9 Pieces of Financial Advice You Should Ignore!

you can't go anywhere without somebody having an opinion or a piece of advice about how to handle your finances today we have nine pieces of advice you should just straight up ignore it's brian preston the bloody guy there really are things i can't help but read articles see blog posts and there is all these things that you're like that sounds okay but then you like dig into the actual the details the meat of the situation that's horrible advice why would you do that so in some of these and look there's probably varying degrees of how bad the advice is so i'll make sure that i kind of color it a little bit with what you know if this is has some semblance of truth to it but overall you might want to think about it as bad advice I think that's the big thing that I took away Brian is we were doing some free shut up remember that game when you played as a kid telephone where like one person says something and then they whisper to the one next person the next person and by the time it gets the end of the line it's a completely different sin it's a completely different idea than what the original person started with I feel like a lot of financial advice it circulates out there it's sort of that same thing it starts off as one thing sort of well intended and then as it sort of morphs through time it degra gates into something that is not that was absolutely the best advice not something you should fall so you're saying there's components that might be like the initial advice but over time and stuff that's exactly excuse yep that's exactly right you want to just jump into these things by the way money got calm go out there give us your email address as well as your zip code so in case we drop into your neighborhood we know wherever all of our audience is and by the way the that that has been growing as you can see our subscribers as I told you at the end of last show we've added over 5,000 new subscribers on YouTube just in the last two to three weeks so please keep that up 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get to kind of see how goofy we are sometimes so here's the first one this one's a big one pay off your mortgage as quickly as possible now that one I'm sitting thing how can that be bad that's a good thing right we we harp all the time on debt is bad you shouldn't have debt you don't want to owe more than your own and we're sitting here saying that when someone tells you pay off your mortgage as quickly as possible that's a piece of advice that you ought to ignore well here's the thing and you guys should know you're probably wondering is that Brian that's out there perusing his way through the youtube comments it's indeed I am one of the people that's out there poking around and this is one that I've been getting a lot of flack about I'll tell you the ones where when I see who's writing comments and we appreciate all comments I want as much dialogue as possible but you guys have been listening and look I love getting out of debt early but here's the thing and I'm gonna make this as concise as possible for all you straight to-the-point crowd your money when you're in your 20s and when you're in your 30s is worth way too much the potential it has to be paying down low interest debt now once you're paying off your credit cards I want you paying off you know I had a couple in here yesterday it had student loan interest that was getting close to 7% I'm okay with pre paying that stuff early but he told me you have a mortgage it's in the threes maybe even a 4% mortgage what are you doing if you're in your 20s and 30s so you're not talking necessarily about someone who's in their 50s or 60s thinking about finally retiring the mortgage or getting out of debt it's a different conversation for those folks and the folks who still have decades upon decades of compounding that could take quite a lot of opportunity for that compounding interest time is on their side so they need to take of Angela and I'm not going to spend a ton of time on this but $1 for a 20 year old has the potential to turn into 88 dollars by the time they're 65 $1 for a 30 year old can turn into 23 dollars at retirement 40 year old $1 turns into 7 do you see that big drop-off we have the 20 year old it's 88 40 year old at 7 and yeah that's a huge difference and then the $1 for a 50 year old is $3 so if you were getting close to 50 if you're in your late 40s early 50s perfectly fine if you want to be debt-free but it's the younger people that I'm worried about and let me close do this one thing too the better way Bo and I are nerdy enough that I kid you not because here's the the better way if you think about this I love that Chris Hogan and his every day millionaire and then Dave Ramsey cuz he's part of the Ramsey solutions they have this great research piece on millionaires and what they found was is that millionaires pay off their mortgage typically right around 10 years I think it's like point to ten point three years that is good advice but the thing I think is bad is if you're a 20 year that's I don't think that that data is a little misleading in one case I resemble who he's talking about okay and I will have this house I currently live in paid off in ten years okay but this is my third house so this isn't a goal that you've had 20 year old Brian this one I bought my first house in my 20s if I would have paid off shot to pay that thing off within 10 years there's a lot of money and my army of dollar bills that would have been left on the table my second house that I bought in my 30s if I were to focus on paying that off in 10 years I don't left a lot of money on the table let me give you the example here's what I actually had Bo run for me you guys wow they really are nerdy and we're gonna do something with this too we will turn it into a graph or do something like I said give me this I said take a 30 year old let's assume that he has a three and a half percent mortgage rate okay for you say those don't exist that's what I have I have a three and a half percent mortgage rate 30-year old but he's going to take Dave and Chris's advice he's go pay it off within 10 years by the time he's 40 years of age the house will be completely paid off well so what's great about that is he gets to 40 he'll have all that extra money that he can just start investing so from 40 to 65 we're gonna let him take every bit of that money that he was paying down the amount of money required to pay it down he's gonna keep investing that because that's kind of what the advice is is that after you pay off you go invest and you'll have a lots of money so we did that illustration and then he's got it we got a counterpart who's the same guy who's 30 years old bought the house he's paying his house off over the 30-year normal cycle okay now that's a little different than the advice I gave but I want to have an illustration here but then he's but we said we said what's the difference between what the guy who's paying it off in 10 years and the guy was paying off 30 years we're gonna let that difference in amount be what he just invest yep let that money go work