YouTube: https://youtube.com/watch?v=NVn0oTbsWTc
Previous: Quirky Aesthetics & Fake Working-Class Problems: The Cringeworthy Finances of Gilmore Girls
Next: How Cutting Out Alcohol For 30 Days Changed My Finances

Categories

Statistics

View count:77,712
Likes:3,001
Comments:209
Duration:11:06
Uploaded:2021-10-12
Last sync:2024-05-25 14:45
Want a crash course on investing, wealth-building, and leveling up your finances? Join us for our all-day, interactive conference, The Intentional Wealth Summit, on November 12th. (If you can't join live, you'll get access to everything to watch at your own pace.) You'll also get access to our free Wealth Building Prep Class, and our YouTube audience gets an exclusive $19 discount on the tickets. Click https://www.eventbrite.com/e/the-intentional-wealth-summit-tickets-178073993107?discount=YOUTUBEVIP to reserve your spot today!

In this video, Chelsea walks us through the 8 numbers every millennial (or anyone of any generation!) should know about themselves, and how to find them.

Credit score video: https://www.youtube.com/watch?v=1yQpE-BnOCs&t=4s

Calculating net worth: https://thefinancialdiet.com/what-your-net-worth-is-why-you-should-always-know-it-how-to-calculate-it/

Student loans 101 video: https://youtu.be/FyLRxU5mJPM

Average cc interest rate: https://wallethub.com/edu/cc/average-credit-card-interest-rate/50841

Debt calculator: https://www.creditkarma.com/calculators/debtrepayment

Retirement calculator: https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.schwab.com/retirement-planning-tools/retirement-calculator&ved=2ahUKEwjx9oKTn5DzAhV2GVkFHbCJCLIQFnoECBMQAQ&usg=AOvVaw3G-12gnz961oO9kB2KyLU4

Tax withholding calculator: https://www.irs.gov/individuals/tax-withholding-estimator

1099 tax estimator: https://www.keepertax.com/1099-tax-calculator

Join this channel to get access to perks:
https://www.youtube.com/channel/UCSPYNpQ2fHv9HJ-q6MIMaPw/join

The Financial Diet site:
http://www.thefinancialdiet.com

Facebook: https://www.facebook.com/thefinancialdiet
Twitter: https://twitter.com/TFDiet
Instagram: https://www.instagram.com/thefinancialdiet/?hl=en
Hey, guys.

It's Chelsea from The Financial Diet. And this week, we are back to basics with regards to managing and understanding our personal financial situations.

It can feel overwhelming to take control of our finances, especially as they pertain to the longer-term. But there is an entire industry built on keeping us in the dark about how easy it actually is to understand money. We don't necessarily always have to manage our money ourselves, or at least not every aspect of it.

For example, I have not done my own taxes in many years. I have a CPA because my taxes are complicated. But I at least understand what I'm paying and why.

And similarly it is important that everyone have that kind of a grasp on the basics of their finances and where they stand. And when most of us think of where our money stands, we're thinking about our salary. What are we bringing in every month and how do we spend it?

But there are a lot of numbers that go beyond that to give us a full picture of exactly where we are financially and how to get where we want to be. So without further ado, here are the eight numbers everyone needs to know about themselves. Number one is your credit score.

And a credit score, for those who don't know, is basically a number that is used to determine your credit worthiness in terms of how likely you are to pay things back on time and not borrow more than you can afford. Without a doubt, the number that will most often define your options financially, whether or not you decide to invest in improving it, is your credit score. I should know.

I neglected and/or flat out sabotaged my own credit score for years in my young adult life, and only this year I finally made it into the excellent credit score range-- ta-da! After almost eight years of working on it. And I largely ruined it in part because I never took it seriously.

I only paid attention to how much I was earning and occasionally how much I was spending, although I often overspent as well. This conceptual Number to demonstrate how responsible and creditworthy I was was just too abstract for me. It was like, what's a credit score?

