3 Reasons Why Americans Are Still Broke!

three reasons why Americans are still broke its brian preston the money guy right you know this show it sounds like it's gonna be negative but this is actually be a positive uplifting show but the truth of the matter is is that we know in our current state of our country there are a lot of folks that just don't make wise financial decisions and do not find themselves in the healthiest financial circumstance and in our opinion it's a little bit their fault most often yeah i mean we have a huge problem where i think the average american is trying to keep up with the Jones that's right we have an issue where we're looking around instead of being happy with what we have we're trying to look at our neighbors and what what all the statistics show is our neighbors are broke and here's what makes me so sad about this whole thing you have everything in the world going for you we are in a globalized economy meaning that the world is getting smaller and smaller innovation is actually speeding up there is no reason that we all shouldn't be benefiting from these great things economically but we can't get out from underneath our own just consumption that's right it is consumerism that is destroying the ability to create an army of dollar bills and what I think is so great is that these three reasons are things that you can control there are things that you can change things you can improve upon so we're gonna educate you on why we feel a lot of Americans are broke but it wouldn't be a money guy so unless we gave you some stats to show you how bad Americans really are with money the first thing is 78% of Americans are living paycheck to paycheck that means that 78% of Americans can't get to the next month if their paycheck doesn't come in this month and it doesn't have doesn't have to be that way if you're living paycheck to paycheck that immediately tells me something right off the bat you're probably not saving any of your current paycheck because if you were saving you'd be building a little bit up so you're spending everything that you make and if you needed more proof of that sixty percent of Americans can't even come up with $1,000 if they had an emergency they're in trouble exactly right so let's figure out how to talk about what are we actually doing what's the biggest reason why Americans will stay broke yeah you know I think that I'm reminded think was my mom he says maybe was a schoolteacher she always used to say that failing to plan is planning to fail and we think that that is the number one biggest reason why Americans stay broke is because they don't have any plan in place they don't have any sort of budget any sort of strategy in place from Jump Street the biggest thing that we see and I call it the rudderless ship or starting out on a road map it you know used to be I don't even know if young people who know what a road map looks like anymore I'm sorry I know believe me there used to be even whole cottage industries where like triple-eight you tell them where you're going or you had you know and they print you out a little spiral booklet or you had MapQuest but Waze is exactly what I'm talking about but imagine if you were going to a place you'd never visited and you didn't even use an app like Waze you just basically said I'm just gonna fill my way through this and I'll be honest with you the average American that is what they do in their 20s that's what they do in their 30s and it's a probably about my age that's when you get the midlife crisis that people go whoa wait a minute I'm going to be at that destination and I don't really 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 going on so we're skipping steps so we want to kind of show you because why would anybody buy premium brands buy designer clothes by designer or luxury cars without knowing exactly where they stand and if they're ahead of the curve behind the curve or gotten run over by the curve but that is what is going on with America and don't miss hear us there's nothing wrong with luxury brands or nice homes or nice cars or fill in the blank but there is an order in which you're supposed to achieve those types of things and if you don't have the financial foundations if you don't have the solid footing in place and you get it out of whack you set yourself up to be rudderless and to stay rudderless as you work through your financial journey so let's talk about planning because that is the thing fidelity has a study they've come out with I've put it in some shows that I put it out there is that one of the biggest indicators of success is that have you taken the time to actually create a plan so let's go through money got 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 knowing actually where are you leaking water where a are you spending 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 gonna ask you a true or false Brian do you budget no I hate budget false I'm the same way we don't budget however there was a time in the life of beau Hanson where I didn't have a budget when I first started out I had to understand if this is how much I have coming in this is how much I need to have going out how do I make those to line up and so we think that early on it may make sense for you to have a budget and what's great is in the world in which we live 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 it's ever been before yeah budgeting is no different than exercise to me I mean it's something that I know I don't like to do but it is something I've practiced in the past because I was trying to develop muscle memory create