Over the past two years when I run into someone and tell them about my podcast, one major question that continues to come up is “What have been your biggest takeaways?”
It’s a great question.
It’s the whole reason I started the show. I wanted to learn from some incredibly smart, family-centric, wealthy, philanthropic, independent, in-control of their future rock stars that would motivate me to give my family the best life possible. And it’s worked.
During the course of the podcast:
- We updated our last will & testament
- We started a chore & reward system for our kids
- I enjoyed a nice salary increase and promotion
- Nicole got a part-time gig in home organizing
- We started saving in an HSA
- Our family traveled on a $6,000 trip to Cabo San Lucas for less than $300 because of travel rewards
- Started a Roth IRA for our kids
- Increased our charitable giving from 1% to 3%
- Grew our net worth by $200,000
- We paid off our 15-year mortgage in less than 5 years
- Saved $50k in our real estate fund
- Nicole and I celebrated our 8th anniversary as a couple
That is just a short list of the things our family has done during the last two years. I honestly believe that if it weren’t for the over 100 interviews I’ve done with young millionaires, financially independent couples and debt-free parents, I don’t think we would have had that much success.
Now the other major reason I wanted to start a podcast was to help others. I have a feeling in my brain, my bones, my heart that I want to give back. I love helping people win. It makes me happy.
In that spirit, here are my “10 Steps to Young Family Wealth and Happiness” courtesy of the money geniuses I've interviewed on my podcast and blog.
1. Choose a Debt Free Life
When we eliminate high-interest debt from our lives, we are saying goodbye to stress and hello to control, purpose and intention. No more living paycheck to paycheck. No more scraping by.
When we say, “I’m going to be debt-free” or “I’m never going to owe someone money again” … there is a freedom to that message that can’t be denied.
Here are a few action plans to consider under this step:
Save up $2,000 for an Emergency
If you do this, you’ll have twice as much money than 57% of the US, and it’ll keep you away from using credit cards for your emergencies in the future.
Live on a Monthly Budget
We can’t improve our finances if we’re not tracking our finances.
Choose a Debt Elimination Method
The Debt Snowball method helps you eliminate your smallest balance first.
The Debt Avalanche method helps you eliminate your debt with the largest interest rate first.
And the Debt Hatred method is where you eliminate the debt that you hate the most first. For example, if you HATE that fact that you owe your parents money, you can pay that off first. Or if you hate your student loan with a passion, pay that off first.
Recommended Podcast: How We Eliminated $27,000 of Newlywed Credit Card Debt
2. Partner with Your Spouse
Building legacy wealth can be difficult, but it becomes a lot easier when you’re partnering with your spouse.
Here are some ways to make some strides together as a couple:
Share Your Financial Dreams
When you’re deep in debt and feel like you’re drowning, we forget our dreams because they seem so impossible. Take some time to dream together with your spouse.
- Do you want to own your own business?
- Are you ready to stay at home with the kids?
- Do you want to start a new career?
These discussions can motivate you and your spouse to make major financial progress together.
Plan Your Path Together
Once you hone in on your dreams, it’s time to put some action steps below them.
For example, if your goal is to go down to one income and leave your job to stay at home with your kids, you’ll need to figure out how to decrease your living expenses, eliminate debt payments or increase your household income. With a strong partnership, it can become a reality.
Celebrate Your Wins Together
If you’re paying down $200,000 of student debt, that path can feel like an eternity! Celebrate along the way. Have some fun when your balance is at $100k, $50k and $25k.
You and your spouse can track the progress together, drink some bubbly or go out to dinner to celebrate each milestone. This is an incredible moment in your lives that should be remembered.
Recommended Podcast: How to Celebrate Paying Off Your Mortgage
3. Protect Your Family
We can make a lot of money and develop a mass amount of wealth, but if we’re not protecting it, it can be a disaster for our family. This message isn’t meant to scare you. It’s meant to help you and your family rest easy.
