227: Saving & Investing for Financial Freedom (Side Hustle to Main Hustle Pt. 3)
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Paving a Path to Time & Financial Freedom
It’s time to close up shop on this 3-Part Side Hustle to Main Hustle Series.
If you haven’t yet, go back and listen to Pt. 1 (225: Rewiring Your Mind to Win) and then Pt. 2 (226: Get Your Money Right).
We’re picking back up from Pt. 2 and the simple 5-step system for getting your money right:
Set up your budget.
Spend less than you make.
Get out of debt.
Save up a rainy day fund.
Invest in wealth generating assets.
Last episode focused on steps 1–3: where to get started budgeting, spending, and getting out of debt.
I want to stress the importance of getting out of debt first and controlling your money habits before you set your sights on what we discuss today.
Today, we’ll tackle steps 4 and 5—getting started with saving and investing.
My goal for this one is to plant some seeds for attaining time and financial freedom and beginning to build generational wealth.
Money isn’t everything, but it’s a powerful tool that can change the game for you and your family's future family!
Saving Your Cheddar
If you’re following Dave Ramsey’s 7 Baby Step formula for paying off debt, the only savings you should have right now is a $1,000 Emergency Fund (Baby Step #1).
After completing Baby Step #2 (Pay off debt), you enter Baby Step #3: Save 3–6 months of expenses for emergencies.
This is also called a “Rainy Day Fund.”
This Rainy Day Fund is crucial, and it’s where your List of Expenses and your budget from Pt. 2 come in handy.
If your goal is to plan your escape from the day job, I highly recommend having two “Rainy Day Funds” built:
One that covers all your main living expenses (mortgage, food, gas, etc.).
One that covers all your side hustle expenses (Adobe, hosting, cloud storage, etc.).
It provides more control over both worlds and simplifies the process during tax season.
Pay Yourself First
Aside from hustling and generating side income to build up your rainy day fund…
(Which again, I have a powerful episode on 30+ Ways to Make Side Hustle Money you can reference.)
Another powerful tip to save money is from the book: “Profit First” in which you literally pay yourself first.
Whenever you do taxes, they’ll break down your net earnings AKA your profit (Gross - Expenses = Net).
Not everyone gets a tax return for over-paying annual or quarterly estimated income taxes…
Often, you’re stuck wondering “Where the hell is this leftover Net profit you speak of?”
Somehow that “net profit” mysteriously gets spread across expenses throughout the year.
You then find yourself left with a big goose egg in the profit column...
This all changes now that you’re out of debt!
Any time you get paid, before you take your 30–40% out for taxes, pay yourself a part of the cut first.
This is where you create a Profit Account. Start by taking 1–2% out each time you get paid from your products or services.
Scale this percentage over time and at the end of the year, regardless if you get back a return or not, you’re sitting on your Profit Account earnings.
You can use this to treat yourself, reinvest back into your business, put into your rainy day fund, or invest in assets which I speak toward later.
Here’s some quick anecdotal evidence of the benefits of this practice...
I hella overpaid in my quarterly Federal and State taxes in 2020. Not only did I get a killer tax return in 2021, but I was sitting on a fat ass profit account too from paying myself first!
High-Yield Savings Account
You should do some research and find the best option to park your Rainy Day Fund, so you can generate some form of yield on it.
In the U.S., the average interest rate for a checking account is .03%. The average savings account rate is .06%. And the average money market account rate is .09%.
Basically...you’re not getting shit in interest by parking it in a traditional bank or credit union.
With the rate of inflation (an average of 2–3% each year, and more recently, the CPI as of July, Consumer Price Index, was 5.4%), your Rainy Day Fund is actually losing purchasing power at a rapid pace.
Here are 2 options to passively grow your money...the higher the yield means the higher the risk.
Option 1: You can get higher average interest rates currently ranging from 0.4–0.6% from Member FDIC institutions like Marcus Goldman Sachs, Sallie Mae, Ally, Citi Bank, etc.
The pros are that you’ll get a somewhat higher yield and that your money is insured up to a specific amount.
The cons are the yield you’ll get is still far below the rate of inflation, so you’ll never keep up.
Option 2: Stick with me here and keep an open mind because the future is Decentralized Finance (AKA Defi).
This leverages cryptocurrency-lending platforms like BlockFi, Celsius, Crypto.com, Nexo, Voyager, Cake Defi. Even exchanges like Coinbase, Binance, Gemini, etc. are starting to offer higher yields for staking your crypto with them.
What I’m currently doing is converting my Rainy Day Fund cash balance into a stable coin called USDC (a crypto asset pegged to the US Dollar).
I then park this in BlockFi and Celsius and get monthly (BlockFi) and weekly (Celsius) compounding interest rate returns of 7.5% up to 8.8% on my money!
The pros are that my parked money is growing and compounding far past the rate of inflation.