habits and that's the part is that if you don't do this you really are not going to get the fruits of what comes from laying the groundwork of budgeting so make sure you understand that the next step is automate you've got to automate the process the more things that you can set up and this is what is going to allow you if you hate budgeting there is a way to get away from budgeting it's actually you pay yourself first you automate all the things that are coming out of your your accounts monthly so you're funding all the big things first and then you don't have to worry about the minutia focus on the little stuff but you can't get there unless you put in the work on the front end front you know the dirty little secret about human nature is if we operate under this place where you know what I'm just gonna wait to the end of the month and whatever I have left over I'm gonna save well it's amazing how every single time you set yourself up to do that you get to the end of the month and somehow that money is found a way to evaporate so if you can make yourself just like you said pay yourself first have an environment of for scarcity you will set yourself up for success long-term so we've got the automated when I mentioned the concept before scarcity what that's talking about everybody knows we are big proponents of you should be saving 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 ago how do I get to 20 25 percent for scarcity is one of the biggest tools you can do because while what means is is that every time you have a step up in your income stream or your cash flow that instead of letting that create lifestyle creep or you let that get away from you you actually allocate deliberately a Porsche that towards long term savings whether it's you know saving for Roth whether it's 401k or retirement there's ways that has a purpose you are a field general of your army of dollar bills is making sure everything has a purpose it's exactly right um all this also leads to a greater plan and and how everything can kind of work together because we mentioned this if you look at the financial order of operations or is the money guy affectionally likes to call foo you know it is one of those things where you could talk we need to talk about order of operations as cash reserves making sure you have your risk and your estate basics covered so if you if something happens to you people are counting on you or not hurt making sure you have a healthy dose of concern about debt and a good relationship with it and then you always want to make sure you're thinking about the future were the retirement savings too yeah one of the things you have to recognize is that if you get one piece okay I've got the budget okay I've got my automated savings there are different ears what you have to fold in if you have it you ought to go check out we've done a bunch of shows on the money guy financial order of operations go check those out and that's how you can make sure you're actually on the path you're not that rudderless ship knowing that you're moving in the direction you're supposed to be moving so to close out step one make sure you have a plan of action and actually stick to it it's okay if it gets amended every year or you have to adjust it in the beginning just make sure you're doing something because a dream does not become a reality until it's actually put to put in action and put on paper so go ahead quit being a dreamer actually being a person it's actually starting to build something for the future love it number two you have to have a healthy relationship with debt but the truth is the majority actually have a very unhealthy relationship with that you know I don't know if I say this is the biggest reason but but I think in America specifically this this might actually be the biggest reason from a consumer standpoint of why people find themselves in trouble because it's just become too easy to borrow our lives to fake what we have going on and did not actually own anything well I I think you know it's just the way things are life is kind of cruel while you're young while you have carefree no no you don't have children you don't have anything that's tying you down you're typically broke mm-hmm so some enterprising group has realized you know what we got all these people that are young they have energy and they have a lot of free time on themselves but they don't have any money if we can only create a product that would help them feel like they did have money when they really don't have money that was the beginning of the credit card that's right because that's exactly what has happened is is that you have an entire group of people who are faking their life they're going on trips they're doing all kind of things buying consumerism on steroids but then guys I'm telling you this is a trap you were slowly working yourself into a situation where the debt slowly consumes you to the point that eventually you become a slaves right to the payments that you're having to do so don't let it really is debt is like a knife mm-hmm it's a very scary sharp instrument it can be very productive it can help you but cut up your fruit cut up your vegetables it's awesome in those aspects but if you don't ever respect you you forget what a knife is and how sharp it is it can turn into a chainsaw or can turn into something that breaks you it can it can actually lose an appendage so when it comes to debt we think that there are really four areas four big areas where they can just lead you down the dark and scary path and Brian you already alluded to the very first one credit cards yeah