I graduated in 2010 with $97,000 in student debt and made impulsive purchases like a new car and a leather jacket. Despite my recklessness, I always maintained a sense of financial responsibility. As I became more interested in self-development, I learned more about managing my finances effectively. Over the years, I built a profitable business, became debt-free, and opened my first retirement account, which I consider a major accomplishment. In this article, I want to share my approach to personal finance, including the accounts I use, why I use them, and the lessons I've learned over the past decade.
My Personal Finance Accounts I have four accounts: a personal checking account, a personal credit card, a Roth IRA, and an Individual 401k. All of my money passes through one of these accounts. Notably, I don't have a savings account as the low interest rates don't make it worth it for me.
My approach to finance is not solely focused on maximizing returns, but rather on managing my time and energy in a way that makes sense for me and provides the best returns for my happiness and finances. I prioritize working on my business and videos over searching for the best interest rates at different banks.
Choosing a Personal Credit Card I pay myself through my business, and the money goes directly into my joint Chase personal checking account, which my wife and I use to pay for rent, utilities, and other expenses that can't be paid with a credit card. Currently, we rent an apartment in Los Angeles because the cost of buying a home is too high, with decent homes in decent neighborhoods starting at $1 million. However, we are exploring the real estate market and considering buying a home when our income and the market align.
For smaller purchases like coffee, groceries, and books, as well as bigger ones like electronics, I use my Chase Sapphire Preferred Credit Card. I chose this card for its benefits for travel and eating out, which I used to do frequently.
The Risks and Rewards of Credit Cards There are mixed opinions on the use of credit cards in personal finance, with some experts advocating for them and others warning against them. I fall somewhere in the middle. I understand the concern as consumer credit abuse is widespread in the US and I have a history of poor financial decision-making. To mitigate these risks, I made a rule for myself to never use my credit card unless I have the money in my debit account. This helps avoid piling on debt and paying extra interest for things I don't need. The most basic rule of personal finance is to spend less than you save, which is not possible if you are spending money you don't have.
Personal Retirement Account My first retirement account after paying off my debt was a Vanguard Roth IRA. I chose a Roth IRA because I prefer the idea of paying taxes on the front end and having tax-free withdrawals during retirement. Additionally, I like the flexibility of being able to withdraw contributions without penalty or taxes.
So my Personal Finance Management approach is minimalist, I aim to keep it simple and efficient by using just 4 accounts, a personal checking account, a credit card, a Roth IRA, and an Individual 401k. I don't have a savings account as I feel the low interest rates do not justify the effort to maintain one.
I prioritize my time and energy towards growing my business, instead of running around searching for the best interest rate. For small and big purchases, I use my Chase Sapphire Preferred Credit Card which offers good rewards for travel and dining.
However, I am mindful of the risks and rewards of using credit, as I understand the widespread abuse of consumer credit in the US. To avoid overspending, I made a rule for myself to only use my credit card for purchases that I have the funds for in my debit account.
My first retirement account after paying off debt was a Roth IRA with Vanguard, which offers tax-free growth and withdrawals. My Individual 401k allows me to make pre-tax contributions and offers more control over investments.
