15 Financial Tips And Tricks I Learned From Self-Made Millionaire Graham Stephan
Like most people, I didn't grow up knowing much about money. It wasn't until my mid-twenties that I decided to get serious about financial literacy. I did what any millennial would do and turned to YouTube, where I found Graham Stephan. And his videos honestly changed my life!
For those of you who don't know, Graham is one of the most popular finance guys on YouTube. He's got over 3.3 million subscribers! He didn't get into college after high school, so he went into real estate. Then, he began making personal finance videos and started raking in the money. He became a self-made millionaire at just 26!
I love that he combines personal finance with his quirky sense of humor. He turns a pretty dry topic into a lot of fun!
So here all the best tips I've learned from Graham's videos:
Note: Graham is not a financial advisor, and I'm not either! This is just stuff that has worked for him over the years that I've successfully applied to my own personal finance journey.
1.I always track my spending.
I'm starting with the most basic tip because this is the foundation for everything. How can you save money if you don't know where the heck it's going?! Tracking looks different for everyone; some people like to manually enter their expenses into a spreadsheet, while others prefer apps like Mint or You Need A Budget that do it for you. It doesn't matter which way you do it, as long as you find something that works for you. After three months of tracking where every single penny goes, you'll have a good idea of how much you spend in each category. Then, you can start deciding where to cut back. Once I started tracking, I was honestly SHOCKED at how much I spent on dining out. Now, I'm much better about it! The ultimate goal here is to recognize any unnecessary expenses so you can cut them out and live beneath your means.
2.I pay myself first.
Of all the tips on this list, this is the one that changed my financial situation the most! When most people get paid, they take care of their bills and treat themselves — and whatever is leftover can go into a savings account. But this is actually backward! Once you've tracked your spending for a couple months and have figured out how much you can realistically save per paycheck, try putting that money directly into your saving/investing account as soon as you get paid. Whether that's $50 or $500 doesn't matter; what's important is you're building the habit of paying yourself first. Pro tip: Automate your savings so you don't even have to think about it!
3.I keep my emergency fund in a high-yield savings account.
We all know that a three- to six-month emergency fund is essential. You've probably heard that a thousand times — and it's true! But once you've put in the hard work of saving all that up, it's important to think about its location. It doesn't make much sense to keep the money in a traditional bank account. According to NerdWallet, the average APY (annual percentage yield) is only 0.06%. But many online banks offer way more! The percentages were slashed during the pandemic, but some are currently giving 0.50% (which is still way more than a regular bank offers). Lots of people enjoy Ally because they offer organizational "buckets," but there are many more to choose from, like Marcus by Goldman Sachs and American Express National Bank.
4.I paid off all my bad debt.
Graham suggests making a list of your monthly discretionary spending and the costs (like going to restaurants or the movies). See the total number underneath your fun spending? It's time to stop having fun so you can put nearly the entire amount toward bad debt, with super high interest rates. It sucks, but that's what you gotta do if you wanna get serious about it. If that seems like a really extreme change to you, you can always work on tapering your discretionary spending down gradually while putting more and more money toward your debt each month. And once you start seeing progress with your debt, you might feel motivated to make even more changes! You can try debt consolidation (like transferring credit card debt to a new card with a lower interest rate), which will save you money. When it comes to actually paying off the debt, some people like the snowball method (paying off the smallest balances first), while others prefer the avalanche method (paying off debt with the highest interest first). The former offers psychological advantages, while the latter can save you extra money. However, once you've paid off all the "bad" debt, Graham recommends you do NOT pay off your mortgage quickly if you're a homeowner. That's because you have such a low interest rate on your mortgage that you're usually better off putting your money in the stock market and making a bigger return there.
5.I opened a Roth IRA.
I like to think of an individual retirement arrangement (IRA) as a picnic basket. In your basket, you can put whatever fruits and snacks you want inside, right? An IRA is the same; inside, you can invest in stocks, index funds, whatever! A Roth IRA is great for people who are currently lower-income, because you use after-tax money now, while you're in a lower tax bracket. That means the money you contribute to the Roth IRA comes from your paycheck, which was already taxed before it hit your account. And that's awesome because all the money your investments make will be TAX FREE once you retire! If you're under 50, the IRS lets you contribute up to $6,000 a year ($7,000 if you're 50 or older), but anything is better than nothing. And the best part is you can take out your contributions (not gains) at any time with no penalty as long as the account has been open for 5 years! If you want to open a Roth IRA, Vanguard, Fidelity, and Merrill Edge are all popular.
6.I never get Starbucks.
We all know you're not gonna get rich just by cutting out your morning coffee. But what I think Graham really means here is stop paying for convenience. Is it more convenient to have a barista make your coffee? Absolutely! But is it good for your wallet? Nope! The "no Starbucks" attitude is just a mentality to adopt and apply to other areas of your life. Start making your own coffee at home. Stop using apps like Postmates and Grubhub when you can cook dinner for way cheaper. Don't have the pizza delivered when you can pick it up yourself. Once you stop paying all these convenience fees, you'll have more money for saving/investing. Now, it's still okay to pay for convenience sometimes, like when you're sick or burned out, but just be mindful about what you're paying and why. And watch out for making it a habit when it's not really serving a purpose for you.
7.I use my credit cards as often as possible.