that's the one I think it's consumers that gets us in the most amount of trouble the quickest because it's just so easy to let it get out of whack so let's kind of go through some stats on credit cards why are these things so now the first thing is interest rates are rough we just talked to a group of 20-something engineers so they're highly educated we asked them what credit card rates were for the credit card sale and they were like 22% 23% I was like that makes sense because we're always quoting the average credit card rate but for younger people this thing is even more disastrous than even what the average is that's right you can see that the average APR for credit cards right now is seventeen point three percent obviously a big portion that's driven up by young folks who are in the 20s yeah and I'm sad that the number is typical our credit card debt is around eighty four hundred dollars right that's a lot of that's a lot of money especially crewing at seventeen point three percent so what's the big thing that you can do to kind of protect yourself make sure if you are someone who does utilize credit cards you pay them off in full every month if you find that you're the kind of person that doesn't have the discipline doesn't have the ability to do that then just don't use them go cold turkey cut them up get rid of them but if you are someone who likes the points like the cash back likes rewards make sure you're paying them off every month in fall so I feel like me and this slide are kind of like hanging out socially now because we gave multiple presentations last week with this slide we're doing it today I admit but then it hit me I was like Brian this is okay this is a public service announcement you need the public to understand that really is a cuss word if you can't pay your credit card debt off monthly don't even use it go cold turkey you know do all the things you might have to be a Dave Ramsey type person where you just swear these things off because they are dangerous dangerous dangerous if you're not responsible remember our advice is not for the 80 percent of the public that has behavioral issues and no discipline we're only giving an advice to the 20 percent that are can go beyond common sense and rose debt no millionaires don't even struggle with debt so why should I have a problem with this so if you struggle with debt get that problem fixed so you can graduate to more of what we're kind of sharing with the audience on this now for most folks credit cards are kind of the smaller thing right like you you rack up credit card debt 100 bucks 200 bucks at a time we the average debt was like 8400 yep 8400 okay that that's that's sad but I know where you going let's talk about something that actually can grow things up right so we think sort of the next second big mistake that you can make is purchasing more automobile than you can realistically afford and cars cars and I've said this multiple times I think this is my new favorite thing to talk about because once again we spend a lot of time with the young investors last week giving them advice I really do believe auto loans are Napalm for your financial life yeah because they are the biggest thing and I think it's so cruel that this is an emotional psychological thing that happens because what is probably the cool quickest way to make yourself cool in high school oh you have to drive a nice car if you have a nice car you really can move up that lease it worked that way back in the old days you know that I was in high school the cool your car was and given the way things went up on the social scale now fortunately college I didn't feel that pressure maybe it is that way but college didn't feel that way but I think there's always an insecure teenager inside every one of us that thinks you know what the car is going to be where I make my mark and show people how successful I am why else would people go through these efforts so that's why it's not uncommon where you see people graduate college or just graduate and get their first big job they think they need to reward themselves with a car that sounds awesome on paper and there's a I mean you can't even turn on the big Thor was it the third biggest advertisers are is the auto industry yeah because it's like beer pharmaceuticals and then like a car and you know auto industry so there's a lot of people telling you go reward yourself there's even holiday Christmas commercials I saw those comments I think it's General Motors it has like an SUV but he thought he was buying the SUV for his wife and he got this big black truck for himself and then the wife runs I was like I'm so excited I'm keeping the truck and it's supposed to be all fun they ought to be beating each other's rear ends because they bought two brand new vehicles without talking to the spouse about what's going on but this is what is being whispered into your ear at all times yeah and this isn't just an ax we know this is actually just a system that one in three people who trade in a car for a new one are actually underwater on the car they're trading in so not only they're taking on debt they're actually taking on negative equity when they go to buy a new car so let's talk about how we can avoid this we've said this before I feel like we're camp hanging out with this one too because we use this last week for our presentation we talked about the money guy concept of 23-8 and all that it what that means is you're going to be we are reasonable with you guys we realize cars are horrible these things depreciate like a rock it's not uncommon for you to lose 40 to 50 percent of your