that's his army of dollar bills he's even that all the way from he's not paying off until he's 60 years of age but he is still investing try difference between paying it off but then by the time he reaches 60s got five years to invest the rest just like his buddy who paid it off 10 years we did it here's the assumptions we used we did a $300,000 mortgage I mean a $300,000 house so $240,000 mortgage we use a three and a half percent mortgage rate and then we said because you guys are blowing up my comment section with the 10% I said let's just assume a seven percent rate of return so it's really only a three and a half percent spread right between what you pay him mortgage interest and what your performance is on your investments the difference at age 65 was the guy who was just paying off the normal mortgage over a 30 year cycle investing the difference was five hundred thousand dollars so I'm gonna say that differently if I was a young person and I have three and a half percent spread from my mortgage rate to the rate of return I can earn to my portfolio by pre paying my mortgage over ten years instead of investing in that first ten years in your 30s realizing I would have done this for a 25 year old able to blown this up even bigger that because you'd had five more years of compounding interest so paying off my mortgage earlier would have cost me half a million dollars that's at a seven percent or as you said three and a half percent spread if you made eight percent on your money query four and a half percent spread it had been at eight hundred thousand our loss opportunity and then if you would have made 10% for those people who are out there buying the sp500 and things like that that's six and a half percent spread would resulted in a 1.8 million dollar difference that's huge that's huge I think that shows problem solved so if you're someone out there who's here at hearing advice or you have older folks or you have just colleagues or friends and hey you know you got to get out of debt you got to pay off that mortgage don't worry about the 401k don't worry about the Roth IRAs pay off the mortgage you may just want to think about the numbers because that may be a very seemingly good decision there's gonna have some drastic long-term possible and negative kind of look and I think the data is right I think I love the data that Dave and Chris put together because I resemble exactly what they're talking about I am in my late 40s my goal is up around 50 I want to be completely debt-free so I get it and I know I'm leaving look I recognize going against the advice I just gave I'm leaving some money on the table of opportunity costs because I could probably invest make more money but at 50 I kind of just want to be debt-free and I don't feel like I'm leaving a lot on the table love it alright so let's stay in that same vein so the first piece of bad advice was pay off your mortgage as quickly as possible it seems like a lot of the information that is is misleading out there is tied to housing and mortgages and that sort of thing am i right on that that is so let's let's run it into number two why waste money on rent when that could be a mortgage payment so we hear that all the time because people say and we hear this especially from recent college grads that just get out school and say you know what I'm just gonna go buy my first house because I don't want to throw away money on rent at least if I go buy a house I'm building equity I'm starting to save up I'm starting to create something if I Rin I'm just throwing my money away and I think there's a lot of people and look there's part of the American Dream that is built on owning a house right right so I get that but I will tell you we did an ask the money guy series recently and I pointed to a CNBC article that showed that as of we haven't seen this happen since 2010 but recently there has not been and we would be because of how much houses have appreciated right and how much you know this is all made the cost of renting more affordable than actually buying in the average if you look the entire United States now every little area is different so we did cross a line there that renting might be better okay but I will tell you I think you got to go more here's the better way I would look at this is that you need to have a plan if you are planning routes meaning that you're going to live in this community you're probably going to raise children in this community the children will be going to the local school system I think it's better to home okay I mean just because it's your house I get it it is part of that American dream but you have to just because you have to look at it from a healthy standpoint and know that this is a use asset so I mean it's not all the analytics or the financial decision-making that goes into it but if you are one of these people that you know you're moving in three years or you just don't know the area what in the world are you doing buying a house right out of the gate well and the other thing is you don't really know how your life is going to change are you certain that the house you want to buy at 21 years old is gonna be the house that's gonna make sense for family and other things at 30 years old or even at 25 years old and and I also think a lot of us like I moved to a different state we know that you know you move to a different state when you move to a different state it's a little scary in the fact that you don't know where the good neighborhoods are what the great schools are you don't know where traffic patterns are and the conveniences so I will tell in even for the business abound well when we moved our company from Georgia up to Tennessee we were in a temporary office space for a year you know we had a conversation about that today because the guys I think in the next remember Tom how I like like four of us used to crowd into one and it was not ideal fond memories of it now but I look back and go what was an established company has been around for a long time being in a temporary space was humbling yep but I will tell you I think it went to a great decision in the fact that it was a great decision in the fact that we got to figure out where the community was how things work and then look you guys know eBay who's come in visits we're in downtown Franklin right over one of the landmark restaurant slash bakeries you don't get this unless you've been here and you actually meet some people so it worked out by doing a rent before we bought I think it all plays out so just pay attention to what your dreams visions and how long you're going to be in the community are so you can make a good decision on the rent versus buy you know and I think before we move to the next point you know we have we have it this isn't just for young folks this isn't just for folks who are buying their first house we see this all the time with retirees who are thinking about they want to move to a different part of the country they want to move somewhere else we always encourage them one of the beautiful things that renting does is it keeps the maximum amount of flexibility in your pocket to figure out exactly