Matt the Money Guy

So many people spend based on how much they EARN, not how much they HAVE. This is a concept that was fleshed out in a book that I recently read called “The Wealth Ladder” by Nick Maggiulli (not a paid plug, I just really liked the book 🙂).

Most peoples inclination when they start earning money or get a huge raise is that they can suddenly spend more. While it certainly feels like that, it’s so easy to forget how fickle. Most people are closer to losing their income then they probably think. It makes much more sense to allow for increases in spending (“lifestyle creep”) when your net worth grows, not your income.

In this book, the general framework is the different tiers of freedom that you reach at certain net worth levels. At $10k net worth, you have more freedom to buy what you want at groceries (a dollar here or there won’t effect you). At $100k, you can be much more liberal with your orders at restaurants. So on and so on.

This is a simplification of the framework, but a powerful mental shift that I feel many people would benefit from making.

The specifics delineations between levels of the ladder and what they can buy you will change over time, but what won’t change is the concept that what you have is a much better indicator of your comfort with spending than what you earn.

If you’re looking for a good read, I highly recommend this one. I

- Matt

It's tempting to purchase just based on price, but keep in mind that there is more to making buying decisions than JUST price.

There are really two factors to this: The economics and the social consideration.

I'm going to start with the social consideration because I know there will be some that are inevitably calling me dumb for caring about that. I'm under no illusion that buying a Patagonia vest is like donating to a non-profit. Patagonia is a corporation that cares about making money (like every other corporation) and a lot of their social-friendly image is due to their marketing team.

That being said, it doesn't mean all companies are created equal. Shein is widely known for terrible labor practices (including child labor) and pushing disposable fashion that is terrible for the environment. If you have to vote with your dollars, I'd vote to not have that continue.

The other angle is the economics angle. Buying a $21 jacket that you use 5 times before it rips isn't going to save you money if you have to keep buying them. Buying the $229 alternative isn't your only option and if you truly want to save, there is probably a durable in-between option on cost. But buying the absolute cheapest piece of clothing isn't going to be as cheap in the long term as you may think (Boots theory and all).

I'm not trying to be preachy in the slightest here - you have fully autonomy over your buying decisions. I just want to bring up the point that you should probably consider more than JUST the price when you are choosing what you buy.

Let the hate roll in 😌

- Matt

P.S. I'm a HUGE index fund guy, so I made a free index fund guide explaining them and laying out options to create an index fund portfolio at different brokers (Vanguard, Fidelity, Schwab, etc). Comment "guide" and I'll send you a link to get the PDF!

Personal finance 101 - understand your paycheck!

I think most people have this experience when they start working - you sign up for a job paying you an amount, then you get your first paycheck and you do NOT see that amount!

What adds to the confusion is that all the line items on the paycheck are NOT explained to you! My advice to people who just started working... make sure you understand what each line item means and how it is calculated.

This will vary by state and employer, so I couldn't make a guide that explains ALL paychecks, but here are a few common line items (I live in NYC, this is just an example I found online that I annotated from CA). If you're reading this, I encourage you to open your paycheck and google each line item that you don't understand.

While every post I make about taxes inevitably gets a ton of political comments, that is not the intent of this post. No matter who is your president or governor, you will always have taxes and withholdings on your paycheck. My only push is that you understand them regardless of what they are!

- Matt

P.S. I use SoFi for my high-yield savings account and they are running a sign-up bonus where you can get up to a $400 with opening a new account and connecting direct deposit. Comment "HYSA" and I'll send you a link to get your bonus!

Relatively small differences can make a HUGE difference. Let me explain...

While $1,000 a month is a large amount, you have to remember that you have two levers to save monthly - you can earn more, or you can spend less.

Let's look at income first - Ian makes $500 a month. If you break this down hourly, that is just a little less than $3 an hour. I wouldn't say that Ian would need a fancier degree or be a significantly harder worker, this could come down to looking for a job in a higher paying industry, job hopping to get higher salary, or just picking up a casual side hustle. While small raises don't feel life changing in the moment, over a long period of time they can make a HUGE difference.

On the spending side, Ian also spends $500 less per month, or just under $17 a day. Again, I don't think Sam is having a WAY better life spending that extra $17. There are TONS of ways to save that money. Get a roommate, cut out some small expenses, cut out some big expenses - any combination of those will work.

How does changing these two relatively minor things impact their retirement prospects? MASSIVELY. If you never invest, you'll never get rich. If you invest some, even if it's not a lot, you will get the compounding started. If $1,000 isn't possible, start with $100. The important part is that you start!

Assumption for calculation: Investing at an 8% real return for 40 years

- Matt

P.S. I'm a HUGE index fund guy, so I made a free index fund guide explaining them and laying out options to create an index fund portfolio at different brokers (Vanguard, Fidelity, Schwab, etc). Comment "guide" and I'll send you a link to get the PDF!

You can’t start investing without knowing what you’re investing in!

It’s overwhelming to see all these terms when you first start, but at a certain point you realize that basically every investment instrument can be framed in very simple terms. You realize that all these different products and asset classes are very simple in concept, and just have new words associated with them.

Here is my stab at explaining some of the more common investment types (either asset classes or investment instruments) in very simple terms.

They say you should never invest in something you don’t understand, so this is a good place to start!

- Matt

This is a GREAT thing to send to a friend or family member who is >50 (even better if they are between 60-63)!