value just in the first few years you own it but I'm going to be I'm going to treat you like you were an adult and I realized that sometimes you might actually have to finance that minivan for your family so with that understanding it's okay if you put 20% down but you will slap pay that car off within three years that is just it's going to happen within three years and you're not going to let the car payments exceed eight percent of your gross income but Bo there is one exception one big asterisk that we put on there what is that for luxury cars you want to buy a luxury car so this is Tesla BMW Mercedes Lexus Acura fill in the blank you need to be able to pay it off in one year yeah twelve months same as cash so I imagine there's two question well hey guys but what if I can't pay off my luxury car in one year then you are buying too nice of a car or you just you're faking your lifestyle everything we're telling you about faking it until you're making it you resemble that if you can't pay the car off or if you want I've shared this story I had somebody reach out and said hey can you do a friend of a family member and talk to this person because they're really panicked about the car situation the car is breaking down they get need to get a new car they're thinking about taking money from their 401k said sure I'll talk to him so traded some emails and then I did it all went radio silent on me now I reached out and I said what what happened what was it oh they actually got a great deal on some financing on a brand new BMW this is this is how people keep going deeper and deeper it's right into the ditch of bad financial decisions so just always be aware of these things so a car so 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 biggie the big one well I mean at least with the car people get to see what car you drive the house nobody sees that but the people who are your neighbors and where you live and and let me tell you psychologically we've talked about this the happiness factor happens right around seventy five thousand because that means you cover the basics but if you are the poorest person on the street and this is counterintuitive because you always hear if you buy the cheapest houses on your street you're probably going to have the most appreciation money I'm so 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 on you so do not stretch yourself so that your house rich life poor because there's a lot of people that do that and a lot of people give that advice to their young to the kids and real estate agents mortgage brokers say yeah just stretch stretch and that's what we've actually we've actually seen that thirty eight million Americans spend more than thirty percent of their income on housing up from 16 million in 2001 what that tells me immediately is that there are thirty million Americans they don't listen to the money got show because if you listen the money got show you would know that spending thirty percent of your income on housing is not how to make fence sound financial decisions that's not where you want to be when it comes to how much to spend on housing no so let's give some money guys let's give some give them some love on some money got tips and then also be confessional on how that downpayment works too so Bo walk them through what is buying a house what are the rules that the money guy puts in so very first thing whenever you go to buy house you should think about your goal should be to put 20% down and the reason you will put 20% down is sort of twofold you'd like to immediately have equity inside the house that you're buying but also you don't be throwing money away on PMI primary mortgage insurance if you can get 20% you don't have to worry about that the other thing you should do is you should have a goal to have your house paid off by retirement I can't tell you how many times someone calls us and says hey I'm thinking about retiring next we'll say awesome tell me a little about your portfolio - I'm a little about what you have going on oh okay am i assuming you're debt-free oh don't know I still owe seven hundred thousand dollars on my house and we're like oh my you can't be financially independent and have a mortgage those are two different things or at least have the ability to pay off the mortgage and then here's here's the biggie here's the really big e when it comes to how much of your income should go to her house towards housing your mortgage payment should be less than 25% of your gross income so these 38 million Americans that are spending over 30% of their income on housing are already out of the gate doing it wrong yeah I definitely think this is something that a lot of people get themselves in trouble is if you if you're looking at your car you look at your housing those are the biggest bites of the Apple that are probably hurting your lifestyle now I do want to give a little bit of love out there because I've all we've all been broke before we've been in our 20s we've been in our 30s when you're trying to get that first house and you see this number of 20% down you know like no way no how I mean my just the market if you're especially like we're in Nashville but if you live on one of the coast or in a hot city like Nashville the appreciation on a house just a loan will probably be more than what you could come up with in savings and a down payment so this it almost feels like the housing market is running right now instead of you being able to get a handle on the 20% down payment so we are once again very transparent and honest because I asked around the entire office there is not a