a client, and we go through this 36%

ratio, we say, is it possible, you know, in this case, is it

possible, you know, Mr. & Mrs. Client, that your accounts at

the bank have been growing over the over time, by roughly $1,000

a month? And they stop and they think about it? They say, Yeah,

I think that sounds about right, I think we could probably save

that because our bank accounts go up by you know, about $1,000

a month. You know, this is a great starting point to start

saving money towards you. Paying yourself first. So in this

example, it just happened to come out to roughly $1,000 a

month, $12,000 a year, which is 10%. That's a substantial or at

least a material amount to pay for your yourself. Pay towards

you first, because you're important.

So thanks for tuning in today. And join us next week for the

episode called Use Lots of Buckets, exclamation point,

where now that you know how much you're paying yourself or how

much you can pay yourself, how separating this into buckets,

where you're saving for these various goals can make them much

easier to see and therefore much easier to achieve.

Overall, though, if you're able to implement what we covered

today, then that's fantastic. You have less to worry about

than before, focus more on enjoying life, kind of the whole

point. So if you are wanting help though with these things,

or you have questions you need help in answering, just check

out the ASK JOE section on the show's website

www.enjoymore30s.com. That's enjoymore30s.com. Till next

week. Thanks for joining me today and I look forward to

connecting with you again soon.

The conversations on this show are

Joe's opinions and provided for general information purposes

only. They do not constitute accounting, legal, tax, or other

professional advice for your specific situation. You should

always seek appropriate advice from a financial advisor,

accountant, lawyer, or other professional before acting upon

any content or information found here first. Joe is affiliated

with New Horizons Wealth Management LLC, a branch office

of TFS Securities, Inc., and TFS Advisory Services an SEC

Registered Investment Advisor Member FINRA/SIPC.