How to Stop Living Paycheck to Paycheck & Finally Get Ahead
The Mel Robbins Podcast
Host Mel Robbins sits down with personal finance expert Vivian Tu, known as 'Your Rich BFF,' to discuss actionable strategies for escaping th
Key takeaways
- Vivian Tu recommends the 'Avalanche Method' for debt, prioritizing payments on debts with the highest interest rates first.
- To build wealth, implement an automated system where 5-10% of every paycheck is moved to a savings account immediately upon deposit.
Main topics
- Financial Mindset and Agency
- Debt Repayment Strategies
Notable quotes
Money is power and money is the ability to leave a job or a relationship or a German cockroach-infested apartment.
Conclusion
The episode provides a practical roadmap for anyone looking to transit
Transcript preview
Speaker 2 (0:00) Hey, it's your friend Mel, and welcome to the Mel Robbins Podcast. Speaker 2 (0:08) I am so excited for the conversation today because you're going to learn how to stop living paycheck to paycheck and exactly what to do right now. And you're going to learn it from Vivian, too. She is known to millions of people online as your rich BFF. And today she is here for one reason. She is here to help you. She's one of the most respected and popular personal finance educators in the world. And here's what I love about her. She's been there. She knows the struggle you're feeling because just a decade ago, she was living paycheck to paycheck herself. And she's going to tell you, when you're trying to pay off debt and keep up with bills and live your life at the same time, one of the hardest questions can be, where do I even start? And if you're wondering, is it harder right now to get ahead? You're not crazy. Vivian will tell you it is harder to get ahead right now. But that doesn't mean... you're powerless. You're going to learn where to start if you've got nothing saved, how to pay off debt when it feels overwhelming, when it makes sense to start investing, and what to do if you're worried you'll never be able to afford to buy a house or you're behind on retirement. Today, you're going to learn how to get ahead when advice like, well, just cut back, doesn't cut it. See, you don't need to fix your entire financial life. You just need to know your next right move. And today, Vivian Tu is here. to show you how to make it. For Speaker 1 (1:39) many of us, going further isn't a choice. It's a feeling we can't ignore because ambition has a way of outgrowing where it began, turning dreams into direction. Every journey brings us closer to the life we imagine. So where will your journey take you? Etihad, beyond borders. Speaker 2 (2:12) Hey, it's your friend Mel, and welcome to the Mel Robbins Podcast. I am so glad that you're here. It's always such an honor to be together and spend this time with you. And if you're new or somebody sent you this episode, I just want to personally welcome you to the Mel Robbins Podcast family. You have picked an extraordinary episode to listen to because today you're learning how to stop living paycheck to paycheck and what to do. right now. From one of the most popular financial educators in the world, Vivian Tu has more than 10 million followers on social media, where she is better known as Your Rich BFF. Vivian is a former Wall Street trader at J.P. Morgan, and she's the author of two New York Times bestsellers. And Time Magazine has named her... to the Time 100 Creators List, recognizing some of the most influential thought leaders in the world. Please help me welcome Vivian Tu to the Mel Robbins Podcast. Thank you so much for having me. When I told everybody that you were coming on, the team went crazy, and I wanted you on this show because my daughters follow you. Yay, I Speaker 1 (3:15) love that. And Speaker 2 (3:15) so many people around the world love you because you have this very rare ability to be able to... Empower us to feel. like we can take control of our money. And at the same time, you also are a realist about what's actually going on in the world right now. And so I'm grateful that you're here. And I'd like to start by having you paint the picture. So if the person who is listening right now is living paycheck to paycheck, what is going to happen? What will change in their life if they take everything to heart that their new rich BFF is going to teach them today? this episode is Speaker 3 (3:54) going to give them power. We talk a lot about wanting money, wanting richness, and I think everybody pictures the lime green Lamborghini and the new designer bag, but that's not what this is all for, right? We should want money because when you have money, you have the power, you have the freedom, you get to be the captain of your own ship. Something that so many people are feeling these days is this lack of agency. that so many things are changing around them, but they don't actually get a say in their life. And to me, that's the most frustrating thing ever because if you Speaker 2 (4:32) can't fix it, then what's Speaker 3 (4:34) the Speaker 2 (4:34) point? Speaker 3 (4:34) So I hope everybody listening will realize by the end of this, you will have actionable things that you can do and that no matter where you are in your financial journey, there are very few mistakes you can't come back from. It's never too early to start, but it's also never too Speaker 2 (4:50) late. I love that. When you have money, you have power and freedom. Yeah. If somebody is listening right now and they're saying, I am struggling so profoundly right now, it feels impossible to get ahead. What do you want to say to that person? I Speaker 3 (5:05) do think that there are very few mistakes, especially in the financial sphere, that you can't come back from because I'm someone who made a lot of them. I'm the person who would overspend. I'm the person who had to wait at a bar until 1201 