Episode Transcript
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Speaker 1 (00:00):
Hey there and welcome
back to Low Income Rich Life.
I'm your host, kevin, and todaywe're tackling a topic that's
close to my heart how buildingan emergency fund and aging your
money can be the game changer.
You need to finally break freefrom the debt cycle, so stick
around, I think it's going to bea good one.
Welcome to Low Income Rich Life, the podcast that helps you
(00:25):
prepare for a secure andfulfilling retirement, even on a
limited income.
Each week, we will explorepractical tips and strategies
for getting out of debt,lowering expenses, living a
simpler life and finding truecontentment.
Whether you're nearingretirement or just starting to
plan, join us as we navigate thejourney to a brighter future.
Let's dive in and discover howto make the most of your golden
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years without breaking the bank.
If you've ever felt stuck,living paycheck to paycheck, or
like you can't get ahead becausedebt keeps piling up, today's
episode is for you.
We'll be going over practicalstrategies you can start using
right now and, trust me, itdoesn't take a massive income or
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extreme budgeting.
Small steps can make a hugedifference.
So let's start with the basics.
What exactly is an emergencyfund?
An emergency fund is simplymoney set aside to cover those
surprise expenses that lifelikes to throw at you.
Think of it like this it's nota matter of if an emergency will
happen, but when.
Whether it's a car repair,medical bill or a sudden job
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loss, having an emergency fundgives you a cushion so you don't
have to rely on credit cards orloans.
In fact, I was reading recentlythat around 37% of Americans
can't cover a $400 emergencywithout borrowing money or
selling something.
That's staggering, and it'sexactly why an emergency fund is
so important.
I remember a time a coupleyears ago when I had a sudden
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car repair come up.
Now, old me would have slappedthat on a credit card and dealt
with the high interest paymentslater, but this time I had my
emergency fund in place and wasable to pay for it without
taking on new debt.
That moment felt like such awin because it reinforced that
small savings efforts will payoff in big ways if you give it
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time.
I get it, though.
Saving for an emergency fund canseem impossible when you're
living paycheck to paycheck, buthere's the thing you don't have
to save a massive amountovernight.
Start with a goal of $500 to$1,000 and build from there.
Even small contributions add upover time, and if saving is
tough, consider these tips.
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First of all, automate yoursavings.
Set up a transfer of just $10or $20 each week into a separate
savings account.
I suggest a savings accountthat is not tied to your
checking account.
I've had struggles in the pastwith that.
It makes it too tempting to doa quick transfer when the old
checking account gets a littlelow and before you know it
you've knocked a dent in youremergency fund.
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If you have to have that extrasafety net of a savings account
being tied to your checkingaccount, be sure it is on top of
your separate emergency fund.
Look for the easy wins.
You can cancel any unnecessarysubscriptions, cook your meals
at home, stop eating fast foodlike I did, or even pick up a
side gig for extra cash.
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Anything you can do to bring ina few extra bucks a month can
really add up over time.
And let's avoid temptation.
Like I just mentioned, keepyour emergency fund in a
separate account, preferably ahigh interest savings account,
so it's out of sight and out ofmind.
This helps keep you fromdipping into it for
non-emergencies.
Speaking of which, now is agreat time to sit down and come
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up with some ground rules onwhat constitutes an actual
emergency, and for more in-depthadvice on building your
emergency fund, check outepisode 6, building an Emergency
Fund your Financial Safety Net.
Alright, now let's dive into oneof my favorite strategies aging
your money.
This is a concept that is puregold.
The idea of aging your moneysimply means that you hang on to
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it as long as you can beforeletting it go.
In other words, in oursituation, when you age your
money, you use last month'sincome to pay this month's
expenses.
This means you're not livingpaycheck to paycheck anymore
because you have a financialbuffer that keeps you ahead of
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the game when that paycheckcomes in, you're not sending it
right back out as soon as youget it.
Tell me if this sounds familiar.
Today is payday.
You get off work, head home andsit down with your bills and
your cell phone, your tablet,your checkbook or whatever you
like to pay your bills with, andyou get to work.
You look through the bills anddecide which ones you have to
take care of before you get paidagain, and you pay those bills.