If you usually use your debit card or cash, you're missing out. Whether you're grocery shopping, putting gas in the car, or paying your Wi-Fi bill, consider putting it on your credit card. Because of the rewards, I get hundreds of dollars a year deposited into my checking account just by using a credit card over a debit card. Some people prefer to use their credit cards for travel points so they get free flights and hotels on vacation, and that's awesome too! Find a credit card that gives you the rewards you want. Just don't forget to pay off your ENTIRE credit card bill at the end of every month! You don't want to pay those absurdly high interest rates. If you're not in a place to pay off your card every month, you should probably skip this step for now.
8.I never buy designer clothes.
So this one might be a little controversial, but hear me out. Graham is a multi-millionaire, but he still wears the same $7 shirts he got from H&M. Why? Because it just doesn't make sense to waste a bunch of money on expensive clothes when you're trying to build your wealth. Like the "no Starbucks" rule, I extend this mindset to different aspects of my life. I used to LOVE shopping, but now I'll go months without a new article of clothing. One trick that Graham taught me is to ask yourself if that item's price is worth the equivalent of the hours you gotta work to pay for it. For example, is that new pair of shoes really worth four hours of hard work? If not, move on. The same attitude can be applied to cars, phones, going to concerts, etc. For every single purchase you make, ask yourself if it's worth it. And if it is worth it, go ahead and buy it without feeling guilty!
9.I try to be smart at restaurants.
Going out to eat is how a lot of us spend time with friends and family. Just because we wanna improve our financial standing doesn't mean we have to be hermits! Graham reminded me that going to happy hour instead of dinner can be just as fun (but way cheaper!) and if you do go out for dinner, you can always order an appetizer as your meal. I actually just did this last week! My friend picked an oceanfront restaurant for a celebratory dinner, and the entrées were way out of my price range. So I just ordered an appetizer for half the cost! Also, I hardly ever get alcoholic drinks at restaurants. They're so expensive that I don't think they're worth the cost. I'd much rather contribute $15 to my IRA than spend it on a cocktail.
10.I have multiple sources of income.
If you're living well beneath your means and saving/investing as much of your income as you possibly can, you're gonna hit a ceiling. You might want to increase your income in order to save/invest more than your current rate, and you'll probably want some of it to be passive. For example, I work here as a writer at BuzzFeed as my full-time job. But since I started watching Graham's videos, I've also invested in the stock market, which means my money works for me and makes me more money. I've bought stocks that offer dividends (though I reinvest mine) which is super cool, and my HYSA gives me a small amount monthly. Just remember that this step will look different for everyone. Whether you walk dogs in your neighborhood, start a small business, or take a weekend job, the bottom line is to increase your income.
11.I don't try to time the market.
Once I've maxed out my IRA for the year, I start investing in a regular brokerage account. This isn't tax-advantaged, but the good news is if you hold the investment for a year, you'll pay a lower capital gains tax. Now, I know some people who try and "time" the market. This means they try and wait for the lowest price before they buy in. But that's usually bad news! Some people wait so long for that ideal price that by the time they finally get in, they've missed out on consistently contributing and end up with a smaller investment. Instead, Graham is a big fan of dollar-cost averaging, which is a fancy way of saying you'll just keep buying in at regular intervals, regardless of price. For example, you could decide to buy $100 of your favorite stock or index fund on the first of every month. Over time, the price you paid will likely average out. And if you're investing long-term, it doesn't really matter anyway. There are tons of brokerage accounts to choose from, like Fidelity or TD Ameritrade.
12.I invest windfalls.
Graham's always talking about being as cheap as possible so you can save/invest as much as you can. And that includes windfalls! That's just a name for any unexpected cash that comes your way, whether it's a surprise bonus at work, some birthday/holiday money, a tax refund, or just $20 you found on the ground. It's super tempting to spend it, but just remember that investing windfalls can make you more money in the future.
13.I try to care of my body now to save money in the future.
This one is long-term, but it's really important. Even though Graham is the most frugal dude on the planet, he still pays for a gym membership and spends money on healthy food. Why? Because it's gonna save him so much money in the long run, and it will improve his quality of life. If you're not at the point where you can afford a gym membership or tons of healthy ingredients for dinner, that's okay! You can always work out at home or grab those pre-made salads at the grocery store when they're on sale.
14.I avoid lifestyle inflation.
During your life, you'll likely get raises and promotions. It can be very tempting to increase your spending as you start making more money, especially if your coworkers and peers are doing it. But getting a new car, going out to eat more often, or moving to a bigger apartment are all inflating your lifestyle. Imagine if you kept the same expenses for years, and all that extra cash was being invested? You could achieve your financial goals so much faster!
15.And finally, I aim for FIRE.
FIRE stands for Financial Independence, Retire Early. The FIRE movement is about investing enough so that you're free from the stress of everyday work. One popular equation to discover your FIRE number is multiplying your yearly expenses by 25. So if your yearly expenses are $40,000, multiply it by 25 to get $1,000,000. This is your FIRE number! However, if you're aiming to retire very early, say at 30 years old, it would be safer to multiply the $40,000 by 33 since you'll be relying on this money longer. Whenever you reach your FIRE number, you can quit working and annually withdraw 3-4% of your investments to live off. So cool! Obviously, the earlier you start investing, the longer compound interest has time to work its magic. Did you know that every $1 you invest at 20 years old will turn into $21.72 by the time you're 60, assuming an 8% average return? Learning this completely changed the way I view investing! Now, for pretty much every purchase, I ask myself if it's worth delaying FIRE. And for the vast majority of stuff, it's definitely not!