The cons are that Defi doesn’t have the same regulations and FDIC insurance as traditional banks. There’s more risk on top of a small learning curve!
I’m young and in a position where I can take more educated risks with my investments based on doing my due diligence and heavily researching these platforms.
Regardless of what you do, don’t park your rainy day fund in a normal bank or credit union.
Find a way to grow your damn money because it loses its purchasing power every day.
Investing in Wealth Building Assets
After you get that 3–6 months of expenses built, pour ALL of your focus into investing into assets instead of stashing more savings in a bank...
(Unless, of course, you’re saving up for a specific purchase that you don’t want to finance like a wedding or vacation.)
I regret not starting sooner, but it’s insanely important to start investing in assets that build compounding wealth that outpace the rate of inflation (e.g., stocks, real estate, precious metals, crypto, etc.)
The Traditional Stock Market has seen an average steady rate of growth of 10% per year.
The crypto markets (Bitcoin, Ethereum, and big market, blue chip altcoin assets like ChainLink, Solana, Polkadot, etc.) can return rates of 100–1000%+ rate of return in a year...but again, there’s more risk.
Both markets are long-term investments, as it’s more about “time in the markets” versus “timing the market.”
If we’re going back to Dave Ramsey’s Baby Steps, we’re now entering Baby Steps 4, 5, and 6 simultaneously (but it all depends on your life circumstances).
Baby Step #4: Invest 15% of household income into retirement.
Baby Step #5: Save for your children’s college fund.
Baby Step #6: Pay off your home early.
For Emily and me, we’re in our “Wealth Accumulation” Phase.
Our focus is solely on Step #4: Investing…
But we’re investing aggressively around 20–25% of our income right now between the traditional stock market and crypto.
We’re not paying off our house early or using things like 529 Plan to save for my kiddo’s college future. I’m not a huge advocate for traditional education unless my kids choose to pursue it.
If feel I’ll get a better rate of return on my current investing strategy to cover my kid’s tuition if needed, which I’ll share in a bit.
If you’re struggling on where the hell to get started with investing, don’t worry, I got you!
Let me break down how you would get started in the traditional world of investing…
And then I’ll share my current approach.
Getting Started With Investing
1. 401k Match
If you have a day job that offers a 401k match, invest whatever that amount is and collect that free money. I’d collect this ASAP when you’re in debt payoff mode even though Dave says otherwise.
For example, my previous corporate employer matched up to 8%. So I had 8% taken out each check and they matched another 8%. So I was growing my 401k with 16% pre-taxed cheddar!
2. Max out HSA
HSA’s are low-key gangster investing vehicles. They have a triple tax advantage meaning you can contribute pre-taxed dollars, grow it tax free, then withdraw it tax free.
If your job offers this, take advantage of it’s investing power, opposed to what it was designed for, which is medical expenses if you’re able to.
In 2021, you can max this out as an individual with $3,600 or as a family with $7,200.
I highly recommend looking deeper into the power of an HSA.
3. Max out Roth IRA
This is another tax-advantaged account where you invest post-taxed cheddar into this vehicle and you can withdraw it tax-free when you retire.
In 2021, the max out rate is $6,000 per individual.
I recommend using brokerage accounts like Fidelity or Vanguard to open yours (I personally like/use Fidelity because it has less fees).
Make the game super easy to get started and simply invest in a Total Market or S&P 500 Index Funds or ETF’s (Vanguard: VTSAX, VFIAX, VTI, VOO) (Fidelity: FSKAX, FXAIX).
In my opinion, I wouldn’t mess around with stocks like GME and AMC. They’re massively speculative with no true value behind them.
In the end, you’re truly gambling and don’t want to be the one stuck holding the bag.
4. Max out your 401k
After you’ve gotten your 401k match and maxed out both HSA and IRA, you’d be turning your attention back to your 401k to max out.
This, again, is the traditional scenario most people get involved in. But let’s talk about my strategy now.
My Current Investing Strategy
I’m dead set on:
Becoming a millionaire in both the crypto market and stock market.
Achieving FIRE (financially independent and retiring early).
Allowing my wife and myself to retire early if we choose to.
Changing my family tree by creating generational wealth.
Being in a position where I can generously donate and invest in others/causes I believe in.
To do so, this is my current investing setup and strategy during this season of my life.
I currently have setup:
My Rollover 401k from my previous employer
My assets include: FXAIX S&P500 Index fund, Apple, Tesla.
Roth IRA’s for both Wifey and I
Our assets include: FREL which is a total market REIT and FXAIX.
UTMAs for both kiddos (put all monetary gifts here)
Theirs assets include: FXAIX S&P500 Index fund
Eventually I’ll create children’s Roth IRA’s for them as we get creative and find ways to generate taxable income for them (lemonade stands, mowing, etc.)
