Pod Insights The Personal Finance Podcast 6 Ways to Master Money in Your 30s (and 40's!) About this episode In this episode of The Personal Finance Podcast, Andrew delivers a comprehensive roadmap for mastering your money during your 30’s and 40’s when you're balancing peak earning years with major life responsibilities. He breaks down six essential strategies: maximizing income growth through smart salary negotiations and strategic job changes that can add hundreds of thousands to retirement, establishing solid financial foundations with proper emergency funds and debt management, accelerating retirement savings by fully utilizing tax-advantaged accounts, navigating major expenses like expensive childcare and aging parent care, protecting your wealth through insurance and estate planning, and creating lifestyle guardrails to prevent income increases from disappearing into lifestyle inflation. This episode provides actionable steps to ensure these crucial decades become the foundation for a secure retirement rather than years lost to financial stress and missed opportunities.
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Transcript 11,982 words · 2 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Andrew Giancola? Longtime listeners know, one of the best ways to build wealth is to increase your income. And one way to do that is by starting a side hustle. And that's one reason why I absolutely love Whatnot. Now, my son and I, we love collecting sports cards. And we've used Whatnot to buy and sell cards. It's been a really fun way to enjoy something we love together. Now, Whatnot is a live shopping platform where people sell everything from sports cards to clothing, electronics, and collectibles. And what's really cool about it is you can turn something you're passionate about into a business. And you could do it right from your phone. You don't even need a storefront or a website. So whether you're looking to make some extra money or find great deals on your next shopping trip, check out Whatnot.
0:44 Andrew Giancola? Search Whatnot, that's W H A T N O T, in the App Store. Download and start selling right away. When I started the Personal Finance Podcast, I had no idea how big it could become. I just knew I had something I wanted to share, so I started putting it online. And looking back, I definitely wish I would have started a decade earlier. One of the horror parts about building something online, though, is making it look professional. A website used to mean hiring a developer, figuring out design, and potentially spending thousands of dollars. In fact, on my website, I spent tens of thousands of dollars. That's what impressed me when playing around with Hostinger's AI website builder.
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2:24 Andrew Giancola? What's up everybody and welcome to the Personal Finance Podcast. I'm your host Andrew, founder of MasterMoney.co. And today on the Personal Finance Podcast, we're going to talk about six ways to master your money in your 30s and 40s. If you guys have any questions, make sure you join the Master Money Newsletter by going to MasterMoney.co/newsletter. And don't forget to follow us on Spotify, Apple Podcasts, YouTube, or whatever podcast player you love listening to this podcast on. And if you want to help out the show, consider leaving a five-star rating and review on Apple Podcasts, Spotify, or your favorite podcast player. Now today, we're going to be diving into six ways that you can master your money
3:07 Andrew Giancola? in your 30s and 40s. This episode is A, going to help you tackle what we call the messy middle. Now, the messy middle is in your 30s and 40s, you are dealing with a lot of things being thrown at you. You don't have much time. You have a lot of responsibility, the most responsibility that you will ever have, and you have to deal with a bunch of financial challenges. Now, the good news is for a lot of you, we'll talk through how these are probably your highest income-earning years, but we want to know what we need to do with those dollars because we need this income in order to just take care of life and everything that life throws at us. And so in your 30s and 40s, this is a really important time to get it right because these are the foundational years for your retirement. These are the foundational
3:49 Andrew Giancola? years that are going to help you have the retirement and achieve all of your dreams that you want. And so because of this, we want to make sure that we nail down these upcoming years. Again, you've got to deal with kid stuff. You've got to deal with aging parents. You have to deal with a ton of very difficult life circumstances that we are going to help you navigate financially in this episode. So the way this episode is going to work is I'm going to go through six different areas that I want you to focus on, and I'm going to tactically show you what you need to do. And then I'm going to give you a checklist after of some of your action step items so that you can go out and take action on this stuff. So this is an action-packed episode. So without further ado, let's get into it.
4:31 Andrew Giancola? All right, so number one on this list is when you are in your 30s and 40s, you need to get very serious about your income. Now, I firmly believe that your income is by far the most important factor when it comes to building wealth. Some people may be saying like, oh duh, but at the same time, it is way more important, I even think, than your savings rate because growing your income is going to make the biggest impact overall on your financial well-being. Now, understanding what to do with that income is another story, but making sure that you are earning enough is very, very important. Now, why is it so important? Let me just give you an example here. If you just got a $10,000 raise over the course of the next decade, a $10,000 raise invested for 20 years at an 8% interest rate
5:14 Andrew Giancola? is over $500,000 that you can have in addition in retirement. And so, we need to take this very seriously when it comes to income. And the first place we want to make sure we focus on is our career earnings. Now, negotiating your salary is something we talk about a ton on this podcast. In fact, we are working on a course right now in Master Money Academy, going through our negotiation process and the entire process for building out your career. And so, this is something I think is very, very important for a lot of people to understand. Learning the skill of negotiating your salary will make you over a million dollars over the course of your career. And I cannot scream this louder for people in the back. This skill is the most important and powerful skill that you could learn today, and you can learn it. It is a skill.
5:58 Andrew Giancola? Maybe you're an introvert and you don't want to do it. I understand, I get it. But if you learn this skill, is it worth a million dollars to go out there and learn how to negotiate your salary? I think it is. You don't want to wait for your boss to notice. Instead, you want to tactically go and make sure that you are having conversations with your boss to put together a plan that is going to allow you to increase your income. Now, we have a free ebook if you go to mastermoney.co/resources that walks you through step by step exactly how to go through this raise process because this is not a quick process. It takes six months to go through the entire process, but this is something where you're going to go into your boss's office and you're going to ask them, what do I need to be doing in order to go get a raise? They're going to give you the information that you need and you are going to work collaboratively over the course of the next Six months in order to make sure that you can achieve that raise.
