---
title: 'Do This Every Time You Get Paid (Updated 2026 Paycheck Routine)'
source: 'https://youtube.com/watch?v=sIQ95q1goMA'
video_id: 'sIQ95q1goMA'
date: 2026-08-05
duration_sec: 831
---

# Do This Every Time You Get Paid (Updated 2026 Paycheck Routine)

> Source: [Do This Every Time You Get Paid (Updated 2026 Paycheck Routine)](https://youtube.com/watch?v=sIQ95q1goMA)

## Summary

This video provides a step-by-step guide on how to allocate your paycheck in 2026, emphasizing the order of financial priorities to optimize savings, debt repayment, and investing. It covers seven steps, from paying off debt to building multiple income streams, with updated figures for 2026 contribution limits and interest rates.

### Key Points

- **Introduction and Updated Context** [00:01] — The video updates a previous paycheck routine to reflect 2026 challenges: higher inflation, lower high-yield interest rates, and increased retirement contribution limits.
- **Step 1: Pay Off Debt First** [00:28] — Allocate money to debt payments (credit cards, student loans, auto loans, BNPL) to protect credit score. Payment history and amounts owed make up 65% of credit score.
- **Step 1.5: Automate Your Finances** [01:22] — Set up automatic transfers for all financial goals to remove reliance on discipline. Automating ensures money moves before you can spend it.
- **Step 2: Cover Necessities** [02:04] — Set aside money for monthly operating budget (rent, food, utilities, etc.). Example: $2,910/month for necessities. Separate from emergency fund.
- **Budgeting: 50/30/20 Rule** [03:11] — Categorize expenses into needs, wants, and savings. Ideal split: 50% needs, 30% wants, 20% savings. Adjust based on cost of living.
- **Step 3: Build Emergency Fund** [03:40] — Target 4-6 months of living expenses (up from 3 months). Example: $2,500/month needs → $10k-$15k emergency fund. Keep in high-yield savings account (3-3.5% APY in 2026).
- **Step 4: Retirement Contributions** [05:12] — Contribute 10-15% of paycheck to retirement. 2026 401k limit: $24,500 (under 50), $32,500 (50+). Always get employer match (free money).
- **Power of Early Investing** [06:32] — Example: $7,500/year invested for 40 years at 8% return → $2.1 million. Starting early and staying consistent is key.
- **Step 5: Pay Off High-Interest Debt** [06:58] — High-interest debt = >15% APR. Two methods: Avalanche (highest interest first) and Snowball (smallest balance first). Avalanche is optimal, snowball builds momentum.
- **Investing vs. Low-Interest Debt** [08:31] — If debt interest is 4-6% or lower, it may be better to invest (expected 8-10% return) rather than pay off early. Personal choice based on psychology.
- **Step 6: Investing Priorities** [09:26] — Order: 401k match → max Roth IRA → top up 401k or taxable brokerage. Roth IRA: $7,500/year (under 50), $8,600 (50+). Tax-free growth.
- **Taxable Brokerage Account** [10:19] — No tax advantages, but flexible. Long-term capital gains (held >1 year) taxed at 0-20%, short-term at ordinary income rate (up to 37%).
- **Step 7: Multiple Income Streams** [11:25] — Diversify income: 65% of self-made millionaires have at least 3 streams. Ideas: freelancing, dividend stocks, content creation, Etsy, teaching, real estate.
- **Reinvest Additional Income** [13:18] — Funnel side income back into earlier steps: emergency fund, Roth IRA, taxable account. Compounding accelerates wealth.

### Conclusion

The video provides a clear, actionable checklist for managing a paycheck in 2026, emphasizing automation, debt management, and diversified investing. Following these steps can help build financial security and wealth over time.