what you said all the community factors are gonna make a difference I got one more real estate one okay now this one is partially true it actually could turn out to be a good financial decision but I think I worry it's going to kill your well-being your your happiness factor it's going to create a lot of insecurity so here it is buy the cheapest house on the street okay so yeah so you're surrounded by a bunch of wealthy neighbor we've even done a show on this before Brian about financial decisions you hope that all your friends make yeah so if you move into a neighborhood where all of your friends have the recreational vehicles and the swimming pools and all the nice things wouldn't that be subscribing to that idea of letting your friends do those things you're not yes I guess but what I'm what I'm thinking is actually going on here bo is that people when they bought real estate I think it's that whole adage of stretch okay yeah buy as much house as you possibly can afford right so if you were taking that to the next step and saying well I'm gonna buy the nicest house I can afford but it's gonna be the cheapest house on this street so I have lots of appreciation appreciation potential right that's what that's where that's where the main you're like I'm gonna make a fortune when I go to sell this house cuz I'm getting in on the ground floor and a really expensive neighborhood the problem is you're probably the poorest person on the street okay and why is that a problem if you're the put there is so much we got a show coming up on how much money creates happiness or how much money you need to have to have to create happiness you're going to find that there's a direct correlation to who you're hanging out with with how happy and fulfilled you are with your money and happiness life so what you're saying is if you end up buying the cheapest house in the street with the idea that there's gonna be a lot of appreciation potential you might be setting yourself up for failure because all of the wealthier neighbors around you can do the things that you might not be able to do if you stretch to buy your house the cheapest house on the street and all your neighbors are talking about their great European vacations they're all whipping by you with their fancy cars all of a sudden I think after a while especially if you're starting to socialize with these people you're going to feel bad about yourself but then you're going to start having this temptation where do you think the Joneses came from the Joneses came from trying to keep up with your peers you be like oh I need that a fancy European car I need to go take my family on vacations you know these big but it's not just vacations it's big vacations I think that all that stuff starts seeping into your mind on how things are it's that whole did a row effect that we've talked about exact same thing because what explain what the dinner Oh effect yeah the dinner effect is you know you buy the nice house well then you got to buy the nice furnishings then you have to buy the nicer car and then you have this thing where toys but got toys so you have it's kind of this treadmill you get on well if you're there in an expensive neighborhood and you don't really you might not necessarily to be in that expensive neighborhood it's gonna be a suffocating thing you're gonna have a real hard time getting out for money so here's the better way you sober eyes when you're considering moving I want you to think realistically about how you gonna fit in and maybe you just don't need to swim upstream yeah I mean that's the thing that I tell me I have on paper because here's the next guideline I don't want you spending more than 25% of your gross income on housing that's a point worth repeating so take your monthly income multiply the gross income multiply it by 25% your total housing costs should not exceed that number and there's a portion of you they get to this may be like this is my third house okay on paper now I could afford even a bigger house sure I'm not doing it I'm not swimming upstream anymore because I don't want to be the poorest guy on on the street I just it's not going to create happiness and it's not going to put me where I want to be financially and then here's the last thing I'm doing it a better way why are you moving why are you moving to this place is it deliberately because you you want to swim upstream impress people when they ride up to your house they go man this guy must be successful because look at this big old honking house because there's a chance if you do it wrong you're gonna price yourself outside of happiness oh I like that hold on if there's a chance you're gonna price yourself out of happiness there's a lot of things I mean if you talk to anybody who's out there who's a private pilot or other things that's what people say they people will price themselves out of this hobby of polycon because they keep buying nicer airplanes will nicer airplanes have more costs and other things it's the same thing with your house because I can tell you when you buy the nicer houses go cost more to landscape it go cost you more to do repairs it's gonna cost though because bigger houses need more furniture well they require there's rooms to do so just think about those things and you're going to be in a better place okay so we're taught about the biggest piece of debt that most people have you know the housing but and I was funny I think I'm I think I'm picking up a trend on how you've ordered these because the next one is also a debt thing that you hear right here's a debt one so first we kind of did debt and real estate now let's just talk about debt everyday debt like a credit cards so look we have a guy that we think a lot of but here's here's what here's the thing you hear credit card should never be used yeah and and just like I said that whole telephone thing that's true for some people for some people that's true if you can't use a response might hear you say this all the time Brian a credit card is like a knife it's a tool if it's used incorrectly can hurt you but very correctly it's very useful I've updated them Oh based upon one of the emails we recently received done I see that email well you'll understand it when I tell you this statement I look at credit cards like a chainsaw okay just like a really fixed fan Cena did you don't see that email we got from a listener oh that email yeah oh yeah we had a do not send any more gross emails by the way but we add a listener I have a hair that he's decided he's gonna go for a rod and hang out right by right near my eyes so if you see me it's not that I'm trying to throw this man a hair around and said I really I was like no this thing is driving me crazy turning an icon credit-card debt is a useful tool but an extremely dangerous tool and I always use the analogy of a knife yeah but I do think there is something about saying that it's more like probably a chainsaw because a knife I mean look a knife you slip you get a scar like I've got okay you slip with a chainsaw you get it you get an up that email so so so this is the thing that's what I think debt is dangerous enough