How To Manage Your Money Like The 1%

About this video

• Video Title: How To Manage Your Money Like The 1%
• Channel: Vincent Chan
• Speakers: Vincent Chan
• Duration: 13:00

Overview

This video explains the 60/20/20 money map system, a method for managing finances designed to help anyone build wealth. The speaker details three core steps: allocating 60% of income to essential living expenses (core bucket), 20% to discretionary spending (choice bucket), and 20% to savings and investments (compound bucket). The video also emphasizes the importance of starting to invest early and introduces two key investment accounts: Roth IRA and 401k.

Key takeaways

• The 60/20/20 Money Map: A budgeting strategy where 60% of income covers essential needs, 20% is for wants and discretionary spending, and 20% is dedicated to savings and investments.
• Core Bucket (60%): Includes essential living expenses such as housing, utilities, basic groceries, and health insurance. The focus is on "reasonable" expenses, not extravagant ones.
• Choice Bucket (20%): Covers non-essential, enjoyable spending like subscriptions, dining out, and hobbies. This bucket encourages finding cheaper alternatives and focusing on value over price.
• Compound Bucket (20%): This is crucial for wealth building and includes two non-negotiables:
  • Cushion Fund (Emergency Fund): An emergency savings reserve, ideally 4.5 months of core expenses, kept in a high-yield savings account.
  • Investment Fund: Money allocated for investing to build wealth through assets that increase in value, leveraging compound growth.
• Importance of Early Investing: The video highlights the significant advantage of starting investments early, even with small amounts, due to the power of compound growth, as illustrated by the example of two brothers, John and David.
• Recommended Investment Accounts:
  • Roth IRA: Offers tax-free growth and withdrawals in retirement, with contribution limits.
  • 401k: An employer-sponsored plan allowing pre-tax contributions, reducing current taxable income, and often featuring employer matching, which is essentially "free money."