3 Reasons Why Americans Are Still Broke!Feb 27, 2020
brokeis brian preston the money guy you know this show sounds like it's negative but it's actually a positive and inspirational show but the truth is we know in our current state of In our country there are a lot of people who just don't make sound financial decisions and aren't in the healthiest of financial circumstances and in our opinion it's kind of their fault most of the time yeah I mean that we have a big problem where i think. the average american is trying to keep up with jones it's true we have a problem where we look around instead of being happy with what we have we are trying to look at our neighbors and what all the statistics show are our neighbors are
brokeand this is what makes me so sad about all this, they have everything in the world going for them, we are in a globalized economy which means the world is getting smaller and smaller, innovation is actually is accelerating. there's no reason why we all shouldn't benefit financially from these great things, but we can't get out from under our own fair consumption, that's right, it's consumerism that is destroying the ability to create an army of dollar bills and what i think is great is that these three
reasonsare things you can control there are things you can change things you can improve so we're going to educate you on why we feel like a lot of
americansare broke but it wouldn't be like that one guy of money So unless we give you some statistics to show you how bad Americans really are with money, the first thing is that 78% of Americans live paycheck to paycheck, that means 78% of Americans can't make it. to next month if your paycheck doesn't come this month and it doesn't have to if you live paycheck to paycheck that immediately tells me something right away that you probably aren't saving anything gives from your current paycheck because if you were saving you'd be building It's going up a bit so you're spending everything you make and if you need more proof that sixty percent of Americans can't even raise $1,000 if they had an emergency, they're in trouble exactly so let's find out. how to talk about what we're actually doing what's the main reason americans will stay broke yeah you know i think i remember it was my mom he says maybe she was a schoolteacher she always said that to fail to plan is to plan to fail and we think that's the number one reason why Americans are left broke because they don't have any set plan they don't have any kind of budget any kind of set Jump Street strategy the most important thing that We have look and I call it the ship without a rudder or starting on a road map you know it used to be.
I don't even know if young people who know what a road map looks like already sorry I know, believe me they used to. be even whole cottage industries where like triple eight you tell them where you're going or you knew and they printed you a little spiral booklet or you had MapQuest but Waze is exactly what I'm talking about but imagine if you're going somewhere you've never been and not even You didn't even use an app like Waze, you basically said, "I'm going to work my way through this and I'll be honest with you, the average American, that's what they do at 20, that's what they do at 30." and it's probably because of my age which is when you have the midlife crisis that people say wait a minute I'm going to be at that destination and I really don't know where to get there I don't know how far it is I don't know how much I need that's right , and that's exactly what's happening, so we're skipping steps, so we want to show you why would anyone buy premium brands, buy designer clothes or luxury cars without knowing exactly where? they stop and if they are ahead of the curve behind the curve or if they get hit by the curve but that's what's happening with America and don't get lost listen to us there's nothing wrong with luxury brands or the nice houses or nice cars or fill in the blank but there's an order in which you're supposed to accomplish those kinds of things and if you don't have the financial foundation, if you don't have a solid foundation in place and you fall out of control, you prepare to be rudderless and remain rudderless as you work on your financial journey, so let's talk about planning because that's what it's all about. fidelity has a studio that they have dated.
I have put it in a few shows that I published it. One of the biggest indicators of success is that you have taken the time to really create. a plan so let's go over the money i have tips so we can make sure you're not a rudderless ship that there's actually something going on there so the first thing you can do when you're starting out and trying to figure things out is really know where you're dripping water where you are sp finish your money and the best thing you can do for that is a budget yeah so you know you hear us all the time now i'm going to ask you a true or false Brian do you have a budget?
No, I hate the fake budget, I'm the same. However, there was a time in Beau Hanson's life when he didn't have a budget when I started. I had to understand if this is what I get. This is what I need. they're going out, how do I get them to line up? So we think early on it might make sense for you to have a budget and the good thing is that in the world that we live in, there are apps, there are worksheets, there are spreadsheets, there are all kinds of things that you can now use at your disposal to make this easier than ever.