that you have to look at it if you were using it and you're not scared of it you're doing it completely wrong and that's something I always tell people because I do think so let's talk about what's the better way to think about credit card use credit card use is the opposite of compounding interest if you think about in terms of that the average answer your interest rate on your credit card is 17% right now the average national average is 17.3% so because of that you guys have blown up my inboxes and comments on YouTube saying guys where do you get 10% rates of returns well if you think that's crazy 17.3% with credit card companies because it's so punitive never ever ever should you have credit card debt debt you should not carry a balance if you're carrying a balance I think you have to go the teetotal route and not have any credit card debt whatsoever I do think if you're a person that pays it off every month and you understand how valuable just the convenience of not having to go the bank and use an ATM a bunch if you also I'm one of these people I actually think that when I have cash in my pocket I spend more I know the argument is is that we use credit cards you actually spend more than it actually you don't feel like it actually oh I usually don't have cash in my pocket now if we have end of times I'm not the guy you're gonna come borrow ten bucks off of because I don't have it but it's it's one of those things that I just don't I think I'm already disciplined enough I don't know that I buy into that I spend more with a credit card that you ash but I sure get I get thousands back every year from my cash rewards also like the purchase protection the extended warranties when I travel insurance and other things that come from there are benefits so make sure if you're at least gonna use credit cards and use them responsibility maximize those benefits without spending more that the key thing I want you to be disciplined and know what you're dealing with you said I think you said be purposeful right exactly because one of the things that I hear all the time and I think this is just worth mentioning as someone says okay well if you like the convenience factor you like that don't use a credit card you should have a card that way you're never spending money that you don't have well even that inherently has its problems because now you know and we talk we've done shows this before if you have an issue with your credit card where somebody gets a hold of that and has a fraudulent charge I think that you're exposed to maybe like $50 they never make you pay they've never make you pay that if someone actually gets your debit card and gets access to your bank account is able to swipe it might be a lot harder to get that we actually had a case study here somebody here in the office that the bank was gonna make them hold but they told him it was gonna have some turnaround time that is the big difference between debit cards and credit cards credit cards it's somebody it's other opium other people's money yep with your debit card they're using your money so if there is fraud or hacking or anything like that though you probably have a chance of getting made whole it's just gonna take a little bit of time to do it so okay so we talked about mortgage debt which is kind of okay debt we talked about credit card debt which is a four-letter word yeah let's talk about some good Deb right cuz there's good debt out there right I love the term good debt cuz good debt is always your mortgage debt and your student loans yeah but is anybody if you ever look at how much interest you pay is any debt really good I mean not the interest I mean that's the thing I know we all want to get it paid off so here's the one that a common advice you hear that you need to be careful of is go to college because student loan debt is good debt you should always invest in yourself I love that's the way people start you should always invest in yourself I mean that's it look we now have cuz we're getting close to election years student loan debt is getting a lot of play because candidates out there tell me they just go poof it's all gonna disappear one day you know you're just gonna forgive all this debt so it's definitely something to think about but here's what I think is interesting is college always the right decision and then look I love I have a hunger for education wisdom so this is not me saying colleges for suckers I don't think that but I do think you have to measure twice cut once I'm making sure fits because there was a study in 2015 that 44 6:46 44.6% of college grads under 27 are working in careers that don't require college degrees that's almost half so half are the folks out there are in a job that did not require them to pay the cost that they paid for a college education another thing I wanted to kind of throw out there is what does it cost to go to school and what is this inflation I mean we hear about inflation but why is inflation on college so much more than it is for every other part of it it seems like the economy I have an illustration to pull up I went to the University of Georgia I know another guy sitting to my left here that one the University of Georgia I don't have an intern that is also from the University of Georgia so we thought it'd be interesting if we went and pulled what each of us paid to go to the same College yep now look I got an accounting degree so it probably nudges that value over a little more on the value proposition but I still give those things but look at now look I am so old I graduated in 1996 how old are you I graduated in 1996 the chart didn't go back to that but it did go to 1998 can I just talk about how exciting it is that you graduated so long ago we couldn't even pull the data I'm sure dug a little harder we could have found the data but 98 is closed off cuz I tell everybody when I say how much did it cost to go to college when you when I was like three grand you know cuz it was I went to a state school UGA that's like that's like the the cost I like the meal plan DS well now you look at it well it's the same thing my parents bought a house and I remember when I first moved to Atlanta right out of college I was paying more in rent a month than my parents were first at four oh I was the third of the risk so one split it in the third you know it's the same way with education if you look at my cost of education what's on the screen right now it's a little under three thousand dollars a year look at bo bo graduated in 2008 it was 6,000 bucks almost double the amount and then look at Daniel one of our interns he's at 12,000 man my tooth my 3,000 looks like looks like a seal so if you actually calculated what's the angle it's inflation on this at 7% yep lievable if you think about me is a why what would it be like if the other items in our lives you know the things that we buy on a daily basis toilet paper or eeeh I don't know what I told a favor Nora is the first to consumer products that come to my mind that's not most people usually say like coffee bread toilet paper all right Nuria Nuria is I get this all right so we might go with it but imagine if