6:43 Andrew Giancola? That way, when comes time for you to have your yearly review, you walk into your boss's office and guess what? You nailed it. You both know what's coming. You're asking for that raise and your plan is to get that raise because you achieved everything on that checklist that you all originally talked about. And so because of this, this is going to be the tactical system. So make sure you check out that ebook. You go to mastermoney.co/resources, you can find it there. Now, a second thing that you need to be doing is if you are not getting a raise, you need to consider switching jobs strategically. So, studies have shown that folks who switch jobs typically get on average about a 14 to 20% increase in their pay rate just from not being loyal to the original company that hired them. Now, why is this important? This is important for a lot of people when you hit a career ceiling.
7:28 Andrew Giancola? And most people are going to experience this where maybe you're working in your day job and you can't go any further. You're as high as you can go or there's just not opportunity for you to grow. If that is the case, you need to make sure that you are looking for other opportunities. Now, I know how difficult it can be to find other opportunities. So I'm not saying you leave your job. I'm saying look for new opportunities while you're at your current job. This is going to be a very important caveat for most people. It is not quit your job and go find one. Instead, you are keeping one foot in the boat that currently pays you. And then you are looking for another boat that you can jump into later on down the line. So you're looking for that other boat to put your other foot in. So you can step in comfortably when it comes to your finances.
8:12 Andrew Giancola? And so there are a lot of examples out there. People job hopping every two to four years and getting those 10 to 20% pay bumps. And it really is a big, big difference because if you get a 3% raise every single year, that's not going to cut it. It is not what you want to do. Instead, you want to make sure that you are getting bigger pay pumps at least every couple of years. And if your company is not willing to do that, then you need to start having conversations and looking for other places to work. Next is I want you to seek leadership and specialist tracks. So if you are someone who is focusing on your career, I want you to seek leadership tracks and decide whether management or deep expertise is something that is going to align with your strengths. So look into management. And look at the people above you and say, hey, is that a job that I could also do?
8:54 Andrew Giancola? If it is, look at their lifestyle and see if it's something you wanted to. If it's not, that's the current trajectory and the track that you're on is where your boss is. If you don't like it, you need to make a change and you need to adjust where you're going to be going. Okay. This is really, really important because making sure that you are on the right track, especially the right career track is going to dictate whether or not you going to work day in and day out actually makes sense. Otherwise, we need to shift gears and go somewhere that does make sense where someone above you has the lifestyle that you actually want. And then lastly, one big thing is pushing for stock options. So I have seen so many more people lately who are getting really, really wealthy off of stock options, employee stock options. And so this is something that I want you to look for, stock options or restricted stock units,
9:39 Andrew Giancola? which are also known as RSUs or even profit sharing, because this is something I think that you can really accelerate your path to wealth by having these bonuses. Here's the beautiful thing about the corporate world is you have access to these, which nobody else has. If you are not working in the corporate world or for a company that offers them. And so because you have a W two job, you get offered some of this stuff. It is really, really important that you take advantage of that. And we're going to do some entire episodes on this because I think tactically, we need to really make sure we are looking at that. Now, a second way to increase your income is building additional revenue streams. Now we have episodes talking about the side hustles that could turn into a full time income. We've already had three parts come out. We're going to continue to do those because those are ways that you can add additional revenue streams.
10:22 Andrew Giancola? Maybe some small business ventures, making yourself an extra few thousand dollars every single month, or even a few hundred dollars every single month. My original goal, when I had my first side hustle was just have enough money to pay my rent. And so, once I achieved that, it was addicting what you could do next because earning more money can be addicting if you really enjoy that process. And once you start to learn, hey, I'm going to cover my electric bill. Now this time I'm going to cover my kids daycare. I'm going to cover my mortgage and you start to level up over and over and over again. And you're going to see a big, big difference in how you actually gamify this system. Secondary is just looking at side hustles. So if you're someone who is in debt, maybe you have high interest debt above a 6% interest rate. I am all for. You side hustling your way to paying down that debt, meaning taking extra jobs, working and delivering groceries,
11:07 Andrew Giancola? doing Uber or DoorDash, all of those are great resources to pay down your debt. If you're not in high interest debt, I would rather you focus on side hustles that could turn into a full-time income because long-term that is the better bet. Short-term, you're not going to make as much cash. In fact, you might be funneling cash into those side hustles. But long-term, you can make a lot more money and you could turn it into a full bona fide business. And if you have a real business that you have on the side that you built, that is something that is one, either a cash flow machine, or two, is something that you could eventually sell. So we talked about some of those wealth flywheels. If you haven't heard our recent episode going through the wealth flywheels, these are things where you can take cash flow, reinvest that cash flow and have the ability to build wealth based on that cash flow reinvestment. And if you haven't heard that episode, I would highly recommend it.
11:52 Andrew Giancola? But that is something that you definitely should be doing. And then the other thing that you could do and invest in is up-selling in career insurance. What does that mean by that? Getting certifications or training. So you could think of things like project management or coding or analytics or MBAs. And these open doors to increased earning power. So that in and of itself is some sort of side hustle. Because if you are someone who is a registered nurse, for an example, and you want to become a nurse practitioner, well, you are guaranteed to make more money if you become a nurse practitioner. So that is something worth your time and energy to go pursue if it interests you. And so that for sure is another one. Now, C, the third part of this and component of this is I want you to think long-term when it comes to your career design.
12:34 Andrew Giancola? You need to design your career in a way that is very, very intentional. Most people just go to work every single day and they say, oh, these people like me here at my job. I'm just going to go to work and come home. No, we're going to be intentional with our career. We're going to get after this thing. We are going to make sure that we lock in. We're in the great lock-in right now at the time I'm recording this. And so we're locking in when it comes to our career, making sure that we do not plateau. Plateauing is the death of us when it comes to our career. If you're not getting small raises, you are falling behind to inflation. So we got to make sure that we're at least getting that 3% raise and then we're going to attack to try to get 5, 7, 10%. Now, you're 30 30s and 40s is when you should have some of your highest earning years. And so because of this, we got to make sure that we do not coast professionally.
