Easy Maintanence and Grow Your System

• The Myth: Getting a tax refund is bad because you’ve given Uncle Sam an interest-free loan.
• Reality: You would have spent that money. We know this because data shows that small tax refunds that are gradually added to your paycheck get spent. Big tax refunds get saved or used to pay off debt.
• Surprising Fact: This is why politicians have a hard choice to make when it comes to tax cuts. Give people small tax refunds over the year and they’ll spend it, stimulating the economy . . . but they won’t realize they’re getting more money and give the politicians credit. Or, give them a big tax refund and your administration will get credit—but people will save it or pay off debt, not stimulate the economy.

• The Myth: America is the highest-taxed nation in the world.
• Reality: Not even close.

• The Myth: Making more money will move you up in tax brackets, causing you to get taxed more and actually earn less.
• Reality: “Marginal tax brackets.”: the “marginal” amount—or the money in the higher tax bracket—is taxed at a higher rate, not the entire amount you earn.

• The Myth: We spend a ton of money on foreign aid.
• Reality: Out of every $100 in federal taxes you pay, around 1 percent goes toward foreign aid, which is dramatically lower than most people think.

• The Myth: There are a lot of loopholes for the rich.
• Reality: There are a few legit ones—like tax efficiency in your investment accounts, maxing out your tax-advantaged accounts, and a few more—but not nearly as many as you think. In general, those loopholes are few and far between and largely available to the super-rich who earn millions via capital gains (not ordinary salaries or even the high salaries of lawyers and bankers).
• Surprise: There are certain loopholes for the super-rich that you probably haven’t heard about. If you earn multiple six figures, go to my website for my course on advanced personal finance.

• The Myth: There are a lot of loopholes for the rich.
• Reality: Your personal psychology, along with your sources of information, play a huge role in your beliefs about taxes. As Psychology Today noted, “People have a number of general beliefs about what kinds of exchanges should be taxable, and they want tax law to fit with those beliefs. When tax law conflicts with those beliefs, then people think the tax is unfair.”

Use these as general guidelines, but take them seriously: If your money is following these suggested percentages, that’s a Big Win toward a Rich Life.

• Fixed costs (50–60%)
• Investments (10%)
• Savings (5–10%)
• Guilt-Free Spending (20–35%)
• Reassess current subscriptions (cut if necessary).
• Renegotiate cable and internet bills.
• Revisit spending goals: Are they accurate? Are you actively saving for them?
• If your fixed costs are too high, it may be time to look at a cheaper rent (or AirBnB’ing a room out, or earning more).
• If you aren’t investing at least 10 percent, it’s worth finding the money from somewhere else— usually guilt-free spending—and reallocating it to investments.

Many companies will offer you introductory rates or lower your monthly fees if you ask. Use my word-for-word scripts at iwillteachyoutoberich.com/negotiate.

• Cell phone bill
• Car insurance
• Cable and internet
• Bank fees

• Confirm you’re contributing the max to your 401(k), that your money is being invested (not just sent over and sitting there—for a cautionary tale), and that it’s being invested in the right fund(s).

• Confirm you’re contributing the max to your Roth IRA, that your money is being invested (not just sent over and sitting there), and that it’s being invested in the right fund(s).

• Be sure you’re taking advantage of all the tax-advantaged accounts you can

• Revisit your debt payoff plan: Are you on track? Can you pay any of your debt off sooner?

• Check your credit report and credit score.

• Renegotiate your credit cards’ APRs.

• Make a plan to use your credit card points! (Some might expire, some might not—but you earned them. Now have fun with them!)

• Call to ask what other perks your credit card offers that you haven’t taken advantage of.

• Confirm you’re not paying any unnecessary fees. If you are, try to negotiate them down.

• Negotiate a raise.
• Make money on the side (visit iwillteachyoutoberich.com for ideas, examples, and courses).

• Review your insurance needs, including renters insurance and life insurance.
• If you have dependents, create a will.

If you suddenly need money for an emergency, here’s your hierarchy of where to get it.

1. Use your savings account.

2. Earn additional money.

   • Drive for Uber, sell old clothes, pick up tutoring.
   • You might not be able to earn a huge amount in a short time, but selling some of your own goods is an important psychological step—it will let you prove how serious you are both to yourself and to your family (which will be useful if you’re asking them for help).

3. Ask your family if you can borrow the money from them. Note: This doesn’t work if your family is crazy.

4. Use the money in your retirement accounts.

   • You can always withdraw the principal you contributed to your Roth IRA penalty-free, although you’ll be severely retarding your money’s ability to compound over time. With a 401(k), you can take money out for “hardship withdrawals,” which typically include medical expenses, buying a home, tuition, preventing foreclosure, and funeral expenses, but you’ll probably still pay early withdrawal fees.
   • If it comes to this, consult your HR representative. But I urge you to avoid cashing out your retirement accounts because of the penalties and taxes involved.

5. Use your credit card only as a last resort. I can’t emphasize this enough: The chances are very good that your credit card will gouge you as you’re repaying it, so don’t do this unless you’re truly desperate!

• This point is largely moot if you invested in an index fund or series of index funds, because they reflect the entire index’s performance.
  • If your “total market index fund” is going down, that means the entire market is down.
  • If you believe the market will recover, that means investments are on sale for cheaper prices than before, meaning not only should you not sell, but you should keep investing and pick up shares at a cheaper price.
• If you invest in individual stock, and it is currently having a poor performance (e.g., down by 35%)
  • Just because they’re plunging doesn’t mean that you should sell immediately! Check the industry context before selling: Is it still viable? Are there competitors replacing it? etc.
    • If the entire industry is down → likely a cyclical downturn → hold and continue buying.
    • If the industry is obsolete → sell. (For example, if you own shares in a company that’s producing CD players, chances are that business is not coming back.)
    • If your stock is down but peers are performing well → problem is company-specific → consider selling.

• if your goal is less than five years away, you should set up a savings goal in your savings account.
• But if you’ve invested money for a longer-term goal that you’ve achieved, sell and don’t think twice. That’s a great investing success, and you should use the money for whatever your original goal was.

• Set up an extra savings goal and then funnel money to it in the same way you would your other goals.
• your emergency fund should contain 6 - 12 months of spending money (which includes everything: your mortgage, payments on other loans, food, transportation, taxes, gifts, and anything else you would conceivably spend on).

• Focus on necessary coverage.

• As a young person, you likely don’t need to buy a bunch of insurance options right now, but you can certainly set up a savings goal so that when you do need them, you’ll have money to use.

• Insurance is almost never a good investment. Use it as protection from downside risk—like for fires or accidental death when you have a family—but don’t think of it as a growth investment.

• Whether or not you have children yet, your first goal should be to excel financially for yourself.
• First, get out of debt and save for your own retirement. Then you can worry about your kids.