I've practiced in the past because I was trying to build muscle memory create habits and that's the part is if you don't do this you're not really going to get the fruits of what you get from budgeting so make sure you understand that the next step is to automate. You have to automate the process as many things as you can configure. and this is what it's going to get you if you hate budgeting there's a way to get away from budgeting you actually pay yourself first you automate all the stuff that comes out of your accounts monthly so you're funding all the big stuff first and then you don't have to worry about the minutiae focus on the little things but you can't get there unless you push yourself up front you know the dirty little secret about human nature is whether to operate under this place where you know what that I'm going to wait until the end of the month and what I have left I'm going to keep it safe, it's amazing how every time you prepare to do that, you get to the end of the month and somehow that money finds a way to evaporate so if you can do what you said pay yourself first have a scarcity environment you will set yourself up for long term success so we have the automated when i mentioned the concept before scarcity you are talking about when everyone knows it. we are big proponents that you should save twenty to twenty five percent for the future a lot of people who are younger like how do i get to or even people in their 30s how do i get to 20? 25 percent scarcity is one of the biggest tools you can do because while what it means is every time you have a step up in your income stream or your cash flow, instead of letting that create a slow lifestyle or let that slip away from you actually deliberately allocate a Porsche that towards long term savings whether you know saving for Roth whether it be 401k or retirement there are ways that serve a purpose you are a field general of his army of dollar bills and he makes sure that everything has a purpose it's exact very well this all leads to a bigger plan as well and how can it all work together because we mentioned this if you look at the financial order of operations or if the money guy likes to affectionately call Foo, you know he's one of those. things you could talk about, we need to talk about the order of operations like cash reserves, making sure you have your risks covered and the basics of your wealth so that if something happens to you, people are counting on you or it doesn't hurt you making sure you have a healthy dose of debt worry and a good relationship with it and then you always want to make sure you're thinking about the future where retirement savings were also yeah one of the things you have to acknowledge is if you get a piece it's ok i have i have the budget ok i have my savings automated there are different ears what you have to bend if you have it you should go see we have done a lot of shows on the financial order of money man ops go check those out and that's how you can make sure you're really on track, you're not that rudderless ship knowing you're moving in the right direction n where you are supposed to move so to close the first step make sure you have a plan of action and stick to it its ok if it changes every year or you have to adjust it at first just make sure you are doing something because a dream does not become a reality until it is put into action and put into practice. paper so go ahead stop being a dreamer you're actually a person you're actually starting to build something for the future i love it number two you have to have a healthy relationship with debt but the truth is Most actually have a very unhealthy relationship with it, you know.
I don't know if I'm saying this is the main reason, but I think in the United States specifically, this might be the main reason from a consumer standpoint why people are in trouble because it's become too easy to borrow our lives to pretend what we're going through and we don't really own anything good i think you know that's the way it is life is a little cruel while you're young while you're carefree no no you don't have kids you don't have anything to I tied you up, you're usually broke mm-hmm, so an entrepreneurial bunch has figured out you know what we've got, all these people who are young and have energy and have a lot of free time to themselves, but they don't have anything. money if only we could create a product that would help them feel like they had money when they don't really have money that was the beginning of the right credit card because that's exactly what happened is you have a whole group of people who are faking their life, they go on trips, they do all sorts of things, they buy consumerism on steroids, but then guys I'm telling you this is a trap, they were slowly getting into a situation where debt slowly burns away. you to the point that you eventuate If you become a slave to the payments you have to make so don't let debt be like a knife mm-hmm it's a very scary sharp instrument it can be very productive it can help you but cutting your fruit cuts your vegetables is amazing in those aspects but if you never respect yourself you forget what a knife is and how sharp it is it can become a chainsaw or it can become something that breaks you it can actually you can lose an appendix, So when it comes to debt, we think there's actually four areas, four big areas that can lead you down the dark and scary path, and Brian already alluded to the first credit card, yeah, that's the one I think.