single person here but let me put that down there are two people here because I lost Eric and Carter now we have more new exception with Eric - because I ask them these questions but most people here did not put down 20% it's okay on that first house if you have to because you're trying to get in is because you don't want to neglect your savings you don't want to like you know all thinking long term envision planning but I will tell you the 25 percent there is no ifs ands or buts because I do want to keep you away from getting a situation where you do have this big honking house that's empty carpeted and you're sitting in the corner crying every night because you have no life that you're living outside of that but I do want to give you enough grace to where you can Elise hopefully get your first foot into a house at some point in your life now second third house I want you to be a little more deliberate with coming closer to that downpayment goal so we've talked about some consumption behavior right so credit cards and buying cars and then buying houses but then there's another kind of debt now this debt though is an investment this is good debt because this is debt that you accumulate to better yourself to improve your a lot to build on what you can work towards in the future you're investing in yourself that's right that's what that's what we're told we're investing yourself in look I am big on always being a lifetime learner investing yourself but this thing with student loans I'm disgusted with what has happened because I looked at what it costs for me to go to University of Georgia and it was a heck of a lot more expensive for you to go to UGA and then we hire full-time equivalent Daniel I was shocked if you remember the inflation rate and it was consistent it wasn't even a rounding error it was a straight 7% per year every year since I graduated the mid nineties all the way to Daniel graduating just recently I couldn't believe that that blew my mind the education has such a big growth factor so it has really run up a lot of debt on our young people so let's give them the tools so they don't let this thing hang out too long but also have a very healthy understanding of how to pay it down exact so as you're listening to show you probably someone who's already got the student loan debt so the question you have is guys I hear you talk about this eighty eight times over 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 nerdy math guys that we are we came up with some simple mathematics 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 kind of think about it in that and here's what we kind of distilled it down to if you're in your 20s and your student loans are more than 6% you should probably prioritize paying them off over building your army of dollar bills and a lot of people do have student loans over 6% when I was recently especially talking to like this group of Engineers last week a lot of them had interest rates six and three-quarters six and seven-eighths so pay attention to what your interest rate is probably want to get aggressive if it's that high that's right if you're in your 30s and it's about 5% you want to start prioritizing it off and then once you get to your 40s if your student loans are over percent you got to get him knocked out because by the time you get to fifty plus you should not have any more student loan debt you know one of the things cuz we Daniel did the research I'd feel horrible if we left this that out the average debt on student loans is twenty nine thousand eight hundred you know and now when does it I'm actually kind of encouraged by that because what do we always say is the appropriate amount of student loan debt to rack up you really don't ever want to accumulate more student loan debt than what you will earn in your first year working well if you look at the average income in this country and see that thirty thousand dollars to it okay that kind of it's nice to see it's not some crazy egregious number like eighty ninety a hundred thousand dollars on average we'll save that for the doctors that's right bring your way up but still it's one of the things so Bo let's kind of talk about because we've talked about the big debt sure but there are things that you can do also that are decisions that you can die from a death from ten thousand paper cuts here yeah we think that there are some small decisions that can cost you a fortune over the long term and so one of the things we want to do investigate was how much do people spend on different areas of their life and so this is from the Bureau of Labor Statistics from MarketWatch and from the Consumer Electronics Association and this is what we found on average Americans spend a little almost $300 a month eating out so three hundred bucks a month going out and eating out at restaurants and blowing nothing wrong with going out to eat as long as you can afford it that's right what I'm worried about is people who are eating out and creating this lifestyle who aren't checking the other boxes first so don't miss read us I'm not against the 288 eating out I'm more about 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 say if things are so tight and then we see out on the weekends you know going to pick up burgers instead of eating at home maybe you're not doing it right a hundred dollars per month on electronics no I'm a gadget guy so that doesn't shock me at all how about this one apparel on average the average American spends a hundred and fifty six dollars a month on clothes I'm skewing that number way down way down a my wife I my wife is helping on the