If you're lucky, you haveenough left over for food and
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gas to get back and forth towork until next payday.
Aging your money will make thewhole process of paying bills
much less stressful, and, beforeyou know it, you will be
heading in the right directionwith your debt as well.
The key is that you're notscrambling to cover this month's
bills with this month's income.
Instead, you've got a cushionthat allows you to pay bills
stress-free and avoid fallingbehind.
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It may take a little time toget there, but the beauty of
aging your money is that onceyou have even a small buffer,
say enough to cover one or twobills, you're no longer living
in a constant state of panic.
You're not worried aboutwhether this week's paycheck
will cover rent, because youalready have next month's rent
saved.
Let me give you a quick example.
Say you earn $3,000 in a monthand your monthly expenses are
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about $2,800.
The goal of aging your money isto start slowly saving a
portion of that extra $200 eachmonth until you've built up
enough to cover next month'sexpenses in full.
Let's take another example afreelance writer.
Freelancers often have incomethat fluctuates from month to
month, making it difficult topredict when they'll be able to
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pay their bills, so aging yourmoney can be a lifesaver in this
scenario.
Let's say our freelance writerearns $2,000 one month and
$4,000 the next.
Instead of spending that higherincome immediately, they can
stash away some of that surplusso when they have a low income
month, they can pull from theirbuffer rather than relying on
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credit cards or loans.
Over time you'll eventually getto the point where you're using
last month's income for thismonth's bills, and let me tell
you, that takes a huge load offyour shoulders.
So here's some practical stepsto start aging your money.
Begin by tracking your spending.
You need to know exactly whereyour money is going before you
can create a buffer.
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Next, create a budget.
Start small if you need to.
Even if you can only save $50 amonth, that's still progress.
Once you have a bit of a buffer, aim to build it to one month's
worth of expenses.
That's the sweet spot whereyou'll really start feeling in
control.
Now let me briefly tell you howI personally go about aging my
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money.
I don't leave that surplusmoney in the bank.
I sit down and the first thingI do is pay all of my bills that
are due between this payday andnext payday.
Once that is taken care of, Ibudget for the variable expenses
that I'll have to pay betweennow and next payday.
That's food and gas for ourcars and any special things
coming up like birthdays, etc.
Then whatever is left is what Ihave to work with.
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This is where I have to usewisdom and make good choices.
I could go blow that money or Ican put it to work.
I choose to put it to work andmaybe blow a little.
I will take that surplus andfirst put it towards my
emergency fund.
I believe you should put 100%of it towards an emergency fund
until you have at least $500minimum of it towards an
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emergency fund.
Until you have at least $500minimum, then I'll cut that down
to say 25% of the surplus untilI reach $1,000 in my emergency
fund and I'm okay with having$1,000 in an emergency fund for
now, since that will cover themajority of small emergencies.
The other 75% of that surplusI'll use to start aging my money
.
How do I do that?
I look at my bills due.
Now remember, I've already paidall the bills due up until next
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payday.
So I will look at the next billdue after payday and pay that
one.
If I still have surplus left, Ipay another, and so on and so
on until I'm out of the surplusmoney.
Next payday I will do the samething.
I will look at my bills and payas much as I can, as far ahead
as I can.
I will follow this method untilI have $1,000 in my emergency
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fund and all my bills are paidat least a month ahead.
Next I start hitting my debt.
Now here's the real kicker,where it can really start
changing your life.
By having an emergency fund andaging your money, you create a
system that helps you avoidfalling back into the debt cycle
.
Debt can feel like anever-ending loop.
You're using credit cards tocover emergencies, taking out
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loans to pay off previous debtsand suddenly you're drowning in
interest payments.
But here's the thing debtthrives on financial instability
.
Without a buffer, it's easy torely on debt for even the
smallest hiccups.
Financial instability Without abuffer it's easy to rely on
debt for even the smallesthiccups.
But when you have thatemergency fund, you don't need
to rely on credit cards forthose unexpected expenses, and
when you aid your money, you'reahead of your bills, so you're
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not scrambling to cover rent orutility payments, which often
leads people to rely on credit.
I know that being in debt canfeel overwhelming and isolating.
There's anxiety, there's stressand, honestly, sometimes you
feel hopeless.
