Today we’re going to talk about a good road to travel. We’re gonna talk about what happens if you plan from early stages on into your life. Stay tuned.
From Philadelphia, the home of the Liberty Bell, Financial Freedom Radio starts now. Here’s your host, Raymond Jewell.
Thank you everybody for tuning in to FinancialFreedomRadio.com. We’re just blessed that you’re here and glad that you’re taking the time to listen to the information. We also want to encourage you to share this podcast with others because that’s our way of growing our listener base, through referrals. All you have to do is send the link to somebody and subscribe and ring the bell. As we say in YouTube land. When you ring the bell, we will notify you when the new podcast is put up there. So let’s welcome our producer, Steve. How are you doing, Steve?
Hey Ray. How are you today?
I’m good. How are you?
I’m doing good.
Well, great. We’re gonna have a lot of good stuff for you to absorb today. You’re gonna love this. If you have any questions, feel free to chime in whenever you feel like it. We’re gonna go into the leap book. If you want to download it, you can get it on Amazon. Just go to Amazon and type in the lifetime economic acceleration process. The author of this book, Bob Castellone. When I was preparing for this show today, I really wanted to talk about what happens when you start something from the beginning to the end. He said it better than I could. This book was written back in the early 2000s. So I just want to do the politics today. I’m not gonna say plagiarize it. So I’m giving you the footnote now.
You’re not plagiarizing it if you’re giving him credit.
Let’s talk about if people simply and faithfully saved 15% of their monthly income and lived to age 85. They would have plenty of money to retire on. If they lived on 85% of their money and saved 15, they would have an ample amount to retire on. They probably don’t. If they did it right, they would avoid the financial problems by doing this. Today, most people save less than 3%. Did you know that, Steve? That’s really bad.
It’s a struggle because I’m just gonna drop in here real quick and tell you my story. I have struggled for years to get there. I’ve not gotten to 15% yet, but I have gotten to 10 and it took a lot of hard work. I know 15 is on the way for me, but it’s a struggle. It’s something you need to commit the time and energy to do because it is incredibly important.
Well, let me share with you what happens when people save only 3%. If you’re given an average inflation rate of 3% and people say it’s not 3%, it’s 3%. Go to the grocery store and you’ll see what inflation really is. I was counting it one time to my wife. She said do you think it’s 3%? It’s really much higher. This was a few years ago. So she took me to the store and showed me the price of products and how they’ve jumped up. It’s more than 3%. Let’s just say inflation’s 3%. It’s no wonder people have to struggle to save because you’ve got to offset inflation with the growth rate. So if you’re saving 3% and you’ve got 3% inflation, you’ve gotta earn much higher than 3% to get ahead.
To show how easy it is to grow wealth, if every person saved $100 a month from age 21 to 65 and invested it into a relatively safe financial product, they would have over $1,000,000 at age 65. We’ve seen these charts before. But the problem that exists today fewer than 1% actually do that. 1% of North Americans or a little less than 1% will save money every month to age 65. Steve just realized that. That’s 99% that aren’t doing it.
I believe it.
It’s crazy. If you took away social security from people, they’d be pissed in retirement. So ironically, many people lose more than $100 a month every month and they don’t even know they’re losing it. It’s due to those eroding factors that we talked about. They overpay their income taxes by not taking advantage of legitimate ways to reduce taxes, they pay out interest on expensive consumer loans that they take out, and credit cards, big killer right there. The credit card debt actually though, I recently saw statistics where people are paying that down nowadays because the economy was so good. People are paying down credit card debt.
Yeah, people are finally getting a handle on it.
They may structure their home mortgage in the wrong way and pay too much in monthly mortgage costs. You ever heard of paying your mortgage off early? They actually ask you to pay on the back end and you pay off the principal. When you pay that money into that mortgage, you lose control of that money. How about if you saved it and then paid off the principal when you have enough money to do it and took out a 30-year loan. Anyway, we can get into all that later on when we start going into models. They often have the wrong type of insurance, overpaying premiums, another big one. Getting no returns on their payments and they settle for low yields on savings. You have a story to tell about savings, don’t you?
