 One thing that I notice is a lot of budgeting and management videos talk about how you should keep track of your expenses and cut costs, but they brush over something that I think is even more important. And that is for one, where should your money go? And for two, where should it go first, second, third, and so on. And this is actually key to effective money management. And I would estimate like 98% of people don't get this right. And it's so easy. So if you can get this right, you will be miles ahead of everyone else. So sit back, relax, boop that like button, and let's get into it. Number one, first one on the list is going to be your 401k or any other tax advantage retirement account. So there's a ton of different retirement accounts here, but the main three that are going to apply to most people are going to be the traditional 401k, the Roth IRA, and then a little more rare, but a really good one is going to be your health savings account. Now the big thing with the 401k, especially one that you get through your employer is going to be that the money comes out before you actually see your paycheck up to $19,500 per year. So just to keep it simple here, let's say you get paid $1,000 and you want 5% of that to go into your 401k, that means you will see $950 on your paycheck. And that means that you only have to pay taxes on $950 out of the $1,000 that you earned and 50 of that goes into your 401k. And the only time you have to pay taxes on it is after you've retired and you start to take it out of the 401k account. Now that is a massive advantage. That means that it gets to compound inside of that account without you having to pay taxes on it for many, many decades. Now if that wasn't a big enough advantage, many companies are going to offer you what's known as matching on your 401k as an incentive to get you to contribute to it. So again, going back to that scenario, let's say you get paid $1,000 and you want 5% of your paycheck to go directly into your 401k, that would be $50. The company might then match you on that 5%. So if you put $50 in, they'll put $50 in as well. So it's literally just free money. So in almost every circumstance, I highly recommend that if the company matches up to let's say 5%, you put at least 5% of your paycheck in because again, that's free money right off the bat. You're doubling your money. That means you're getting a 100% return on your investment right off the bat. And that doesn't count any of the compound interests that is going to happen inside of the account. Now my 401k is with Vanguard and I highly recommend them. I think they're a great company. Other great companies for doing a 401k would be Fidelity, Charles Schwab. And you can check out my videos here. If I remember to put it here, I did an entire review on some of the best companies that you can use that are stock brokerages. Now on top of this, there is the traditional IRA. This one has a maximum of $500 a month or $6,000 a year for young people. This is another one that I highly recommend that you contribute to because it has amazing tax advantages. And then you should also look into the health savings account, which is something that you can have with certain companies or if you own your own business. And there's honestly a lot of other really good options depending on your specific situation, but you would need to talk to a financial advisor because it's going to be different depending on, you know, whether you have kids or a bunch of other factors like that. Now once in a while, you will see on YouTube people saying that you shouldn't contribute to these retirement accounts and they have all these like wild conspiracy theories about how it's the government's way of keeping you in a position where you can never get away from them, like all kinds of weird stuff like that. Even if you get into a situation where, you know, you have to withdraw that money from your 401K, for instance, yes, you're going to get penalized, but you can actually apply for hardship to the government. And a lot of the time they're going to end up forgiving you and you won't even have to pay the penalty. So there's pretty much no reason that you shouldn't be contributing to your 401K, your Roth IRA, etc. Next on the list is going to be a checking account. That's right. There's nothing sweeter than listening to the sound of that check hitting your bank account. Current balance is negative $300. Just kidding. But a checking account is where your money is going to first hit when you get paid. That's right. Don't accept checks from your company. Make sure that you sign up for direct deposit, so it goes straight into your bank account because your checking account is going to basically be like the hub for everything else on this list. So it's all going to start in the checking account and then it's going to go to different places on this list in this order. Now a local bank like a credit union, for instance, is going to be really nice because you can go in and talk to a real person. Usually local banks have better service. And if anything ever happens, you can just drive to the bank and get the problem resolved. Whereas if you choose an online account, there are some perks to doing that as well. But the problem is if anything ever happens, you're going to have to call them and sometimes their customer service isn't going to be the best. However, because of the fact that a lot of online banks don't really have to have as much overhead like they don't have to hire bank tellers, etc., they'll usually give you slightly better rates when it comes to checking account interest rate and savings account interest rate. So the way I like to do it is I have my checking account in a local bank and my savings account in an online bank. Next, the third place your money needs to go is going to be needs. We're talking about necessities like food, transportation, healthcare, where you live, etc. And no, we're not talking about getting a PlayStation 5, buying Pokemon