It's the consumers that get us into the most trouble the fastest because it's so easy to let things get out of hand, so let's review some statistics on credit cards, why are these things so now? The first thing is that interest rates are approximate. we just talked to a group of twenty something Neers engineers so they are highly educated we asked them what credit card rates were for credit card sales and they said like 22% 23% I said that makes sense because we always quote the average credit card rate but for younger people this thing is even more disastrous than average that's right you can see the average APR for credit cards right now is seventeen point three percent obviously a lot of it driven by young people who are in their early 20's yeah and i'm sad the number is typical our credit card debt is around eighty four hundred dollars that's a lot that's a lot of money , especially crewing at 17 point three percent, so what's the most important thing you can do to protect yourself?
Make sure if you are someone who uses credit cards that you pay them off in full each month, if you find that you are the type of person who doesn't have the discipline, you don't have the ability to do that, just don't use them Go to court from cold turkey get rid of them but if you are someone who likes points like cash back as rewards make sure you pay them every month in the fall so i feel like me and this slide is like hanging out socially now because we gave several presentations last week with this slide we'll do it today i admit but then i realized i was like brian ok this is a public service announcement you need the public to understand that it really is a bad word if you can do not pay thecredit card debt monthly, don't even use it, do it all at once, you know, do all the things you could possibly have to be a Dave Ramsey type of person, where you just give these things up because they're dangerous, dangerous, dangerous if you. i am not responsible remember our advice is not for the 80 percent of the public who have behavior problems and lack of discipline, we are only giving advice to the 20 percent that may go beyond common sense and increased debt not millionaires or They don't even have a problem with debt, so why should I have a problem with this?
If you're having debt problems, fix that problem so you can graduate and get more of what we're sharing with the audience right now for most people. credit cards are a smaller thing like you rack up credit card debt 100 bucks 200 bucks at a time average debt was 8400 yeah 8400 ok thats sad but i know where you go let's talk about something that can actually grow things right so we thought the next big mistake you can make is buying more cars than you can actually afford and cars cars and I've said this a few times I think this It's my new favorite topic to talk about. because once again we spent a lot of time with the young investors last week giving them advice.
I truly believe that auto loans are Napalm to your financial life, yes, because they are the most important thing and I think it is so cruel that this is an emotion. final psychological thing that happens because what is probably the fastest and coolest way to make yourself cool in high school oh you gotta drive a good car if you have a good car you can really move up in that lease it worked out that way in the old days. you know i was in high school because of how cool your car was and given the way things have gone up the social ladder now thankfully in college i didn't feel that pressure maybe i am but college didn't feel like this, but I think there is always an insecure teenager inside each of us who thinks you know what the car where I leave my mark and show people how successful I am is going to be, why else would people make these efforts, so it's not uncommon where you see people graduate college or just graduate and get their first great job, they think they need to reward themselves with a car that sounds amazing on paper and there's a I mean you can't even turn on the big Thor was the third largest advertiser? the auto ind Try it, yeah, because it's like beer, pharmaceuticals, and then like a car, and you know the auto industry, so there are a lot of people telling you to go reward yourself, there are even Christmas commercials.
I saw those comments. I think it's General Motors, it's like an SUV, but he thought. he was buying the jeep for his wife and he got this big black truck for him and then the wife runs i was like im so excited i keep the truck and its supposed to be fun they should be kicking each other butts because they bought two vehicles new without talking to the spouse about what is going on, but this is what they whisper in his ear at all times, yes, and this is not just an ax, we know that it is actually just a system that in three people who exchange a car for a new one they are actually dipped in the car they are trading in so they are not only getting into debt but also taking on negative equity when they go to buy a new car so let's talk about how we can avoid this we have said this before.
