Episode 153
The Budget Show
August 9, 2019 · Mike Murphy
EP153: The Budget Show Behind the scenes of my simple and practical new financial freedom plan to help me create the life I want. Today is about taking action and control of your finances so you can create the life you want. Episode Summary: –The motivation or my why for taking action on my finances. –The two books that helped me build the framework and key takeaways from each. –My new plan along with the tools I am using to put my financial plan on auto-pilot.
Episode Summary: A behind-the-scenes look at a simple, practical financial freedom plan — the two books that inspired it, the “pay yourself first” method, and the specific tools used to put it on autopilot.
What You’ll Learn
- The motivation behind building a simple, practical financial plan at 50
- Key lessons from I Will Teach You To Be Rich and The Latte Factor
- The “pay yourself first” method and how to calculate it from your salary
- The specific tools Mike used to put his finances on autopilot
Why Take Action on Finances Now
Turning 50 in November was the trigger, but the deeper motivations were reducing stress and self-doubt, financial freedom, peace of mind, control and clarity, and staying in a position to keep moving forward and advance.
The Two Books That Led to Action
I Will Teach You To Be Rich by Ramit Sethi — Mike’s biggest takeaway from the first edition was setting up online banks to automate finances: deposit a paycheck into checking, then let set amounts flow automatically to bills, savings, and investments. He revisited the book via the audiobook on Audible and found it held up — a crash course in investing fundamentals with tactical, step-by-step advice and specific recommendations. It first pushed him to take action ten years earlier, and it had the same effect the second time around: the book isn’t really about money, it’s about intentional living and purpose.
The Latte Factor by David Bach — mentioned via The James Altucher Show, also consumed as an audiobook on Audible. It follows Zoey, a twenty-something in NYC buried under student loans and living paycheck to paycheck — a familiar story for many. Zoey meets a wise mentor who teaches her the power of compounding interest and, most importantly, the concept of paying yourself first.
Pay Yourself First
Take the first hour of every working day and put that pay into savings or investing.
Bonus math tip — getting your hourly rate from an annual salary: divide the salary by 2.
- $50,000/year → $25/hour
- $75,000/year → $37.50/hour
- $100,000/year → $50/hour
Example: at $50,000/year ($25/hour pre-tax), saving one hour per working day is $25 × 5 days = $125/week, or $450/month, just from paying yourself the first hour of every day.
Takeaways: pay yourself first, treat savings like a monthly expense, and prioritize it.
The Plan and Tools
Mike figured out his savings goal using the Latte Factor’s pay-yourself-first method: salary divided by 2 for an hourly rate, multiplied by 7, rounded up — funding his 401k, Roth, and several savings buckets.
- Vanguard — moved his mutual fund and Roth IRA here. Tip: look up expense ratios, they matter a lot.
- Ally Bank — set up online banking with multiple savings accounts (regular savings, vacation fund, emergency fund), connected to checking for automatic recurring deposits.
- Personal Capital — a money-manager app like Mint, aggregating every financial account into one real-time snapshot.
- YNAB (You Need a Budget) — a budgeting tool Mike was adopting, around $80/year with a steep learning curve.
- Pay myself first — a recurring $100/month deposit from checking straight into his Roth IRA.
The plan in action: paycheck arrives → automatic 401k contribution → remainder to checking → checking funds Vanguard (Roth IRA) and Ally Bank (savings/emergency fund) → Personal Capital organizes the full picture → YNAB tracks spending → pay yourself first, then bills, then everything else is yours to enjoy. If you’re running multiple side hustles, pump as much as you can into the system and let it grow.