I was just talking to my dad about this a few days ago and I'm fully convinced that a huge portion of people who could be taking advantage of catch-up (and now super catch-up) contributions aren't fully aware of it.

Catch-up contributions have been a thing for a while - if you're over 50, the IRS gives you a bit of a boost to give you MORE room for tax-advantaged dollars in your 401(k). What's NEW is that there is a second bucket now for people who are 60-63 where they can contributed even MORE.

I've said this once and I'll say it again - the government does NOT want people out on the streets in retirement. That's not good for the people, it's not good for the country, it's not good for anyone. Because of that, they are genuinely trying to help give people tools to retire more comfortably. 401(k)s are not a scam, and anyone who says so is probably trying to sell you life insurance for a commission.

Take advantage of your 401(k), and if you're over 50, start putting money in those catch up buckets and getting even MORE tax savings!

- Matt

P.S. I use SoFi for my high-yield savings account and they are running a sign-up bonus where you can get up to a $400 with opening a new account and connecting direct deposit. Comment "HYSA" and I'll send you a link to get your bonus!

Have you heard of the Endowment Effect?!?

If you're deep in personal finance, behavioral economics is like the cousin field that you can't help but be interested in. In traditional economics, everyone acts rationally. In behavioral economics, we get to discuss when and why people act IRRATIONALLY.

Anecdotally, I certainly feel this effect. It's kind of the effect of "eh, I bought this thing and didn't really want it, but now I also don't really feel like it's worth it to return and get my money back." For some strange reason, once we own something, it's value goes up for us.

How does this relate to personal finance? I think it's good to be aware of this bias, especially in the case that you're a pack rat. Some people really struggle to part with things because they assign such a high value to things that they already own that they never want to throw anything out.

In a truly neutral setting, something should have the same value whether you own it or now (outside of the "cost" of effort to buy or sell something). While that will never truly happen due to our natural human biases, being aware of this effect can help us mentally correct for it a little bit so we don't make decisions that are TOO irrational.

A bit more theoretical post today, but something that I read about that I find very interesting!

- Matt

P.S. I'm a HUGE index fund guy, so I made a free index fund guide explaining them and laying out options to create an index fund portfolio at different brokers (Vanguard, Fidelity, Schwab, etc). Comment "guide" and I'll send you a link to get the PDF!

If you needed another reminder that you won't LOSE money by getting a raise into another tax bracket, THIS IS IT!

This uses the 2025 tax brackets to show how much federal tax you will pay as your income scales. When you make $100k, your federal marginal tax rate is 22%. See how you only pay $13.6k in taxes? That's because you aren't paying 22% on ALL of your money.

As your income rises, you only pay the marginal tax rate on your "next dollar". So if you made $100k and suddenly had $1 added to your income, THAT dollar would get taxed at 22%. Similarly, your first dollar earned isn't paying any taxes because it is within the standard deduction. Of course, the IRS isn't tracking the order of your dollars earned, this is just looking at it all in a lump sum at the end of the year.

This is a slightly more experimental graph, so sorry if it's confusing. I like it though, so hopefully you do too 🤓

- Matt

P.S. I use SoFi for my high-yield savings account and they are running a sign-up bonus where you can get up to a $400 with opening a new account and connecting direct deposit. Comment "HYSA" and I'll send you a link to get your bonus!

All I have to say is OUCH, that is EXPENSIVE.

As someone who is planning on getting married in the next 2-3 years, I grapple a lot with wedding costs. On one hand, this may be one of the only times in life where you can get all of your family and friends in the same room for a big celebration. I VERY much understand the desire to ball out on that type of party (for lack of a better term...).

On the other hand, spending that much money on one night is crazy. While the night will be very special, I don't want to be frivolous. As special as it is, $35k can buy a LOT of special things (for me and my girlfriend, we mainly think of it in terms of how much travel we could do with that much money).

I certainly don't judge those who have the means and desire to have a really nice wedding, but I think I will probably go for the "nice but modest" wedding to try to make it special but not over the top.

Either way, as a data nerd, I loved seeing the averages for such a large sample of weddings. Food is the craziest to me - that much on one meal is wild!

- Matt

P.S. I use SoFi for my high-yield savings account and they are running a sign-up bonus where you can get up to a $400 with opening a new account and connecting direct deposit. Comment "HYSA" and I'll send you a link to get your bonus!

With the same outcome in mind, there are MANY instances where the price of an item doesn’t make a difference.

A lot of people will misinterpret the point I’m making here. I’m not saying you should never buy premium options, just that a lot of times, what your paying for isn’t the core outcome of the product.

With watches, you buy a $10k Rolex for status, not to tell the time. For flights, you buy a nicer seat for short term comfort. For headphones, you buy comfort / sound quality. For golf, you convince yourself that the clubs are the problem (should have just invested in lessons).

That last one was a joke, but the broader point stands! The delta on these isn’t the core outcome, it’s usually a secondary consideration. For some people, that secondary consideration is worth the extra money.

For a lot of people, and I mean 99% of people, they can get by just fine with the left side here. Others will strive for the right side if it matters for them. My only word of caution is stretching yourself to the right side because you feel like you need to. Do it if you want to, but you don’t need to.

Price often doesn’t change the core outcome, so don’t make purchasing decisions expecting it to. That’s how you get in a nasty case of keeping up with the Joneses.

- Matt