Here’s how you can do this:
Get Term Life Insurance
If your family depends on your income, you need term life insurance. Find a partner that shops the marketplace on your behalf and finds you the best deal. Depending on your situation, Whole Life can be very pricey, with less coverage and not the best investment.
Craft Your Will and Trust
To protect your family and ensure they are in good hands if the unexpected occurs, get your last will and testament going ASAP. And as you’re building your wealth, look into a trust to ensure you avoid issues for your family if you were to pass away.
Tomorrow gives you a free last will and testament in a handy app.
Review Your Insurance Coverage
Everyone’s situation is different, but here are some types of insurance to keep your family safe:
- Homeowners / Renters
- Long Term Disability
- Umbrella (if you have a net worth over $500k).
- And of course … Life Insurance.
Recommended Podcast: 5 Term Life Insurance Providers That Make the Process Easy
4. Save for Retirement
Automated investing and compound interest will build us a huge nest egg and help us to retire comfortably. If we set things up correctly, we can essentially get rich while we sleep!
Here’s a few tips that I learned:
Take Advantage of your Workplace 401k
By consistently investing in your workplace 401k you’re doing 3 things:
- Automatically investing your money and never touching it so it grows for a really long time
- Taking advantage of compound interest. This is when your money starts to make money.
- If your company matches your contributions, you are essentially receiving free money!
Look into Index Funds
If your 401k or other retirement routes like Roth IRA or HSA has the ability to invest in low-cost index funds, consider it. You can save a boatload on fees and you can essentially mirror indices like the S&P 500 that provide you a great long-term return.
The key is not to touch it until retirement. Hence the name “retirement savings”.
Max Out Tax Favored Options
If you have the income and ability to, try to max out your tax-favored retirement options like the 401k (or 403b or 457 plan), IRAs and HSA. By maxing these, you’ll get the full tax-saving advantages available to you and your retirement funds will skyrocket.
Recommended Podcast: Simple Millionaire Investing Strategies with the 401k, IRA and 529
5. Grow and Diversify Your Income
Saving, tracking and protecting your money is important but growing your income is a major part of your solidifying your young family wealth.
It would be a flat out lie to tell you that someone making $200,000 and someone making $50,000 has an equal shot of becoming young millionaires.
Is it possible depending on their savings rates? Yes, for sure.
Is it going to be easier for the person making $200k? Absolutely.
So let’s chat about how we can grow and diversify our income streams.
Increase Your Salary at Work
If you’ve been consistently exceeding expectations at work and it’s been a while since you’ve received a raise or promotion, it’s time to ask for what you deserve. Check out industry sites like Glassdoor to find out what people in your position and in your area are making.
It’s time to make more money!
Invest in Real Estate
An excellent way to diversify your income is with buy-and-hold rental real estate. This is something I’m so excited about and can’t wait to make it a reality this year.
Nicole and I are saving up for our first rental. We're trying to decide if we want to buy in cash or take out a loan. Either way, we're excited to take the plunge and become investors!
Start a Side hustle
If you have passion and talent towards something outside of your full-time job, see if you can make more money with it. See if you can start something that doesn’t require a lot of capital in the beginning, that way if it doesn’t work out, you’re not in a bunch of debt.
Exhibit A: My blog and podcast.
I started it with maybe $250 and yes, I’ve invested more, but my little hobby made me $13,000 last year. That’s more money for fun, real estate savings and investing.
Recommended Podcast: How This Mom Makes Over $100,000 Working Part-Time From Home – with Sarah Li Cain
6. Develop a Legacy for Building Wealth
We can work on our financial situation as much as we want, but if we’re not helping our kids to carry on the legacy then our family trees won’t grow strong for very long.
You may have seen it or heard it. A stunning 70% of rich families lose their wealth by the second generation. 70%!!!
Let’s hang in that 30% zone my friends … here are some thoughts on how:
Initiate a Chore and Reward System
Help your kids understand that with hard work comes reward. The things they truly want in life are there for them if they want to work for it.