I feel like we're camping hanging out with this one too because we used it last week for our presentation. We talked about the concept of the money man from 23-8 and all that. it's going to be, we're fair with you, we realize cars are horrible, these things depreciate like a rock, it's not uncommon for it to lose 40 to 50 percent of its value just in the first few years you own it, but I'm going to be I'm going to treat you like you're an adult and I've realized sometimes you may have to finance that minivan for your family so with that understanding it's okay if you put 20% down but you will pay the car in three years that's just it's going to happen three years from now and you won't let your car payments exceed eight percent of your gross income but Bo there's an exception a big asterisk we put in there what Is that for luxury cars? want to buy a luxury car so this is Tesla BMW Mercedes Lexu s Acura fill in the blank you need to be able to pay for it in a year yes twelve months the same as cash so I guess there are two questions ok , guys, but what if I can't afford my luxury car in a year? you are buying too good a car or you are just faking your lifestyle all we tell you about faking it until you are doing it sounds like if you can't afford the car or if you want to I shared this story.
Someone came up and said, "Hey, can you talk to a friend of a family member and talk to this person because they're really scared about the car situation? The car is breaking down. They need to buy a new car." I'm thinking about taking money out of his 401k, I said yes I'll talk to him so I exchanged a few emails and then I did it all went radio silent. trying to finance a new bmw this is how people keep digging deeper and deeper its right in the ditch of bad financial decisions so always keep these things in mind for what a car credit cards were bad and a car is even worse because now we're talking about big numbers let's talk now Brian about the big one the big one well I mean at least with the car people can see what car you drive the house nobody sees that except the people who are your neighbors and where you live and let me tell you psychologically we've talked about this the happiness factor happens around seventy five thousand because that means you cover the basics but if you're the poorest person on the street and this is counterintuitive because You always hear that if you buy the cheapest houses on your street, you will probably get the most appreciated money. fast economically it is the best opportunity psychologically it is the worst decision if you are the poorest person on your street it will have negative consequences for you so don't make an effort so that your house rich life poor b because there are many people who do that and many people give That advice to your youngsters, to the kids, and to the realtors, the mortgage brokers say yeah, just stretch, stretch, and that's what we've actually seen, thirty-eight million Americans spend more than thirty percent of their housing income, up from $16 million in 2001, what tells me immediately is that there are thirty million Americans who don't listen to Money Got because if you listen to Money Got, you know that spending thirty percent of their Housing income is not the way to make sensible financial decisions It's not where you want to be when it comes to how much to spend on housing No so let's give it some money guys let's give give him some love some money got tips and then also be confessional about how that down payment works too so Bo explains what it is to buy a house what are the rules that the money guy puts first thing every time you go to buy a house Must You think your goal should be to make a 20% down payment, and the reason you're going to make a 20% down payment is two-fold: You'd like to have immediate equity inside the home you're buying, but you don't have it either. throw the money away on PMI primary mortgage insurance if you can get 20% you don't have to worry about that the other thing to do is have a goal of having your house paid off before retirement.