## Transcript

money every time I get paid and why the order matters now more than ever since it did three years ago. I've updated this video to reflect the challenges of 2026 and beyond which include inflation numbers, lower high yield interest
rates, as well as increased contribution amounts for retirement accounts. The serve as a guideline in how you should be thinking about the flow of your money after you receive a paycheck. And you can always refer back to this video at
waste any time. After you get paid, the first place that your money should go is on debt, such as credit card payments, student loans, auto loans, or even BNPL or buy now pay later debt. Think of this as your treading water step. You
because if you're late or even just miss one of these payments, your credit score it's going to make qualifying for things such as renting an apartment or getting very difficult. Credit scores are calculated through these five factors.
And you can see the top two here. The first is simply payment history. So, as payments, your credit score should be in good standing. And if you keep the reasonable level, your credit score should take care of itself. Because
these two factors alone make up 65% of what your score is comprised of. Now, in just yet to take care of all of your debt. You just really want to make sure your automatic payments are set up so that you don't miss any payments. We're
strategies in step number five, but for now, let's move on to the next step, which is actually a bonus step today. So, step 1.5, and I'm putting this here everything else in this video easier. Step 1.5 is all about automating
up automatic transfers for everything we're about to cover in this video, it you can make because you are removing yourself from the equation entirely. And all psychology. And the psychology here is really simple. You can't spend any
money that you don't even have. If the money moves automatically before it even relying on discipline or remembering to do it every month. It just kind of happens and it can just flow into the following steps seamlessly. Most banks
and brokerages let you schedule recurring transfers. So, take 15 minutes today, and then automate your money into their respective buckets. All right, step number two today is to put money aside for necessities, aka your monthly
this money in my main checking account or even a separate account that I label sure you're accounting for the money you need to live on a daily basis. So things like your rent or mortgage, food, healthcare, utilities, transportation,
budgeting spreadsheet, you can see that this person has a rent of $1,750, insurance payment, groceries, cell phone, and internet bill totaling about
2910 per month. That means if I were allocating my pay for step number two, have at least 2910 in my account at all times and upwards of even $3,300 just think that's always nice to have. Note that this money for your monthly
operating budget is separate from what's called an emergency fund. So, an emergency fund is for when accidents or unexpected life events happen, which we but just know that this monthly operating budget that you have is
notice, this budgeting worksheet is also categorized in terms of needs, wants, important to categorize your expenses and differentiate between what a need expense is and what a want expenses. Ideally, the split between the three is
going to be 50 30 20. So, 50% to your needs, 30% to your wants, and 20% to in a high cost of living area, the needs percentage might be closer to 60%. And if you're in a lower cost of living place, it could be 40%. Either way, it's
you're getting paid and how much your establishing what that looks like every month or every paycheck. Okay, so once you have that, we'll move on to step number three, and that is establishing
your emergency fund in 2026. If you've watched some of my videos before, you should have a good idea of what this is, but as its name implies, it's an account unless it's for an emergency. Now, for
experts used to recommend 3 months of living expenses. But these days, with so having 4 to 6 months worth of your expenses as your target is a good goal to have. So, if your monthly needs cost you about $2,500 a month, then your
emergency fund target should be somewhere between 10 and $15,000. I know perhaps you set a intermediate goal first. So, maybe get your first $5,000 and then work your way up after that. This is still the thing that I would
to invest and allocate my money elsewhere. And honestly, I think it's few years ago. In terms of where to keep your emergency funds, you want it in a generates some interest while staying completely liquid, which means that you
it. Now, what's even harder these days is that back in 2023 and 2024, high yield accounts were paying between 4 to 5% per year in terms of interest. But these days, you're looking at between 3 and 3.5% depending on the bank. It's
savings account, yes, which averages around.11%. the next few years, we might have to For this year, though, we should still be fine in a high yield savings account,
to my favorite ones in the description three or three and a half steps covered, now it's the best time to start step number four, and the best place is with your retirement account or pension
of people who watch this channel are in you're in the UK, you have something called a workplace pension. Australia has a super annuation and Canada has RRSPs. Whatever country you're in, the
principles here still apply. And I think a good goal here is to contribute at least 10 to 15% of your paycheck towards retirement. In 2026, the 401k limit is now $24,500 per year if you're under the age of 50 or 32,500 if you're 50 and
older. If your employer offers an employer match, you need to contribute And I think that you should always do that because it's free money from your contributions. Beyond the match, if you want to save more of your salary into
your 401k, that's definitely up to you. But there are some other things that you remember that any money that you do save into your 401k should not be withdrawn until retirement age. This is actually a problem for some people. They might run
throughout their earlier years in case they want to use that money for you hit retirement age, which is usually around 59 and a half. But still, I still think a 401k is quite worth it. So,
let's say you contribute 10% of a $75,000 salary. That's $7,500 per year. If you invest that consistently for 40 years in the S&P 500, averaging 8% annually, you're still looking at about $2.1 million by retirement, which is why
I think it's so powerful to start early when you are young in your 20s perhaps, and you can stay consistent with it. This is also why step 1.5 is so powerful even better and I think it's one of the best places that your money can go. All