We’ve already told that story. There’s no such thing as a decent return any more.
Have they told you zero?
No. When I signed up, it was 1.5% and then it went to 1.3% and I believe now we’re at 1.05%. They always end the email the same way. We’re still the highest in the country. That says something.
They don’t protect themselves from losing money in the stock market and tie up their money in a retirement savings plan that caused stress in other aspects of their financial lives. You’ve heard horror stories of people putting money away for retirement and then having to take out huge loans to pay off things and create amazing debt because they’re saving for the future. So it’s put stress on other parts of their lives. Does that make sense?
We find all these problems even before we analyze their unnecessary expenditures for miscellaneous consumer products that become obsolete or never used. If you’d have told me in 2005 that I would’ve had a phone that was more than a computer that they used to fly to the moon. What do they say about this, Steve? It’s more powerful than the first computer?
I have no idea.
It’s amazing power. I would’ve laughed at you. We’re having the video conference calls, video conference shows, and you’re up in Delaware and I’m down here.
I think it’s funny that with the phones, we were having this discussion at dinner the other night, we were trying to remember the name of an actor in a particular movie. Literally driving down the road, you can summon up your phone, find the answer to that question. Back when I was a kid, you would’ve had to deal with the fact that you didn’t know the answer.
Part of freedom has been able to buy and enjoy what we want, but people need to think of the consequences of their spending and of their own family’s financial wellbeing. How many times have you ever heard of somebody going out and buying an expensive new gadget at the expense of their family? It’s crazy. Well over 50% of divorces today are directly related to money problems. If you ask any marriage counselor, he’ll tell you that. 50% of divorces are due to financial problems. It doesn’t have to be that way. Our economy flourishes in the envy of the world. We are the top economy. Look at what’s happened with our president. He brought us from a really backslide into a current great economy. Yet, we’ve had a downturn, but that’s gonna be fixed momentarily. We’ll be back to where it was. If you took, as I said a few minutes ago, if you took away people’s social security checks, we would have millions of debt of elderly that were just destitute. They rely so much on that Social Security check that it’s the main area of their retirement. The other area is their home. So when they save in their mortgage, it’s a big part of what they own as an asset as money. Financial institutions have decided to try to go get that. Thank God they can’t get ahold of the social security checks.
The problem for over 35 years is people’s inability to save has two components. The smaller component is the lack of personal discipline.
It does take discipline.
Yeah. As you said earlier, the far larger component is a general lack of financial or economic education and the misinformation and financial literature. We’ve talked about this before. When you were in high school, did you get any financial education?
No everything I got was from my parents or self-taught.
I was taught how to balance a checkbook.
We weren’t even taught that.
Yeah, I was taught how to balance a checkbook. It was in accounting that I was taught that. We had home economics. A lot of guys could take home economics to get credit.
Yeah, we just baked things there.
So you took it?
We made tiramisu. My son will get that joke. (Transcriber note: Good one)
Okay. It’s the greed factor. People are greedy and they need to stop. So the reason I’m rehashing and going through all this is I desperately want people to figure out that they can get on the right track. If you’re 21 years old or if you’re young and you’re listening to these shows, you should start now. Even if it’s 50 or 100 bucks, just start putting it away now because you only get one shot at this. You need to be on the right road. You need to get rid of that greed factor. There is a greed factor when it comes to saving and investing.
I’m gonna take issue with that. Bob Castellone is a great guy, but I disagree with him. I don’t think it’s greed. I would classify it more as instant gratification. I want what I want right now. It’s the same reason people get into credit card debt or any other kind of borrowed loan debt, I want what I want right now. I don’t wanna wait for it. That’s not necessarily greed, that’s just impatience and like you said self-discipline. I do think it’s greed. Greed to me implies you want more than I got 10 now, I want 20. I got 20 now 140. That’s not what it is. It’s here’s a shiny new object. I want it now. I don’t want to save the money and wait six months to get it. I want it now. To me, that’s not greed. Maybe we’re arguing semantics.