I can't tell you how. So many times someone calls us and says, "I'm thinking about retiring, next time we'll say awesome, tell me a little bit about your portfolio, I'm a little bit about what you're doing, oh okay, I'm assuming you're debt free." oh I don't know I
stillowe seven hundred thousand dollars on my house and we were like oh you can't be financially independent and have a mortgage those are two different things or at least have the ability to pay the mortgage and so this is the most important thing this is the really important thing when it comes to how much of your income should go to her home towards housing, your mortgage payment should be less than 25% of your gross income, so these 38 million americans who spend more than 30% of your housing income is already out the door doing it wrong yeah I definitely think this is something that a A lot of people get in trouble if you look at your car you look at your housing those are the biggest Apple bites that They're probably hurting your lifestyle right now, I want to spread some love out there. 'Cause I've all we've all been broke before we were 20 we've been in our 30's when you're trying to get that first home and you see this 20% down number you know no way no I mean my just the market yeah you're especially like we're in Nashville, but if you live on one of the coasts or in a hot city like Nashville, the appreciation of a home just one loan will probably be more than you could get from savings and a down payment, so which almost feels like the ho the use of the marketplace is working right now instead of you being able to handle the 20% down payment so once again we are very transparent and honest because I asked throughout the office that there isn't a only person here but let me note that there are two people here because i lost eric and carter now we have more new exception with eric - because i ask these questions but most of the people here didn't put 20% ok in that first house if you have to because you're trying to get in it's because you don't want to neglect your savings you don't want to like them you know everyone thinks about long term planning but i'll tell you 25 percent there are no buts because i do want to keep you away of a situation where you've got this big honking house that's carpeted empty and you're sitting in the corner crying every night because you don't have the life you're living outside of that, but I want to give you enough grace as far as you can Elise, hopefully getting your first foot in a house at some point in your life now second third house I want you to be a little more deliberate as you approach that down payment goal so we've talked about consumer behavior so credit cards credit and buying cars and then buying houses but then there's another type of debt now even though this debt is an investment this is good debt because it's a debt that you accumulate for me improve yourself to improve your a lot to build on what you can work on in the future that you're investing in yourself that's what we're told we're investing in look i'm big on always being a lifelong learner investing in yourself but this with student loans i'm disgusted with what happened because i looked at what it costs me to go to the University of Georgia and it was way more expensive for you to go to UGA and then we hired your full time equivalent Daniel I was surprised if you remember the rate inflation and it was consistent it wasn't even a rounding error it was 7% per year every year from when I graduated in the mid 90's until Daniel recently graduated.
I couldn't believe that blew my mind, education has such a huge growth factor that it has really put our young people in deep debt so let's give them the tools to not let this take too long but also have a very healthy understanding how to pay it off exactly as you're listening to probably show somebody that they already have student loan debt so the question you have is guys. I hear them talk about this eighty-eight times and how powerful my army of dollar bills can be. How should I approach building my army but also satisfy? my student loan debt and being the math nerds that we are, we came up with some simple math to help you figure it out and this information is based on the equity risk premium, which is essentially the rate of return you get for taking on risk. i'm thinking about that i n that and this is what we distilled if you're 20 and your student loans are over 6% you should probably prioritize paying them off over building your army of dollar bills and a lot of people have student loans too many loans 6% when I recently spoke especially to this group of engineers last week a lot of them had interest rates of six and three quarters, six and seven eighths so pay attention to what your interest rate is you probably want to be aggressive if it's that high, that's right, if you're 30 and it's around 5%, you want to start prioritizing it and then once you hit 40 if your student loans are above that percentage, you need to eliminate it because by the time you get to fifty or more you shouldn't have any more student loan debt you know one of the things because we Daniel did the research I would feel horrible if we left this out that average loan debt s student is twenty nineeighteen hundred you know and now when I do I'm actually kind of encouraged by that because what we always say is the right amount of student loan debt to accumulate you really never want to accumulate more student loan debt than you will earn in your first year if you work well if you look at the median income in this country and see that thirty thousand dollars is fine it's nice to see that it's not some crazy egregious number like eighty ninety hundred thousand dollars on average we'll save that for the doctors that's right bring your up but it's still one of the things so bo let's talk a bit because we've talked about the big debt sure but there are things you can do as well that are decisions you can die a death for ten thousand paper cuts. here yeah we think there are some small decisions that can cost you a fortune in the long run so one of the things we want to investigate is how much people spend in different areas of their life and this is from Bureau of MarketWatch employment statistics and from the Consumer Electronics Association and here's what we found that on average Americans spend a little over $300 a month eating out, so three hundred dollars a month you go out and eat in restaurants and there's nothing wrong with go to eat. as long as you can afford it, that's right, what I'm worried about is the people who are eating out and creating this lifestyle who aren't checking the other boxes first, so keep reading.