five, which has to do with paying off any remaining high interest rate debt. High interest rate debt, in my opinion, would be anything over 15%, and there are two main methods that people use to pay off debt. The first is the avalanche
method, and the other is the snowball method. Now, both have their pros and cons. The avalanche method prioritizes the highest interest rate debt to be financially optimal, but it can be the most psychologically difficult. So,
of debt on the screen right here. You have car payments, credit card payments, and student loans. And you owe $3,000 on each of these. The interest rate is as follows: 7% interest rate on the car, 25% on your credit card, and 4% on your
should pay off first? If you said the credit card balance first, then you you the most amount of money every single month because of its high APR and then you would do the car payment and then finally the student loans. Now, in
balance the exact same on all of these, which is usually not going to be the going to probably owe a lot more on say your student loans versus your credit card payments. It's important to note that with the avalanche method, you're
all you should focus on. The other method, called the snowball method, is where you knock off debt in order of the smallest to largest balance. The goal here is that you will gain momentum by paying off these smaller debts, and that
if you're able to maintain momentum and then kill all that debt sequentially. and see which one you like more. It really just depends on who you are and Now, one thing I want to discuss is lower interest rate debt and investing
at the same time. So, oftentimes people will ask me if they can still invest if long as the debt is lower than an interest rate of 4 to 6%. For example, interest rate, it may make financial sense to actually invest while you still
rationale being that you can make around 8 to 10% in the stock market. So, investing is technically worth more of your money. However, if you want the psychological win, every dollar that you pay off with a student loan debt of say
rate that you are getting on your money. It's a guaranteed return of four or 5%. for peace of mind. I personally don't like having debt, but I do know people that like to carry debt and still invest. So, even though my choices might
not be the financially best move, for me, psychologically, it is the best. It what people on Reddit or the internet have to say. It's really a personal choice. So, make sure you choose what's best for you. Step number six is to
you've done steps one through five, here's my personal investing priority. First, I would do my 401k match. Then, I would max out my Roth IRA. And then, I would top up my 401k or just simply invest in a taxable brokerage account
investing in stocks and ETFs. The main advantage of having a Roth IRA is that taxfree. That means when you retire and you withdraw all the earnings on this account, you won't pay any taxes on it. Now, if you're under the age of 50 in
2026, you can contribute $7,500 a year into it. And if you're over the age of 50, you can contribute $8,600 a year as a catch-up mechanism. The catch is with the Roth IRA is that you're contributing to it with after tax dollars. So, you've
already paid taxes on this money going in, but you'll never pay taxes on the out your Roth IRA and you want to invest even more, I would say open up a normal taxable brokerage account or just simply max out your 401k. Now, with a taxable
investing. There's no special tax treatment, no contribution limits, and you can access your money anytime without penalties. The difference is brokerage account for a reason. Because if you make $10,000 in gains, for
example, and you sell some of it, you will actually owe capital gains on that stock and you sell it within the same year, you are going to be taxed at your ordinary income tax rate, which could be upwards of 37% assuming you made profit.
Now, if you hold any security for longer than a year and then you sell it for a profit after a year, then it will qualify for long-term capital gains and you will pay a smaller percentage in tax on the gain anywhere between 0 and 20%.
sense to me. So, in a Roth IRA, I tend to go for higher growth ETFs and stocks that can maximize my upside. That's because the earnings in this account are growth that's in that account. In a taxable brokerage account, it makes more
sense to stick with simple index funds like the S&P 500 or maybe even QQQ or SHD. They're tax efficient, they have low fees, and they are reliable. Now, investing consistently. If you're able to stay consistent and invest regularly,
even if it's not like 99.9999% optimized or anything like that, you who doesn't invest at all. All right, lastly, let's get into step number seven, where your money should go, and that I believe is towards multiple
in the flowchart, that's amazing. You're already ahead of most people. You've regularly, and now it's more about diversifying how you make your money. According to inc.com, 65% of self-made millionaires had at least three streams
relying on just one single income only have we seen layoffs in tech, but AI is reshaping entire industries and every corner. So, I think that diversification can really help against
also in your income as well as your skills. You don't have to do 80 hours a week of work in order to do this. But if you can just dedicate just one to three to 5 hours per week to build something on the side, that's an extra 100, 200,
could help you change your financial path. So, some ideas here, I'm going to do freelancing or consulting in your area of expertise. So, let's say you're job. Maybe you do it on the side or help businesses with it. Number two, you
dividend paying stocks. Number three, you could build a content channel like YouTube, Tik Tok, Instagram, a Substack, etc. Number four, you could start an know some people that run an Etsy shop. They sell jewelry and little charm
side income off of that. Number five, you could teach or coach people in what running, climbing, tutoring, something like that, you could teach others how to real estate or wreaths, real estate investment trusts. So, these are all
could add an additional income stream to your life. The beautiful part is that additional income streams can be immediately funneled back into steps one your emergency funds. You could increase your Roth IRA contributions. You can
have more money in your taxable account. It's going to all compound for you. All right. So, that is what I would do in 2026 if I got paid and the exact order in which I would do it. Make sure to subscribe to this channel if you got any
looking for a video on how to invest your money in 2026, you want to check out my beginner's investing guide, which will be linked right here. I hope that see you guys in that one or a future video on the channel. All right, thank
video on the channel. All right, thank you for being here. Peace. you for being here. Peace. [Music]