those sort of things inflated is 7% the same way that tuition is there be an outrage and outcry and so I think you know I think the point that we're making is you need to measure twice and cut once because some of those basic necessities you can't live without like toilet paper and Oreos there may be certain scenarios where you might not need to go rack up student loan debt only because it's what someone told you you should do or you think it's the natural next evolution of your so let's talk about the better way here's here's the steps and things to think about I think we say this thing all the time because is this important is begin with the end in mind so when you are in college and you know you're choosing your major figure out what the anticipated rate of return I mean anticipated first year salary will be for that position and make sure your student loan debt doesn't exceed that amount that is that's on the great thing if you're in that situation now if you're a person that's already come out of school and you've got this student loan debt what you're like well thanks I wish I'd have heard that four years ago but now we got you to get you in a situation where you have to just kind of did this yesterday for a client that was a prospect that was in the office and they had student loan debt and I was walking them through that five different student loans we put them in order and looked at the interest rates and the ones that were going to be you know long term hurtful to their their future we Pat so let's pay it off Charlie's come up with a plan to pay it off you know but then there had a few student loans that were in the three range I was like well that's not okay that's not predatory or really going to be you know punitive type of interest rates so we'll work that into the debt repayment plan but it's not going to be something that we're going to forego all savings to pay off that student loan so you have to pay attention to the jobs pay attention to the market what I would say also is pay attention whether what type of school you're going to if you know that what you're going to be doing for a living is not going to generate a ton of money please don't go run up a ton of student loan debt it just does not make sense to do that be very realistic about what your income proposition I have my daughter is going to a camp right now and it's something I think she wants to do for a living I will tell you it's more on the artistic side which is great I'm very excited she's talented but she's also super analytical my daughter is wicked smart in math so I had the conversation when I said look I said I love that you're taking this camp I said and you think you wanna do this for a living she goes yeah I said have you thought about the fact that it doesn't it's probably not ever gonna pay a ton of money and she goes I have actually dad and I said well does that that stop Ian she goes no I think I think I like it enough that'd be okay you know not making a ton of money with it and I was like okay like yeah so as long as we check the boxes and new that I think that's the decision and then you can apply that same logic in that same check-the-box mentality to how much debt do you are you willing to incur in which schools do you go to so as a parent given that conversation given which you're probably not gonna send her to a really expensive super prestigious private school even even if she could get in I mean we have someone in here said yeah what if my kid gets into Stanford or Princeton that's also if they get in that's wonderful but if the degree that they're gonna get from that school is not gonna be the vocation and movie now I'm not gonna tell you what those are you know I don't want anybody writing this hate mail because we name some degree that's probably not gonna pay well but also I want to tell you every time my air conditioner has gone out twice you know because I had it was a gizmo that I had on my system it's not because I have a women's system every time I have a technician come out to my house and I have to write that minimum check uh-huh a tradesman is not the worst thing well I can tell you back in Georgia when I worked in public accounting one of the biggest clients that I worked on was the owner of an air conditioning company okay and so there are jobs out there as careers other things guys if you can because the research out there shows it that you can get a four-year for years bachelor degree does make more money but a two-year program as a person if you compare the cost of education to earning potential years out it's not as big as you think yeah so just be careful think about that if you're good with your hands and you don't love sitting in a classroom it's not the there is a lot of opportunity in what's going on in the economy right now so good so give that a thought all right so this next one it kind of reminds me of the one it said you know I shouldn't why would I waste money on rent when I could have worse cuz you know it's not it's not permanent it's not there this next one is one I think we here this might be the one we hear the most I don't know you know what I'm always curious is because this is what we do for a living I wonder if more people if we are more sensitive this because we hear people tell us this all the time or if the person man on the street if you ask them is this something you hear but here it is term insurance is just throwing your money away because if I buy a 20 year term life insurance policy and I die on 20 years and one day it was worth nothing I just wasted all that money that was the situation this is put for us as usually an insurance agent has pitched one of our older clients on why you know term insurance is just a bad deal it's because that insurance just is gone going away after you've paid all those premium payments for all those years and at the end what do you have to show for it well it's kind of the same thing as your car insurance I mean you actually hope you have nothing to show for it because I mean she didn't have a claim and with the life insurance is even more valuable because that means you didn't die but here's the thing that I think is important to understand I want kind of walk you through what why what's the better way to think about insurance in life insurance specifically if done properly for the majority of people now look there's specialized situations let me put that caveat out there but for the majority of people it is a risk that should go away over time okay so it's a temporary problem money because think about this your kids you want to make sure they go to college or have money saved for them and in providing income while their children and becoming adults but hopefully in the next 20 years like I have one there's a sophomore right if my 20 year term comes out and she's still in the house something has gone horribly wrong because she will be graduating you know they also the income that I'm worried about my wife I'm trying to build financial independence but you know if you die for maturely there's a chance that you're gonna die before you have truly built up that nest - so you need life