I am not against 288 eating out. I'm more interested in you doing this when you don't have your financial order of operations in a good place if you tell us, oh man, I just can't tell if things are that tight and then we go out on the weekends, you know? go get burgers instead of eating at home maybe you're not doing it right a hundred bucks a month on electronics no i'm a gadget guy so that doesn't surprise me at all how about these clothes on average? American spends a hundred and fifty six dollars per m As far as clothing I'm skewing that number down way below my wife my wife is helping out on the other side so we have a push pull system going right now , the next one I thought was really interesting because we've done shows about this before in the past the average American turns 200 and almost $40 a month in subscriptions now I did it because I asked something I was like dang give me some stats on what that's like number so big and i don't know if it includes you know, like your internet bill but but but this is the newest grant battleground for your dollars and look i'll be confessional.
Change. I cut the wire. cable because I moved to YouTube TV and it was a huge savings because I went from a hundred and ten dollars a month down to 35 which looks great but here's the rub. I've refilled all those savings. What is the backfield first? of all YouTube TV's up I think we're over fifty bucks now oh wow we added HGTV so there's some wins on there we also had TNT for NBA basketball so they had that channel so I'm not even going to ripping them off too much for jacking up the prices, but the problem here is where I have a problem. that's how we keep filling in.
I mean you have who you have Netflix you have prom and then Disney Plus comes on the scene and then even before Disney Plus comes on the scene Apple has its own streaming channel. I know that NBC has its own CBS. all access because they have Star Trek and some other custom stuff and before you know it guys there's no doubt you'd be spending more money on all these subscriptions than you would if you were back on your old school cable , this is guys, you have to be very deliberate about what you're going to subscribe to to know that I love what you said there, broad, because you said two things. it's you said hey I'm a gadget guy so I don't mind spending m Honey I told you hey I like Disney Plus.
I like it. It's okay to spend money on the things you love and the things you care about. The main thing is to make sure and we put this umbrella over a lot of our advice and content. you have to be saving twenty to twenty five percent of your income if you can make sure you're covering the basics if you want to have all the streaming subscriptions. I'm ok with that actually I love my disney plus and shop with hulu and bo if you haven't seen the imagineering series that's on disney plus you're missing ill greeby and i've already gone crazy with this i mean this conversation without me, it wasn't no, it's like that. well i'll tell you a mistake you know my daughter is very young she loves the magic of disney but you know and she's autistic she's ten years old but she's more like a six year old in the way she processes the world in which we had it. while she was there she didn't think of anything new is that you and they were making the new world of James Cameron what do you know about an animal kingdom and Pandora and the open door with the floating rocks?
She saw where they were showing how they made the floating rocks. She practically started crying so it's fake. my daughter had no idea so we ruined it by watching this Imagineering show so I want to tell you there are some risks in watching some of these shows behind the scenes but it's gratifying to see the vision that Walt Disney had in each series. walks through the Imagineers and how they fulfilled Walt's visions and then how that happened to all the different CEOs and it's just amazing, I know, uh, I'm going to Shanghai at some point and you know that just because I know. a lot seeing this ok its not that related to the topic that the damn trolls are commenting on it but i couldnt help it so when it comes to this consumer behavior when it comes to seeing the Imagineering focus on spi Preste Pay attention to things that make you happy, but don't make it out of step with your trading order, so if you can follow the money, get trade news, it will give you the freedom and flexibility to pivot and then the second thing is if you're someone who likes to use something like credit cards if you do that sort of thing make sure you pay it off in full each month i mean certainly if you're not paying it off monthly however you are digging deeper I know you would ask Daniel.
He said hey I heard the average debt is around 8400 I ran some stats on what it would look like if you just paid the minimum yeah so what we said is fine if we have the average APR 17.3% rate most credit card users will let you pay a minimum of twenty five dollars for three percent of your outstanding balance so lets say you wanted to buy something for the average price on a credit card $8,400 well It will take you 189 months to pay for that thing, so your initial purchase of eighty-eight thousand, three hundred and ninety-eight dollars will cost you seven thousand, one hundred and twenty dollars, interest during those almost sixteen years, that thing you bought will have cost you fifteen thousand five hundred and eighteen dollars was a blast that really breaks it first of all to see something that almost has a mortgage type amortization schedule that most likely you gave to the thrift store years ago and you're still paying that's not a good move towards proper financial independence so pay attention don't fake it till you make it guys don't let consumerism take over we are trying to turn you Addicted to a healthy lifestyle to pay yourself first, be a good field journal for your army of dollars. bill C you don't have to work there will come a point where you have to work so hard with your back and your hands you will let your money do the work for you so don't get ahead of yourself reward yourself celebrate by throwing away the Gatorade when you run out to graduate that you just got to the starting line you have absolutely nothing so don't fake it until you've started to have some accomplishments so we said we think there are three reasons why americans are broke.
