Is your money working for you? Optimizing your money and spending can not only give you peace of mind, but it can also bring you one step closer to a 4-Day Work Week. In this episode we break the process of optimizing your money down into 10 simple milestones, from saving on a regular basis to clearing debts, creating emergency funds, and more.
Watch the video above (or listen or read below) for the full lesson so you can take the next step towards creating and maintaining a #4DayWorkWeek
PODCAST VERSION (AUDIO)
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The 4-Day Work Week Apprentice
The first stage in the 4-Day Work Week journey is to become a 4-Day Work Week Apprentice. Many people will move further along the process, and they'll become a 4-Day Work Week Entrepreneur or even a Business Owner, but they won't have mastered some of the milestones and the things that need to be mastered to be a good 4-Day Work Week Apprentice.
The 4-Day Work Week Apprentice is focused on maximizing your life outside of work, without having to change jobs, whether you're an entrepreneur or an employee. It’s all about optimizing:
For each of those 4 areas, there are certain milestones that help you know that you're on the right track. For me, sometimes I’m on top of these milestones and sometimes I’m not, but I know that I’m a lot happier when I’m in control of them.
Money Optimization Milestones
Here are the 10 Mastery Milestones for optimizing your money. With each one, think about whether it needs adapting to your lifestyle, whether you want to do it, and if so, when. Set a target date so you have something to aim for.
1. Have Enough to Pay Your Bills, Live Within Your Means, and Save 20% of Your Income
I can’t tell you the exact amount for this, as everyone’s cost of living is different. Some people say you should be saving 10% of your income, which is better than nothing. But when I speak to people who are doing really well financially, they almost always tell me they’re saving 20%.
2) Zero Credit Card Debt
Ideally, we wouldn't use credit cards, but admittedly, we all do for certain things. For example, I like to know what my charges are going to be, with no surprises. I also know that credit card charges are usually easier to reverse than ATM charges, so I put some of my recurring bills and payments on my credit card. But I always know exactly what they are, and I make sure that my balances are paid off each month, so I'm not paying credit card interest. I’ve learned this from my mistakes in the past. It's really painful when you're wasting money on credit card interest, because you get nothing back for that.
3) Emergency Savings Fund
Ideally, this should be equal to 6 months of your take-home income, regardless of what you make. For example, if you take home $3,000 a month, that multiplied by 6 is $18,000 set aside in a savings fund. This fund is just for emergencies: not for shopping, not for extra cool toys, not for Black Friday, just emergencies. This milestone is especially important if you're an entrepreneur, as it creates a lot of security. You don’t need to be constantly worrying where next month’s paycheck is going to come from, or if your next venture is going to work out.
4) Personal Income Protection Plan
This is also known as a disability insurance policy. Most people don't like to hear that word because they think of catastrophic, horrible things, but the truth is that people are sometimes unable to work because they experience an injury. It might not be forever. Some estimates show that 1 in 3 people, at some time in their life, will be unable to work for an extended period of time, over at least 6 months.
You want to be able to get a policy that's equal to at least 70% of your income or more; usually it's capped out about 80%. I have an insurance background, so let me tell you how important this kind of insurance is. If you're unable work, make sure that you don't have to come up with all that money. Just because you can't work, this doesn't stop the bills coming in.
5) Family Income Protection Plan (For People with Dependents)
Some people call this life insurance. I know life insurance can be a touchy subject, and there are some scams out there, but that doesn’t mean it isn’t important. If you have people that are dependent upon you, and something were to happen to you, wouldn’t you want to know that they were taken care of? Knowing you have that taken care of, and doing that, is a really huge thing.
One of the more basic types of life insurance is term insurance, where you're covered for a certain term, say 10 or 20 years. For some people, this is enough time that they know their kids will be grown up, or they won’t have anyone depending on them any more. It can be cheaper than whole life permanent insurance, though that can still be awesome, in the right situation.
6) Having All Debt at an Interest Rate Under 5%, and a Credit Card Score of 800+
If you can carry any debt, having it under 6% interest will make a huge different to your finances. I have to admit, at times, I didn’t think I needed to worry about my credit score. But then when something would come up and I’d need to borrow some money, I would find myself with higher interest rates because I didn’t have such a good credit score.
It’s not hard to monitor your credit score, either by asking your bank or by using one of the free online credit checking services. It’s a small thing that can make a big difference to your finances, both in terms of the interest rates you pay and how you manage things. It's not so that you can buy a load of stuff you can't afford, but rather it's so that when you are investing, you can get the best rates possible.
7) Tracking Expenses and Having a Monthly Budget (and Sticking to It!)
I would always recommend using software to do this, as it does the math for you. If you don't like using software, have somebody use it for you: there are bookkeeping companies and accountants for that reason. Sticking to this milestone will help you keep up with all the other milestones, so don’t neglect it.
8) Be Able to Travel and Enjoy Life Comfortably, According to Your Priorities
Don’t forget, that's one of the reasons we make money: to enjoy ourselves. We don't make money because money tastes good, or because we can drive around in money. We drive around in a car, not the money. The money gets things for us, and one of those things is the ability to enjoy life or a lifestyle of a certain way.
9) Be Able to Comfortably Give to Charitable Causes
Of course, this one is up to you: I’m not going to force you to give to good causes. But it’s pretty powerful knowing that you're in a stable enough position to say, “Yeah, I can afford to do that. I've got my emergency savings fund. I've got my family income protection, my personal income protection. Yeah, I've got extra money. I can afford to be abundant and share that.”
10) Build a Net Worth to Afford Educational Goals and a Retirement with the Same or Better Lifestyle
I should point out here, though if you've listened to any of my work, you probably know: I don't think most people really actually want to retire. I don't believe in the overall concept of retirement. It was a idea that was introduced to help the soldiers coming back from war get jobs, with older people making room for the soldiers. If you look at nature, animals don't retire.
However, as much as you may want to keep on working forever, we never know what’s going to happen. You might get too sick or frail or tired to enjoy working. You may want to be semi-retired, and only work on the stuff you’re passionate about. Saving for retirement gives you the freedom to make those choices when the time comes.
The Next Steps
So, these are the 10 Mastery Milestones for optimizing your money. I’ve said this before, but it’s important. I'm here to help you make more money in less time, doing what you do best while you're at work, but if you get outside of work and you can't enjoy your money and you can't manage your money, then all the work we're doing to do a better job inside work isn't as effective. We want to be on top of these milestones to make the most of your money.
If you have any questions on this episode, on how to best achieve these milestones, or about resources to help with this process, please let me know.
If you'd like to learn more about the show or the slide notes, you can go to 4dayentrepreneur.com. You can also learn more about becoming a 4-Day Work Week Apprentice by going to 4dayworkweek.com/apprentice, where you’ll find our training program that will help you make the most of your life outside of work before you even change jobs.
As always, I look forward to helping you make more money in less time, doing what you do best.
Envision & Create the Game Plan for you to start working a 4-Day Work Week.
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Learn this simple process for creating the GAME PLAN that can serve as your road map.
The 4-Day Work Week Apprentice
Learn to start moving towards a 4-Day Work Week lifestyle WITHOUT changing jobs.
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