13:18 Andrew Giancola? But instead, we are trying to network. We are attending industry events. We are doing things that build our reputation. This is because these years are pivotal when it comes to wealth building. Now, if you missed out on these years, you're listening in your 50s, or if you're in your 20s right now and you are listening, just understand it is never too late for those of you in your 50s. And if you are in your 20s, now is the time to start getting that networking going, building up that reputation so that you can get into your 30s and 40s and really hit the ground running with your earning power. I cannot stress that enough. And then making sure that you think through your time leverage. So if you are someone out there who is starting to earn a lot more money, use your money and spend money to buy back your time. Leverage your time so that you can go out and make more money.
14:01 Andrew Giancola? An example of this is I used to, I talk about this all the time, but I used to mow my own lawn. It would take me five hours every week and I would trim the hedges, do all this other stuff. Well, then I hired a lawn company. And once I hired this lawn company, it made a big, big impact on how much money I was making because I could get those five hours back every week. That's 20 hours every single month that you could put towards things that you actually value. Maybe it's family time. Maybe it's time to earn a little extra money on the side. But it is something where if you are making good enough money, you can go and leverage that money to buy back your time. And then lastly, if you are a leader in your industry, building a personal brand, being a leader in your industry is going to help you make a lot more money as well. So you could do things like speaking or writing
14:43 Andrew Giancola? or posting insights online that can help position you as a thought leader within that industry. So if you're a physician, or if you're an attorney, or if you're a teacher, it doesn't matter what you do, you could become a thought leader within your industry. And I promise you, opportunities will open if you begin to do that. And so learning to become a personal brand and opening the door to promotions or partnerships or business opportunities can be really, really impactful. So I got some tactical steps for you based on this first section. I know we've already covered a lot just in this first section here, and I'm throwing a lot of stuff at you. But number one is I want you to schedule a meeting with your boss to discuss growth and Advancement opportunities. This is your time to discuss those. We're going to get after it.
15:24 Andrew Giancola? Number two is I want you to update your resume on LinkedIn, even if you're not actively job hunting. That thing needs to be locked and loaded at any given time. And honestly, you should always, always be looking. Number three is identify one skill gap that you have, one thing that you're struggling in, and if filled, would that add 10 to 20 to $30,000 to your salary? And I want you to focus on that and try to fix that skill gap that you currently have, so that you can add more to your potential income. And then I want you to set a target date to start a second side income stream if you want to. It's not for everybody because if you're focused on your career, I want you to focus on your career. But if you're not focused on your career, or you feel like you've hit a ceiling and you don't know where else to go, then I want you to set a target date to try to earn more money. Maybe I'm going to try to earn
16:07 Andrew Giancola? $300 more per month by X date. And I want you to lock that date in and then tactically build a plan backwards based on that. So do those four things first. And now we're going to talk about the second thing you can do, which is lock in the foundations.
16:21 Andrew Giancola? All right. So in your 30s and 40s, you need to make sure that you have the financial foundations, right? This is the time to get it all together, because if you didn't in your 20s, or maybe you did in your 20s, but you feel like you're losing track of where your dollars are going, or you feel like you don't really have a cushion in place in case an emergency happens, or you feel like you're really not investing properly, now is the time to lock in those foundations. And so here's what we're going to do. One is we're going to do a health check on our debt. Where do we stand with our debt? So high interest debt, anything above a 6% interest rate outside of your mortgage, I want you to prioritize first. That needs to get paid down as fast as we possibly can. And so because of this, when you have that high interest debt, we want to attack that high interest debt at all costs. So this could be a 6% interest rate
17:04 Andrew Giancola? in some way, shape or form. So this could be student loans, for example. If the student loans are still lingering out there, what is the interest rate on those? Let's organize those and get a debt pay down plan. Right now in Master Money Academy with our founding wealth builders, I'm actually going through and I gave them a spreadsheet and I said, hey, send me over all of your debts. I'm going to give you a debt pay down plan for every single one of these debts, because we want to tactically make sure that we clean this up. We get rid of the high interest debt, and we have some of that low interest debt available. Next is mortgages. So when it comes to mortgages, I want you to make sure that if you have a low interest rate mortgage, you're not just prioritizing paying that off unless you really want to. This is something that
17:44 Andrew Giancola? This is something that, hey, we all want our mortgage paid off. We want it paid off early, but if you got one of those COVID mortgages that was 2.5%, you may want to hold off on paying that off because you'd be much better served by investing those dollars instead. Those dollars can grow within the market or grow within real estate or wherever else you put those dollars. They can grow at a much more rapid rate than you paying down that mortgage. Now, if you hate debt, you don't like the mortgage, that is completely fine, but nothing wrong with thinking through and planning out our mortgage. Now, what I do want you to do, because you do have the time horizon as to when you are going to retire, I do want you to plan on paying off that mortgage by the time you retire. So maybe it's making a couple of extra payments per year if you feel like it, but at the same time, letting that mortgage ride out, if you have a really low interest rate, is important.
18:28 Andrew Giancola? If you have a high interest rate mortgage, let's reevaluate as rates begin to drop and let's start to refinance those high interest rate mortgages, because some of you have mortgages at a 7.5%, 8% interest rate. Well, mortgage rates are starting to drop down a little more now, and so we want to look into possibly refinancing if it makes sense. Now, how do you know if it makes sense if you're refinancing? You're going to have some closing costs when you refinance a mortgage, and so ensuring that when you do this, when you look at those closing costs, you are actually making more by reducing that interest rate than you are based on paying those closing costs. That's where you know it's going to be profitable in the long run. And then lastly, is any other low interest rate debts? We're not going to prioritize those. We're going to prioritize those high interest rates first. So that's the way we're going to look at that.
