Aug 24, 2023
Vivian Tu knows she doesn’t look like who you’d typically imagine appearing on CNBC to dole out financial advice — but that’s what gives her an edge.
Tu’s a self-made millionaire who also goes by Your Rich BFF online. At 29, she’s leveraged her experience in finance as a trader at JP Morgan and media (after a stint as an account executive at Buzzfeed) to craft an online following of 2.4 million on TikTok, where she shares easy-to-understand tips on managing your money. She also has her own podcast and is releasing her first book, Rich AF, in the fall.
Advertisement
She’s got plenty of advice when it comes to building wealth and managing your money. “If you want to be rich, if you want to be financially stable, if you want to live the life that you want to live, you have to STRIP,” Tu tells Moneywise, joking that she’s always nervous about bringing up the risquė acronym in interviews.
But Tu’s STRIP method actually stands for five financial tenets: saving, total debt, retirement, investing and planning. Here’s how it works — and how to apply it to your own finances.
S is for savings
It’s important to have some money saved up for a rainy day so that you’re always prepared in the event of an emergency.
“I'm talking about if the wheel falls off your car, or you end up having a roach infestation in your apartment,” Tu explains. “And as you get older and your expenses get larger and larger, that emergency fund needs to grow with you.”
Tu recommends you set aside three to six months’ worth of savings in a high-yield savings account — which could get you 4%-5% back in interest.
In comparison, a traditional savings account will earn you just 0.43% in interest, according to the FDIC.
Must Read
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and the simple steps to fix it ASAP
- Robert Kiyosaki begs investors not to miss this ‘explosion’ — says this 1 asset will surge 400% in a year
- Vanguard reveals what could be coming for U.S. stocks, and it’s raising alarm bells for retirees. Here’s why and how to protect yourself
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
T is for total debt
The next step is to pay off your debts — and Tu recommends the avalanche method, where you start off with the debt with the highest interest rate first.
“Rank your debt from highest to lowest interest rate and pay it down in that order because it'll allow you to pay the least in interest and also pay it down in the fastest time frame,” she says.
If the prospect of tackling your highest-interest debts first seems too daunting, you can opt for the snowball method instead, and get some momentum building by clearing your smallest balance first.
Advertisement
But Tu warns that paying down your debts this way can be less efficient, since you end up paying more in interest over time.
R is for retirement
If you haven’t already got an account on the go, look into retirement savings vehicles — whether that be a 401(k) through your job, or an IRA — so that you can park some savings and grow your wealth for your golden years.
“These are essentially accounts that provide you tax benefits, AKA, you get a pat on the back for doing a good job and a little lollipop for doing the right thing — taking care of future you,” Tu says.
With a 401(k) or traditional IRA, you can contribute some of your pre-tax income and let it grow tax-free until you make withdrawals in retirement.
If you decide on a Roth IRA instead, you’ll pay your taxes upfront and enjoy your withdrawals tax-free later.
If you’re not sure which account is right for you and your retirement goals, you might want to speak with a professional financial adviser to help guide you through the process.
Read More: Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
I is for investing
Tu says it’s important to pick your portfolio carefully while you’re growing your money in your investment accounts.
Advertisement
“Do not try to cherry pick stocks,” she warns. “When I worked on Wall Street, I would see hedge funds blow up all the time. And these are people who have hired some of the most financially literate, super-educated economic experts — who had billions of dollars of resources at their fingertips — and they still couldn't get it right.”
Instead, Tu advises investing in a diversified portfolio of index funds, target-date funds, or even a few ETFs or mutual funds.
She says these baskets of investments can help people weather economic downturns more effectively, as opposed to overexposing themselves to one particular sector.
P is for planning
Lastly, Tu says you need a plan for the future — for retirement or whatever your happily-ever-after looks like.
She tells people to calculate their “F- you” number by determining how much money they’d need to live their perfect life, and divide it by 0.04. She says that’s “essentially what you would need to kick over your desk, tell your boss ‘F- you’ and walk away from [your job].”
With the S&P 500 historically offering an average annual return of 8%-10% and high-yield savings accounts providing around 4% back, Tu says you can figure out how much you need to have invested in order to eventually leave your job and live comfortably.
While Tu doesn’t picture herself ever retiring, she is still planning for her perfect life with her fiancé — with time for travel and dining out, one to two kids and a little English Bulldog. She and her partner already bought a $2.7 million New York City apartment when Tu was just 27, but she wants a vacation home as well.
“In my happily-ever-after … I get to live the life that I've always really dreamed of without having to sacrifice that much.”
You May Also Like
- Turning 50 with $0 saved for retirement? Most people don’t realize they’re actually just entering their prime earning decade. Here are 6 ways to catch up fast
- This 20-year-old lotto winner refused $1M in cash and chose $1,000/week for life. Now she’s getting slammed for it. Which option would you pick?
- Warren Buffett used these 8 repeatable money rules to turn $9,800 into a $150B fortune. Start using them today to get rich (and stay rich)
- Here are 5 easy ways to own multiple properties like Bezos and Beyoncé. You can start with $10 (and no, you don’t have to manage a single thing)
Serah Louis is a reporter with Moneywise.com. She enjoys tackling topical personal finance issues for young people and women and covering the latest in financial news.
