Welcome to reThinkable - my Sunday newsletter where I share actionable money tips, strategies, and resources to help you make smarter money moves.

Read time: 3.5 minutes

Hey friend,

Tariff on, tariff off, tariff on, tariff off.

There's more economic uncertainty right now than trying to figure out who keeps stealing your labeled lunch from the break room fridge.

But while I can't help you catch the office lunch thief, I can offer something better: an optimal payday routine.

In today's newsletter, I wanted to share one of my favorite payday routines to best prepare yourself for whatever economic surprises may come in the future.

Payday is a dangerous day…

…Not because you’ll get mugged, but because you’re 33% more likely to overspend when you get your paycheck.

Even Mr. Worldwide said it:

This is because most people follow mental accounting which is when you mentally categorize your money based on when and how you get it.

For example, when you receive a cash bonus, you’re more likely to “bucket” it as fun money because your brain perceives it as “extra” cash even if you carry debt.

That’s why Pitbull’s broke but still partying.

The 7-Step Payday Routine

Step 1: Find your Financial Baseline

Establish your absolute minimum monthly cost to survive costs. Jot down your essential expenses.

• Housing which could be rent or mortgage. Generally you want this to be under 30% of your income

• Groceries and food. About 10% of your income.

• Insurance and utilities like internet, cellphone and electricity. About 10%.

Strip away non-essentials to find your true baseline and keep it under 50% of your total income. If it's over, look for expenses to reduce.

Step 2: Build Your Emergency Fund

With 56% of Americans unable to afford an unexpected $1,000 expense, an emergency fund is critical.

Your goal: save 6 months of your Financial Baseline. If your baseline is $3,000 monthly, aim for $18,000 in your emergency fund.

Keep all this money in a HYSA (High Yield Savings Account) to make the most of it. Here are some of my favorite HYSAs.

Step 3: Tackle Your Debt

77% of Americans are in debt. The problem is when you’re paying thousands in interest payments alone, it quickly eats into the amount you can save and invest.

Here are 2 approaches I recommend you follow to pay off your debt. Pick 1 and stick with it:

• Avalanche Method: Pay highest interest loans first (most efficient)

• Snowball Method: Pay smallest loans first (builds momentum)

Step 4: Get Matched

Albert Einstein once said, “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”

Compound interest is the reason you should’ve started investing YESTERDAY..

Prioritize contributing up to your Employer’s 401(k) Match. This is FREE money.

For example: If you earn 90,000 a year and your employer matches up to 3% of your salary, you’ll get an EXTRA $2,700 for free if you contribute up to the Employer’s Match.

But don’t forget to invest the money in your 401(k)!

Step 5: Fund Your Roth IRA

Next, contribute to a Roth IRA account.

The advantage of this account is you don’t have to pay taxes on any of the growth and you can withdraw your contributions at any time.

Step 6: Invest The Rest

Next, contribute to a regular brokerage account.

The key is consistency - invest a fixed amount monthly regardless of market conditions. Index Funds are the best way to consistently earn over years. Don't try timing the market. Stay disciplined and think long-term.

Step 7: Automate

BUT… the trick to this Payday Routine is to automate everything.

As soon as your paycheck hits your bank account, your money should automatically flow into all this and more:

Bam!

Which step do you have questions on? Reply to this email and I’ll try to help you out.

To making smarter money moves,

— Vincent Chan

Cool things I found this week

• This mobile carrier launched a 100% FREE phone plan with 3GB of 5G data, 300 texts, and 100 mins of calls (no credit card required). Get the app here and use code VINCENT to receive $10 of Cloud Points which can be used for gift cards to shops, eats, travel, and more. Note: to get the free plan, you do have to share anonymized location data to help improve Helium Mobile’s network coverage.

• Go through this quick 3-step formula to see if you’re doing financially well or not.

Vincent Chan

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