“I Want to Achieve My Financial Goals Within Five Years. What Should I Be Doing Now To Get There?“ (Listener Intervention)
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That's B O F A dot coma flash N E W prs P R O S media, b va outcomes, ash, new process media. I'm to call lap in the only financial expert. You don't need a dictionary to understand. It's time for some money. We have.

So have been doing this whole financial education thing for over a decade. And I have to say the economic landscape has never been harder to navigate. And so bank of america, I are teaming up to help you.

Money rehabs answered the big financial questions that are on your mind right now. Like, how do I talk to my friends about money? Should I combine finances with my spouse? How do I make my money work harder for me? You know, all the bigger.

So bank of american, I are doing six episodes together where I talk with a real money rehabs about their financial dreams and navigating the economy. You're about to hear the first episode, and IT tackles the topic of how to live the life you want now, while also building toward the financial future you want for yourself. When your setting out on a part of financial freedom, you're inevitably gona hit a fork in the road.

The from what you want right now and what you think you should provide for yourself in the future. That's what today's money we have. Ver called me to talk about SHE feels like she's at that fork in the road and he needs help deciding which wage to turn.

The good news is he doesn't have to choose with a thoughtful, intentional spending plan, which is what I call a budget, by the way, because that sounds more fun. You can set your future self up for financial success and enjoy the present, which is exactly what I wanted talk to her about to take. So here's how went on. Max welcomes the money rehab. What's your question?

Uh, I feel pretty good about where i'm right now in terms of how much are making. I feel like i'm able to little like that I want right now as much as someone in my early, early thirties, but I wouldn't be able to just like fast four and ten years and live how I want to live when i'm forty, if I make sense, like I wanted buy a house someday, but I couldn't know. So I want to help figuring out what I should be doing to set myself up, to be able to meet my financial goals that will later come.

Well, I love this question, but before we can talk about how to get the financial future you want, we need to talk about what you want for your financial future. So can you describe what your dream life looks like?

Well, I worked in marketing, and i'd like that my own firm. someday.

I like that. Okay, cool. So let's get a little more granular. You mentioned that you want to buy house.

Do you want to buy a house where you are now? Or do you want to move to another city? Do you want to have kids? You want to retire early?

Do you want to work to late night? I will tell me all the things. Max.

right? fair. I live in your city, and I Normally see myself by an apartment here.

It's just like way too expensive for what you can get. I think I move outside of the city, but stay close. I'm not exactly sure where that will be.

Um yeah, I do want to get married. I do want to have kids. I have two sisters and were really close.

So i've always kind of pictured having three kids. I don't know the me to live in a super rich and crazy luxurious life on, I ruder, but I do. 嗯， no, I don't wanna worry about money. I want to feel like I can always get what I need. I think that building up my firm is going to take time, but rather that have that be really successful, then retire early.

And when you picture buying this house, how old are you have in this picture? Is IT twenty years from now? Is that ten years .

from five years from now? I'm thirty one, and i'd like to buy a house for. So I guess all I am shooting to buy in five or six years ago and are IT.

Well, unfortunately, dreams have Price tags. Do have a sense of how big you want this home to be. I'm just trying to get a sense of for what our budget is here.

Well, let's say I do have three kids. I'd like everyone to have their own bedroom. So I guess for that they would necessarily all have to to have their own bedroom rooms from birth.

Growing up, my family lived in a four bedroom house, and I shared a room with my older sister until I was maybe and then the spare room was uses a guestroom really looking at real estate just get but I do know everything is expensive, but because i'm flexible on the location, i'm not tired to living in a super expensive area. But realistically, I don't know. Do you think someone in three decades is reasonable?

Yeah mean, as you're talking as some searching around and am seeing four bedroom homes for seven hundred k instead I land jersey city, seeing I really, really go home for six hundred K I mean, who knows what's going to happen in five years? Real state does tend to appreciate, but I think seven hundred fifty k is a reasonable budget. Okay, this is great news.

We now know what we want. And when we want IT, we just need to figure out a plan to get there. So in order to make a realistic plan, let's talk about your financial picture right now. How much money are you making?

I make just over one hundred thousand dollars.

It's amazing. I know you said that you eventually want to start your own firm. And are you happy with where you .

are right now? Y, I don't want to start my own firm because I don't like where I am now. It's more that I want to build a business that's mine and be able to run IT in the way I want.

Yes, sister, you want to tell me I totally get IT. Uh, so you're not planning on leaving this job, hundred key job anytime soon.

No, i'd like to stay for here for a while.

And you mentioned you're renting right now. How much are you spending on rent?

I play around thirty three hundred about a month.