cards, going out for expensive meals, or getting your Starbucks coffee every morning. We are talking about the necessities here. And this is where tracking your money comes in handy because chances are you're just like me and everybody else out there and you spend a lot of money on things that you really don't need. And chances are most of this stuff isn't going to make you happy or enhance your life at all because we sort of live in a toxic consumer culture where spending is the norm. So it's very important for you to figure out what your needs are, what your wants are, and what things you spend money on actually make you happy or actually enhance your life and keep these things separate. It's also great to automate as much of this process as you can. So for instance, your utilities should just be automated to where they're paid off every single month on time. The fourth thing that you should do is always pay the minimum amount on any debt that you have. And this is another thing that should be automated. It should be very easy for you to call whatever company you owe the debt to and just set up a minimum payment that you pay off every single month automatically without you even having to look at it. The reason for this is because if you miss a payment, even just missing one payment, it can seriously affect your credit score. This can be used to buy a house, get a car, get a business loan, all these different things that you might be able to do in the future to help yourself out to leverage debt. You won't be able to do if your credit score is low. Now I get it, you know, 2020 has been a very tough year. If you are in a situation where the minimum payment on some debt you have is too high, a lot of the time you can end up just calling the company and negotiating it down. So let's say you're paying, you know, $500 a month in debt, you might be able to negotiate that down to $250 a month. This is extremely important and you should always prioritize. Number five on the list is going to be emergency fund. All right guys, so this is important because this happens to almost everybody. You're living your life, things are going well, and then all of a sudden, boom, an emergency hits. And to be honest, I don't mean to scare you, but this is probably going to happen to you several times in your life. These are things like your car breaking down, some type of global financial crisis, your business getting shut down because of the pandemic, maybe you have health problems, there's all kinds of things that are probably going to happen to you and it's just a matter of time. I don't mean to scare you. All I'm saying is you should be prepared for this. And the problem is a lot of people end up working paycheck to paycheck and when something happens, they absolutely cannot afford any more expense. So what do they do? They either take out a payday loan or they go into credit card debt. Now the interest rate on credit card debt is around 20% or so. Payday loans, it can be even worse depending on what state you live in. And of course, they're living paycheck to paycheck. So the next month, unless they're making a lot more money, they're going to have trouble paying it off again. And it's just going to get bigger and bigger. And this is how people end up with tens of thousands of dollars in credit card debt or even worse, they might end up losing their house or homeless. So it's very important to start to build up an emergency fund and a great number to start with is $1,000. And if you do that, you will be ahead of just about everybody because only around 31% of Americans have $1,000 in savings. That means 69% of Americans would not be able to handle a $1,000 emergency expense. So this is a great goal for you to set for yourself because you need to be able to cover your costs in case something really bad happens like, you know, this year with the pandemic, for instance, even if you can just save $100 or $500, you'll still be pretty far ahead because 45% of Americans have $0 in savings. Start small and work your way up. And I can promise you that this is going to give you amazing peace of mind. Now, where you put your emergency fund, in my opinion, should be a high interest savings account. Now, high interest savings accounts are great because you can take your money out anytime. They're extremely liquid. However, they still give you a decent return on your money. So for instance, last year before the pandemic happened, savings accounts were giving up to 2.57% interest. Because of the pandemic, it's lower now, but it's still not bad. There's some savings accounts like Yata Bank, for instance, that still give pretty good interest. Some other good ones are Ally Bank, CIT Bank, VIO, Capital 1360. Now, realistically, you do want to try to work towards a savings where you can cover three to six months of your expenses. However, there is an exception to this rule, and I don't recommend it for everybody, but a lot of people do this. Now with number six, some people will disagree with me on this one, and it's a little bit controversial. I can see where they come from, and that's going to be a Roth IRA. So the thing about a Roth IRA is it's a retirement fund just like a 401K. However, it's not going to be taken out pre-tax. This is an account where you can put in about $16 a day or so up to $6,000 a year as of 2021, and you will be able to retire as a tax-free millionaire by the time you're around 60 years old. That's right. Just with the Roth IRA alone, you'll likely be able to retire at a normal time. That's how amazing this tax-advantaged account is. Now, there's one other thing that you can do with a Roth IRA in case you get caught off guard by an emergency. Many people actually skip building an emergency fund, and instead they put money into their Roth IRA because of the fact that any money you put into it, you can take that money out without any penalty. With most other types of retirement funds, there's some sort of penalty that you would get