But by starting small with anemergency fund and aging your
money, you can break that cycle.
Now I know for some of you, theidea of building an emergency
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fund or aging your money canseem impossible.
Life is unpredictable andsometimes it feels like there's
no room in your budget foranything extra.
So let's talk about some commonchallenges people face when
trying to save or get ahead andwhat you can do to tackle those
hurdles head on.
One challenge I hear a lot, andprobably the most common, is I
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don't have enough money left atthe end of the month to save,
and I totally get it.
When the bills are piling up,the last thing on your mind is
putting aside savings.
But here's the key you don'tneed to save huge amounts to get
started.
Even if you're putting aside $5or $10 a week, that's still
progress.
The real magic happens when youautomate your savings.
Set up an automatic transferfrom your checking to your
(10:18):
savings account.
Over time, those small amountswill add up and you'll be amazed
at how quickly your emergencyfund grows.
Another challenge I hear is Idon't trust myself not to dip
into my emergency fund.
This is a real issue for manypeople, including myself.
One way to avoid thistemptation is to keep your
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emergency fund in a separatesavings account, preferably one
that isn't linked to your debitcard, so that you can't you know
easily access it.
You could even use a high-yieldsavings account to make sure
that your money is working foryou by earning some interest
while it sits there.
The reason these two strategieswork so well is because they
give you control.
When you control your money,instead of your money
controlling you, debt doesn'tstand a chance.
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So let's talk about someactionable steps to break the
debt cycle.
One start with your emergencyfund.
This is your safety net thatwill prevent you from taking on
new debt in the future.
Even if you can only save $10 aweek, that's something.
Number two age your money.
Once you have that buffer,focus on aging your money by
saving for next month's bills,or do it like I do and actually
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pay that month's bills inadvance.
Saving for next month's bills,or do it like I do and actually
pay that month's bills inadvance.
The goal here is to createenough space between your income
and expenses so you can avoidneeding debt to get by.
Number three is then you get totackle your existing debt.
Use the snowball or theavalanche method.
Whichever one works for you.
With the snowball method, youpay off your smallest debts
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first, creating momentum as yougo, and with the avalanche
method, you pay off your debtswith the highest interest rate
first to save more in the longrun.
Debt can take an emotional tollthat many people don't talk
about.
It's not just about the numbers.
It's about the stress thatcomes with it.
A study by the AmericanPsychological Association found
that 72% of Americans feelstressed about money and for
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many, that stress is due to debt.
The anxiety of debt can affectyour mental health,
relationships and even your jobperformance.
That's why having a plan tobreak the debt cycle is so
crucial.
By building an emergency fundand aging your money, you can
stop the debt cycle fromcontinuing.
You won't need to rely oncredit cards for emergencies,
and that gives you the freedomto focus on paying down the debt
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you already have.
One listener shared with me howshe used the debt snowball
method.
She started by paying off hersmallest debt.
It was a $500 medical billfirst.
That small win gave her themomentum to tackle her larger
debts and within two years shewas completely debt-free.
What made the difference?
She stopped using her creditcard for emergencies because she
had an emergency fund in place.
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Small changes add up.
Speaking of listeners, I wantto share a quick story from a
listener, sarah, who startedbuilding her emergency fund just
a few months ago.
She started small just $25 aweek and before she knew it, she
had enough saved to cover a carrepair without using her credit
card.
She's also aging her money nowand for the first time in years,
she's a month ahead on herbills.
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Sarah's story is proof thatthese strategies work, even if
you're just getting started.
If Sarah can do it, so can youNow.
If you've been tuning inregularly, you'll know that I'm
passionate about giving youactionable steps to take control
of your finances, especiallywhen resources are tight, and
today I'm excited to sharesomething I've been working on
behind the scenes a workbookthat will guide you through this
(13:33):
process step by step.
It's called Financial SecurityThrough Aging your Money a
step-by-step guide to financialindependence on a low income,
and it's designed with you inmind, whether you're just
getting started on yourfinancial journey or you've been
managing on a tight budget fora while now.
What's great about thisworkbook is that it's not just
theoretical.
(13:53):
It includes real, actionablesteps that help you understand
where your money is going andhow to make it work harder for
you.