Oh, I can't buy things with it? Well, then never mind. But little did I know that a good credit score is not just essential for doing things like getting a home loan, it's often essential for things like renting an apartment or getting a cell phone plan or buying a car.

If I had known my score and been working to improve it, or at minimum, not so cavalierly wrecked it in the first few years of my adulthood, the past 10 years of my finances would have been totally different. So check out the link in our description for a video all about your credit score and how to perfect it. Number two is your net worth.

Put simply, your net worth is just a math equation. What you own, your investments, your cash, your real estate, et cetera minus what you owe, like your debts. It can be very tough to want to keep track of your net worth when you don't have many assets and you're deep in debt, like many people are due to student loans.

Because often for many people, that means their net worth is technically negative. But remember that even if you currently have a negative net worth, that doesn't really mean much about your financial habits or your financial potential. It's just a quick picture of where you currently stand.

For example, you can technically have a negative net worth, but an excellent credit score. A lot of people think if they have student loans, they won't be able to buy a home, but this isn't true. Just because a person has debt doesn't mean they can't take on more in the form of something like a mortgage.

It's all about your ability to pay it off, which is mostly dependent on your income, and your reliability in paying it, which is mostly your credit score. But on the flip side, a net worth doesn't really mean much about what you're earning, because you can have a high salary and a low net worth if you're constantly spending beyond your means. And this is why your net worth is ultimately more important for future you than current you.

It is important to become OK with times in which your net worth is low or even negative while keeping your eye on the general prize that the goal is throughout your life to bring it into the positive and ideally just keep building on it. Whether it's getting an education or buying a home, sometimes building longer-term wealth means making those initial investments. And keeping your eye on your net worth over the entirety of your financial journey means that you're constantly pointing yourself in the right direction.

We'll link you in the description to a good resource for calculating your net worth. Number three is your interest rate on student loans. At TFD, we generally recommend a once-yearly check in on your student loan payment plan.

Because what you started out with may not at all be the best payment plan for where you are at now financially. And most importantly, you may have improved your financial health enough that you now qualify for a much better deal. For example, if you have a great credit score that you didn't have when you started your repayment plan, you could very easily be getting better terms and a better timeline.

We'll link to our video on everything you need to know about student loans where we dive into this more deeply so that you can make the most educated choices for yourself, whether you're applying for college or just paying it off years later. Number four, similarly, is your interest rate on consumer debt. Unlike student loans, credit card interest rates are usually very high.

The average was over 18% for new credit card offers in 2021. And as with basically any type of debt, the longer it takes you to pay off, the more you end up paying in total. And with credit cards, that matters hugely, because the interest rates are so damn high.

So we recommend using a credit card debt calculator, and we'll link you to a good one, in order to figure out the best plan for your repayment schedule. That will be based on things like the amount you owe and your different interest rates on different cards. For instance, if you owe $5,000 at an 18% APR, you can pay off what you owe in 13 months by making payments of $458.

But once roughly what you're dealing with, you can explore your options. If you have good credit, for example, you may be able to open a 0% APR balance transfer credit card and transfer over the total credit card debt you owe for a one-time fee. These type of cards offer an initial period without any interest at all, ranging from 6 to all the way up to 18 months.

Meaning that you could theoretically transfer over the balance and pay off the remainder of what you owe without accruing any additional interest. The catch, though, is that you have to pay this off before the intro period ends and the real approximately kicks in. But no matter how you go about it, the point is that you likely have more options than you think when it comes to managing and paying off your credit card debt, and at least every six months, it is worth taking a look at what you're doing because those interest rates are so high that even a matter of a few months can make a big difference.

Number five is what you can afford to spend. We don't always like to get super granular when it comes to money, because everyone's spending is different. But when you put together a budget, you need to figure out how to translate it to your actual everyday life.

A budget is no good if you can't actually follow it. So whether you're talking about groceries, a night out, a vacation, new electronics, or anything else you might be spending on, the point is to actually know what you can realistically afford in a given month. Apps like Mint or You Need a Budget are great because you can check them last-minute to see where you stand.

