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How I manage my personal finances as a minimalist. - YouTube
Channel: Matt D'Avella
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- Okay, so if you're a long
time subscriber to this channel,
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you probably already know my backstory,
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but for those that aren't as familiar,
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let me give you a quick recap.
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Back in 2010, I graduated
with $97,000 in student debt,
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bought a brand new car
and a cool leather jacket.
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If it's any consolation,
the car was a Kia.
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So even when I'm reckless, I'm
still fiscally responsible.
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I didn't know much about
personal finance back then,
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but as I got more interested
in self development,
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I started to learn more about
how to effectively manage
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my own money.
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I eventually built a profitable business,
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opened my first retirement account
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and became 100% debt-free.
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The latter, I consider it
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one of my greatest accomplishments.
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And so today, 10 years
since I graduated college,
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I wanna talk about how I manage my money,
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specifically, the accounts that I use,
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why I use those accounts
and some of the lessons
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that I've learned about personal finance
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over the past decade.
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Okay, let's start by
getting a bird's eye view
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to see how I manage my money
and which accounts I use
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and then we'll break
things down even further.
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I have a personal checking
account, a personal credit card,
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a Roth IRA,
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and an Individual 401k.
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All of my money goes through
one of these four accounts.
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The one thing you'll notice that's missing
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from this equation is a savings account.
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At this point, I haven't
seen the need to open one
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because the interest rates are so low
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that opening an account
for maybe getting a 100,
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200 bucks over the course of the year
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isn't really worth it for me.
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I'm not always simply trying
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to get the greatest return possible.
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I'm trying to manage my time
and prioritize my energy
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in a way that makes sense for me
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and that gives me the best
return on both my happiness
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and my finances.
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So I choose to put more
of my time and energy
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into focusing on working on my videos
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and growing my business
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versus running around from bank to bank,
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trying to find the best
interest rate possible.
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So I pay myself through my business,
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like anyone would get
paid by any employer.
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That money goes directly into my Chase,
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personal checking account.
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So this personal checking
account is a joint account
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that I share with my wife.
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We use it to pay for rent, utilities
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and a few other items that
can't be paid with credit.
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The main reason that we rent an apartment
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versus buy a home is because
we can't afford a home.
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It's really, really
expensive in Los Angeles.
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It costs upwards of $1 million
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to find a decent home in
a decent neighborhood.
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And so right now, even though
we're not ready to buy a home,
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we are starting to look into
the real estate industry
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by looking into what
it takes to buy a home,
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what you should be thinking about
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because once the two
factors align our income
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and then the market,
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once they align in a way that makes sense
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to make that investment,
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then that's when we'll
likely go through with it.
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But when it comes to any major purchase,
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I think it's really important
to be cautious and careful
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and not get too starry-eyed
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and too eager to go into a deal
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that you might eventually regret.
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For everything else,
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I use my Chase Sapphire
Preferred Credit Card.
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I use it for small things like coffee,
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groceries and books, and big
purchases like electronics.
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I chose the Chase Sapphire
Preferred Credit Card
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because it's really good for
both travel and eating out,
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which are two things
that I used to do a lot.
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Before moving on, I think it's important
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to talk about the inherent risks
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and rewards of having credit.
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Now when it comes to personal finance,
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experts are often split on this.
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There are those that say
it is an amazing idea
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and you should get the rewards from it
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and those that say credit is
the worst thing in the world,
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and you should avoid it at all costs.
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Now I fall somewhere in the middle.
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I understand the apprehension,
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the reason that somebody would say,
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"Do not get a credit card,"
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because there are so many people,
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especially in America who suffer
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from really bad consumer credit.
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According to bank rate,
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the average credit card debt
for millennials is $4,889.
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Since there's such widespread
abuse of consumer credit
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in the United States
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and since I personally have a
past of poor decision-making,
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when it comes to money,
I made a rule to myself
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when I first got a credit card.
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I will never ever, ever pay
for something on my credit card
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when I don't have the
money in my debit account.
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Now this is a rule that
I'm incredibly strict with.
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Most people, when they
take out a credit card,
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they use it to buy things
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that they don't have the money for
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and this is the absolute
worst way to use a credit card
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because eventually
you'll pile on the debt,
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you'll have higher interest rates,
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you're gonna be paying so much extra money
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for things when you don't need them.
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The most simple rule when
it comes to personal finance
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is save more money than you spend
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and you can't do that
if you're spending money
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that you don't have.
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The very first retirement
account that I opened
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after I paid off my debt
was a Vanguard Roth IRA.
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The decision to go with
Vanguard came about
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in the same way that I make every decision
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when it comes to personal finances.
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I do as much research as
I can without passing out,
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I listen to the experts that I trust
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that are already in the industry,
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and I make the best decision
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as it relates to my own lifestyle
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and the risks that I'm
willing to tolerate.
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And so I learned that Vanguard
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is a trusted investment company
that has really low fees,
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lower fees in the industry average
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and I decided to go with them.