And besides housing, what are some of your .

big expenses? I guess, just utilities like electric internet and my phone bill.

So how much would you say you spend on all that month?

Oh, I should finally know that. Maybe three hundred dollars.

cool. And do you have a car? Doesn't sound like IT.

No, I don't. I take public transportation to get to work. So it's like five box day. Nothing crazy.

Do you have any deck?

And about twenty thousand dollars left time of student loans.

That is one expensive, beautiful brain you have there, right?

Yeah, seriously. And I got institute tion to so wasn't even as crazy y as I could have been.

How much are you paying off your debt a month？

It's three hundred and lady maximum. So when we think .

about those big expenses plus other things that come up, of course, going out to dinner, ordering in meeting friends, were drink, whatever IT is, what do you think you're average monthly burn?

What do you mean by burning?

Like how much do you spend a month on average, including run? Yeah let's include .

run how like five years.

Okay, cool. So after taxes, we have humanly take on pay, usually it's .

around six thousand dollars a year.

okay. So the Matthew is easy. IT sounds like you have about a thousand books a month left to play with. What are you doing with that thousand bugs right now? Are you saving IT?

Are you investing IT i'm putting in in the VS account .

how much you have in there right now.

I can just like a regular .

savings account or high savings account.

just a regular savings account.

Oh, well, I um I have some notes on that. But okay, do you have a separate retirement plan?

Yeah, I have a retirement plan through work. I think I are on sixty k there. I ve been at the same companies. Ince, I graduates.

That's great. So i'll tell you how I think about budgeting for the future and my future goals. And then you can Taylor what I do to fit your needs and goals and wishes and desirs and all that accepts.

So I created a spending blend for myself, and I divided up into what I call the three ease, essentials and game and extras. Essentials are all the things we talked about, housing, transportation, groceries, all the need to have. The extras are the nice to have.

These are other things that you like, but you don't necessarily need so eating out or doing in bar vacations. So whatever does IT for you, the end game is the thing we can often forget about. That's your retirement in your long term of future goals.

Like having those three kids buying that four bedroom house building up for ARM, retiring on the beach somewhere when you're ready, of course. OK. So when I was your age, one hundred thousand years ago to school, but when I was your age, I put seventy percent of what I made toward to my essentials, fifteen percent toward my n game and fifteen percent towards my extras.

But in this economic climate, I see more of a case for the fifty, thirty to twenty role, which you may have seen. And following this role would basically mean fifty percent of your income toward essentials, thirty percent of your income toward extra, twenty percent of your income toward your end game. So between the thirty three hundred bucks for rent, around three hundred bucks for utilities, three hundred and eighty dollars for your student loans, your essentials are at thirty nine eighty and that is an include growth.

Y so let's call IT more like forty seven eighty. But you said your burnit is five thousand a months. So let's see the delta or the difference between the five thousand that you Normally spend and the four thousand seven hundred and eighty that you spend on essentials is what you're spending on extra s that sounds like you're spending about two hundred and twenty box on export OK.

So cranching the numbers, you're spending about seventy nine percent if you're total pain tiles, which is a bit higher, fifty percent we laid out in the fifty, thirty, twenty rule. If you shoot to bring down what you're spending on essentials, you can allocate more towards your future goals will also treated your present itself, of course, your biggest expense right now is rent. That is typically ly the case.

Usually experts say your housing costs should be no more than thirty percent of your take home pay. Right now, you're spending more than fifty percent of your take home pay on rent, which is not unusual and an expense city like la or new york. But I think what you need is to start taking into account your future yourself.

If you want to buy a seven hundred hundred and fifty thousand dollars in five years years, you're going to need to put one hundred and fifty k down for a down payment if you want to put twenty percent down. And right now you have about ten thousand dollars saved. If you advertize what you need to stash away for a downpayment, you're gna need to put twenty eight thousand.

Per year aside for that limbs. Mb, and you don't need to put to one percent down. And if you're a first time homebuyer, you can probably get a first time home by your loan and put a lot less down.

But that just means that the principal on the loan, the trunk that's accruing the interests is going to be bigger. So as something for you to keep the mind, so let's above the banded here. You're saving a thousand dollars a month or twelve grand a year.

If I read, I would be asking myself, how can I essentially double the amount that i'm saving? This isn't exactly what you need to do, and I i'll talk about in a second. But let's just imagine a scenario.

You're really leveling up your savings. The obvious place to reallocate your budget is defined, some savings with your rent. I know it's a pain in the neck to move, but do you think you can find a cheaper place?

I mean, I live in wine was burger, and I love my apartment, but IT is in the most expensive part of replant. I've lived in the same apartment for two years, but it's just an annual. I'm not locked in for a long time.

