Let’s get it out of the way and start with the disclaimer that personal finance is always personal and that this isn’t advice. 😁

In this post, I’ll explain how I think about and manage my personal finances based on where I’m currently at in life.

While some principles can be applied to any life stage, I’m sure how I think about money for my personal situation will change over time. And I’m sure yours will as well.

Everyone’s personal finances start with understanding cash flow. You need to understand how much you’re spending and be able to review whenever you need to.

I use Mint and Right Capital for tracking my personal spending. I use QuickBooks Self-Employed for tracking the cash flow of my financial planning firm, Modern Wealth Builders.

It’s not necessary whatsoever, but I review my cash flow daily 😂. Re-categorizing any transactions within Mint, Right Capital, and QuickBooks that don’t have pre-determined rules or are miscategorized.

Being on top of reviewing transactions helps with:

  • Immediately identifying fraudulent purchases.
  • Maintaining consciousness of spending decisions.
  • Incentivizing yourself to spend with intention.

I regularly audit my spending decisions to ask myself, “do I value this purchase”.

I use my credit cards for all purchases (that can be charged via credit card) for the following reasons:

  • It keeps all transactions electronic and trackable.
  • It adds a layer of security as opposed to a debit card.
  • It allows me to maximize cashback rewards.

I don’t get caught up in maximizing specific cashback rewards (it doesn’t really move the needle), but I do think it’s important to get at least the standard 1% back on all purchases.

Part of the reason I am so on top of tracking cash flow is that I get paid primarily quarterly. As you might imagine, I want to budget properly for expenses, taxes, and *ideally* investment contributions.

Understanding cash flow helps to determine how much cash to keep on reserve. Because I’m self-employed and somewhat risk-averse, I tend to keep more cash on hand than I probably need.

I prefer to have twelve months of living + business expenses in cash at all times.

While this may not be the “smartest” mathematical decision from a financial planning perspective, it does give me the following:

  • Peace of mind
  • Flexibility in drastic economic environments
  • Leverage to quote my value as a solopreneur

A strong cash reserve gives me a “hidden return” by enabling me to be aggressive in other aspects of my financial life.

Additionally, it allows me to maintain my investment allocation across my various retirement accounts. Let’s talk about my personal investment philosophy.

The vast majority of my investments are held in a combination of six ETFs. My primary concern always starts with asset allocation and asset location, as I believe most returns (net of fees and taxes) can be attributed to these factors.

The six ETFs cover the following:

  • US Equity
  • International Equity (developed and emerging)
  • Domestic and International Fixed Income

I keep it as simple as possible and allocate based on market cap, while being mindful of asset location. For example, keeping the asset classes with higher expected returns (long term) in Roth accounts, and keeping less tax-efficient investments (fixed income) in pre-tax accounts.

Rebalancing occurs automatically based on pre-determined rules for drift.

Each tax year, I take full advantage of the tax-preferential accounts at my disposal. This currently includes a SEP IRA, Roth IRA, and Health Savings Account (HSA). I anticipate I’ll be changing from a SEP IRA to a Solo 401(k) and taking advantage of backdoor Roth IRA contributions soon.

At this point, I’m not currently investing in any taxable accounts as I need the cash reinvest in MWB.

The way I look at it, once you’ve maxed your available tax-preferential accounts in a given tax year, that’s when the fun starts for determining the best use of your money.

When you’re investing in a strategic bundle of ETFs globally diversified, you know (generally) the ceiling on expected returns. There’s nothing wrong with this ceiling (when compounded over time), but if you want to achieve higher returns with your money, you usually need to take matters into your own hands.  😎 

Invest for beta. Earn for alpha.

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