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Exploring the yellow brick road, incentives, and ideal days

Welcome to the Intentional Dollar weekly newsletter — great work taking this small step to move your money forward. I’m Logan, a Certified Financial Planner™, and I’m excited you’re here!

What’s inside?

• One tool to experiment with

• Two quotes from others

• Three questions to dig deeper

• Four lines of poetry for the point

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_{One tool to experiment with:}

The Yellow Brick Road:

Where are you going to put your next dollar? 

Should it go toward debt, should it sit in savings, should it move to investments, which account should hold it? 

This allocation decision brings friction.

When you know where they should go, life becomes easier.

The yellow brick road is your gold standard guide. If you walk down this path, you’ll end up in the right spot and you’ll always know where to place your next dollar. 

Buckle up. There are seven sights on this road, and we will visit each one. 

Stop 1: Covering your deductibles

With your dollar in hand, you’ve arrived at the first stop. The guard at the gate asks you this, “If everything terrible happened to you at once, medical incident, auto crash, homeowners claim, could you generate the cash to cover the deductibles on your insurance?”

Practically speaking, this means you should add up all your deductibles and reference that sum against your cash savings. Note, these funds should be in cash, not investments or penalty-restricted accounts. 

If your answer is yes, you may move to stop number two. If no, your dollar sits here, in a high yield savings account, until your answer becomes yes. 

Stop 2: Earning your max employer match

Working and have access to an employer retirement plan? It’s time to look at your employer retirement account match.

This match is an instant return on investment. These returns vary based on the retirement plan design, but the goal is the same: take advantage of free money, let your employer bare some of your retirement burden. 

Stop 3: High interest debt

Time to get out of the debt hole.

Lean your ladder against any debt with a price tag of 8% or more. Personal loans, credit card debt, and some student loans have exorbitant rates that claw away at your money until it’s gone. They must go.

Eliminating this debt guarantees a return on your money — a return higher than the market’s average.

Warning. Eliminating this debt comes with a burden. Your minimum payments will disappear, and they will leave a clump of unspent money at the end of your month. 

The wise will drive these dollars to stop 4, but the foolish will find a frivolous trinket to toss them at.

Stop 4: The safety net

Here we will focus on fully funding your safety net. Safety nets catch you if you fall.

Financial planners will say “three months worth of expenses if you have dual income, and six months worth of expenses if you’re on a single income.” Let’s define these expenses.

Expenses equal your musts for the month. Mortgage, car payments, other debt minimums, baseline groceries — not vacation, going out, or hobby monies. If you lose your job, you still have to pay for things. We assume you become rational and only pay for what you need. You become a survivalist until you find more income.

Don’t roll the dice with a safety net, don’t look at your retirement accounts or your home equity for these funds. It’s a separate savings account, mentally filed away and forgotten until bad things happen. 

Fully funded is not a scientific number — remember planners say 3/6 months. These numbers are guide posts for now. You can add more later.

Onward. 

Stop 5: Super accounts

If you qualify — and if it makes sense for your age/income standpoint — it’s time to max Roth IRAs and HSAs. 

Roths are funded with taxed dollars that grow tax free for retirement. Say you place $100,000 into your Roth and it grows to $1,000,000. All $900,000 of gain is yours, tax free. Pretty great deal.

Health Savings Accounts are beautiful. There’s only one way out of life for all of us — except for Bryan Johnson — he’s working on another solution. For the rest of us, we will have ongoing and increasing medical expenses. If you have a high deductible health plan, you need an HSA.

HSAs allow you to deduct your contribution (win 1), invest money with tax deferred growth (win 2), and take money out tax free for qualified medical expenses (win 3). Three wins is good. They also turn into traditional IRAs when you hit 65 — I would call that a fourth win.

Maxed these out? Well, there’s another stop I would like to show you.

Stop 6: Maxing out your retirement accounts

For most, this means going back to those employer retirement accounts with larger max contribution capacity. The plan is simple here, place your dollars into these accounts until you hit the annual limits. Future you thanks you. 

See you at our final stop.

Stop 7: Freedom funds

You’ve reached the end of the yellow brick road. Arriving here means you have a lot of power. And power means you get some choice. At stop 7, the aim is to super charge your dollars. This is where you save excess money in a brokerage account (which can serve as a second layer of safety under your financial safety net), save for your children, and start to think about paying off lower interest debt. 

“Odd”, you whisper, that paying off the last bit of debt has survived all stops and sits at the end of the road. Remember, debt isn’t terrible. The cost of this debt is lower than what we can earn through long-term investments. But you’re at stop 7, so it’s your choice. 

The journey has been rewarding and you’re in a great spot. It takes a long time to get to stop 7, but some choose to drive faster cars.

_{Two quotes on incentives:}

Incentives tell all.

_{Three questions on ideal days:}

1. What does an ideal day look like?

2. What’s one piece of the ideal day I can put in place now?

3. How much does my ideal day cost?

Which question stuck with you? Questions like these are spotlights for the mind. Reply to this email and let me know which one shined light on a previously dark cave.

_{Four lines of poetry for the point:}

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