It has sections dedicated tobudgeting, saving for retirement
, cutting unnecessary expensesand aging your money a key
concept I've discussed on thispodcast before.
The goal is to give you ahands-on tool that you can use
to organize your finances, makeinformed decisions and
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ultimately build a sustainablepath toward financial
independence.
I've included worksheets thathelp you track your spending,
break down your debt repaymentstrategies and plan for
emergencies.
Plus, if you're already part ofour Facebook group, you know
how important it is to have asupportive community.
To turn to the new workbook,financial Security Through Aging
your Money, a step-by-stepguide to financial independence
(14:37):
on a low income, should be readyfor release sometime by the end
of October.
I'm about to release the firstdraft to a few folks in my
Facebook group that hasvolunteered to be beta testers
and give me feedback.
If you're interested in being abeta tester, simply join by
going to lowincomerichlifecomslash, join the group and look
for the post calling for betatesters pinned at the top of the
(14:58):
group.
This workbook isn't going to beabout setting lofty goals.
It's about creating smartfinancial goals, goals that are
specific, measurable, achievable, relevant and time-bound.
This concept may sound familiarto many of you, especially if
you listened to my recentepisode where we dug deep into
smart goals and how crucial theyare to long-term success.
In case you missed it, feelfree to check out Episode 9,
(15:21):
mastering SMART Goals yourRoadmap to Financial Success.
I've packed that episode fullof tips and strategies to get
you on track, and this workbookbuilds directly on that
framework.
In the meantime, if you want toget started with your own SMART
financial goals, check out thelink to my workbook Mastering
Smart Goals atlowincomerichlifecom slash smart
.
I'd love for you to take a look, try it out and let me know
(15:44):
what works for you.
I'm confident that this toolwill make a real difference in
how you approach your finances.
So let's recap what we'vecovered today Build your
emergency fund, start small.
Automate your savings andprotect it for true emergencies.
Aid your money.
Create a financial buffer bysaving for next month's bills
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and, last but not least, breakthe debt cycle.
Use these two strategies tostop relying on credit and
finally gain control of yourmoney.
Remember, this is a marathon,not a sprint.
Small steps will lead to bigwins over time.
And before I go, remember tojoin our low-income rich life
community on Facebook.
It's a thriving group oflike-minded individuals who are
(16:25):
navigating the road to financialfreedom together.
Whether you're looking foraccountability, inspiration or
just a space to share your winsand struggles, we've got your
back.
You can find the group andconnect with others working
toward their goals right here atFacebookcom.
Slash groups slash low incomerich life.
And, of course, if you have anyquestions or stories to share
(16:46):
about how you're breaking freefrom the debt cycle, I'd love to
hear from you.
You can leave me a voicemessage on SpeakPipe at
wwwspeakpipecom.
Slash low income rich life.
Wwwspeakpipecom.
Slash lowincomerichlife.
That's speakpipe.
S-p-e-a-k-p-i-p-e dot com.
Slash lowincomerichlife.
Or send a message in the group.
(17:06):
Your stories inspire not onlyme, but everyone else who's on
this journey with us.
Remember small steps,consistent progress and having
the right tools and mindset willset you free.
I believe in you and can't waitto see you take the next step
toward building your financialfuture.
Until next time, stay focusedand keep moving forward, and
(17:27):
I'll see you in the next episode.
Thank you for joining us on thisepisode of Low Income Rich Life
.
I hope you found today's tipsand strategies helpful.
If you enjoyed the show, pleasesubscribe, rate and leave us a
(17:49):
review on your favorite podcastplatform.
Your feedback helps us reachmore listeners and improve the
content we bring to you.
Don't forget to visit ourwebsite at lowincomerichlifecom
for additional resources, shownotes and links to everything we
discussed today.
You can also join theconversation in our Facebook
group at facebookcom slashgroups slash low income rich
(18:11):
life for more updates andretirement tips.
Remember a truly rich life isnot about how you spend your
money, but how you spend yourtime.
Remember, a truly rich life isnot about how you spend your
money, but how you spend yourtime.
I'm Kevin Bass, wishing you aprosperous and joyful retirement
journey, stay well and stayinspired.