other side so we're kind of got a push-pull system working right now this next one I thought was really interesting cuz we've done shows on this before in the past the average American spin 200 and almost $40 a month on subscriptions now I did I cuz I asked thing I was like dang give me some stats on how is that number so big and I dunno it includes you know like your internet bill that is but but but this is the newest grant battleground for your dollars and and look I'll be self confessional I switch I cut the cord so proud we even do you can go find our show where we did cutting the cord because I moved to YouTube TV and it was a huge savings because I went from like a hundred and ten dollars a month all the way down to 35 that looks great but here's the problem I have back filled all those savings what's the backfield first of all YouTube TV has gone up I think we're over fifty bucks now oh wow we did add HGTV so there's some wins there we also had TNT for NBA basketball so they've had that channel so I'm not even gonna con them too much for raising the prices but the problem here's where I do have a problem is how we keep backfilling I mean you've got who you got Netflix you got prom and then Disney Plus comes on the scene and then even before Disney Plus comes on the scene Apple has their own streaming channel I know NBC has their own thing CBS all access because they have Star Trek and some other custom stuff and before you know it guys there is no doubt you'd be spending more money on all these subscriptions than you would be if you just were back on your old-school cable this is you guys you have to be very deliberate on what you're going to subscribe to know I love what you said there broad cuz you said two things I thought that just seen me so well and this is just right in line with our money guy tips is you said hey I'm a gadget guy so I don't mind spending money I got you said hey I like Disney Plus I like this it's okay to spend money on the things that you like and the things that you care about the main thing is making sure and we put this umbrella over a lot of our advice and content you got 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 every streaming subscription I'm okay with that matter of fact I love my Disney Plus and I bundle it with Hulu and Bo if y'all have not checked out the Imagineering series that is on the Disney Plus missing ill greeby and iíve already nerd it out on this thing I mean this conversation without me I wasn't no it is it is so good I will tell you one one mistake you know my youngest she's very she loves the Disney magic but you know and she's autistic she's ten years old but she's more like the six year old on kind of the way she processes the world we had it on while she was in there didn't think anything of a new are you and they were doing the the new James Cameron world what is it you know over an animal kingdom and Pandora and open door with the floating rocks she saw where they were showing how they did the floating rocks she practically started crying so it's fake she had note my daughter had no idea so we ruined it by watching this Imagineering show so I do want to tell you there are some risks to watching some of these behind the scenes shows but it is fulfilling to watch the vision that Walt Disney had in each series kind of walks through Imagineers and how they kind of fulfilled Walt's visions and then how that went to all the different CEOs as well as it's just an incredible incredible stuff I know huh I'll be going to Shanghai at some point and you know just because I know so much about it from watching this okay that is so not on topic that bloody troll comments from that but I couldn't help myself so when it comes to this consumption behavior when it comes to watching Imagineering focus on spinning on the things that make you happy but don't do it out of whack with you order of operations so if you can follow the money get word of operations it will give you the freedom and the flexibility to spin and then the second thing is if you are someone who's like using something like credit cards if you are do that sort of thing make sure that you pay them off in full every month I mean without a doubt if you're not paying them off monthly you are digging yourself deeper though I know you'd ask Daniel he said hey I heard that the average debt is around 8400 run up some stats on what that looks like if you just paid the minimum yeah so what we said is okay if we if we have the average annual percentage rate of 17.3% most credit-card commoners will let you pay a minimal of either twenty-five dollars for three percent of your outstanding balance so let's just say that you wanted to go buy something for the average price on a credit card $8,400 well it's going to take you 189 months to pay that thing off so your initial purchase of eighty eight thousand three hundred ninety eight dollars is gonna cost you seven thousand one hundred and twenty dollars an interest over that almost sixteen years that thing that you bought will have cost you fifteen thousand five hundred and eighteen dollars was it gusting that really breaks your it first of all to see something that almost has like a mortgage type amortization schedule that very likely you have given to the thrift store years ago and you're still paying for that is not a good step towards financial independence right so pay attention don't fake it until you make it guys don't let the consumerism take over we're trying to get you addicted to a healthy lifestyle of paying yourself first being a good field journal for your army of dollar