Could you be committing these 5 mistakes in your money habits? Find out in this launch episode of the Freedom Focus Podcast.
Could you be committing these 5 mistakes in your money habits? Find out in this launch episode of the Freedom Focus Podcast.
Welcome to the freedom focus podcast. I'm your host, Brittany Davis,
the Brittany Davis,
Your favorite financial counselor. Stay tuned as we explore strategies, tips and advice on being financially free to live our best life. So grab your tea or your coffee. Sit back and enjoy the show. Welcome, welcome. Welcome
Welcome to the very first episode of the freedom focused podcast. I'm your host, Brittany Davis, the Brittany Davis, and I'm so excited to embark on this new journey of my business and so excited to share my knowledge with you. So the freedom focus podcast in case you're wondering is all about providing strategies, tips, and advice on how to free yourself from your nine to five and financial constraints and everything in between. So I started this journey as far as being in personal finance about, I believe it's about eight years ago. If it's 2020 this year, and first job out of college, I worked for a nonprofit that focused on helping lower income families make the best of their resources. And so eventually I'm helping these lower income families, the nonprofit focused on helping them grow assets. So that means purchasing a house, getting education, things of that nature.
And I think seeing that and being a part of that really opened the door to my passion about helping people and helping them in their personal finances. And from there, it just evolved from, you know, me taking a step in correcting my own personal finances and then helping others. So that's pretty much a very, very, very short clip of how I got my start in, in this industry. And it's been a tremendous and honorable journey. I've moved from so many different, um, areas of finance. I've worked in accounting at one point. And, uh, right now I am working full time at a wealth management firm. So, but anyway enough about me, I want to talk about helping you, helping those of you out there that want to free yourself from your nine to five and get control over your finances to set yourself up so that you can do and live the life that you want to live.
And that's the main focus of my business and of this podcast. So welcome, I'd like to start today's episode, I'm telling you about the five financial mistakes you're likely making. So let's jump right in number one, being not keeping track of your net worth. So, so many people plan to be wealthy, want to be wealthy, but they are not tracking their finances the way that they should be. And one of the things that you must track when you're on this path to wealth and financial freedom is your net worth. So the two factors that affect your net worth is assets and liabilities. So assets who include your savings account money in your checking account, the value of your car, the equity in your home, things of that nature. And once you add all of those assets together, it gives you a number. And then you look at liabilities, liabilities are debts or things that you owe on.
So your car could also have a car note. Your house likely has a mortgage. Your student loans count as liabilities. So what you do is with assets, you subtract your assets or you subtract liabilities from your assets, and that will give you a final number, which is your net worth. So for example, if you have $20,000 in the bank or $20,000, um, in a savings account, just to simplify it and you owe 200,000 on your home, in a mortgage, well, your net worth is a negative 180,000. So you are subtracting that 20,000 where you're subtracting that 200,000 from that 20,000, and that will give you your net worth. So that's a very baseline example, but a lot of people are not tracking their net worth on for one a month to month basis and an annual basis. So of course, month to month basis, that net worth will be very dynamic.
Some months you'll have more expenses than others. So your net worth will go down and then some months you'll have more income and your net worth will go up. So, or if you're paying off debt that also impacts your net worth. So it's important to see this number, this net worth number, um, on an annual and keep track of it because you will see where you going in your finances. If you're doing well, if you need to work on something and then on a year to year basis, you can see if your net worth is growing. That's the most important thing is checking on your net worth on a year to year basis. So if you want to retire, let's say in 20 years, 10 years, you have to know if you're growing your retirement fund and your retirement fund is a part of your net worth. So really think about where you are right now. And one of the resources I'm going to provide a, a freebie or a download for you to get this information on the resources, on keeping track of your net worth. Uh, it's called, what is it called capital.
I can not think personal capital. I had to think about that personal capital? So look into that software. You can load up all of your accounts and get an idea where you are as far as your net worth and your cashflow. So definitely, definitely one. The number one mistake I see, or one of the number one mistakes I see is people not tracking their net worth. So the number two mistake I see people making in their finances is not planning their finances on an annual basis. When most people are doing right now is planning their finances on a month to month basis, which is great, which is recommended at least your, at least your planning, but in order to really good, get a good look at what your month will look like is to plan on an annual basis. So of course, people know, you know, the holidays come around, birthdays planning for birthdays, planning, your retirement contribution.