My crypto portfolio
My positions are roughly 55% Bitcoin, 30% Ethereum, and 15% Altcoin Assets (Origin Trail, ChainLink, and Binance Coin).
Notes:
1. We unfortunately don’t have access to an HSA right now.
2. I don’t have a solo-401k or separate IRA at the moment to contribute to.
(Once I transition to an S Corp in 2022, I’ll have this investment vehicle set up where I can contribute after I max out my Roth IRA.)
3. I've been a huge crypto advocate since 2017. I believe in the future of Bitcoin and Ethereum, and I am heavily invested in this world. I’ll happily provide you with more info if you hit me up on the side.
Just know it’s a riskier bet I hedge against my investments in the stock market.
I would never recommend investing your money into something you don’t understand!
I’ve poured thousands of hours of research into learning about this space and the disruptive tech in it (along with the scams, shitty projects, and meme coins like DogeCoin, Shiba Inu, etc., and risks that go along with it.)
4. My wife and I will be maxing out our Roth IRA’s in the meantime.
Basically my strategy revolves around putting my money into whichever market is experiencing the most fear. I invest heavily during bear markets, big corrections, or dips.
For example:
If the stock market is booming but crypto is experiencing a bearish sentiment, I’ll invest big into crypto assets I’ve researched and stack my bags.
On the flip side, if the crypto markets are booming with tons of hype and greed and the stock market is stagnant or going sideways, my dollars are going into the stock market.
Automate Your Finances
Some true gangster shit is automating your finances so your money is working behind the scenes.
Most of us put our debts on auto-pay because, sometimes, you get an interest percentage discount.
But you can also automate how your money is dispersed as well as invested.
Here are two options to keep in mind.
1. Direct Deposit Dispersing
Some online-based banking accounts like Ally and Capital One have the function where you can have your direct deposit automatically disperse a percentage of that check into separate accounts.
So you have your main umbrella account where your funds are deposited into…
Then imagine you have sub-accounts like:
Savings for new home
Investing
Fun money (shopping + entertainment)
Profit
Taxes
You can set rules that a certain percentage of your check gets automatically split and sent to these accounts behind the scenes.
It’s a powerful way to make hands-off smart money moves.
2. Automatic Scheduled Investing
Say you have that investing account now…
You can connect that account to traditional brokerages like Fidelity and Vanguard and set up weekly or monthly investing schedules to fund your account…
Or you can have them automatically purchase said Index Fund or Stock of your choosing.
The same goes with crypto exchanges like Coinbase. You can have an automatic investing schedule going on behind the scenes where you’re constantly Dollar Cost Averaging and not trying to time the market.
Think of both of these scenarios as when you never see the money that is automatically taken out to fund your 401k from your paycheck.
If you budget for these things, then you never feel the friction, and you’ve created a wealth- building vehicle that’s set on autopilot!
I know what I shared today may be over your head or something that totally disinterests you…
I get that, as talking about money and investing was never an interest of mind and always bored me.
However, once I realized how my poor relationship and ignorance toward money was digging a hole for myself, my dreams, and more importantly, my family, I chose to make it a priority.
No one is going to get your money right for you…
Hiring a financial advisor is cool and all, but make sure they’re a fiduciary and know what type of fees they charge to manage your money.
There’s a lot of scammers in the traditional world of money, and people like to take advantage of you if you don’t know what’s going on.
To end this with some action steps, three fantastic books I recommend you reading to gain financial literacy, improve your relationship with money, and built wealth are:
1. I Will Teach You to Be Rich - Ramit Sethi
2. The Simple Path to Wealth - J.L. Collins
3. You’re a Badass at Making Money - Jen Sincero
Remember, money is a tool for improving the life of yourself and others that you want to make an impact on.
You owe it to yourself, your family, and the world to get your money right.
Instead of talking shit on the capitalists because you don’t understand how to play the game…
Learn how to play the game to get your slice of the pie so you can:
Take your side hustle full time.
Experience a higher quality of life.
Set your loved ones up with financial freedom.
Do some damn good during your finite existence.
Series Recap
I poured my heart and soul into this series in hopes it will provide some clarity and direction on what moves to make now and far into the future.
I’m tired of the starving artist mindset and want to show you the power of investing big in yourself and getting your money right.
Just know the more I learn and tap into new levels of success, the more I’ll share it all with you here.
I want to see you win—not only with your creative pursuits—but your pursuits of happiness, impact, and time/financial freedom.
You can become an unstoppable force by applying what you hear in this series!
There are levels to this game we’re playing that’s so much bigger than “getting paid to create cool work.”
That’s all surface-level bullshit.
So keep the big picture in mind during your daily grind and appreciate the progress you make along the way.
Just remember, the level of your success all depends on the investment of your personal development.
Be patient and stay hungry. You got this!
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