bill C you don't have to work there will come a point you ought to work so hard with your back brains and your hands your will let your money do the work for you so don't get ahead of yourself reward yourself celebrate by dumping the Gatorade when you have just graduated that you've just made it to the starting line you have one absolutely nothing so don't fake it until you've actually started having some accomplishments so we said there we think there are three reasons why Americans are broke you know number one was no budget a plan number two was this unhealthy relationship with debt but we think that there is one decision and this one decision grasping this one concept will have the biggest impact on your financial future and how successful ultimately you'll be from a financial perspective so when I first got I mean I was already working in the field I'd already left on my first started my first company in 2002 but I looked around I was like you know what is really screwed up in the world is how young people have no idea how money works so I went to the local school system this is back in George and approached the superintendent said I want to teach these kids the power of personal finance this is before the money got show cuz they realize this is two thousand three that I'm doing all this stuff started the money got shown in 2006 the superintendent dr. Jack parish loved the concept so he immediately hooked me up with a high school I remember doing the first one in a trailer because the school was so over capacitated you know some overcapacity I said that wrong over capacity that's why maybe that's why I put me on the trailer but anyway these kids and the first concept I told them this long story the big thing I told them guys there is one thing I want you to take from today's presentation if you can understand this one concept it will absolutely change your life it's that deferred gratification is the foundation for all financial empires that are built out there if you can take just a teeny tiny bit of today for an awesome tomorrow this thing will multiply I mean it really is Jack's magic beans is deferred gratification that earlier you realize the concept the bigger your vision of success can actually be yeah you said something so so poignant right there Brian the earlier that you can grasp this the sooner that you can grasp this the bigger and more impactful and more powerful to be for your long-term success so it's only so fair that I still remember there was an illustration I pulled from that curriculum because I had gone to a local credit union organization to give me curriculum and they even I knew it was meant to be when the first chapter covered deferred gratification I was like we are cooking with some bacon grease I mean this is good stuff here but there was an illustration I have used for years I've used it in 401k presentations I've used it in a lot of other stuff and boom we did this show meeting we were we got to pull it out now producer rebe just the owner she didn't love this idea so if you don't like it then ramiz right if you love this if you believe if you're one of these people has given how lujah is the deferred gratification this concept will hit you right between the eyes so go ahead and load them up Bob so let's talk about the advantage of starting early let's take three savers and all we're gonna do is say these things are gonna max out their Roth IRAs every year they're gonna do six thousand we're not gonna assume indexing ready that kind of stuff and let's just assume that they can all earn the same rate of return they're all gonna earn eight percent over the long term while they're invest man you you're not given the trolls any ammunition normally we go aggressive while you're younger and bring it down slower you just said you know we're gonna choose a moderate 8% trolls you guys go on back there's nothing to see here get under your bridge so here's the answer five hundred dollars per month or six hundred six thousand dollars a year earning 8% so let's look at three different savers saving number one is Adam Adam is you know he just graduated he's like me he graduated college early and he said you know what I'm gonna come out of the gates running I'm gonna start saving from the time I'm 20 and I'm gonna say for my entire 20s but when I get to 30 I'm gonna start living life I'm gonna 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 gonna get married and have kids and do all the things well then there was Bill bill said you know what I just got through school um I don't want to start saving yet I have earned a my right to go spin and go do the things so in my 20s I'm just gonna go all out and I'm gonna enjoy it but but I recognize I'm losing some time so I'm gonna start saving $6,000 a year every year from the time that I've turned thirty all the way until I retire till I can tell him 65 all the way through my 64th year and then there's Cleo and Cleo she just says you know what I'm gonna do it for the whole time I'm not gonna do this early thing in partying I'm just gonna save 6000 from the time I'm 20 all the way into my career well so this is what we thought was interesting when you add up all the numbers Adam who saved only in his 20s save sixty thousand dollars six thousand dollars a year for ten years Bill who saved for thirty five years from the age thirty to sixty four he 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 that's pretty incredible this is one of the things this is this is a wake up call to those who don't understand compounding interest the sooner you start the sooner you let your