You know number one was not a budget. Plan number two was this unhealthy relationship with debt. But we believe that there is a decision and this decision. Understanding this concept will have the biggest impact on your financial future. and how successful it will ultimately be from a financial perspective, so when I first got it, I mean, I was already working in the field. What's really fucked up in the world is how young people have no idea how money works so I went to the local school system this is in George and I went up to the superintendent and said I want to teach these kids the p The power from personal finance this is before the money was shown because they realize this is two thousand and three i'm doing all this started the money was shown in 2006 the superintendent dr.
Jack Paris loved the concept, so he immediately put me in touch with a high school. I remember doing the first one in a trailer because the school was so capable. the trailer but anyway these kids and the first concept i told you this long story the most important thing i told you guys there's one thing i want you to take from today's presentation if you can understand this concept it will absolutely change his life, is that deferred gratification is the foundation of all the financial empires being built out there if you can take just a little bit of today for an amazing tomorrow this will multiply i mean it really is jack's magic beans it's deferred gratification the sooner you realize the concept the higher your vision of success, yes you said something so moving right there, Brian, the sooner you can understand this, the sooner you can understand this. e bigger, more impactful, and more powerful to your long-term success, so it's only fair that I still remember that there was an illustration I pulled from that curriculum because I had gone to a local credit union organization to get give a syllabus and they even I knew it was meant to be when the first chapter covered deferred gratification.
I thought we were cooking with a little bit of bacon grease. I mean, this is cool here, but there was an illustration that I've used for years. I have used it in 401k submissions. I've used it in a lot of other things and boom we did this reunion of shows we had to get it out now producer Rebe just the owner she didn't love this idea so if you don't like it twig right? if you love this if you believe if you're one of these people who has realized how lujah delayed gratification is this concept will hit you right between the eyes so go ahead and load 'em up bob so let's talk about the advantage of starting early, come on take three savers and we're all What we're going to do is say these things are going to max out their Roth IRAs every year they're going to make six thousand we're not going to assume that indexing is ready for that kind of thing and let's assume that all they can earn the same rate of return as Everyone is going to earn eight percent in the long run while investing.
Man, you don't give trolls any ammo. Normally, we get aggressive while you're younger and slow it down. choose moderate 8% trolls you guys go to the back nothing to see here get under the bridge so here's the answer five hundred dollars a month or six hundred six thousand dollars a year earning 8% so lets look at three different savers saving number one It's Adam Adam it's you know he just graduated it's like I graduated early from college and he said you know what I'm going to run out I'm going to start saving from the time I'm 20 and I'm going to say during my 20's , but when I get to 30 I'm going to start living g life I'm going to start enjoying so you know I'll do this deferred thing I'll do it for a while but when I get to 30 then you know I'm going to get married and have kids and do all things good then there was bill bill said you know what i just finished school um i don't want to start saving i've still earned my right to go spin and go do things so in my 20's i'm going to do everything i can and I'm going to enjoy it tar, but I know I'm wasting some time, so I'm going to start saving $6,000 a year every year from the time I turn thirty until I retire until I can say 65 all the way through my year. 64 and then there's Cleo and Cleo she just says you know what I'm going to do all the time so I'm not going to do this early at the party I'm just going to save 6000 of the time I'm 20 till the end of my career ok so This is what we thought was interesting when you add up all the numbers.