19:12 Andrew Giancola? Just cleaning up our debt, low interest debt, I am okay with you making the payments. High interest debt is an emergency. You need to get rid of that as fast as you possibly can. Next is we need to look at an emergency fund upgrade. So the 1-3-6 method is our methodology for the emergency fund. If you haven't seen that episode, go and check out the 1-3-6 method. You can just look at the 1-3-6 method and we will pop up. And when you look for that, you first want to get an emergency fund that is one month's of expenses, okay? So when you have one month's of expenses of your emergency fund, then you can start to pay off that high interest debt. Then we want you to move to three months of expenses. So you already have one month in place. You're going to add an additional two months of expenses to your emergency fund, where you keep it, high yield savings account and/or money market account. And you're going to keep those dollars in that emergency fund and then we want you to ultimately
19:57 Andrew Giancola? have six months of expenses long-term. You are in the messy middle. If you have kids, if you are buying a house, if you have aging parents, things are going to happen in your life. And if you don't have an emergency fund in place to take care of life, throwing things at you day in and day out, you will never, ever get ahead financially. I'm just telling you this right now. It removes your stress. It removes your anxiety and everything surrounding anything that could happen to you. We just had somebody in Master Money Academy, for example, who said, I am so glad I have a six-month emergency fund right now. My car broke down, it was thousands of dollars and I didn't even stress about it because I had a six-month emergency fund in place. That, my friends, is exactly what we want you to do, is we want you to have that emergency fund in place so you don't have to stress, you don't have to worry.
20:42 Andrew Giancola? Instead, you're able to take care of your stress and anxiety around money with having cash on hand. And so this is really, really important. A lot of people will say to me, hey, should I be investing these dollars instead? Man, 10% is a big difference from having like 3% to 4% in a high-yield savings account. No, this money is there and meant to be kept safe so that in the future, if something were to ever happen to you, you have the cash just there. So it's really, really important to do that. Now, another basic that I want you to get down and locking in on the foundations is automating your money. And so automating your bills, automating your investments, automating your debt payoff, automating your savings buckets, these are going to be the core areas that I want you to automate and learn how to automate if you haven't already. So automation is a key component of what we talk about in Master Money Academy and this
21:26 Andrew Giancola? is going to be something I think you really, really need to make sure that you are aligning. So the checking account, everything is going to flow through that checking account and you are going to automate it to the places that it needs to go. Really, really important stuff there as we get this ball rolling. And then cash flow management. So when it comes to cash flow, your money coming in, meaning when you earn an income, what do you do with those dollars next? Well, every single dollar that you earn needs to have a purpose. It needs to have a place that it goes. And so you need to identify each dollar and tell it what you want it to do. And so the way to do this is to have a cash flow management system. So when money... Money comes in, you direct that money towards something. Now, what I really want you to do is figure out, okay, how am I going to do this? Well, first, let's focus on investing.
22:11 Andrew Giancola? So always pay yourself first and then spend what is left over. That is the key goal that I want every single person to remember and repeat to themselves over and over and over again. Every time my paycheck comes in, I'm going to pay myself first and then spend what is left over. The beautiful thing about something like a 401k, for example, is it does this automatically for you. It pulls and pays yourself first. It pulls your money out of your paycheck and pays you first. And then you get to spend whatever is left over. So if you can build systems that repeat the same exact thing like a 401k, you're going to be able to grow your wealth over time. So 20% towards your future self, at least 20 to 30% is the goal. Really, we want you at 25%, but starting at 20% in as a minimum, meaning that money is going towards your investments or your emergency fund is the starting point.
22:55 Andrew Giancola? And we want you to do 50 to 60% towards your baseline expenses. These are your necessities, the things that you absolutely need to pay for. So housing, childcare, bills, debt payments, those are going to go with your baseline expenses. Even healthcare is a really important thing here and fitness is also a part of those baseline expenses. I feel as though, and you can tell me if I'm wrong, but I feel fitness is a baseline expense. It's a necessity for long-term health and longevity. And then spending more on things that you love, so 20 to 30% on things that you love is the other component that we want you to spend more on. And so I want you to spend and enjoy your money and be able to do whatever you want in life with these dollars. But you got to make sure that you get your financial life in order first and go from there.
23:39 Andrew Giancola? And so really, really important to tactically think through this. First, let's talk through the steps that you need to follow here. One is I want you to audit your debt. So list your balances, interest rates, payoff dates, and make sure you have a spreadsheet available that can help you list out that debt. Two is I want you to build and boost your emergency fund. So set up an auto transfer. That will help you hit six months of expenses and building and boosting your emergency fund. Three is set up 100% of recurring bills on autopay. If you have recurring bills that happen every single month, they should all be on autopay because that's going to help you automate your finances upfront. Then four is automate your retirement contributions. Send money every month to your 401k, your Roth IRA, your IRA, whatever other retirement accounts that you have out there, your HSA,
24:23 Andrew Giancola? to help you transfer this monthly. And then number five is I want you to review your spending and adjust your percentages to roughly align with that 2055-25 rule. So as you start to think about this, I really, really want you to get those basics down. Now let's get to the third thing, which is retirement allocation.
24:44 Andrew Giancola? All right, so when you're in your 30s and 40s, you want to make sure that you are really laser focused on retirement and making sure that you're saving enough for retirement. And so this is the halfway point. We are working our way towards retirement. We are halfway there. And so we got to make sure in our 30s and 40s, we are laser focused on what we need to do. So first, we need to max out those tax advantage accounts. Those things are so impactful to our dollars over time. So we've got the 401k, which is usually through your employer, which is also the 403B or the 457, depending on what kind of job that you have. So those are the pre-tax accounts, making sure that we look at those. Then we have the Roth IRA, which means money goes in tax-free and it can grow tax-free and you can pull the money out tax-free.