when my direct deposit hit to be able to afford my bar tab. Like the scariest words to me at 21 were, your card declined. And I am not someone who grew up with money. I am the only daughter to two Chinese immigrant parents. We grew up incredibly frugally. They really valued education. I did. everything the way I was supposed to. I went to the right type of college. I got the right type of job. I got the Wall Street job. I mean, trust me, my Asian parents were very, very proud. And I made a lot of money mistakes. So for me to be able to sit here now and talk to you about all of these things, I'm so proud. It's an honor being able to show that I have battle scars and I came out bigger and better and braver and I feel the same way. I mean, I have millions of followers who DM me and tell me the things that they were able to fix because they put this work into Speaker 2 (6:17) action. I would love to have you, Vivian, just speak to this moment. Yeah. And what is the person who really does feel like they're never going to get their head above water? What is available to them in the things that you're about to teach to us today? Speaker 3 (6:32) First and foremost, let's address what you just said. Like, these people aren't crazy. If I can address the audience, you are not crazy. If we actually look at the stats, right, we've seen that over the past century, the housing market, exponential increase. The cost to get higher education, exponential increase. The cost of living, exponential increase. You know what hasn't exponentially increased? Wages. So you're being asked to do... More with less. If I can kind of wrap this all in a nice big bow. Please. There are macroeconomic forces, whether that be politics, you know, geopolitical conflict, things like legislation. The way our economy is currently designed. really benefits people who have money and penalizes and treats not having money like it's a crime. Those are not things that you can tomorrow wake up and change. These are things that are going to impact your money, but you are not necessarily going to be able to flip a light switch and be better at. Speaker 3 (7:38) Tomorrow, and hopefully, depending on when you listen to this today, if you actually can make changes in your own life, you can always end better than you started. Speaker 2 (7:49) And Speaker 3 (7:49) I think that's what we're missing is that internal locus of control, people who have an external locus of control think things are happening to them. And people with an internal locus of control think things are happening because of them. And when you think that things can happen because of you, Now you're very, very incentivized to try and make every smart move, every good decision to put yourself in a better financial position than you were yesterday. I love that. And here's what I love about it. Speaker 2 (8:20) When I was really struggling financially, it was very easy to be angry at the world and to not look in the mirror and go, well, there are some pretty dumb things I've been doing. Yeah. And on the converse to go, wait, there are actually things in my control that will empower me. There are things that in my control, if I change some small habits day to day, will give me power back around money and around how I feel in my life and around the freedom I can create over time. What are three things you wish you knew when you were broke? One, it's Speaker 3 (8:52) very expensive to be broke. Think about it, right? Who gets charged overdraft fees from their bank? Speaker 2 (9:00) Oh, it's the people who are overdrafting on their accounts. They don't have the money. Speaker 3 (9:04) The second thing is, is that there's a little bit of a frustration that comes when you're playing this comparison game of you're broke, but you're trying to prove to people that you're not broke. Speaker 3 (9:21) I very much had this because I had the brand name job. I had the fancy title, but I didn't have the money. And I did not come from a family that was going to be able to bail me out like that. And so I would see some of my peers from college. They would be moving into an apartment that they bought. And I'd be like, man, like, what am I doing wrong? FYI, their parents bought the apartment for them. I. Wasn't 100 % sure about that at the time. I am now. I'm very sure about that. And I think I got myself on this consumption hamster wheel trying so hard to fit in because I wanted to prove so badly that I wasn't broke. Because right now, money for us is very much a moral measuring stick. People feel like if you have money, you are a good person, you are a smart person, you do good things. And if you don't, it's a moral failure. Like you are not smart. You've made bad choices. You are irresponsible. And that's just not always true. And I think keeping up with the Joneses, in my case, keeping up with all of the hot, flashy, cool things that were happening around me was a big problem. And last but not least, I would say the third thing I really wish I knew when I was broke was that you don't have to be broke forever. It felt like I was going to be stuck in a bad spot for eternity. So I found this apartment and it's teeny tiny. My bed touches three walls, but it was going to be this beautiful Soho apartment. And my sex in the city dreams were about to start finally. That apartment ended up having a severe German cockroach infestation. Oh, my God. And I was so horrified because we had to pay to break our lease. And that was every dollar that I had saved from the first. full calendar year of working. And I was devastated because it felt like I had run on a treadmill in place for 365 days of my life. What a waste. And ultimately, that was the moment, the belt tightening, come to Jesus moment for me, where I was like, I actually need to be better. And I think I felt like I was going to be stuck there forever. But