if you put any money in and then end up taking it out. But with the Roth IRA, as long as you don't touch any of the money that compounds, you can take all of that out in case of an emergency. So let me just clarify here. Let's say you put $10,000 into your Roth IRA and then you just leave it alone for 10 years, and it doubles to $20,000. At that time, you have an emergency where you're going to need about $10,000. You can take that original $10,000 out penalty free. So no worries whatsoever. As long as you don't take the $10,000 that it compounded to, so the extra $10,000 on top of the first amount. Now, the truth is you would want to avoid this if possible just because of the fact that it is a tax-advantaged account, and any money that you take out, you can never put that back in. And the reason for that is because you're getting that compounded money tax-free. So it's like the compound effect, which is already amazing as it is on steroids. So a lot of people would say that you probably shouldn't use your Roth IRA as an emergency fund. But if it's one of those situations where you got to do what you got to do, at least you won't get penalized for it. Now, I personally have an emergency fund on top of my Roth IRA. My Roth IRA is kind of like my backup emergency fund. And I used to have it with Fidelity, had a great experience with them. But I recently switched mine over to M1 Finance just to check them out. And I've also had a great experience with them as well. Now, technically speaking, you can do this same process with other retirement accounts. If you have some sort of emergency, you do have to apply to the governments for hardship, basically. And it's a bit of a process, but you can get this same thing where you get the penalty waived on other types of retirement accounts as well. But it's not as straightforward as it is with the Roth IRA. Number seven on the list, you are going to want to pay off all forms of bad debt. Now we get to the fun part. You're going to get rid of all of your bad debt. But the big question here is what exactly is bad debt? Well, good debt would be something that ends up making you money. So a few examples of this would be getting a mortgage on a cash flowing property, getting an education, getting a good degree that's going to lead to you to making more money, taking out a business loan, starting a successful business. Bad debt is going to be something like a car loan, a credit card loan, a payday loan, a credit card debt specifically, for instance, is going to have interest rates up to 20% sometimes. That is way, way, way too high. So you want to pay this down as soon as possible. And the way you want to think about this is if you're paying down a loan that let's say is, you know, 20%, that's almost like making 20% on the stock market, which is extremely good. And the reason for this is because a penny saved is a penny earned. Now, there's generally two schools of thought on how to pay down debt. First of all, you've got the avalanche method, and then the snowball method. Now with the avalanche method, what you're going to do is attack the type of debt that has the highest interest rate first. And this makes a lot of sense mathematically, because the one that has the highest interest rate is going to be the one that compounds the fastest. So for instance, if you've got $10,000 in debt, and it's got 20% interest per year, that means in one year you're going to have around $12,000 in debt. So if you're being super logical and mathematically speaking, this is the smarter way to go because if you pay that debt down faster, that means it's not going to be able to compound as fast. The second school of thought is the snowball method, which comes from Dave Ramsey. And this is where you pay down your smallest loan first. So let's give an example here. So let's say you have $10,000 of credit card loan debt, and it has 20% in interest. And then you've got $1,000 of a car loan, and it has 10% interest. With the snowball method, you would actually start paying down the $1,000 of car loan debt first, you'd pay that down completely, and then you would attack the credit card debt. With the avalanche method, it would be the exact opposite. You would start paying down the $10,000 in credit card debt at 20% interest first, and then you would attack the car loan after that debt is completely gone. Now like I said before, the avalanche method is going to be faster. It's technically mathematically sound. But the reason that Dave Ramsey recommends the snowball method for most people is because you end up getting small victories. And this is something that is going to boost you emotionally. So when you're looking at something like a $10,000 debt, it seems almost insurmountable. And a lot of people, when they start paying down that debt, they're just going to give up immediately. But something like $1,000 is pretty doable for the average person. So this is why Dave Ramsey wants you to start paying down your smallest loans first. And then once you pay that $1,000 down, you're going to feel really accomplished. You're going to get really excited about it and you're going to be ready to tackle the $10,000 in debt. It's almost like hiking a smaller mountain first before you try to tackle Mount Everest. So again, it's really just going to depend on the person. If you're somebody who needs that motivation in order to pay down your debt, then you probably want to go with the snowball method. And if you're somebody who doesn't really need motivation, you're more of like an analytical person, you'd probably want to go with the avalanche method. Next on the list, number eight is going to be investing. Now that you've paid off all of your bad debt, it is time for you to start putting your money to work. Now, until just a few years ago, investing was pretty much something that only rich people did. It used to be that you'd have to have at least $10,000 to start investing. And there was insane trading fees that the brokerages