25:26 Andrew Giancola? We also have the HSA, which is a health savings account, but also has triple tax benefits and one of the most important accounts that we have out there. And then catch-up contributions if you are above the age of 40. So at 50, you got to plan out, you can have catch-up contributions for all these accounts. Now you may be saying to yourself, well, Andrew, what order do I actually start to allocate dollars to these accounts? And it's going to depend on two things. One, it's going to depend on how much money you make. But two, it's also going to depend on what your financial goals are long-term. For most people, I like 401k match, then Roth IRA, HSA, then back to the 401k, then you can go to the taxable brokerage account. That's kind of the order that I think about this, but it depends on your tax.
26:09 Andrew Giancola? Situation as well. So if you're really high earner, ask your CPA if you should be contributing first to the 401k instead of the Roth so that you can get those tax benefits right now. You may need those tax benefits right now if you make a lot of money. And so for a lot of you out there, that could be the case. If you don't make a lot of money and you're well within those Roth IRA limits, that's okay. So you can start with that Roth IRA and get that tax for growth. That is absolutely amazing. Now, if you make more than the limits and you think you can't contribute to a Roth IRA, you, my friend, are mistaken. You could do a backdoor Roth IRA, and that is going to allow you to get money into those accounts. Also, to add flexibility to this is you heard me mention at the end, the brokerage account. If you are someone out there who is planning on retiring early, the brokerage account is going to be your best friend. This is just any
26:53 Andrew Giancola? old brokerage account that you can open at Fidelity or Vanguard. This is going to be something that gives you additional flexibility. And really, it is a powerful account for most people who are looking to retire early. They have tax efficiency, especially if you are favoring index funds and ETFs. Where the max you're going to pay is 20% tax on the gains only, so the amount of money that your money made. But for most people, they're going to be paying right around 15% on those gains. And so, understanding how that works is really, really important, especially if you're a long-term investor. Now, if you're a short-term investor and you day trade, you're going to be paying a lot more than just those long-term capital gains. You're going to be paying short-term capital gains tax. You got to make sure that you are investing in the right account when you decide what your strategy is. But also, when it comes to retirement, you need to know what your retirement
27:37 Andrew Giancola? number is. And so to understand that, what you want to do is figure out, okay, how much am I going to spend in retirement? This is the quick and dirty back of napkin math, okay? How much am I going to spend in retirement? Well, if I want to spend $80,000 per year in retirement, then I'm going to take $80,000 and I'm going to use the rule of 25. So I'm going to take $80,000 and multiply it by 25, and that is going to give me $2 million to have available in retirement. $2 million means that you can draw it on 4% a year, which is $80,000 per year. And so that's the quick and dirty math on how to figure out what your retirement number is. Now, there's other things you need to factor in. There's other things that you need to make sure that you note, like healthcare inflation. You need to factor in the rate of inflation. You need to factor in a bunch-
28:19 Andrew Giancola? Of other metrics that are very, very important, but this is a great starting point that's going to help you through that process. Now, there are two other things that I want you to think through is I want you to fine tune your allocation. So in your 30s, you should still be aggressive, looking at the majority of your portfolio. Unless you don't have the risk tolerance, you should be aggressive in having a lot of money in your stock allocation. And then as you start to get closer to retirement age, there's two to three modes of portfolio growth. There's the aggressive growth phase, which is your 20s, your 30s, even your 40s. I'll probably even be in the aggressive growth phase in my 50s, but it just depends on when you retire. It's the aggressive growth phase where you're going to have the majority of stocks. Then you're going to have the transition phase where you're adding in a little bit of bonds to start to transition to your preservation phase.
28:59 Andrew Giancola? Because once you get to preservation within your portfolio, now it is time to have an asset allocation that adds in some additional bonds. So that you are just preserving your portfolio to outlive you. You want your portfolio to outlive you so that you can live off it for the rest of your life. And so those are the three phases that a lot of portfolios go through. In reality, that's all it really is. It's a very simple process. It's not easy, but it's simple to understand and fine tuning that asset allocation can be really important. Also, just deciding, hey, do you want international exposure? Do I need to rebalance my portfolio? Answering those questions in your 30s and 40s can be very, very important. And then retirement planning beyond just investments. Okay, so we already mentioned this, but employee stock programs like RSUs or ESPPs are really important.
29:44 Andrew Giancola? Are you going to get a pension? How are you going to handle that pension? Is the pension guaranteed? Those are things we need to factor in. Social Security is another component of retirement we need to factor in. And retirement lifestyle and the vision behind retirement is another one. In Master Money Academy, we give you a spreadsheet that kind of goes through all of these different factors. So that you can really nail down that retirement number and the gap that you need to make sure that you have invested in a portfolio. And so that's what I love about this stuff is that you really can fine tune it and nail this number down. So some tactical tips for you based on this step is increase your retirement contributions by at least 1% to 2% of income. Until you hit 20 to 30%, making sure that you are increasing that over time. Two is open the retirement accounts that you do not have open, like a Roth IRA or a 401k if you're not.
30:29 Andrew Giancola? Taking advantage of that through your employer and then making sure that you look at your HSA as well. If you have a high deductible health plan, you can contribute to an HSA. That is another great thing on this step. Four is to open a brokerage account for flexibility and making sure that you have that available and then calculating your fire number or your financial independence number is number five. So those are the five things that I want you to do. That's your homework based on that step. Next, let's get into navigating the big expenses that we all have to deal with in our 30s and 40s like childcare, aging parents, those types of things. My relationship with money has changed a lot over the years. Early on, I thought building wealth was about making more money. Now, I know it's really about having clarity. When you know exactly where your money is going and whether you're on track, you make better decisions.
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33:22 Andrew Giancola? Leesa.com promo code PFP. It's kind of amazing how much can change in just a single year. Every summer, the kids are a little bigger, a little more independent, and life looks a little different than it did the year before. And it reminds me that while we can't predict the future, we can prepare for it. That's one of the reasons I like PolicyGenius. See, PolicyGenius isn't an insurance company. They're an online marketplace that lets you compare life insurance quotes from some of America's top insurers side by side for free. And their licensed team helps you compare coverage, prices and terms, answers your questions and even handles the paperwork so you can get the right policy without the hassle. For me, having life insurance isn't about expecting something to happen.
