5 Steps You Must Take When You Get Paid

About this video

Sean sets out five steps to take whenever you get paid, whether from a job or a business, arguing that keeping and growing money matters as much as making it. Step one is to pay bills and necessities first — rent, food, gas, electricity, water, car insurance and groceries — distinguishing needs from wants and entertainment. Step two is to build an emergency fund of at least six months of living expenses, especially important for the self-employed whose income can fall or who could lose work; using his own example, he puts his living costs at roughly $1,000 a month, so about $6,000 would cover him. He urges keeping savings that sit idle in a high-yield savings account rather than a checking or traditional savings account, saying such accounts were paying around 1.6% at the time versus about 0.01%, and he recommends SoFi on those terms in the video. Step three is to allocate some money for entertainment and enjoying life, ideally cheaply, but never to go into debt for it. Step four is to invest: early on, reinvest profits back into the business; once the business cannot absorb all profit, he prioritises a 401(k) up to any employer match, which he calls free money, then maxing a Roth IRA — up to $6,000 a year at the time — and actually buying index funds inside it, before considering real estate or stocks, mentioning Acorns’ automatic round-ups as a beginner route into stocks. Step five is to redefine your financial goals, because the right strategy depends on whether you want modest freedom or to build something much larger; his own stated goal is a steady six figures of passive income, around $100,000 a year.

Key takeaways

• Step 1: pay necessities — rent, utilities, insurance, groceries and transport — before any wants or entertainment
• Step 2: build an emergency fund of at least six months of living expenses, held in a high-yield savings account rather than a low-interest account
• Step 3: budget some money for entertainment, but never borrow or use credit-card debt to pay for it
• Step 4: reinvest in the business first, then take any 401(k) employer match, then max a Roth IRA and buy index funds inside it before other assets
• Step 5: redefine your financial goal, since the investment strategy should differ for modest passive-income freedom versus building a much larger business

Episode details: published February 24, 2020 · 19:45 long. Summary written by Self Growth Videos from the episode itself. Business results and any income figures mentioned are Sean Dollwet’s own claims, shared for education — they are not typical or guaranteed.

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