To your point, instant gratification is a big problem, but people go into the stock market and they want wealth right away. They want to be at the top yesterday. They want their stocks to pay. They want to become rich and do it quickly. That’s greed. That’s not instant gratification.
That I’ll agree with. I dabbled in Forex for awhile. I got the heck out of that for that very reason. I put money in and I lost it. I got frustrated because I’m supposed to be rich overnight. That’s greed.
When we look at it, the greed factor creeps in because they want to have it and have it now. Now you could argue that that would be instant gratification too, but instant gratification would be a hundred dollars. Greed would be a thousand. It’s a combination I would imagine.
I think a lot of it has to do with coming back to the same thing, self-discipline. For the longest time, I could not get 3% savings. Then I got 3, then I got 10, now I’m working my way towards 15. There is power with knowing that I could live on 90% of my income and work toward 85. You have to cut corners. I’m at a point now with my lifestyle and my savings and my discipline that if I want something, I can go buy it and I can buy it with cash and don’t have to go into debt to do it. Yes it’s hard, yes it takes work, yes it takes discipline, but it’s worth it in the end. There was a time where I was living on 40-50% and saving 50-60%. People will say well you made a lot of money. That’s true, but I didn’t let my lifestyle creep up. I stayed where I was where a lot of people would have gone out and bought a bigger house. They would’ve bought a more expensive car. I didn’t change that. I always kept my labor cost of my business down. So people can get there. You’ve got live within your means. Too many times, we live beyond our means. That’s why I’m saying if you start at a young age, even if it’s $100 a month, that’s $25 a week. That’s not a lot, but it gets you started because if you keep putting it off and say I don’t make enough money. You’ll always make enough money to save a little bit. If you’re not, then you’re living beyond your needs.
In our world and the country we live in, instant gratification and the greed factor is alive and well. Everybody wants to get rich. That we’re not willing to put in the time. You can’t get rich overnight. It doesn’t happen. So the reason for financial failure, people can’t expect instant gratification. Financial failure can’t be simply that people are greedy or that they don’t plan or that they don’t save. Even people who create financial plans and who do save often fail to establish any significant amount of wealth. The problem is that people are not taught how to properly build wealth and protect it. They are also manipulated by the media and financial institutions to do what is expected. We get bombarded by bad information on a daily basis. I pick on Dave Ramsey. He gives out bad information. He’s good early on when he tells people to get out of debt or start paying off your debt. That’s good for that level of person, but what happens when you get beyond that. You’ve got to have guidance into putting away the money and not letting the eroding factors, as I said earlier, taxes, inflation, lost opportunity cost. If you’re saving 15% and you’re only earning 3% on that, you’re not even winning with inflation. You’re actually going backward because on top of the growth, you’re going to have taxes and lost opportunity cost. You’ve got to be more efficient in your growth. Maybe I’ve cited this before, remember there’s a book called The Millionaire Next Door. Ross Perot was a very wealthy guy and started CMS. It was a computer company. He was worth billions and somebody said why do you have your money in tax-free municipal bonds. He said because they’re more efficient. He was earning money without inefficiencies. He had positive growth all the time.
So I share this with you because we’re gonna start breaking down the lifetime economic acceleration process. We’re going to explain how the process works so that you know a way out if you’re looking for it. As we said earlier, 1% of the people will actually save 15% of their income. Actually it’s less. 99% aren’t doing it. 99% are living hand to mouth or in huge debt. As we talked about earlier, if you took away Social Security from the elderly, they’d be destitute. So you want to make sure that you’re following a winning strategy and the financial institutions are not going to do that because their whole goal is to sell you a product. No product, no financial product can you ever make you wealthy. It’s process.
Thank you all for coming and listening and downloading. Please send your friends. Like, Share, and ring the bell on YouTube. You can go to FinancialFreedomRadio.com or YouTube.com/FinancialFreedomRadio. We’re going to be doing shows from in the mounts this next couple of weeks. So, we’ll be using probably my iPad or some other vehicles. Anyway, tune in because we’ve got some great stuff for you the next couple of shows. I hope you have a great week and a great weekend. Come back to FinancialFreedomRadio.com. Take care and God bless!
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