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35:34 Andrew Giancola? the premium status it deserves at indeed.com/podcast. Just go to indeed.com/podcast right now and support our show by saying you heard about Indeed on this podcast. Indeed.com/podcast. Terms and conditions apply. Need to hire? This is a job for Indeed Sponsored Jobs. All right, so next, we're going to be navigating the big expenses of this stage. So what are the big expenses of this stage? Well, it's going to be childcare first. So childcare is basically like a hidden second mortgage. If you have ever experienced childcare and if you have to send your kids to daycare because you work, you know how expensive this can get. And in many states, daycare prices are rivaling college tuition. And I'm not joking about that. It is really, really expensive to send your kids to daycare.
36:17 Andrew Giancola? For us specifically in Florida where we live, we spend close to about $30,000 per year just on daycare when our kids are younger. So my oldest has just finally gone to elementary school, so that cost has slightly gone down. But I have two other kids that are younger. And so this is something where if you have two spouses that are working, you are going to be spending a lot of money on daycare. And if you are someone who doesn't have kids yet and you're thinking about having kids, just make sure you figure out what that cost is going to be. So that you just understand and can plan and prepare financially for those costs associated with it. Now, don't view childcare as a waste because it is an investment that allows both parents to keep growing their income and focusing on their careers and seeing the long-term trajectory of those careers. But you can do a couple of different things to do the math.
37:02 Andrew Giancola? Now, we had an entire episode talking about childcare and how to do the math to see if one of the spouses should stay home and all those different types of things. So we won't cover that in this episode because we go into great detail in that episode. So if you're interested in that, make sure you check that one out. But this is something where if you're looking for tax breaks, there are things like the dependent care FSA. If you're not going to do an HSA and you do something like a dependent care FSA, which means you could put up to $5,000 pre-tax in this account. But secondarily, another thing that you should do is come tax time, making sure that you take those daycare costs, give them to your CPA or put them in your TurboTax or whatever else you're utilizing and making sure you're getting deduction on those childcare costs. Now, one hack is as your kids start to enter school, if you are able to handle the cost of childcare, is redirect the freed up money that you have straight into your retirement
37:47 Andrew Giancola? accounts or your brokerage account. This is something that I tried and it worked beautifully. So if your kid goes from, say, pre-K to kindergarten, well, when they go to kindergarten and you have an extra, I don't know, $1,000 to $2,000 per month freed up, take those extra dollars and instead just start to funnel them towards your retirement account to increase your contributions to retirement. Because all of a sudden, what is going to happen here is that you're going to still be living the same lifestyle, but now that cash is going to grow in your wealth. And so that's just one quick hack for a lot of people who are going through that transition phase if your kids are younger. Now, if you have kids who are in elementary school or you're paying for private school, that is a whole different story. And if you are paying for child sports, this is a big one for a lot of you now, is child
38:32 Andrew Giancola? sports are thousands of dollars per year. Just talk to someone, they spend $7,000 per year for one child to be in club soccer. Well, if that is you, we got to make sure we're planning for this and budgeting this out because that's not a cheap expense whatsoever. And so making sure that we think through, how are we going to handle sports? Are we going to put them in all the sports? Are we going to put them in club sports? If we do, how early are we going to do that? And what are the costs associated with this? Because if you are putting your children's club sports ahead of your retirement savings, you have it backwards. Now let me say it again louder for the people in the back. If you are putting your Kids sports ahead of your retirement savings. We, my friends, are not making the right move.
39:16 Andrew Giancola? Okay, your retirement savings needs to come first before your kids' college savings and everything else. It needs to come first because there are no loans for retirement. And you're going to get to the point in time where you get to retirement age and really, really regret what's going on there. So really, really important to make sure we just say that upfront. Two, aging parents. So a lot of you out there in your 30s and 40s are going to have aging parents. That you need to make sure that you are starting to have conversations about their finances, about insurance, about retirement income, about how they plan for emergencies, all those different types of things. You need to talk about long-term care planning if that needs to happen. Are they going to live with you? Are they going to live in a long-term care facility? How is that going to work? Who's going to pay for the long-term care facility? If that happens, you need to start having these conversations now.
40:01 Andrew Giancola? Also, encouraging your aging parents to have wills and legal documents and trusts. It is a nightmare to go through probate if they don't have these documents in place. Help them get those documents in place. It's going to save you way more time if you actually help them through that process than having to go through the probate process because it is a nightmare. And it's going to have a financial impact on you. So how do you handle it? Sometimes culturally, you're supposed to make sure that you take care of your parents as they start to age. And so if that's the case, you got to make sure that you have a plan in place for that and you are financially saving for it. I think it's a beautiful thing, but you've just got to make sure that you are financially saving for it. And then college planning. Let's talk about college planning because 529s are the way that I start and to save for my kids' college. It is a way that I contribute money over that timeframe. We have entire episodes on the 529 plan if you haven't heard them.
40:46 Andrew Giancola? But it is a tax advantaged way to save for college. Even small contributions over the course of 15 to 18 years can grow to very large amounts of money. If your kids get a scholarship, you can roll $35,000 of the 529 plan into a custodial Roth IRA for them. There's a lot of great things that you could do with a 529 plan. But you must prioritize your retirement first. When an airplane is going down, what do you do? First, you put on your oxygen mask, then you help others put their oxygen mask on. The same goes for your money. When you are saving, you need to save for your retirement first. Then you can help other people because if you do not do this, again, there are no loans for your retirement and right now is the time you need to understand this in your 30s and 40s.
