so if you want to get better with your money in 2025 it all starts with what you do after you get your paycheck I'm Vincent I have 8 years of experience working in finance and I'm sharing the 10 steps you need to take as soon as you get paid the first step is to find your financial floor and the reason we need to do this is because our brains are hardwired to avoid or ignore things that make us even slightly uncomfortable right that's why we rarely check our bank accounts even though we just went on a shopping spree but the problem is avoiding things like our finances and our money is just going to make things worse a lot faster which is one reason why 47% of Americans live paycheck to paycheck the bright side is it's actually pretty easy to find your financial floor just grab a piece of paper or open up Google doc and start jotting down all your expenses from the previous month like your rent payment your utilities Pizza Netflix and then also jot down how much each item cost then just remove anything that you don't actually need to survive on and yes that means the removing Netflix your pizza and the fancy avocados you bought afterwards you should just be left with a couple things like your housing which could be your rent or your mortgage payments which you want to be less than 30% of your income your groceries and your food which should be about 10% of your income and then also your insurance and your utilities like your internet your cell phone and electricity bills um that should be about 10% as well whatever you end up with that total cost becomes your financial floor and you want to aim to keep it under 50% % of your total income and if it's over just look for easy opportunities to swap for less expensive options I like to use subreddits like dupster everything and Frugal for this part step two is to build or rebuild your emergency fund a 2024 bank rate study found that 56% of Americans can't afford an unexpected $11,000 expense and 27% have no emergency savings at all but there's this thing called the Murphy's law that basically says everything that can go wrong will will go wrong like when I was backpacking in India back in 2020 or 2021 I was staying in this really cheap hostile right but then the entire AC system broke down so I had to move to a nearby hotel that cost a little bit more which was fine because I had budgeted for it but what I didn't budget for was someone stealing my computer my camera and my headphones while I was in the process of switching to the hotel replacing all that took out a good chunk of my emergency fund but it was that emergenc fund that gave me my peace of mind cuz if I didn't have that amount of money then I probably would have been freaking out the entire time and it would have ruined the rest of my trip now the rule of thumb is you want your emergency fund to cover around 6 months of your financial floor so if your needs are $3,000 a month then you need to save about $18,000 for emergencies and by the way if you want to learn how you can save $1,000 this month without changing your lifestyle or pinching pennies I'm hosting a completely free 5day one 1K savings challenge starting January 6th where we cover the best savings strategies tips and resources that actually work it's completely free if you want to check it out link below or scan the QR code if you get to the website and it says no longer available then unfortunately we already reach capacity also it's best to keep your emergency fund in a separate bank account so you're not tempted to spend it a great option is a high yield savings account currently my hysa is I think around paying me around 5% interest a year which is definitely better than my everyday checking account which is around 0. 1% next you want to focus on paying down any debt with more than 7% interest rate and you want to prioritize these debts first before you invest your money because it's like a guaranteed return on your money now typically if someone tells you that you can make a guaranteed return or guaranteed profit then I'd say block them cuz they're trying to scam you but in this case it's actually true for example let's say you invest in the stock market which has an average of a 10% return a year that's great but what if you could have a guaranteed 25% return by paying off your high interest debt that's eating up your cash flow every month so let's say you have 10K debt on your credit card with a 25% interest rate you're going to end up paying $2,500 in interest that is money straight out of your cash flow out of your pocket that goes to the credit card company which prevents you from saving and investing as much as you could right it's like trying to put gas in your car while knowing you have a hole in your gas tank that is leaking gas in that case your first priority should be to fix that leak so if instead of investing that 10K and you use that money to pay off your credit card today you just saved yourself from paying that $2500 in interest which is like getting a guaranteed return of $2,500 in in bonus or earning a 25% return in the stock market on 10K so you definitely want to prioritize paying off your highin debt before you start investing the next step in your paycheck routine is to max out your employers 401K up to the employer match which is the closest thing to free money as you can get and according to Vanguard around 46% of employees with 401ks don't contribute enough to get their full employers match which is basically like your boss offering your raise and you say nah I'm good a common 401K match structure is a 50 to 100% contributions up to 6% of your salary so let's say you make uh 60k a year right and your employer matches 100% of your contributions up to 6% of your salary that means if you contribute 6% of your salary or 3. 6k then your employer is going to throw in another 3.