So I guess I was looking into a cheaper place. I don't know. I'm my thirties. I want to living in the same kind of shoe box. I was living in my funnies where if I was lying down on my bed, I could touch all for walls.

So fair. So maybe for you your housing volts into your s and your extra category because maybe it's not essential for your apartment to be as awesome as IT sounds like IT is. But IT also is the place that you wanna treat yourself, which I to hold, tally, get and totally understand.

The thing is though, something has to give right. The good news is that you have a lot of options here. If you don't want to spend less on your essentials, you could work on making more money. You could also ask for a raise at work or take god a side hostel.

If you're assuming your income is going to save the same, you can always extend your timeline so that you have more time to save up for that downpayment or you can look for a less expensive house. So the downpayment isn't that half ty? You have a lot of levers to all here. You could also think about not putting to one percent down. Like I said, again, that has implications for how much you pay over the lifetime of your loan, but you have options.

Thanks.

but I do want to be so clear. Hair max, you can meet your financial goals without depriving yourself in the present when I make my spending plan. And yes, I meted IT in my twenty and then have updated a constant license life, and everything else has happened.

And our budget is always changing. So when I make my spending plane, I personally made sure that I think about my future self and budget for my end game and my current self. And that's where the essentials, but also the extras comes in.

IT is really important to do the things that make you happy now and baLance the things that make you happy later on. So what is unable to have both? You just have to be international about IT. So let's talk about saving for your downpayment. Do you have any investments right now?

No, I don't, other than my foo. Okay, okay. So here's the .

cool thing about getting deeper rents of the financial world. That one hundred and fifty thousand dollars that you need for a downpayment is hefty and probably sounds like a really intimidating number, but you don't necessarily need to earn one hundred and fifty thousand dollars to the panne e to have one hundred and fifty thousand dollars because you can build toward that dawn payment with investments too. Are you open to .

interesting? And I guess i'm still paying off my loans fill little risky to invest. The case I lose the money.

I totally get IT a there are different flavors of investing. There are principal protected offerings like treasury bonds and certificate of deposit AA cds. There are also higher risk options with a potentially higher chance of reward, like investing in the stock market.

Historically, the stock market has returned eight percent year over year, and your right investing does come with some risk of loss. So what I do personally is diversify my investments. I invest in the stock market, which again is a higher risk, higher reward option, and that also invest in safer investment offerings like cds and treasury bonds.

Treasury bonds are backed by the U. S. Government, so they're one of the safest investments out there. Cities are also super safe. Bake of america, for example, has three CD options that are all insured up to two hundred and fifty thousand dollars.

So you could essentially put your whole one hundred and fifty thousand dollars for your downpayment in a city, and the entire next egg would be ensured. The city yield actually depends on where you live. You're going to want to check out your specific rates.

But for where I live in, a bank of amErica has three different city options. The featured city that available offers up to a four point three five percent yield at the time we're talking. So if you can invest some of what you're saving and you earn a yield that can help you finance your house for more than gesture income alone. So in order to build over this school, you're onna need a budget. Do you have anything like that right now?

no. Do you .

think you could?

Yeah for sure.

So what I would do for your next steps, max, is to take the Price tag that we put on that seven hundred and fifty thousand dollar home and build out a budget that gets you there. So reverse engineer, at once you take a look at those numbers, you might decide that is more worthy for you to push back the timeline or maybe you want to maybe this financial goal is more important to you, but the most important part is that you do the math and know where you're at and if you're on track for where you want to be. Do you have any questions about this game plan?

I feel good. Actually, there is a part of me that finds that a little scary to put the numbers to a goal. But IT was a motivating and having a plan that will help me get there is amazing.

Well, I am super proud of you, max. And no doubt future max is round of you to for today's step, you can take straight to the bag. If you are also looking to make money moves for your current and future yourself, go fight tools and guidance.

You need, I think, america, to get started, just go to b of a docs, slashed new process media and linked in the show notes. But if you have your heart set on typing this one out again, IT is B O F A dot com slash new pros media. This episode was brought to you by bank of america.

Money we have is a production of money news network. I'm your host, nickle lapin. Money rehabs executive producer is more than the void. Our researcher is Emily homes.

Do you need some money rehab? And let's be honest, we all do. So email is your money questions.

Money we have at money news network dot come to potentially have your questions answered on the show or even have a one on one intervention with me and follow us on instagram at money news and tiktok at money news network for exclusive video content. And lastly, thank you so seriously. Thank you. Thank you for listening and board investing in yourself, which is the most important investment you can make.