Smart decision after smart decision compounds the same way bad decision after bad decision does. And eventually, things changed. Slowly. Not quickly, not overnight. But one day I woke up and I didn't feel like I had this fear every single day of, was I ever going to make it? Was I ever going to have enough in savings to feel comfortable? It's my promise to people listening that you don't have to be stuck forever. There is a different interpretation Speaker 2 (12:17) of that story, and I want to give it to you. Ooh. You just proved what you promised you were going to teach us, which is that money is power and money is the ability to leave a job or a relationship or a German cockroach-infested apartment. And so you did have a tiny enough mountain to have the power and control to leave. Speaker 3 (12:43) And wasn't that an amazing way to end that story instead of saying I had to live there? Speaker 2 (12:49) Yes, because the you from a year ago would have had to live there. Yeah. But what was the thing you changed most? I think Speaker 3 (12:57) it was the keeping up with the Joneses. It was such a public thing because I was on the trading desk, which, by the way, you're sitting shoulder to shoulder with other people. on the phone with the exterminator, yelling at the property manager, just I'm red in the face. All the while, I'm trying to juggle all of the trades happening, trying not to lose my job, trying to be good so I can possibly get a good raise at the end of the year. I'm on the phone talking about my cockroach infestation. And Speaker 2 (13:28) everybody knew. Speaker 3 (13:29) Everybody Speaker 1 (13:29) knew I was weird cockroach girl. And so I Speaker 3 (13:33) was so embarrassed. And I was like, OK, we Speaker 2 (13:35) have to lock it up. We Speaker 3 (13:37) aren't getting our nails done every week. We aren't. going out to eat as often. Speaker 2 (13:41) Maybe you've had an experience where, like me, I was, I remember standing on the sidelines watching our daughter playing town soccer, knowing that the $125 check that we had sent in the week before had just bounced. Speaker 2 (13:59) the fee for her to be on that field and not wanting any of the parents to know. And then after the game, watching the coach walk over and knowing that I was about to be asked about this and hoping they didn't say it too loud. Speaker 3 (14:19) But Speaker 2 (14:20) I think we all have those moments you talked about, like that frustration that you can't seem to get ahead. And I love that it was this I'm just not going to stay here. I'm going to accept that I'm here right now, and this is why I wanted to talk to you, and this is why I wanted you to learn from Vivian to your new rich BFF, is because if you can have that mindset shift to say, I hate being broke, I hate being paycheck to paycheck, I do not have to stay this way the rest of my life. There are simple things I can learn, and there are behavior changes that I can make, and you can do it from any starting point. So does it start with that, like, damn it, I'm sick of this? Speaker 3 (15:01) Yeah. Are you sick and tired of being sick and tired Speaker 2 (15:05) of being broke? Is there a reality check that you also have for the person who's saying I'm paycheck to paycheck, saying that I'm struggling, saying it, but there are hidden buffers, so to speak, of Speaker 3 (15:18) stuff you don't need. Ask yourself honestly. When you say you are paycheck to paycheck, Are you spending all of your money after taxes on necessities? Or can you think of multiple instances where you have spent money that you have had regret about? Let us do an audit of your spending of the past month. First and foremost, if there's a bunch of stuff that you bought and regret, can you return it? Two, if you are seeing that there is a trend of feeling like you are hand-to-mouth, oh, but by the way, there was that lash appointment, that nail appointment. Maybe you were sports betting. Maybe you bought those concert tickets that you didn't necessarily need to get front row seats to. You could have just gotten a GA ticket. I'm not asking you to cut out every little thing in your life that brings you joy forever. I'm asking you to cut it out for the next couple months to see what type of buffer you can build yourself. Because once you can get your head above water, once you are able to actually put some of that money into a little nest egg, into investments that can work for you, you'll be able to do all of the things you enjoy and you won't have to feel guilty about it. Speaker 2 (16:42) You write on page 49 of your... bestselling book. This is in a chapter called Investing in Yourself. Would I still buy this if I couldn't tell anyone about it? One of the best pieces of spending-related advice I've ever gotten was to ask myself this question. Sometimes when we invest in luxury items or upgrades, a big part of the appeal is being able to tell others we have them. This question cuts to the core of that. Would I want the BMW as much if everyone else thought I had a Kia? So talk to me about this. Would I still buy this if I couldn't tell anyone about it? That's such a Speaker 3 (17:25) powerful spending exercise because I've actually bought a lot of stuff that I don't like. And it's kind of crazy to say that part out loud, but I have bought shoes that were incredibly uncomfortable because they were from a specific designer and I wanted people to know that I could afford that specific designer. The stuff where I've actually spent money to improve my life in a meaningful way has always paid off and had a bigger ROI in terms of my joy and my satisfaction than stuff that I bought just so that I could tell people. that I had the thing. I love a little three-month challenge because Speaker 2 (18:07) I also think we don't have a clue what we're spending money on because you just swipe and