insurance to bridge that shortfall but 20 years in the future if I keep diligently saving like I'm doing that dollar you know that army of dollar bills there should be no need to replace my income anymore because I'll have a big enough pot that I can self insurance right so since the need is going to go away it's a temporary need exactly what you said it's okay if the policy goes away after that 20 years I'm gonna rephrase what I just heard you say if you have a temporary problem it's okay to implement a temporary solution it's exactly right it's okay that it you just want to hear me say Bo you were right oh man then that sound good guys but the whole gallery is small and they love you let me give you let me give you one other thing this is the dollars and cents of it I pulled this up from NerdWallet had a blog post on the difference between whole life and term insurance just to put an exclamation point on this let's do Mel's first these are both 40 year olds looking at $1,000,000 of coverage 20 year term perfect the men about 600 bucks for term insurance so cheap it's really cheap get a million dollars for six hundred dollars a year that's the protection you get whole life thirteen thousand nine hundred and two dollars whoo that's like a mom it's a mortgage that's big when you're paying that much does that come with an engine on it because when I hear 13,000 9:02 I'm like that's a car you bought a used car that's a female term life insurance five hundred nine dollars okay four million hours of coverage whole life eleven thousand seven eighty seven so I couldn't help myself because I'm like the investments the nerdy numbers guy right I said okay if somebody could actually do the thing that we always hear people talk about my term invested difference my term invested interest if you did that for the man the difference in thirteen thousand nine hundred and six hundred dollars if you invested that difference alone for twenty years and I said eight percent for a four-year-old I just check the number on the hat that would leave you at the end of the term with six hundred and nine thousand dollars for a man just investing the difference so you had in shirts for twenty years and the other twenty years yeah the insurance went away but you got six hundred thousand not not a bad gig for the female you do the same thing the difference in 11805 one hundred you invest that for 20 years you're left with five hundred and sixteen thousand so yeah the insurance went away but you still have half a million dollars if you're disciplined enough to be able to invest the difference I think it makes tons of sense I noticed in the notes Bo because that we've used everything in this illustration has been 20 year term and 20 year term is super popular but that's not for everybody because you might be catching it being a little late in the game so base your term based upon how old the kids are think about when you think you're going to get them out of the house when is your date of financial independence yep because that's that's the less would the other risk that you're really trying to cover for and then as you put think about term staggering because maybe your debt is going to be paid off 10 years in the future so you don't need to protect that anymore maybe your financial independence date falls off here or maybe your college debts even before that you could stagger these so maybe you do a 10-year term a 15-year term and a 20-year term you're just at a price and look at it yep nothing wrong with that was saving a few extra bucks love it so let's move on to this next one I hear this one this one you practically I could pull this out of our comment section the stock market is no better than gambling there are so many people in the comment section they tell us who would invest right now this stock market is so overpriced fraud they would get crushed I mean I hear that stock market is no better than gambling that's what people people say a stuff all the time let me give you some perspective the S&P 500 has gone up 74 percent of the years since 1926 so if you tell him out on a year-by-year basis from 1926 all the way through last year eighteen seventy four percent of those years three out of four the markets positive greater than zero positive rate let's remark it up or was it down for the year seventy four percent of time it's up what are the I doesn't sound like gamble what are the Vegas odds I don't know I won't on that table put me on the table that's paying I went that me the player wins 74 percent I've been on a lot of games that feel like the casinos at that 74 percent but never ever do you see the player get a 74 percent probability that they're going to come out on the winning side up yep far from gambling so listen I got some stats for you love to give you guys stats so you can seem smart at the cocktail parties or just around your relatives 92 years the S&P 500 has positive calendar years total 70s or at 74% of time and 26% of time it's negative sure if you want to know what the average positive years were it was 21% so if you looked at just on average the positive years it's around a 21% return holy cow no but you got to moderate that because the negative years average 14% okay so a lot of you guys are probably doing this is not good math you're say 21-14 that's 7 you can't do that because remember it's up 74 percent of time that's why it is such a positive thing and that's why it's closer to 10 percent historically it's because it's up much more than it's down but still though it's kind of interesting that those years is positive 21 percents the average years is negative 14 percent loss is the average so if I should not think about investing as gambling what's a better way to think about it how should I approach the thought of looking at investing well I think that you I mean you're going to be looking at your age your goals your risk profile you're gonna be building a portfolio that matches all those things I just mentioned and it's a deliberate plan as soon as it becomes a deliberate plan you have now transitioned yourself from the speculative side of investing which is aka gambling to now you've created a plan that's going to actually help you reach your financial goals so rather than you know are gambling where you're just kind of thrown it out there and crossing your fingers and wishing and hope and you when you're an investor can put a plan in place that that not certainly but almost certainly leads to success over a long enough time period and here's the thing because once again I hate to keep picking on you guys but I want you to keep making comments is that all of you guys are talking about how negative things are right now go out there I mean it's not just me it's not just Warren Buffett I mean think about just what's going on with your cell phone what's going on in the medical field what's going on in globalization I mean guys there's a lot of cool things to get excited about if you just turn off the news media and actually pay attention to what's going on in the world there's a lot of reasons to be pretty excited because innovation technology is just walking