Summary of "Essential Habits For Financial Success (Bestie Ep) #1002"

by iHeartPodcasts

Introduction

In episode #1002 of How to Money, co-hosts Joel and Matt delve into the essential habits that pave the way for financial success. Building upon previous discussions, including insights from economist Katie Milkman, the hosts provide listeners with actionable strategies to improve their financial health, regardless of their long-term goals.

1. Tracking Spending and Budgeting

Joel and Matt begin by underscoring the importance of tracking expenses as the foundational step toward financial awareness. Matt emphasizes, “If you don't know where your money is going, it becomes really easy to let those precious dollars slip through the cracks” ([10:04]). They discuss various methods for tracking finances, from traditional spreadsheets to modern budgeting apps like Mint and YNAB. Joel adds, “Tracking and budgeting are like two unavoidable peas in a pod,” highlighting that consistent monitoring is crucial for identifying unnecessary expenditures and optimizing spending habits.

2. Cutting Expenses and Embracing Frugality

The hosts advocate for regularly assessing and reducing expenses, particularly in major areas such as housing and transportation. Joel shares a listener’s tip about using independent insurance agents to save on insurance costs, stating, “Finding a local independent agent is one of the easy things that you can do to potentially save hundreds or maybe even a thousand dollars or more” ([05:42]). They encourage habits like implementing a 48-hour waiting period before making purchases and exploring options like house hacking or reducing car ownership to increase financial margin.

3. Regular Investing and Dollar Cost Averaging

Investing consistently is highlighted as a pivotal habit for building wealth over time. Matt explains the concept of dollar cost averaging, noting, “We’re not talking about single stock investing, we’re not talking about crypto... index funds that represent the entire market” ([30:23]). Joel reinforces the idea by stating, “Making investing a regular habit... that’s going to lead to financial success down the road” ([33:28]). They stress the importance of automating investments to ensure consistency and minimize the influence of market fluctuations.

4. Avoiding High-Interest Debt

A significant portion of the discussion focuses on the detrimental effects of high-interest debt. Joel advises, “The habit of reflexively avoiding debt is a good one to get into because... you don’t want to mess with any of them and you don’t want to play with fire” ([31:35]). They differentiate between bad debt (like credit cards and personal loans) and good debt (such as mortgages and student loans), cautioning listeners to carefully evaluate the necessity and impact of any debt they consider taking on.

5. Investing in Oneself

Joel and Matt highlight the importance of personal development as a pathway to financial success. Joel mentions, “Investing in yourself... it’s not just good for your bottom line, but it’s also super rewarding” ([34:03]). They encourage continuous learning and skill development, whether related to one’s career or personal interests, to enhance earning potential and adaptability in a changing economic landscape.

6. Building a Supportive Social Circle

The hosts emphasize the influence of one’s social environment on financial habits. Matt notes, “The more we spend time with folks who handle their money well... it’ll motivate you to do the same” ([48:12]). They advocate for surrounding oneself with like-minded individuals who prioritize financial health, as this can lead to better financial decisions and increased accountability.

7. Setting and Writing Down Goals

Joel and Matt discuss the power of writing down financial goals to increase commitment and clarity. Joel states, “If you’re putting pen to paper, the likelihood that you’re going to prioritize that thing goes up substantially” ([55:02]). They recommend limiting the number of goals to maintain focus and breaking down larger goals into actionable steps to make them more attainable.

8. Automation and Regular Reassessment

Automating financial processes, such as bill payments and investments, is presented as a key habit to ensure consistency and reduce reliance on personal discipline. Matt explains, “Automation helps us do the right thing without having to continue to decide” ([37:25]). However, they caution against becoming overly reliant on automation by regularly reviewing and adjusting these processes to align with evolving financial goals.

Notable Quotes with Attributions and Timestamps

• Matt ([10:04]): “If you don't know where your money is going, it becomes really easy to let those precious dollars slip through the cracks.”

• Joel ([31:35]): “The habit of reflexively avoiding debt is a good one to get into because... you don't want to mess with any of them and you don't want to play with fire.”

• Joel ([34:03]): “Investing in yourself... it’s not just good for your bottom line, but it’s also super rewarding.”

• Matt ([48:12]): “The more we spend time with folks who handle their money well... it’ll motivate you to do the same.”

• Joel ([55:02]): “If you’re putting pen to paper, the likelihood that you’re going to prioritize that thing goes up substantially.”

Conclusion

Joel and Matt wrap up the episode by reiterating the significance of cultivating these financial habits to achieve long-term success. They encourage listeners to take actionable steps, no matter how small, and to remain committed to their financial well-being. By adopting habits like tracking spending, cutting unnecessary expenses, investing regularly, avoiding high-interest debt, investing in personal growth, building a supportive social circle, setting clear goals, and leveraging automation, listeners can create a solid foundation for financial freedom and flexibility.

Final Thoughts

This episode serves as a comprehensive guide for anyone looking to enhance their financial health through practical and sustainable habits. Joel and Matt provide valuable insights and relatable anecdotes that make the journey toward financial success both achievable and engaging.