All of these things should be considered on an annual basis. And when you look and you project into the future, trying to guesstimate what expenses come up, you can, you can look back at your past expenses for a previous year and plan for the unexpected. Now we know the holidays come up, we know birthdays come up, as I mentioned earlier, but look at those expenses that you incurred the previously year that was unexpected. Did you have an unexpected medical expense? Did you have to, you know, you have a car repair or some repair that you had to prepare for, or spend money on for your house. So those things come up in life and a lot of times they're unexpected, but if you're planning on an annual basis, you can predict them in a sense. Now, I know people would consider those types of expenses and unexpected expenses to be a, in an emergency fund, which is great.
You should have, um, six to 12, I would say, uh, months of baseline expenses saved up as an emergency fund. But if you can predict if you can plan for those repairs and, and, and I don't know, medical expenses and put that down as well. You're ahead of the curve. You won't have to dip into your emergency fund. And 2020 has been one of the best examples of making sure you have savings for situations like when you were going to be laid off or well, in this case, I know we're, we should be experiencing a lot of savings. Those of us who are working from home now, but a lot of us childcare costs have gone down since you're at home, but you know, you still have other expenses like food that may have gone up since you're at home a lot more. So having a plan, looking back on a year year and making a plan based upon things that happened the previous year helps you prepare more and puts you in a better financial position.
So second mistake not planning on an annual basis, the third mistake, and probably one of the most common mistakes committed in your finances is increasing your bills every time you receive a raise or an influx in income. So this tends to happen when people experience a raise at work, or you get a new job and you're making, let's say 10 to 15,000 more a year. You're so excited. Of course you are in a new tax bracket, but you, you still experience an increase in your weekly and monthly income, which is great. But then the next thing people tend to do is, you know, they upgrade, they go and upgrade their gym memberships. They upgrade, I don't know, subscriptions that they have on their phones or, um, cable subscriptions, which is really, I don't, I don't see why people would have cable subscriptions nowadays, any that anyway with, um, Netflix and Hulu and things of that nature.
But those months, a month bills tend to increase along with that income. And that is a huge mistakes mistake because, I mean, where is your money going? You're going to look back and realize, Oh, or, or you're going to feel like, well, I didn't really get a raise and you'll feel resentment. And you know, you'll start to think, Oh, I need more money. And it is a vicious, vicious cycle. So I would not recommend you increasing your, your expenses or creating a whole new bill when you get a raise. The number one thing that I recommend when you receive a raise or you get an influx of money is thinking, think of it as a 50% rule. So I, um, I don't remember where I got this from. It was from a, um, a colleague I believe, but 50% rule is saving half of that increase in your income.
So let's say you earn a, an additional 15,000 per year. That would mean saving 7,500 of that income to invest it, or just store it away, just to keep it from yourself, preserve half of that income, that income increase and the other half you can, you can spend it the way you want on yourself, take a vacation, do something that is an experience versus creating a new bill, because the experiences will last and appreciate over time versus buying a new product or upgrading anything. The experiences that you have traveling the world, seeing new things, learning new things. That's a good way to spend that other half is learning something new, but definitely use that 50% raw and save or invest that half the first half and then spend the rest on yourself, but a huge, but don't create a new bill. And when I say bill, you all know what I mean?
Something that has a due date that you have to pay off on a monthly basis. So that is the, where are we? Third mistake increasing your bills as your income increases. So number four or the fourth mistake I see people making in their finances is not setting their fixed or the common or same amount bills to automation. So one thing that I know that I've heard from clients who say that, you know, they tend to forget a due date, or they miss a payment on, let's say a credit card and they incur a late fee, or, um, if you're late on your insurance it lapses. So one thing that I recommend, uh, for financial peace of mind, so knowing that your bills will be, will be paid on a month to month basis, it's to set them to automation. I don't think it's should be a huge deal, especially if you have, you know, if you've planned and you've looked at the numbers, you know, that your income is more than your expenses, your bills should be set up, especially those bills that are the same amount each month should be set up on a automatic payment set up pretty much.
