6 Places Where Your Money Needs To Go (Saving Money)

Where does your money need to go after you get paid? This video is about the 6 Places where your money should go - to save money and invest!

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Today I wanted to walk you through step by step exactly where I think your money should go whenever you get paid. I think that a lot of people get confused as to how they should be allocating their money when they get paid - and honestly if you just follow along with the steps outlined in this video, you could find yourself in a way better financial situation in the future.

Step 1 is contributing to a retirement account, but before I even talk about that, we need to first address that most people don't even get to Step 1 because most people just have their pay, when they get paid - going into their checking account. And then they spend their money - whether that be needs, wants, investments, debt payoff, all out of one account. This is not the best approach because it's not a proactive approach, it's more of a reactive strategy and that's one we want to avoid for financial independence. And this is exactly what I used to do as well, so there's no shame in being here, but lets talk about how we can get better.

Step 1.
We want to be sure that a percentage of our paycheck before it even hits our account is being set aside for retirement.

Step 2.
The money finally hits your Checking account. Then it can go a few places...

Step 3.
I guarantee you haven't heard of this, it's a fund I've called "The Overhead Fund".
- Essentially its a fund for all of your NECESSITIES in life - rent, utilities, groceries, insurance, car payments, etc.
- THIS IS NOT an EMERGENCY fund, I'll talk about this next.
- Rather, this is a fund that you only use to operate your necessities, and it's also a fund that I think you should try to save around 3-6 months of NECESSITY expenses in.
- Ideally you know your monthly recurring expenses down to a number, and you save a portion of your paycheck toward this fund
- I like using an Overhead Fund for this as a separate account, and I would suggest allocating most of your paycheck into this fund and your emergency fund until they're established.

Step 4.
Your Emergency Fund.
Ideally this is an account that you DO NOT touch unless, for EMERGENCIES. Most people suggest 3 months of living expenses for an emergency fund.

I would suggest 6 months of living expenses for your emergency fund, but that's just because I like to be on the safer side.

Step 5.
Paying Off Debt
If you have any high interest rate debt, you want to start putting a dent in that as well before moving on to Step 6. High interest rate debt would be anything over 10% in my opinion, but you could even make an argument that even 5-6% is high interest rate debt since its hard to easily beat that interest rate using investments.

Step 6.
Investments! This is where it gets fun. The money that is going into this investment account, it can really flow to a lot of places.

Within this account you are hopefully breaking down any money that you may have into different investments for a well-diversified investment portfolio.

These type of investments include:
- Portioning off some cash for a real estate fund
- a Fun fund for vacations, dream cars,
- Investing in a Roth IRA or Traditional IRA for more retirement funding
- Shorter term investments like stocks, bonds, dividend portfolios
- Cryptocurrency
- Precious Metals, Collectibles, etc.

▶️ My name is Humphrey Yang, I've built multiple businesses and am passionate about Personal Finance. If you're trying to build a solid foundation of financial literacy, learn to invest, or become financially free - then I'm here for you! This channel cover topics like getting out of debt, managing money, building credit, multiple income sources, passive income, etc.

Disclaimer: I am not a financial advisor, any investment commentary are my opinions only. Some of the products and services that appear on this channel are from companies that I have an affiliate relationship with, such as Robinhood, for which I recieve a small percentage made via those links, but it doesn’t cost you anything extra!

[sox]

Binge watching your videos man and I have learned more from you than I did in finance classes

[bentriulzi]

Fantastic video Humphrey. Keep up the great content. Came across the channel recently. Started my first professional job out of school this past summer. Turns out I was doing essentially an identical strategy with my finances. Had scholarships in undergraduate and graduate school (no student debt) and I bought my car used (no car payment). During the Covid-19 pandemic I was luckily able to work 100% remotely so I was able to end my lease and move home for about 10 months (rent free). Combined with a higher than average salary and not being a huge spender plus these 6 tips I feel incredibly financially secure and responsible. Thanks for helping me get there, Cheers!

[Notimprtant]

This video came out seven months ago but today was the day I needed to watch it. I’m about to log in to my work account and change my payroll to have 10% deposited into Fidelity. You’re so right - if I never see it, I’ll never want to spend it. Thanks for such helpful advice as always

[Mersoh]

Thank you for writing out a text summary of the video in the description! I love having a summary of videos so I can jump to the part I'm most interested in right away

[TheAnthonyplasen]

20 years old currently have 12 percent going into my sponsored 401k employer has to match my percentage

[laportafrank]

Insightful video. I just want to know best how people split their pay, how much of it goes into savings, spendings or investments. I'm 27, and earn nothing less $150k per year, but nothing to show for it yet.

[stevenrakich]

Subscribed. Appreciate all your videos Humphrey. Your recommendations of Rich Dad Poor Dad and The Goal (graphic novel of course) have jumpstarted my thirst for financial literacy and I’m already seeing the effects🙏🏼

[lisrc]

I am 18 and first generation American this is so helpful! Thank you :)

[terid]

Have always hated "should" and in this case I'll make an exception. It really is important to put aside first, then spend. Thank you for all your help. Wish you were around when I was younger, and it's never too late to fine tune my game. Thank you.

[ArmaniV]

List copied down, thank you for the input. At 27, definitely time to start saving for retirement :)

[TheFragmaster]

Loving the edits! Keep up the great work Humphrey!

[shaneconcepcion]

Clear and concise information. Thank you!

[bilalahmedkhan]

Yo Humphery! your vids are an absolute delight to watch. Do consider starting a podcast would love hear about your thoughts on the developing situation of the global economy in this pandemic, BTW Keep up the good work. ✌

[jamesbrooks]

I love your video!! If possible can you make a video about First time purchasing a house and what is some tips they need to know. Thank you very much

[dogsavethequeen]

The problem with only putting away 10% of the average salary is that in 2060 it's doubtful a mere million will be enough to retire on.

[thomasharrison]

First time I've heard of an emergency fund. That's probably the money I use to bank account churning. Helps with the low current APY(.5% also have marcus)

[fatimajaffer]

Hey Humphrey! Been a long time fan of yours, and super grateful for all the content you provide. I'm curious to hear what kind of account you have for an overhead fund? Is it just a normal checkings account? And if you don't mind sharing where as well that would be much appreciated!

[MrLALakerfan]

Great video thank you very helpful learned a lot of what I need to do

[KodyKarppinen]

Your channel is awesome! I'm learning so much from all your videos 👍👍

[yangproductions]

Been watching your videos for a while now. Just bought my first business and started multiple stock portfolios by the age of 20! Thank you for the inspiration!!!