Rich AF: The Winning Money Mindset That Will Change Your Life

by Vivian Tu

Half-Payment Budgeting The half-payment method is a super simple way to budget, particularly if you get paid twice a month. Basically, you split the cost of your bills into two lump sums. Your first paycheck of the month covers one half of your expenses, and the second paycheck covers the other half.

Did I really need this? Is this something that I’m actually going to use regularly?

purchase has value for us when we have more positive feelings about having it than we have negative feelings about not having the money anymore.

Value-based spending means you weigh the price of a potential purchase against the work you’ve done to earn that amount of money, and then ask yourself, Okay, so is it worth it?

Value-based spending changes the question from “Do I have the money for it?” to “Is it worth the work I put in to get that money?”

price of item / your effective hourly wage.

Every single person deserves to have one or two items that are nonnegotiable in their lives and not feel judged or ashamed about it.

budgeting happens over time, and goof-ups are a part of that.

For example, if you’re doing 50/30/20, then maybe you have three accounts, one for each of 50, 30, and 20.

We want that money earning us interest—and we want the most interest possible. Enter: the high-yield savings account.

A HYSA may not be the one thing that makes you rich, but IMO, there is no reason not to have one: it is probably the easiest, quickest way to put yourself on a better financial path.

SoFi, Goldman Sachs, American Express, and Ally,

The math behind sinking funds is pretty simple: how much the thing costs divided by how much time until you plan to buy the thing.

I suggest you pick expenses that are coming up in the next six months to a year. Longer than that and (1) it starts to feel so far off that you lose the sense of purpose you’re getting by giving your dollars a job and (2) you might be better off investing to make that money earn more money (and we’ll get to that).

focus on bargaining down the biggest expenses in life (housing, cars, bills, etc.), and you’ll save the most money for the least amount of effort.

Remember: you can always ask.

You can negotiate medical bills—holy shit, please, especially if you’re low-income, negotiate your medical bills.

You are entitled to the best service possible.

I have three Your Rich BFF truths to share: One: investing might seem complicated, but it doesn’t have to be. Two: investing does not require you to be a stock market genius (and if you think you are, you’re probably in deep shit). Three: investing—not saving—is how you get rich. Because you cannot save your way to rich.

They are rich because they use their money to make money—they invest.

when you’re trading, you’re in the moving business. When you’re investing, you’re in the storage business.

Before you invest anything, you want to make sure you’ve set aside the cash to cover those three to six months of living expenses.

investing is worth doing no matter how much you’re contributing.

If you have a positive delta—if your investment earnings are bigger than your debt interest payments—you’ll make money over the long term.

So, to invest like a rich person, you’re going to prioritize those tax-advantaged retirement accounts first and foremost.

when it comes to investments, generally speaking, the longer your time horizon is, the more risk-tolerant you can be.

asset: it’s something you own that has value and can be used to make you money. Assets can be physical, like a house, a Picasso, a pile of gold bricks, etc., but they can also be intangible, like stocks, bonds, or cryptocurrency.

when you buy a bond, you’re essentially issuing debt.

With bonds, you can find the bond rating, which is essentially a review of how risky a given bond is on a scale from AAA (v. v. low risk) to CCC (pretty high risk).

high-yield bonds. These are issued by companies with lower credit ratings that are a bit riskier to lend to, but, as a result, they’ll offer you a higher interest rate in return.

A fund is an asset essentially made up of little tiny pieces of other investments.

an equity fund is just a basket of different stocks, while a bond fund is a basket of a bunch of bonds.

exchange-traded fund (ETF) or a mutual fund.

brokerage is a company that basically acts as a middleman to help you buy and sell investments.

A solo or individual 401(k) is a special type of retirement account for self-employed people or small-business owners who don’t have any employees besides themselves or their spouse.

traditional IRA lets you take advantage of all the amazing tax benefits up front. The amount you contribute to a traditional IRA is deducted from your taxable income for the year you make those contributions.

Roth IRA, you don’t get to deduct your contributions from your income this year and save on taxes today. But, when you start taking distributions from the account in retirement, those distributions will be 100 percent tax-free, baby.

HSAs are a triple threat of tax advantages: you put money into the account pretax, the money grows tax-free, and you can withdraw from it at any point to pay medical expenses . . . and that’s also tax-free.