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One of the biggest selling
points for going with a Roth IRA
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versus a traditional
IRA is that I pay taxes
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on all the money I invest
into the account now,
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but then when I take it out at retirement,
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it's absolutely tax-free.
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Now if any of this is putting
you to sleep and trust me,
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it did when I first looked into it,
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all you need to do is
look up traditional IRA
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versus Roth IRA, do a little
bit more research on your own.
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But honestly for me, the Roth
has been a great investment.
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Some of the safest
investments you can make
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are in low-cost mutual funds.
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If you go with funds that
mirror the stock market,
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your returns will likely
average around 10%
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over a 30 plus year period.
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You may be wondering how
my investment strategy
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has changed with the given
downturn of the economy
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over the past month or two
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and the truth is that nothing has changed.
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And that's not because
I haven't lost money.
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I have just like everybody
else who's investing in stocks,
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my profits have gone down quite a bit.
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But for me, it's all about
having the right mindset,
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knowing that there is going
to be short term losses
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and big gains in the future.
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Just sticking it out for
the long run is so important
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and pulling out your money too soon
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is you trying to time the market
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and not even the greatest
experts in the world
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are able to do that consistently.
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So keep your money in there,
invest for the long run
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and eventually you will
likely see the return
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that you need to retire with dignity.
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There is around a $6,000
contribution limit
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for your Roth IRA in the United States.
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Early on when I got started
out, I would barely reach that.
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And then as my income started to grow,
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I wanted to invest beyond that
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and that's when I opened
up my Individual 401k.
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For this, I opened up a
Vanguard Individual 401k
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account with my business.
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My investment diversification is similar
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to my Roth IRA account,
largely low cost mutual funds
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highly invested in stock.
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How I balance my investments
is going to change
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as I near retirement age,
where I'll begin to move
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most of my stocks into more secure bonds.
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If you're new to this stuff,
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it can be both intimidating
and overwhelming,
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but just know that if
you start to invest now,
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if you invest when you're young,
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you can see a massive amount
of growth in compound interest
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over the course of 30 to 40 years.
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Let's say you're able
to invest $4,000 a year
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for the next 35 years.
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At a 10% return, you'll
have nearly $1.2 million.
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If you didn't invest your money at all,
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and simply save $4,000 a year,
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you would only have $140,000.
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Invest now and your future
self will thank you.
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So in order to be able to contribute
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to something like a 401k,
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you need to be able to make income
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and one of the ways that I
do that is through sponsors,
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sponsors like Squarespace.
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My sponsor for this video is Squarespace.
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I've partnered with them all year
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because I've gotten a
tremendous amount of value
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from their platform
over the past few years.
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Whether you're building a personal brand,
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starting a podcast, or
creating a blog or business,
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they make it effortless
to create a beautiful
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and professionally designed website.
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And they have so many
tools that are helpful
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from blogging to analytics
and so much more.
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I have benefited so much
by using Squarespace
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over the past few years
and if you're in the market
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to build a website,
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I highly recommend that
you check them out.
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Go to squarespace.com for a free trial
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and when you're ready to launch,
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go to squarespace.com/mattdavella
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to save 10% off your first purchase
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of the website or domain.
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So truthfully, anytime that I make a video
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about personal finance, I
get a little bit uneasy.
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Uneasy when I start working on the video,
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when I'm shooting it, when I'm editing it,
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the whole process makes me feel
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just a little bit uncomfortable
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because I don't consider myself
a personal finance expert.
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I consider myself an expert
in my own personal finance,
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and that's why I feel comfortable
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talking about my own strategy.
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But I know with that comes inherent risks,
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it comes people talking
about all the things
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that I'm doing wrong and
how I'm not optimizing
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to the 10th degree and
getting every single benefit
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I could from every account that I have.
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And I understand it and that's okay.
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But I also think that
part of that reaction
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is why people don't
really take an interest
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in personal finance to begin with,
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because there are so many
conflicting opinions.
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There are so many people
out there telling you
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the right thing to do, the
right direction to head.
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And really when it comes down to it,
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there are so many different options
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that could be right for you.
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And so being honest with
yourself, doing the research,
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taking a look at your personal finances
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and figuring out how to get
out of those financial holes
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that you currently find yourself in,
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it's going to give you
so much of a return,
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much more of a return
than money can provide.
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When I got out of debt,
like when I paid off
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that final student loan, I
cannot tell you the weight
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that was removed from my
shoulder, how much freedom I had.
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I now had the ability
to take greater risks,
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to start a YouTube channel,
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to maybe slow down my income streams
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because I wanted to pursue my passions.
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And this is something that you can do,
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you have to do with confidence
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and having a solid financial ground
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to make those decisions
on is just paramount.
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And so no matter what, don't let the fear
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of doing the wrong thing
prevent you from doing anything.
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And so do your best, do your research,
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but no matter what, just make
a decision and move forward.
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Investing in your personal finance
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is an investment in yourself.
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Thank you guys so much
for watching this video.
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I hope you got something out of it
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and I can't wait to see you next week.
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