But a good rule of thumb is to have your affordable number in the back of your mind for different occasions so that you don't constantly have to reference your budget sheet. For instance, if your monthly going out restaurant budget is $400 and you go out once a week, you can assume that it's safe to spend $100 every time you go out. Of course, your mileage may vary depending on different months, but having that ability to quickly reference numbers when you're making shopping decisions ensures that you're not going to blow up your budget every month by constantly accidentally going over.

Number six is your salary in comparison with your industry. Here's the thing. Very few people just starting out in any industry have the foresight or the skills to negotiate a better starting salary for themselves.

And more importantly, few people just starting out are aware of just how easy it is to find comparative rates for jobs that you're applying for on places like Glassdoor or PayScale. Without the proper research, we're already at a disadvantage when it comes to negotiating our first salaries. And combine that with how little leverage entry-level employees often have, and most people end up starting their first job or first few jobs with a relatively uncompetitive salary.

And if we stay at that company for a long time and are therefore building off of that initial not great salary, that means we can be well into our career and still earning behind what we could be standing to earn in other places. There's a reason why statistically people most often realize their greatest increases in pay when they change employers. So forcing yourself to regularly compare where you're at in your current job versus where it stands up and competitive employers is incredibly important.

It is very easy to become complacent in your job, especially if you've been there for a very long time. But statistically, if you've been there for a very long time, that's when you are most vulnerable to being underpaid. Don't let the trap of familiarity prevent you from getting what you're worth.

And this is equally important when applying for jobs. Never go into any interview or negotiation without being very read up on what your actual value is in the market. And remember, it is illegal in many states for people to ask what your current salary is.

But even if it's not, you should be basing it off of the upper end of market averages. Number seven is your retirement. When you combine the retirement funds that many employers provide to employees, like 401(k)s, with the widespread availability of self-sought retirement funds, IRAs, Roth IRAs, et cetera, it becomes increasingly difficult to justify the close-my-ears-and-wait approach that so many of us have when we're starting to think about money long-term.

Yes, retirement is boring and scary to think about. And it sort of feels like we're an entirely different person in that far-off vision of ourselves. But the truth is, with any luck, we'll all be old one day and we will want that money.

And yes, it will very much be ourselves who want it. And that old version of ourselves is not going to be that different from who we are today and that they'll want to live a good life without having to worry too much about it. And just like having a good credit score that you monitor closely will open up all kinds of opportunities for you financially, having a sound retirement plan that you're actively working towards means you will not be caught off-guard.

And of course, the amount that you'll need to save for the retirement that you want is going to vary totally person-to-person. So we'll link you in the description to a good calculator to use to figure out your retirement plan, but not having one is not an option. Number eight is what you pay in taxes.

For most of us, taxes are taken out of our paychecks, so we don't really have to think about them except that once a year when they actually get filed. However, based on the exemptions that you claimed when you started your job or last filed a W-4, you may be over or underpaying your taxes each month, which will affect you come tax time. You could end up owing the IRS money or you could be getting a big refund check, which means your paychecks could have been larger all along.

We'll link to the IRS withholding calculator so you can figure out what you should ideally be paying in taxes from each paycheck. And if you're a freelancer and therefore don't have your taxes taken out of your paycheck, you should be filing them quarterly. Which means yourself saving a certain portion from each paycheck in order to be able to pay income tax type, which can be very difficult to do in practice-- I know that better than anyone.

But a good rule of thumb is to save 30% from every paycheck. And we'll link you to a great calculator to estimate your taxes if you're being paid on a 1099. Those are just eight of the numbers that are very important for getting a great idea of where we stand financially and how to get where we want to go.

There are plenty more, and we'll talk about them on the channel. But if you're a financial beginner and wondering where to start, those are eight great places to look. As always, guys, thank you for watching, and don't forget to hit the Subscribe button and to come back every Monday, Tuesday, and Thursday for new and awesome videos.

Goodbye.