6k that is an instant 100% return on your money but if you're only contributing 3% of your salary you're leaving half the match or 1. 8k on the table and what I think is fascinating because of compound interest if you use that money and invest in the S&P 500 Index Fund and assume a 10% annual rate of return that 3. 6k match each year could grow to over $650,000 and that's just the free money right we're not counting your own contributions and we're also assuming you're not getting additional pay raises which let's be real you're probably going to get a pay raise but the great thing is any 401K contributions you make is with pre-tax money meaning it lowers your taxable income so if you earn 90k a year and you max out your employer match with 3.
6k in contribution you'd only pay taxes on about 86. 4k of your salary so you want to check out your companies for 1K policy and how much they match so you can Max it out the next step is to max out your Roth IRA and unlike the 401K where contributions are pre-tax with a Roth IRA contributions are post tags meaning you can only contribute money that you already pay taxes on the advantages of a Roth ra is that you don't have to pay any taxes on your earnings or your contributions when you retire meaning if the investments in your Roth AR account grow to let's say $20 million right you can withdraw that $20 million taxfree and while the Roth IRA is technically a retirement account it actually lets you withdraw money from the principal or how much you originally contributed whenever you want but you do want to avoid doing this because it's not the smartest Financial move in 2025 you can contribute up to 7K in your Roth AR and if you're older than 50 you can contribute up to 8K but one thing a lot of people forget about is you can only contribute to a rotha if you make less than a certain amount of money for 2025 it starts phasing out at around 150k if you're a single filer or 236k if you're a married couple now if you do make more than this then you want to look into backdoor IAS the next step is you want to contribute to any other tax advantage accounts that you might have access to depending on your lifestyle and your goals for example I had this thing called an HSA or health savings account which I maxed out for years because of its rare triple tax benefits but the thing is you can only qualify for HSA plan based on your health insurance so that's something you want to double check some other tax advantage accounts you want to look into to see if it fits your lifestyle is the 529 plan 403b 457b FSA or Esa accounts this step is also where you might want to contribute any additional money to your 401k plan beyond the employer match okay so now the order of the next two steps really depends on your personal situation and how you view your own opportunity cost which is B basically when you have to choose one thing to do with your money or your time or your resources then the opportunity cost is what you have to give up in order to do set thing now there's no wrong answer here so feel free to switch up step seven and step eight based on your own personal preference so this step right now is to invest in yourself and I think for most people the easiest way to increase your income is with a raise or a side hustle and the only way you can really do that is if you invest in your skills or your experiences or your education right the more skills you have or the more skills that you can offer to your employer the more income that you can likely earn like one of the first things I ever invested in was this uh video editing course uh for My Side hustle at the time which was this YouTube channel I had just made a couple hundred dollars right as a content creator and I knew that I wanted to invest back into my video quality and honestly it's been one of the best investments in my life because now I'm able to run my own media business and it's all thanks to accumulation of all my learnings and my education and skills the point is if you put your money into the right education tools and resources to improve your skills it will pay back in dividends the next step and remember you can switch the order with the previous step if you want and the next step is to invest through a regular brokerage account for most people I suggest you just primarily invest in a lowcost index fund and hold it for the longterm Some solid options that have low expense ratios that follow the S&P 500 would include Bo or spy historically the S&P 500 Index returns about 10% a year meaning your money will essentially double every 10 years without you needing to do anything other than invest in it so if you invest $6,000 a year from 25 to 65 at an annual return of 10% you'd end up with a total of over $2. 7 million if you choose not to invest and instead keep your money under the mattress you're going to end up with a total of $240,000 and that difference can easily change your life now after you have the foundation of your invest M portfolio setup you maybe want to consider dedicating a very small very tiny less than 5 to 10% of your portfolio to invest in higher risk higher reward Investments whether that's riskier stocks or cryptocurrency and to be clear this is not for everyone and is really just based on your own risk tolerance so don't take this as me telling you to invest in Risky assets I think it's a solid way to get your feet wet into the world of investing it's kind of like if you don't know how to swim throw yourself into the pool and then you'll be forced to learn how to swim um but again only do this if you are 100% comfortable and make sure it's a tiny percentage of your actual portfolio also a lot of people ask me what I use to invest and honestly a lot of brokerages are pretty similar like a Fidelity and Schwab um but if I had to pick one I'll probably say I really like using Mumu specifically for their institutional tracker feature which shows what Wall Street and big hedge funds are investing in most brokerages do charge you for this information but Mumu actually gives it to you for free which is pretty great so if you're interested in Mumu if you sign up with my link down below and you make a qualified deposit you can get up to 15 free stocks plus there's a limited time 8.
