Jaspreet Singh Shares 7 Things To Do Every Payday
Written by
Peter Burns
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Joe Evans
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Everybody likes payday. The relief from when your hard-earned money hits your bank account makes all sorts of stress melt away. However, many individuals don’t take the right steps after getting paid to ensure those stresses stay away permanently.
Jaspreet Singh, the host of the Minority Mindset channel on YouTube, has some advice. In a recent video, Singh breaks down seven steps you should take every payday to maximize your financial health and retirement savings.
Step 1: Reduce Automatic Costs
When your paycheck hits your bank account, certain amounts have already been deducted for taxes and 401(k) contributions. While this is common practice, Singh explains that most Americans are overpaying in taxes and unaware of their 401(k) fees. He recommends reducing these costs to bolster your take-home pay.
In regards to taxes, Singh says workers who file a W2 have less flexibility than those who own a business or make money from investments. However, they can improve their situation by spending some money to speak with an accountant to make sure they’ve maximized their tax deductions.
Singh also cautions against blindly putting money into your 401(k). If you have a 401(k), you should look into your portfolio and check the expense ratio. While an expense ratio of less than 1% doesn’t look like much, over 40 years, it can take a really large chunk out of your investment. Getting more out of your paycheck and finding a fund with a lower fee might be a better alternative.
Step 2: Lay Your Foundation
Identifying the right priorities for your financial health is the first thing you need to do after receiving your take-home pay. Many individuals think they should put their money into the stock market and buy assets to accumulate wealth quickly. However, Singh disagrees.
Instead, he suggests you set aside a small sum in a separate bank account to start an emergency fund. The second thing is paying off any credit card debt as fast as possible. Credit cards can charge between 15-25% in interest, while the stock market has gained around 10% yearly over the past century. This means choosing to invest over paying off your credit cards will only worsen your debt.
Step 3: Build a Financial System
For this step, you’ll need to have three bank accounts that you will use to split your paychecks into your priorities. Now, with each paycheck, you can start dividing your pay into three parts between these bank accounts.
Singh recommends putting 10% of your paycheck into your emergency fund, 15% into your investments, and a maximum of 75% toward spending. By prioritizing your investments and savings instead of just spending, you’re taking steps to become wealthy.
Step 4: Don’t Make Emotional Investment Decisions
To succeed, start making financial, not emotional, investment decisions. Many people search for the next hot stock or cryptocurrency that will skyrocket and make them millions. Singh contends that money and wealth actually come from boring investments that grow over the years. The best way to do this is to stay current on the market, understand the trends, and avoid getting wrapped up in the emotional aspects.
Step 5: Understand Your Savings
Wealth isn’t just having a lot of money in a savings account. Because of inflation, the value of money will slowly decrease, so you should know why you’re saving. Singh says the only reasons to save money are for an emergency, to make a purchase, or to invest.
Make a savings goal that covers between three and 12 months of expenses for an emergency savings fund, and once you reach it, stop putting money into it. Start putting the excess money toward investments.
Step 6: Create a Spending Plan
Now, you need a plan for the money that isn’t going to emergency savings or investments. Singh emphasizes the concept of being able to afford something. His definition is buying something with cash. If you need to finance a luxury purchase like a TV by splitting up payments over several months, you can’t afford it.
Another way Singh limits his spending is with his “Rule of Five.”
If there is something that he wants to buy but doesn’t need, he’ll check his savings. If he can’t afford to buy five of these items, he can’t afford to buy one. For example, if he wants to buy a $2,000 TV, he should have at least $10,000 available to spend. It is a challenging strategy, but it helps him keep his priorities straight.
Step 7: Earn More Money
Having a system in place for what to do with your paycheck is an excellent strategy for wealth building. However, Singh thinks you should take it a step further and find ways to earn more money. There are many ways to accomplish this. If you’re working a job that takes up all your time, find out how to make yourself more valuable and get a raise.
You may want to try to switch to a more lucrative career or get a part-time job. Making more money doesn’t automatically mean you’ll become wealthy. However, putting more money into your system allows you to save and invest at a greater rate.
Singh’s Bonus Tip
While you need to set up a system that helps you build wealth over time and afford a more luxurious lifestyle, Singh highlights the importance of giving. Giving back and supporting your community should be integral to your lifestyle, especially as you build wealth. With more money and time, you can do and give more and have a more significant impact on the well-being of others.
Investing in others isn’t just about money, though. Singh explains that taking the time to help others build their financial systems to create wealth can be an even more valuable gift.
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