would charge. But with new FinTech apps coming out like Webull, for instance, which you can get your four free stocks down below in the description, investing has become ridiculously easy. Pretty much anybody can do it. Now, honestly, I recommend you start investing even if you just have like a dollar a day. The reason for that is even though it's not going to make you rich, it's going to get you to start investing. And you're going to see your portfolio start to grow. And that's going to make you excited. Once you start to see some progress and you see it grow, you're going to get excited about it. You're going to start putting more and more money in there. And that's where the magic of compound interest happens. And it's not just stocks like index funds, for instance, there's also going to be real estate, cryptocurrency, there's so many different ways for you to invest your money. You can also consider investing in yourself by learning a skill and maybe starting your own business or a side hustle. Next on the list, number nine, we're going to be talking about guilt free spending. That's right. What things do you want? Now, this part is actually really important because as much as we hate to admit it, we are all human. And we're going to have these emotional needs that we need to fulfill. Now, I am a huge fan of this whole movement of minimalism and essentialism. I think it's a great counter to the toxic consumer society that we've gotten into. But to me, minimalism is more of a phase. It's a great way for you to learn which objects actually bring you joy, which objects bring you true happiness over a long period of time, and which ones you don't really care about and you don't need. And once you figure out what actually makes you happy, what you actually enjoy, you should spend money on it. Now, this is going to be different for everyone. For instance, you might really love video games. It's a great stress reliever. It truly makes you happy. And in that case, you should spend money on them. So for me, for instance, I do spend quite a bit of money on camera equipment just because of the fact that I'm learning this whole filmmaking thing and I'm having a lot of fun doing it. I also spend money going out to eat dinner with my friends because for me, it's a social event. And as long as I'm eating with somebody else and enjoying the experience, it's going to be worth it. Same thing goes with traveling. Whenever the world opens up, I'm going to be spending money on traveling because I've really missed it. Now, the key here, besides only spending money on things that truly make you happy, not things that you're addicted to or things that make you happy for like five seconds, like, you know, eating cake or something. And then five seconds later, you feel bad about yourself. The key here is you need to plan these things out. So let's say you're really craving going to a particular restaurant, or you really want to go visit some random place like the Philippines, for instance, what you can do is you can set a goal for yourself in real life and you can tell yourself when I meet this goal, I'm going to plan a trip to the Philippines. So for instance, an example for me with camera equipment, I really wanted a GoPro, but I thought it was kind of like an impulse type purchase. And I told myself, like, listen, if you get to 10,000 subscribers on YouTube, you can get yourself a GoPro, I got to 10,000 subs. And that's exactly what I did. So this is the type of spending that should be completely guilt free. You should not feel an ounce of guilt after you do this because you planned it out and it's something you know is truly going to make you happy in the long run. And weirdly enough, I've found that spending money on these types of things will actually lead to you making more money because you're just going to be happier with your life in general. And that's going to cause you to kind of like chase your goals, chase your dreams and your passions. But if you're too skimpy on money, first of all, you're going to be in this weird mindset where you don't want to spend money on anything. And a lot of the time in life, you have to spend money in order to make money. So for instance, if I was too cheap, if I didn't want to buy camera equipment, then I probably never would have been able to start this YouTube channel. Number 10 on the list is going to be more investing. Now, as you grow older, you've made more money, you've got a job you like, you know, you're doing side hustles, eventually you're going to reach the point where you basically covered all of your other bases. So you're saving your money, you're investing your money, you are spending money on things that you really care about, but you're being smart with it, and you still have money left over at the end of the month. What are you going to do with it? Well, you could fall into the trap of lifestyle inflation, which is what you know, most people are going to do, they're going to start spending money on stuff that they really don't need. Or what you can do is start investing even more. And this is where the fire movement and movements that are similar to it come in. And fire stands for financial independence retire early. This is an entire community of people who want to achieve financial freedom at a relatively young age. Usually it's around like 35 to 45, whereas the average person is going to retire around 65 years old. So instead of retiring at 65, where it's hard to even travel, instead, they're going to retire at a young age where they can enjoy things like traveling much more. Because what's the point of saving up a bunch of money if you're too old to actually enjoy it? If you haven't done it already, go ahead and gently tap that like button, hit the subscribe button, ring the notification bell and comment down below any thoughts, comments, criticisms, et cetera that you have on the video. And before you leave, check out my other videos right here. I made them just for you.