Adam, who saved only on his 20th, saved sixty thousand dollars, six thousand dolls. Ars a year for ten years Bill who saved for thirty five years from age thirty to sixty four saved two hundred and ten thousand dollars so naturally who has more money that's three and a half times the amount of money I said that's quite a lot amazing. This is one of the things. This is a wake up call for those who don't understand compound interest. Adam's thousand Bill's two hundred and ten thousand I'm sure you're thinking that common sense was that there's no way sixty would beat 210, so Adam, but he became a millionaire, turned his six thousand dollars every year alone for ten years into almost 1.3 million dollars more thana millionaire bill that saved 210 thousand also became a millionaire but look at this he only ended up with a terminal value of just over 1 million 30 thousand dollars despite the fact that he has saved three and a half times more than he had around two hundred and fifty thousand dollars less before showing how smart Kaleo is.
Here's something I think is interesting. Adam who only invested his first 10 years if you do the math that's about 5% so that's 5% is his contribution the 95 percent comes from appreciation which means the army of bills dollar worked for him. The bill still did a good job. He started at 30 and stayed for 35 years, but if he notices that he's about 20% of his initial contribution, the other 80% is gross, still healthy, but man. Adam has it so much easier with just a 5% contribution, that's awesome, but then there's Cleo and Cleen said, “you know” and I'm either going to do this or I'm just going to save all the time. consistent and what she said is I'm going to save $6,000 every year and then she actually saves $270,000, so that's only $60,000 more than Bill or $210,000 more than Adam.
What did she end up with when she retired? More than 2.3 million dollars. stayed consistent starting as early as you could so there are multiple components here start early mm-hmm be consistent yeah and the other thing is if you think of this in terms of you're looking for freedom if you can afford yourself yourself first it's ok once you can get that 20 to 25 percent to start thinking about other things that's where you can start rewarding yourself start living a little bit longer but make sure you cover the basics first it's such a powerful and that's what we know.
I wanted to give you some motivation, but also give you some data so that you can awaken that invisible hand and realize how powerful all the elements are working for you to be financially successful. So you just have to start participating in the process, get up and be a part of the success that is happening financially and you may wake up one day and realize that this has happened for you too, so many of you probably realize that we are charging you we are giving you tons of free advice what is the problem what are these guys asking for it is all based on the principle of the cycle of abundance we are coming you come here we will let you learn apply grow I don't know if it will be five years in the future I don't know if it will be ten years in the future I don't know if it will be fifteen years in the future There will come a point where you will be so successful you are going to go I need a co-pilot I need someone to look over my shoulder to tell me where things are so time i'm worried my spouse doesn't think about money like i need someone who thinks like this these guys do it to make sure this doesn't go to the ditch right after i leave we see people all the time time that will be the cycle but abundance that will start to push you and say hey you remember those guys who loaded you with a bunch of advice then that's when you go back to looking for limited wealth or the kind of money we have.
Contact us page go check that out but I also want to tell you a little humble brag we just crossed 50,000 weeks I mean it was just a few days ago yeah so this is picking up speed I have a goal and Now that I've said it out loud it has to happen and I need your help guys I don't take anything for granted we say thank you all the time but I need your help I need you to tell at least three friends. and family about the money guys show because I need that number to be one hundred thousand times twelve thirty hundred thousand YouTube subscribers, go ahead and ring the bell to get notified, we do a lot of live shows and we want you to participate. those i feel i can stop barking now everyone bows but i'm excited ed about i think there's a lot of great things happening in the year 2020 and it's one of those things i want to get the money.
I involved the family in that process. We are very excited. We are so committed. This bountiful cycle, obviously, you. come here you can learn from the show you can learn from the things we post if you've had a chance to visit our website go to our website we have a blog there if you like to consume written content we can go a little deeper and we even have a blog page resources if you haven't gone to the resources page gone and taken advantage of the free resources pdf spreadsheets deliverables things you can actually take with your family share with your friends it's there for you so make sure you go check it out so we can continue this bountiful cycle through time thanks to the guys the money got the team
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