This can start off very young with chores around the house. A consistent tradition like this can help them learn responsibility, integrity and how money really works.
Try a Breakthrough Allowance
As great advice from John Lanza, when your kids get to be pre-teens or teens, give them enough allowance to cover their clothes, food out of the house and cell phone costs. This way they will learn how to be responsible with money early.
They will surely make mistakes, but better to do it at 14 instead of 41.
Help Them Save for College
Student loans are at an all-time high and we don’t want our kids getting caught up in that hot mess.
How can we help them thrive and also learn during the process?
- Start a 529 college savings account as early as possible. Once your kids are old enough, show them how compound interest works and how the growth of their college savings account is going to help them in the future.
- Encourage your kids to work during high school and college to save for tuition. They'll learn hard work and it'll help them stay debt-free.
- Lastly, look into scholarships! They are available and waiting to be earned. Work with your kids to fill out the applications and start earning that free money.
Recommended Podcast: How Pam Andrews Helped Her Son Earn $700,000 in College Scholarships
7. Become a Generous Giver
What?! How can we become wealthy if we’re giving away our money!?
That’s actually where my head was for a season too … In 2017, our family gave 1% of our income. Then in 2018, we gave 3%. Now we're shooting for 5%. Baby steps!
I hope I can be like the inspiring givers that I’ve interviewed. Because I love the feeling. It feels great to give. And I want to inspire my kids to be givers too.
If we feel passionate about a cause, a mission or a movement, our wealth can make a big difference. Instead of hoping for change, we can be the change. That’s powerful.
Here are some things I’ve learned:
When you find charities that really resonate with you, you’ll become inspired to give more. For me, I like charities that give underprivileged kids a better shot at life. That’s just me though. You might be all about the environment or animals or the ocean. Find your passion, get inspired and give.
Ladder Up Your Giving
If you’re like me, maybe you’re not giving a lot. That’s okay.
See how you can increase each month or year until you’re giving 5%, 10% or whatever number inspires you. I’m not sure what the magic number is. I’m still discovering that.
10% sounds awesome. I hope I get there someday.
Donor Advised Funds
If you’re looking to take your giving into overdrive, look into Donor Advised Funds. Depending on your contributions, you can receive a tax deduction and you can invest the money to grow for future giving.
Does a “Family Giving Foundation” that lives on in perpetuity sound cool to you? Yeah me too!
Check out more details on Donor Advised Funds and see if they are right for you.
Recommended Podcast: Why I Give 10% of My Income to Charity – with Allison Kade
8. Achieve Financial Independence
This is the top financial goal I’ve heard from almost all of the people I’ve interviewed. Financial Independence, FI or FIRE is when you have enough income to cover your annual expenses without the need for full-time employment.
This is when your assets are producing enough income for you that you don’t need to hustle and make more money.
For a parent, that can mean more time with their family and more time spent doing the things you love. Time freedom!
So how do we get there?
Understand Your Annual Expenses
To understand how close you are to FI, you need to know your annual expenses. Tracking those through the monthly budget we talked about in Step 1 is key to your success here.
These expenses are:
Total all of those expenses up for the year and that’s your number.
Grow your Passive (or Active) Income
Let’s say your annual expenses are $60,000 per year. That means you’ll have to develop passive or (active) income sources that total $60,000 per year (after taxes) outside of your full-time employment to hit FI.
These can be sources like rental real estate, a taxable brokerage account or a small business – at least these were the top favorites from the folks I’ve interviewed.
For a very high-level example, if you own 6 homes that each provide you $10,000 per year in net income, then, in theory, you’re financially independent!
Let’s say that owning 6 homes is not going to be possible but 4 might be possible. Figure out a way to lower your annual expenses. It’s a lot easier to spend less each year than it is to make more money.
Can you eliminate debt to decrease your annual expenses?
Can you eliminate your annual travel expenses by looking into credit card rewards?