and marching forward I mean things are advancing a lot faster than they ever have and I think it's gonna be opportunities for you to profit off that as well as make your life just a little bit better all right Bryan so I hear all that it's not market investing many Patrol knows here comes the troll troll though this is coming on the market invest it makes me nervous I want to do something a little safer yeah I want to get I want a sure thing you want to sure that know what you want cuz I know where you're going when the sky is falling there is one investment that always comes on the horizon been around Sam I probably could have gone to a dumpster about six years ago and found one of these it's one of those songs I could have spun around you know says we buy gold we buy gold I mean it was you know there's a big signs and that's what the sky is falling there's all kind of people that come out and go go buy gold yellow gold will keep you safe and we've done shows on it if you want to net C we took it down I think in 20 2011 that we did that our first youtube video on goldberg fool's gold yeah so I mean we took that video it was it was not up to morph we auction quality standards so let's go you know I've already thrown him one you know atta boy so let's let's look at what Warren Buffett's thoughts on gold are I'm just gonna read these quotes cuz they're that powerful this came from his 2019 letter to shareholder its shareholders it was those who regularly preach doom because of government budget deficits and he even throws himself on the bus he says as I regularly did regularly did myself for many years might note that our country's national debt has increased roughly four hundred fold during the last of my 77 year periods that's 40,000 percent suppose you had foreseen this increase and panicked at the prospect of runaway deficits and a worthless currency how often do we hear comments about fiat currency to quote protect yourself you might have a skewed stocks and opted instead to buy three and a quarter ounces of gold with your hundred and fourteen dollars and seventy five cents so instead of investing that hundred fourteen seventy five we're gonna go buy gold with it so he continues he says in quote and what would that suppose that protection have delivered you would now have an asset worth about forty two hundred dollars well that doesn't sound bad hundred a fourteen up to forty two hundred but this is an exclamation point less than one percent of what would have been realized from a simple unmanaged investment in America business he's talking about the sp500 the magical metal was no match for the American metal you see what he did there such a word so think about this let's look at the data cuz here's the actual details he gave later in the piece he in nineteen forty two is when he started investing in stocks if you invested $10,000 in the S&P 500 in 1942 at the end of 2018 it have been worth 51 million dollars that's really that's almost unfathomable that's a lot of money if you had invested $10,000 in gold in 1942 that have only been worth $400,000 so okay so four hundred thousand is a lot of money and that's pretty good it ain't 51 million so we did our own research let me I got one more Buffett quote then I want to show a slide that we did another Buffett quote about gold in other words for every dollar you could have made an American business you'd have less than a penny of gain by buying into a store value which people tell you to run to every time you get scared by the headlines I like that a lot more exclamation point oh don't let these guys figure out of losing all the money you could make so here's another thing we did our own research piece on it we did a brief history of what has happened to gold and compared it to S&P 500 in 1928 if you want to buy an ounce of gold it was 20 dollars and 66 cents okay you follow me I'm with you so we're gonna put that as a line in the sand we're gonna buy into the sp5 you know at the time it was not five hundred but the S&P index 1928 we're gonna buy 20 dollars and sixty six so we get an apples to apples comparison yep into 2018 by the way into 2018 market lost close to 20% or did losing Universal Authority rarely so I'm not even cherry-picking because we could choose right now close to June 30th of 2019 in this number would be even significantly better because we've had a great recovery in the first half of 2019 but I would conservative and so let's do this right so at the end of 2018 an ounce of gold was worth one thousand four hundred and twenty eight dollars again doesn't sound bad 20 bucks turns into fourteen hundred bucks 90 minute you can see right there in the middle that gold turn around you four point seven two percent on average if you if you calculated this a 1/4 yep GM out like that you sound fancier than average geometric return so we'll go with that if you look into just to compare it in 920 into 2018 the sp500 now would be worth that $20 investment 96,000 almost 97 thousand dollars or return rate of return right under nine and a half percent so over a 90 year time period i mean if we're just thinking about this 90 years you have one investment that over that 90 year time period turn from $20 in the 1400 or you had another opportunity that was $20 to almost $100,000 big difference it's not hard to see which one looks a little bit a little bit better you know and I'll go ahead and tell you the same thing I did in 2011 if you're so worried about the world economy and the American economy that you think you need gold because you're gonna be biting off a tip of it to trade for food because that's what how are you going you'll break a coin in half and hand somebody poured it you probably need bullets before you need gold in fact I mean because that if we get to the point that you're having your break coins in half to get a you know a few bushels of something you're in a bad place so we'll leave it at that here's the last one I want to close it out with this one is near and dear to my heart because I come from a public I think we love I think we left this one last for you I think yeah you won't you want to give a nod to my CP anus is that a word CP aeneas yes I can't even say it CP a eNOS here's the last one it's deductible oh I'm the only one that hears this cuz I have everybody's always trying to tell me if that deductible in that deductible I'm gonna do this because I'm gonna get some tax write-off especially I may get some tax rental property everybody's always though real properties are awesome because even you know you know what you could deduct those losses your this investment so good you're gonna be losing money you get to deduct it off it's like all that money you're saving on your taxes well they don't tell you as soon as your income makes between a hundred to one hundred fifty thousand dollars all those losses that you're so excited about because you get to deduct them that's how much we hate paying taxes by the ways that we celebrate deducting those losses is it that you phase-out of those you have to start carrying forward for the future that's not a great thing I'm not picky that's not a