Yeah. And that's easy to do. You can do it through your bank, or you can do it through the actual Bill's website. And I would think that they probably would prefer it that way. You know, you go ahead and have those things paid off when they're due, but I like this, this method of handling my finances, having things on automation, because I can focus on things that really matter my planning for future savings, future investments, making sure that my day to day expenses doesn't go over, uh, the number that I've set or the budget that I've set for it. So having your fixed bills set to automate and come out of your account really helps you have a peace of mind and not worry about having late fees or having things shut off. So I highly recommend it. It's, it's, it's amazing because you can set other things to automate as well, but I won't jump ahead.
One a particular note out setting things to automate is, uh, utilities. I know that utilities or electricity tends to vary each month. I do think that you should have that set to automate, but if it's possible, get an average, if you could have the electric company send you an average, a monthly invoice that you have of, or, or of the average of your power to using, and just have that set to automate, that's amazing. And it keeps you, yeah. Keeps your expenses predictable for you, especially actually, when you're doing your annual planning, as we mentioned previously. So definitely number four is people not setting their bills to automate number five. And the last mistake that people are making in their finances is refusing to leave a bank that charges fees for literally everything. So I am familiar with banks, especially the brick and mortar banks that charge fees for, um, transfers to another bank that you own, which I was really surprised about, of course, overdraft fees and just bank fees or having the account fees.
I know that there are some ways that you can avoid the, what they call it, the maintenance fees that some accounts have if you have a direct deposit. But what if you don't want to have a direct deposit in your account? What if you are a person that has multiple accounts and you don't want to incur any fees? That's one thing that I see some people, you know, doing is remaining with the bank, even though they're being charged for every little thing that they do and just having the account. So I want you to share alternatives. I know that some people are leery of digital banks, but technology and online banking is it's the future. It's the present actually. And most banks that have locations are, especially now during this pandemic, encouraging their customers to use more online banking. The only caveat to having a digital bank is, you know, not having access to, you know, an ATM sometimes.
But what I found is these digital banks are using locations like a grocery store to, um, have where their customers can, you know, withdraw money without incurring a fee. The other caveat is depositing cash. Now that's one thing that you have to consider when looking into a digital bank, but if you prefer to have a local bank consider a credit union, they usually don't have as many fees because they are usually not for profit. And they focus on members and they're member owned. So shop around, optimize your finances in a way that benefits you. And that will include who you bank with. Look at the features, look at the interest rate rates of that bank, what they offer and what are their fees, if any, uh, another thing that I wanted to mention about fees and banks is overdrafts. So I know that some people incur overdrafts, uh, with their, with their banks, overdraft fees, with their banks.
And they, they tend to be 35 to $40, really expensive, right? Especially if the expense is $2 and then you add on another $35. So what I recommend a lot of times is for people to, for their uncontrollable expenses or their controllable expenses, grocery shopping general shopping is to have a prepaid card or some other account where you cannot overdraft that way you're not incurring that fee, but that will, that information will be included in the download with this episode as well. So make sure you check that out. So forget about brand loyalty. Forget about sticking with a bank, just because family, all of your family is with this bank shop around, do what's best for your money. And don't make the last mistake, which is refusing to leave this bank that is charging you for fees, for everything. To recap this episode, are you making these five mistakes in your finances?
Number one, not tracking your net worth on a year to year and month to month basis. Number two, not creating an annual plan for your finances. Number three, are you increasing your bills every time you have an increase in income? Number four, are you not planning or setting your bills to automation, uh, to pay off when they're due? And number five, refusing to leave a bank that is charging you fees for everything, really take a look at this. And I have a free resource for you that will be linked somewhere on this page. And I want you to check it out and look at the resources, look at the information and answer these questions for yourself and don't feel bad if you are. We have all made financial mistakes and I believe that people need to talk about the mistakes that they're making so that we can all grow in our finances and do better. So thank you so much for checking out the first, the launch episode of
The freedom focus podcast.
Again, I'm your host, Brittany Davis, follow me on Instagram at the Brittany Davis. Check out my website, brittany davis.com and also subscribe to this podcast. Leave me some feedback, leave me a review. Let me know what you think. And I look forward to speaking to you all next time.