Perhaps saving on your weekly shopping habits?
This may bring you down to $40,000 per year. Keep researching and experimenting until you find the number that is feasible for your family.
Recommended Podcast: Finding the Right Savings Rate for Your Family's FInancial Independence
9. Follow Your Passion (and Use Your Talents)
Once you’re financially independent (or at least feeling financially in control), you can feel free to pursue a life and calling that truly inspires you.
A lot of the folks I interviewed became financially independent and, after enjoying some much needed relaxation and travel, they realized that they had more to give and more to do in life.
They wrote books, gave back in their community, coached others and started small businesses. I mean really … how long can you really sit on the couch, play golf or sip cocktails on the beach? You need purpose and meaning in your life, right?
Here’s what I learned from these inspiring people:
Take Time to Reflect
A lot of us are so busy moving from one task to the next task that we don’t take time to think and reflect on what’s truly essential in our lives. It can help to remove or limit digital distractions like the cell phone, social media or email clutter that can consume our day.
This way we can take more time to plan, think, journal and simply reflect on where you want your life to go. Honestly, we can do this well before hitting FI but it's even more important when we have more time on your hands.
Define Your Path
Just like the previous steps, it’s important to clearly define what you want your life to be like now that you have your financial freedom.
Write it down. Use a journal or a blog. Decide on paper what your path will be.
Have you always wanted to spend more time volunteering in your community but you never had the time? Now is your chance!
Have you always wanted to write a book but didn’t get around to it before? This is your moment.
Use Your Talents
Do you have talents and skills that can help you pursue your passion and make a difference? Now that you’re an FI-hero, you can use your superpowers for the good of your family, yourself and your community. Talk about a life of purpose!
Recommended Podcast: Track Your Net Worth and Become a Young Millionaire – with J. Money
10. Teach Others (Especially Your Kids)
One the greatest joys in life is helping others win. The interviews conducted over the past two years were produced with the intent of empowering families to win with money.
Once you start to really grasp this financial knowledge and you’re making a major difference in your life, it’s time for you to teach others how.
Wouldn’t it be incredible to make a major financial impact on your community, or your country or the world!?
This is doubly important for your kids! We don’t want all of this wealth, time freedom and legacy of purpose to fade away after just one generation!
Here’s how the rockstars I interviewed are teaching and keeping the spirit alive:
Write a Blog
The internet gives people access to free and incredibly helpful information. Join in on this revolution and share what you know through a blog. It’s not only a great way to teach and give back, but it gives you a medium to plan, reflect and journal about your future.
Volunteer in your Community
Share your experience and knowledge in person with groups that could really use your support.
Check out programs like Jumpstart.org or TalkinginClass.org to see how you can share your experience in the classroom with younger kids. This way you’re promoting financial literacy for the next generation.
Teach Your Kids
I love the saying “Give your kids enough money to do something, but not so much that they do nothing.”
We want to empower them to keep this legacy alive. As they grow older, we should give them progressive levels of responsibility when it comes to their money. And we should always do our best to communicate and model strong financial habits. After all, kids are great imitators!
Recommended Podcast: How to Raise Financially Savvy Kids – with Bill Dwight
Okay … well, we did it! We hit on all 10 steps for achieving young family wealth!
- Choose a Debt Free Life
- Partner with Your Spouse
- Protect Your Family
- Save for Retirement
- Grow and Diversify Your Income
- Develop a Legacy for Building Wealth
- Become a Generous Giver
- Achieve Financial Independence
- Follow Your Passion (and Use Your Talents)
- Teach Others (Especially Your Kids)
Now, I’m not sure these steps need to be followed sequentially. I suppose it couldn’t hurt to pay off your high-interest debt before you become a generous giver.
Either way, these are not hard and fast rules. They are concepts that I learned from over 100 self-made millionaires, personal finance experts and financially independent couples who are killing it for their families.
I’m using these steps. It’s working for our family and life is great right now. And I’m thrilled about our family’s future.