pick on completely of rental property just don't do something because you're so excited about the tax deduction that's not try to make money on all of your transactions oh I don't want to deduct the losses only I've had people come up to me I had a guy who was in the production side and broadcasting he told me that his you know his cable TV was completely deductible oh because he had to stay up on current events okay that makes sense that's okay I had another person tell you that that their job required them to look good at work so their haircut as well as their suit what's not you I would even though you do think it is your job to look good you are not the first thing that came to me and said your suits or your your outfits as well as your haircut were deductible oh you know it may be every time I have somebody come to me with these cockamamie scheme of I always think this famous saying that it's not famous because it was my boss that said it to me I'll make it famous I had a boss my first boss out of college at the accounting firm I work that he said Brian it's all deductible until you get caught that's it and think about when you file a tax return they'll send you a refund yeah just because they hit that put that money in your bank account does not mean they agreed with your return though they can come back a few years later but everything is deductible until you get caught so let me explain what I mean by that do not first like the rental property and other examples don't let the tax tell wag the entire financial dog yeah because they like I said there are so many people that hate paying taxes that they will step into schemes just so they don't have to pay their favorite uncle taxes have you not seen those things I'm not I'm not even hauling in we've seen some of those oil and gas partnerships that we had decades ago Unidos there's some land deals right now where people are taking huge terrible deduction on that the IRS has come out and said whoa be careful guys because we're gonna pick up our big stick and hit you with them and eventually so oh and this is the other thing I think about maybe it's because I've actually sat across from the IRS at actual IRS tax audits always visualize yourself anytime you are taking in a deduction that's in the gray area I want you to picture yourself sitting across from the IRS agent and visualize describing why this is deductible why your haircut is deductible why it's necessary I think it will help you stay on good ground because remember I want you to maximize your deductions your legal deductions we love you minimizing your taxes legally that's the thing is it's got to be legally we said all the time Bryant at tax evasion is illegal ask out Capone right that's what got tax avoidance highly encouraged and we're here to help you guys figure out it so just make sure you're on stable ground because um obviously I've had grown men call me crying sitting across from the IRS so don't don't get yourself in that pickle of a situation you've heard me say it I'll say it again because it's been you know throw a few months a few years since I've done a show on it if you ever get a full audit meaning that they ask for an in-person meeting you do not represent yourself you heard an accountant or an attorney to represent you do not show up for yourself it would just not be a good idea this this is what I love so much about this show Brian it seems like we are inundated with information I mean we are constantly between our watches and our cell phones and the TV and the media we are always bombarded with people trying to tell us how to make decisions that are in our best interest giving us advice whether we're seeking it out or not it just seems to flood over us and it becomes really really difficult to sift through what's good sound solid advice and some of those things that you should ignore and so today we just won't take 9 that we hear often we actually had like four or five more we did they hit the cutting room floor because if it sounds too good to be true there's a lot that probably is I mean that's just the thing so use some common sense and it's like you said but a lot of this stuff had tidbits of good advice and some of it is actually okay advice it's just but there's unintended consequences right that you're just not thinking of they could actually derail it's just like buying real estate is not a bad thing and even buying a house in a neighborhood but if you are the poorest person in that neighborhood it's just going to have long-term effects so think about that so even things that seem like on first glance that they're good for you financially just give it time to think about them in process and then always begin with the end in mind and just always think is this going to help me get to where I want to be from a financial independent standpoint from a just fulfilment and a happiness standpoint all this stuff works together because we love hearing from you if you have some ideas of pieces of financial advice that you've heard or bad stuff you've been given let us know about it you've heard we check our emails go out to the website go to money guy.com you can go to contact us you can ask us a question or share us a story you can leave a comment below in the comments we actually look at it and read that we have the whole team we talk about it a lot of the content that we comes up come up with it's actually generated by you guys so if you have ideas for thoughts for us be sure to reach out we're here to be a resource for you guys and want to engage in that way well guys I'm your host Brian Preston mr. beau handsome go check out money guy com give us your email address also subscribe whether it you know if your podcast person also subscribe to that so you're getting this stuff automatically Sonny just ask Taggart he has a great question let's he said hey can you put the nine things and an email to the subscribers one thing that we do that you may not know about is if you go out to money guide com give us your email address sign up on the website when we have shows like this that have some really good pieces of information maybe it's the charts that you just saw maybe it's a list of the nine financial things to avoid will actually send something out to you it might be a list it might be a spreadsheet might be a document that you can actually take and use we don't put it on the website we don't make it available anywhere else except to our email subscribers so if that's something you're interested in go to the website sign up and that will be in your inbox in the next week or two all right guys I'm your host Brian Preston mr. beau handsome we'll be back soon thank you for tuning in

Channel: The Money Guy Show

Views: 73,152

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, 7 Pieces of Financial Advice You Should Ignore!, money advice to ignore, money, bad money advice, finance, bad financial advice, advice, how to save money, financial advice, financial, financial independence, saving money, save money, terrible money advice, worst money advice

Id: 00fR9uNHfHE

Length: 53min 10sec (3190 seconds)

Published: Fri Jun 28 2019