money work holy cow get out of its way because Bo give them the big reveal cos sixty thousand from Adam two hundred ten thousand from Bill for sure you're thinking common sense was there's no way sixty overcomes 210 so Adam but came a millionaire he turned his six thousand dollars every year just for ten years into almost 1.3 million dollars more than a millionaire bill who saved 210 thousand he also became a millionaire but look at this he only ended up with a terminal value of just over 1 million and 30 thousand dollars even though he's saved three and a half times as much he had about two hundred and fifty thousand dollars less before you show how smart Kaleo is here's something I think is interesting Adam who only invested his first 10 years out if you do the math on that that's about 5% so it's 5% is his contribution the 95 percent is from appreciation meaning the army of dollar bills worked for him bill still did a good job started at 30 stayed for 35 years but if you notice he's about 20% of is his initial contribution the other 80% is gross still healthy but man Adam has it so much easier with only a 5% contribution that's it that's incredible but then there's Cleo and cleen said you know and I'm not gonna do this either or I'm just gonna save the whole time I'm just gonna be consistent and what she said is I'm gonna save 6,000 every year and so she actually saves 270,000 dollars so it's only sixty thousand dollars more than bill or 210 thousand more than Adam what did she end up with at retirement over 2.3 million dollars she's a multi-millionaire not because she really behaved any differently than the two of the other guys she just stayed consistent starting as early as she could so there's multiple components here start early mm-hmm be consistent yeah and the other thing is is that if you think about this in terms of you're looking for freedom if you can pay yourself first it's okay once you could do that 20 to 25 percent to start thinking about other things that's where you can start rewarding yourself start living a little bit extra but make sure you're covering the basics first it's just such a powerful thing and that's what you know we wanted to give you guys kind of some motivation but also give you some data so that you can wake up that invisible hand to realize how powerful all the elements are working for you to be financially successful you just have to start actually participating in the process actually get up be a part of the success that's going on economically and you can wake up one day and realize this has happened for you too so a lot of you probably realize hey we're loading you up we're giving you tons of free advice what is the catch what are these guys asking for it's all built upon the principle of the abundance cycle we're gonna come you come here we're going to let you learn apply grow I don't know if it's gonna be five years in the future I don't know if it's ten years in the future I don't know if it's fifteen years in the future there's gonna come a point that you're gonna be so successful you're gonna go I need a co-pilot I need somebody to look over my shoulder tell me where things are maybe I'm worried will my spouse they don't think about money the way I do I need somebody who thinks like these guys do so to make sure this thing doesn't go in the ditch just after I leave we see people all the time that will be the but abundance cycle that will start nudging you and tell you hey you remember those guys who kind of loaded you up a lot of advice that's when you'll reach back out to a bound wealth or the money guy we have a Contact Us page go check that out but also I want to tell you a little little humble brag we just crossed 50,000 weeks I mean it was what just a few days ago yeah so this thing is picking up speed I have a goal and now that I've spoken it out loud it kind of has to happen and I need your help you guys I don't take anything for granted we say thank you all the time but I do need your help I need you to go tell at least three friends and family about the money guys show because I need that number to be a hundred thousand by twelve thirty one hundred thousand YouTube subscribers go ahead and ring the bell so you get the notifications we do a lot of live shows we want you to jump in on those I feel like I can quit barking now at everybody bow but but I am excited about I think there's a lot of great things going on in the year 2020 and it's one of those things I want to get the money got family engaged in that process we're so excited we're so committed this abundant cycle obviously you guys come here you get to learn from the show you get to learn from the stuff we put out there if you have had a chance to go out to our website go to our website we have a blog there if you like consuming written content we can go a little bit deeper and we even have a resource page if you've not gone out to the resource page gone and taken advantage of the free resources PDF spreadsheets deliverables things that you can actually take with you with your family share with your friends it is there for you so make sure you go check it out so that we can continue this abundant cycle through the time through time thanks guys money got team out

Channel: The Money Guy Show

Views: 59,829

Rating: 4.9153786 out of 5

Keywords: money guy show, debt, budget, cash, real estate, insurance, how to make money, save, credit card, compound interest, buying house, buy stock, success, personal finance, 3 Reasons Why Americans Are Still Broke!

Id: -aWIcTS98go

Length: 42min 24sec (2544 seconds)

Published: Fri Feb 21 2020