41:28 Andrew Giancola? Because if you don't, you're going to save way too much money for your kids' college and you're not going to save enough for yourself and you're going to get yourself in a situation where you're stressed about money again. And I don't want that to happen for you. So this is the order of operations. Your retirement first, then your kids can get the college savings and/or their long-term wealth building savings, but you need to take care of yourself first. It sounds selfish as a parent. It sounds counterintuitive to our instincts as parents. I get it. But we also got to make sure that our retirement is covered. Otherwise, our kids are going to have to handle us in retirement and that is a way bigger burden than any college loan would be. And so making sure that you take care of yourself first is actually also taking care of your kids. So do not get it
42:12 Andrew Giancola? twisted when it comes to that situation. Now, one hack is you can front-load 529 contributions if possible. So you get that early growth. It's going to grow a lot faster. That is one thing I would definitely consider. And then lastly is the home design and lifestyle costs. So your 30s and 40s, a lot of times you want to start balling out, upgrading that house, getting that blacked-out SUV to haul the kids around. You got the black truck with the black rims and the black-on-black, no chrome anywhere on that vehicle. If that's you, just make sure you can afford it. So mortgages, need to keep housing costs 25 to 30% or below every single month of what your income is. 25 to 30%. Really, 30% is the max that you should be doing when it comes to how much you're spending
42:55 Andrew Giancola? on housing. Stretching for a dream home in your 30s and 40s can absolutely choke your savings if you do not do this right. If you buy too much house and it is not enough to also cover your retirement, you could be choking your retirement savings. Upgrades and remodels. So make sure you budget immediately. Don't go into debt for an upgrade or a remodel. Instead, budget out your money and make sure you have that in place. Do not let renovations eat into your retirement. It's not worth it. It's going to go out of style anyway at some point in time. So making sure we do that. And then the "I deserve it" trap when it comes to cars. Cars can absolutely destroy your wealth. And if you get too big of a car payment, it's really important to make sure that you do not do that. So keeping all car costs, including insurance.
43:38 Andrew Giancola? Including maintenance, including repairs, all below 12% of your monthly income is what you really want to make sure that you're doing. So all of that in place to ensure that you are still staying on track financially. And so tactical steps for this one is run the numbers, calculate your true childcare costs, make sure you're budgeting it out for that. Have a talk with your parents and make sure you go through all the things we just chatted about. Number three is open a 529 plan for your kids' college if you have the extra funds available. Number four is audit your lifestyle creep. If your lifestyle is creeping up, make sure that you know what you are doing and then write out a priority hierarchy. So it's going to be retirement, number one, emergency fund, number two, college, three, parents, four, something like that. Just figure out what your priority hierarchy is, write that out so you can
44:21 Andrew Giancola? stay focused when choices get tough. Okay. So that is the checklist for that one. Now, let's get into how to protect what you're currently building. All right. Number five is to protect what you're currently building. So by your 30s or 40s, you've accumulated some assets, you've got a home, got a retirement accounts, maybe a business. And so you have people depending on your income. So there's some things that you definitely want to look at. And first, we want to make sure we do an insurance checkup. So life insurance, term life insurance is the way we want to go. Coverage for 10 to 12 times your income is the big thing. Two is disability insurance. This is often overlooked, but it's something you should definitely consider if you cannot replace your income with any cash that you have on hand. So look into disability insurance, kind of do your research on that. Health insurance, everybody should have health insurance. If you don't, I don't know what you're
45:05 Andrew Giancola? doing. You need to have health insurance. Umbrella insurance, if you're a really high earner and you have a high net worth over a million dollars, umbrella insurance may be great for you. And then home and auto, obviously, everyone should have home and auto insurance. If you live in a house that's paid off and you don't have home insurance, you're making a mistake. You need to make sure that you have that in place as well. Now, B, estate planning basics. All right. So wills, those are going to make sure that you decide guardianship for your kids. And they're also going to say who gets assets and who handles affairs. Trusts are for people if you have younger kids or complex assets. So if you have businesses, if you have LLCs, if you have rental properties, if you've got all these things going on, then a trust may be a great place to start. And so between those two things, you can go to a place like Trust and Will, for example, for a really
45:47 Andrew Giancola? Easy, simple will setup. You could also do a trust there as well. But if you have a more complicated situation and going to an attorney to help you set this up is going to be really, really important. The attorney should not cost you an arm and a leg. Really, on the average end, it should be about $5,000 to set up a trust if you wanted to do like a full-on trust. If it's way, way more than that, if they're charging you 15 or 20, you gotta make sure you get the right attorney that's not just trying to rip you off. So that is the way to think about that. Protecting your income and assets. So, three things I would say here is making sure you diversify your investments is number one. Okay. Number two is business owners, consider having an entity structure where you have an LLC or an S corp and you have that in place where you're protecting yourself. Really important. Three, having a cybersecurity plan or a plan in
46:31 Andrew Giancola? place to ensure that you do not get ripped off and lose money. We just had somebody talk about this. They lost $100,000 to a cybersecurity scam. And this is why we talk about this stuff so much. So doing things like freezing your credit or removing your personal information from the internet is going to be one of the most important things. If you've never heard of removing your personal information, the way that this works is that you go to a service like Delete Me. So Delete Me is a place where you can give them all of your information and they'll remove your information from data brokers. So if you Google your name, your address, or any of that information, you're gonna see a bunch of your information pop up. Well, Delete Me will go to those data brokers and get your information removed. Because the problem is, a lot of people who get a piece of your information, maybe they steal a piece of your social security number, or they steal your
47:14 Andrew Giancola? home address, and they're looking for the rest of your information. If they can just Google you and find that information, they'll be able to piece it all together and open a bank account in your name, or a credit card, or a student loan. This happened to me, which is why this stuff is so important to me, because it is so stressful and so frustrating to have to go through. So if you go to joindelete.me/DFP20, there you can get 20% off of Delete Me. It is the best service that I have ever used. It has saved me hours and hours and hours, because they just go in there, they remove your personal information from all those pesky data brokers, which is really hard to do, by the way. And then you get a report back every time they do it. And so they tell you, hey, here's where we removed your personal information, and it is a really, really powerful tool. We've been using it for years. So again, go to joindelete.me
47:58 Andrew Giancola? PFP20, really, really great place to go. And then again, freezing your credit, if you've never done that, you go to the three major credit bureaus and you say, hey, TransUnion, Equifax, say, I'm not going to open a credit card right now, or I'm not opening any mortgages right now, so just freeze my credit so nobody else can either. And then when you're ready to, you know, open up something like a credit card, you just go and unfreeze your credit. It's a very simple process and they made it a lot easier in the last year or so. And so it is something everybody should be doing is going out and freezing their credit. Also, during this stage, your health is your wealth. And so most of you need to understand that because your health is your wealth, you need to prioritize your health. So for me specifically, I got a bunch of blood work done. I have high cholesterol.
