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How I Manage My Income | Income Streams, Investments, Retirement Planning - YouTube
Channel: Bukola
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- Hey, everyone.
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What is up?
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Welcome back to my channel.
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If you're nosy like me,
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you like to know the details
of people's finances.
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You like to know, what
are you invested in?
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What do you think about cryptocurrency?
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Are you invested in real estate?
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How are you making your money?
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You like to know all the
tea, and in this video,
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I'll be discussing how I
manage my six-figure income.
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By the end of this video,
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you'll know where most
of my income comes from,
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where I invest my income,
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how I deal with my tech equity that I get
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as part of my total compensation.
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You'll know all the tea
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about how I manage my six-figure
income working in tech.
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So before we can even talk about finances,
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I think it's always useful to get an idea
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of someone's background,
because your background
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and your goals influences
how you manage your finances.
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So I was born in Lagos, Nigeria,
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moved here when I was six years old,
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and I've been in the US
for the past 20 years.
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I grew up basically middle class
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in the US to immigrant parents,
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so a lot of their ideas about money,
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the savings parts, definitely
got passed onto me.
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Although saving is an important part
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of managing your personal finances,
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there were so many missing pieces
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like how you minimize your taxes,
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how you invest in the stock market,
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how you actually build wealth
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that wasn't really passed down to me
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so I had to learn a
lot of that information
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through different books
and on the internet.
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Another really important
part of understanding
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how I manage my money is
also understanding my goals.
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One of my biggest goals is to
be financially independent.
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By financially independent, retire early.
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Basically what I call it
is being work optional
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in the next 10 to 20 years.
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So a lot of the way I
manage my personal finances
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is built on the FIRE movement,
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the Financial Independence,
Retire Early movement.
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Let me just say, though,
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I'm not like the other FIRE girlies.
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I actually do believe in
having a good lifestyle
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while you're building towards the future.
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A lot of the ways I manage
my money is also making sure
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I'm considering the lifestyle
that I'm living now,
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making sure that it brings me happiness,
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even if it means having
to reduce my savings rate.
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So now that you understand
my background, my goals,
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let me talk about how
I actually make money.
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I have two major sources of income
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and in those sources of income,
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there are different categories
of how I make my money.
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My first source of income
which is the biggest piece
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of how I earn my money is
through my nine-to-five tech job.
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I've been working in tech
for almost five years now
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and this has been my
largest source of income.
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I get 60% of my tech
salary as a base salary,
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so just your typical salary.
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You get paid biweekly.
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Another form of income that
I have is getting money
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through public equity and also bonus.
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That is about 40% of my tech salary too.
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So the bonus I get yearly,
the equity I get quarterly,
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and I also make money
through content creation.
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I love content creation so much.
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It's only possible
because of you all liking
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and subscribing to my YouTube channel,
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so if you haven't done that,
this is a good time to do that.
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I've been doing content creation
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for about three years since 2019,
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and I've really enjoyed sharing
about my journey in tech,
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giving tips and advice for people
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who are thinking about breaking into tech.
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I think a lot of people overestimate
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how much certain content creators make,
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because my content
creation income is still,
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after so many years
doing content creation,
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is still significantly
less than my tech income.
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As a content creator, I make money
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through three major means,
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my sponsorships, AdSense,
and affiliate links.
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And because I have a high tax rate,
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and because I invest right back
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into my content creation
business by having editors,
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by buying the best equipment
that I can possibly buy,
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I actually only got to take
home a very small piece
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of the money I make
doing content creation.
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But I do wanna say that I
do get some tax benefits
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as a creator that I
wouldn't be able to get
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as a regular W2 worker.
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Now, let me talk about how
I actually manage my money.
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So because a majority of my money
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comes from my W2 income,
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and my filing status as a single woman
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in a very high cost of living city
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with no dependents means I'm
at a really high tax rate,
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that doesn't include also
getting taxed social security,
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Medicare benefits, state income tax,
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city tax if you're in New York city,
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there are just so many
taxes that I have to pay,
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so that's why the first
places I like to put my money
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are in places where I can get
some sort of tax benefits.
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So I prioritize my tax advantage accounts
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because that is where I'm gonna be able
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to reduce my taxable
income and save on taxes,
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which are my largest expense.
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And believe it or not,
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I still pay more taxes
than these billionaires,
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so I don't even know how that's possible.
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These are the tax advantage
accounts that I invest in
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as someone making six figures
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at a very high cost of living area.
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Starting first, I invest
in the traditional 401k.
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If you're not familiar
with what a 401k is,
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it's an employer-sponsored retirement plan
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that allows employees to
put their pre-tax dollars
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into an investment account,
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and in that account you invest,
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and then you can access
money in that account
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when you're about 59 years old.
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If you access it before then,
you have to pay a penalty.
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So yeah, the number one
reason I like the 401k
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is because it gets to
reduce my taxable income,
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so I get tax benefits that way.
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I also get a company match,
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and my company has a super generous match,
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so that's like free money immediately.
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The first thing I like to focus on
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is maxing out my 401k completely.
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I try to do that within the
first six months of the year.
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So now before we move
on to the next thing,
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I do wanna thank the sponsor
of this video, 80,000 Hours.
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I wanna thank the sponsor
of this video, 80,000 Hours.
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80,000 Hours is the number
of hours in an average career
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and also a nonprofit that aims
to help people pursue careers
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that effectively tackle the
world's most pressing problems.
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I've been a fan of the site for a while.
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Their research and writing
about effective altruism
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has had a huge impact on my life.
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It teaches you how to donate
your money and your time
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to have the most positive
social impact on society,
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by focusing on contributing
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to evidence-backed organizations
that are most effective.
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They have a website with useful research
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on social impact careers, and
also very insightful podcasts
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like the one with Cal Newport,
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jobs boards that are up to date,
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free one-on-one career
calls with their advisors.
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If you're interested in
80,000 Hours' newsletter
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to get updates on their research
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and new high impact job opportunities,
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please check out the link in
the description box below.
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They'll send you a free copy
of their in-depth career guide
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to help you plan a fulfilling
career that does good too.
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So once I've done my best
to minimize my taxes,
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the next place I like to put my money
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is in a mega backdoor Roth.
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For someone who's in
the income requirement,
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you probably would wanna
go for a traditional IRA.
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That's where you'd wanna put your money,
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but I don't meet those requirements,
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so I usually have to do a backdoor method
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which is the mega backdoor Roth.
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This is an alternative
legal backdoor method
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to put more money into retirement,
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and you can even put up to $40,000
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into your mega backdoor Roth.
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I put less than that,
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but you can put up to $40,000 as of 2022.
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So basically what happens is
that your after-tax dollars
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get put into a traditional IRA.
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Then it gets rolled over to a Roth IRA.
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This is automatically done
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by the place where my
retirement accounts are held.
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So I usually put a bit of
money into that as well.
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The next and final place
where I put my money
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to take advantage of taxes
and to reduce my tax rate
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is through an HSA.
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So to be honest, I was so late
to contributing to the HSA.
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Honestly, I only started
doing it this year,
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because I didn't really
know a lot about it
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and my other companies didn't offer HSAs.
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HSAs are a Health Savings Account
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for people with high-deductible insurance.
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You can put money in those accounts,
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and in that account, you
can actually invest money.
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This money is supposed to be
used for medical expenses.
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And the cool thing about an HSA
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is that you get triple tax benefits.
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You get to use your pre-tax dollars,
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so you get to reduce your taxable income.
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You can invest inside of your HSA.
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You don't have to pay capital
gains tax on your investments.
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And finally, when you withdraw the money,
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you don't have to pay income tax as well.
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So you get triple tax benefits
putting money into an HSA,
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and I'm so angry that
I didn't do it earlier,
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but you know, you live and you learn,
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and that's the third and final place
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in this taxable advantage accounts
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that I try to prioritize
even before putting money
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into my main investment account.
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I also wanted to make sure I shared
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what I actually invest in.
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So in all of these accounts,
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I'm invested in target date funds.
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If you're not familiar
with target date funds,
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these are retirement funds
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that are a mixture of stocks and bonds,
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and as you get closer
to the retirement date,
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the portfolio is rebalanced
to have more bonds
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as you get closer to your retirement date.
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So once I've done my best
to minimize my taxes,
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the next place my money goes to
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is in my investment accounts.
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This is all done through
my automated systems.
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Usually like in the middle of the year
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once all of my tax advantage
accounts have been maxed out,
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now it's time to focus
on investing monthly
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into my investment account.
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I have about one major investment account.
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This account I invest
in every single month.
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It's entirely self-managed by me.
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I don't use robo advisors.
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I'll put a list over here
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of really good investment accounts
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if you're curious about
doing self-management.
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I manage this account by myself,
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and that's because I'm
only invested in two things
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that the robo advisors
are also invested in.
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They're both index funds.
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The only difference is
that one is a mutual fund,
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one is an ETF.
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I have exposure in the
entire US stock market,
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and this is where I put
all of my money investing.
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And it's important to do
this because if you remember,
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I talked about FIRE, Financial
Independence, Retire Early.
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After contributing to
your retirement account,
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it's also important to
put a significant portion
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of your income into your
investment accounts as well.
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So that's why I make sure
to prioritize investing
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in my investment accounts,
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because it makes it easier
for you to retire early.
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Let's talk about my
public company's equity.
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So every single quarter, I
get public company stock.
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What I do with that stock is
that I immediately sell it.
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Everyone has their different
strategies, but for me,
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I just have so much reliant
on this one company.
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It's where my day job is,
which is most of my income,
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it's where my content
creation is done mostly,
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and it doesn't make sense
for my most of my portfolio
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to also be in this stock.
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I'd much rather be diversified
across the stock market.
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So what I do with my
stock every single quarter
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is that I usually sell it
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and reinvest that money into index funds.
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Now let's talk about my
alternative investments.
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To be honest,
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I don't recommend what I do
with my alternative investments,
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but this is such a small
part of my portfolio,
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and I kind of got in when
it was like really hyped up,
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and I don't wouldn't recommend it.
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So yeah, I invest in cryptocurrency.
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I hold Bitcoin, Ethereum,
and unfortunately,
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I'm cringing even saying
this, I own Dogecoin as well.
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I was completely uninformed
when I invested in Dogecoin.
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I just thought it could be a great way
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to make some quick
money, and I got burned.
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So, I'm still gonna hold my cryptocurrency
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even though I'm taking huge
losses these days on it
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because I basically bought at
the peak of cryptocurrency era
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and I'm too embarrassed
to realize my losses.
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So basically what I'm gonna do
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is I'm planning to just hold these things.
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So yeah, that's basically a summary
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of how I manage my money.
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I would say if you're someone with no debt
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and you're kind of curious
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about how do you manage your money,
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I think I'm managing my money pretty well,
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and a lot of the ways I manage my money
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are based on the books I've read.
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I'll leave them right
over here so you can see,
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and I'll also have links
in the description box
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if you're curious about buying any
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of those personal finance books.
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So there you have it, a full breakdown
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of how I manage my money
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as someone making six figures in tech
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in a very high cost of living area.
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Hope this was helpful.
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Let me know in the comments
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if you found this video helpful.
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(gentle music)
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