48:42 Andrew Giancola? I have done everything in my power to lower that cholesterol and it is just genetic. I can't lower it. So there's a lot of different things that I am making changes to, uh, to help me lower that cholesterol. But for a lot of people out there, understanding your health and making sure you prioritize that is what is going to allow you to live a longer, more fulfilling life. And so prioritizing that in these years is really important. And then tactical steps. So again, if you don't have life insurance, term life insurance only is what we talk about here. It's the cheapest by far and just gets done what you need to get done. So get term life insurance quotes from a place like Policy Genius, one of our sponsors on this show. That's where I got mine. Two is check your employer's disability coverage and see what needs to be done there. Three is if you have a high net worth, look into umbrella coverage and add that to your policy.
49:26 Andrew Giancola? And then four is if you don't have a will or trust, create a will, trust, power of attorney, those types of things, get that in place. And then five is audit your online security. Go to joindelete.me.com/pfp20, freeze your credit. Make sure you have that stuff in place. It is so important. Most people overlook this, but protecting your wealth isn't sexy, but it is something that is absolutely necessary for any of you wealth builders out there. Now let's get into six, which is lifestyle design and guardrails. All right. So the last one is lifestyle design and guardrails, just setting up some guardrails to make sure that we are fighting against some of the things that happen to most people within the 30s and 40s. So first is to fight against lifestyle creep. So every time you get a raise, following the 50/50 rule is the number one thing I want
50:09 Andrew Giancola? you to do. Take 50%, put it towards whatever you want to spend that money on, ball out, blow it. If you get a raise or a tax return, whatever else, and take the other 50% and put it towards wealth building activities, either your emergency fund or growing your investment. Now, if you're in credit card debt, all of it needs to go towards that. But if you are not, then using the 50/50 rule is really important. Now, avoid as many debt fueled upgrades as you can. Drive your cars longer if you can. Make sure that you're staying in your house long enough to really get the value out of it. Just avoid any debt upgrades. Like if you can't pay in cash, avoid it. Don't renovate your home on debt. Things like this that we all should make sure that we are paying cash for. And then define what your enough number is. The hardest part for me, when it comes to money, is defining what my enough number is. And once you know what that enough
50:53 Andrew Giancola? number is, it will change your why on why you're building wealth. So figure out, do I need $2 million? Do I need $5 million? Do I need $30 million? How much do you want to save in your retirement? How much is enough? And that is going to change your life once you figure that out. The other thing I want you to do, though, is I want you to define freedom. For you, what does freedom look like? Will you retire early? Are you going to travel? Are you going to work part-time? Are you going to build a business? What does actual freedom look like for you? Write it down. Two, is I want you to plan out more experiences. This is the golden years of your life when it comes to spending time with family. And if you have kids, anybody listening who has kids, which a lot of you do, do not skimp out just because of money on experiences for your kids. Vacations and
51:38 Andrew Giancola? making those memories can be really, really powerful. If you've got the cash on hand, I do not go into debt for a vacation. But if you have cash on hand, make sure you're saving a little extra cash for vacations so that you guys can have those experiences. They did a study and looked at kids and what they remember from their childhood. And most kids, their greatest memories were on vacations. It's because it's the time where you were removed from your routine and those core memories actually stick into your brain and they remember those vacations. And really, That's one of the best investments you could ever make. So don't try to hoard up a bunch of cash. Instead, make sure you're spending it on things that you actually value and enjoy. And then try to future-proof things. So if you can start to save some extra cash on hand now, I know I just told you to spend more on vacation.
52:21 Andrew Giancola? But if you can start to save a little extra cash on hand now for things in the future that you know are coming. Wedding fund, aging parents fund, or college savings. All of these things are extra gravies on top. But if you can do them, they're just going to reduce your stress and anxiety around money long-term. That could be really, really helpful. So I want you to just kind of audit your spending. I want you to audit your housing, your transportation, your savings rate. I want you to figure out if you have any lifestyle design that is getting too expensive outside of the parameters that we always talk about on this show. And then from there, I want you to make sure that you're spending more on the stuff that you love. Because these are the years, these are the core pivotal years that could change your life.
53:02 Andrew Giancola? Some amazing memories could happen, especially for you, your family, and everything in between. So listen, thank you so much for being here on this episode. I hope this episode was helpful to you. I hope it was tactical and you got some big, big takeaways in this episode that you can take home for your 30s and 40s. Again, Master Money Academy is launching, so make sure you check that out if you have not already. You are going to transform your finances in Master Money Academy. This is the transformative place that I want you to join when it is time and when you are ready. So thank you so much for being here. Thank you for investing in yourself. I truly appreciate each and every single one of you, and we will see you on the next episode.
53:54 Speaker 01 At Edward Jones, we believe rich is more than caring about the latest and greatest. It's also taking care of what gives your life meaning. That's why your dedicated financial advisor meets you where you are with personalized financial strategies that help protect what matters so you can preserve your progress while creating a path forward. The key to being rich is knowing what counts. Let's find your rich together. Edward Jones. Member SIPC.
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