The 5 Secrets We’ve Learned in 50 Years of Financial Planning

0:00Brian Preston:When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs. Zootopia 2 has come home to Disney+. Let's go! Get ready for a new case.

0:35Brian Preston:We're gonna crack this case and prove we're the greatest partners of all time! New friends. You are... Gary The Snake. And your last name? The Snake. Dream Team. In new habitats. Zootopia has a secret reptile population. You can watch the record-breaking phenomenon at home. You're clearly working it. Zootopia 2. Now available on Disney+. Rated PG. We've been managing people's money for a long time, and we like to think we've learned a thing or two. Brent, I am so excited because over the years, we've had the opportunity to get to look under the hood at people's finances, to dig deep on the habits and behaviors that have helped them accumulate significant wealth, and now we get to share those secrets with you, our audience.

1:23That's right. Today, we're going to reveal the five secrets that we believe could make all the difference on your wealth-building journey. With that, let's dive right in.

1:38Brian Preston:Yeah, Brian, if you think about just the numbers, between you and I, we have been managing people's finances for collectively over 50 years now. No, wait a minute. Let's get this right. Close to 50 years. Are you trying to? No, no, no, no. I'm not trying to add more years. Over 50 years. It is definitely close. Don't do the bow thing where you blow this thing up. Well, here's what we've done. We've helped people navigate all-time highs, all-time lows. We've helped people deal with triumphs and with tragedies. And through that, there are some key lessons that we've learned. We thought, okay, why don't we try to distill these lessons down into some tangible soundbites that might be valuable for you, our financial mutant audience.

2:21Brian Preston:The first one is one that you have heard a lot if you've listened to us for any amount of time at all. But it's maybe one of the biggest secrets that when you figure this out, it unlocks opportunity for you. And it is this, that money is just a tool. Now, when I see this saying, I think a lot of people, because there's a lot of people, if you don't have money and you start to realize your discipline, they think, yeah, it's more than that. If I can get a million dollars or I can get$2 million, that's actually what's going to do it for me. But I'm here to tell you, we think that you need to put a little why, a little oomph on understanding how this magical tool of money works and can help you.

3:06Brian Preston:Yeah, too many people, they just want to accumulate wealth for the sake of accumulating wealth, not recognizing that when you accumulate wealth, that when you build up these tools in your toolbox, it provides opportunity and it gives you a lot of benefits that you might not have otherwise. It's really about stacking tools to focus on, just like you said, Brian, the why, the things that truly matter, whatever that may mean to you. For some people, it may mean nicer homes and nicer cars, but for others, it may be freedom of time and flexibility. you have to decide what it is that you want money to do for you.

3:45Brian Preston:And then you need to use money to do that thing and not get distracted. Well, I think if you don't understand the why, it actually can lead to you becoming a financial miser where you just get addicted to stacking money up in the background. And that's just not going to make you a happy person. It's not going to make you a happy person to be around either. And that's why with goal of why of accumulating, when I find out people are part of the fire movement or any of these things where they really are accumulating large sums of money very quickly, I'm always going to try to get you to focus on, well, what if you had an abundance level of money, meaning more than you ever do?

4:18What are you going to do more of? Because maybe instead of financial independence, retire early, maybe you're thinking about financial independence next endeavor so that you really are spending a lot of time on the why and what actually brings you joy with this tool of money.

4:34Brian Preston:So at the end of the day, it is just a tool. And it's a tool that if wielded responsibly can do some pretty amazing things. When you build wealth, when you accumulate money, it can provide security. It can give you that foundation that perhaps you did not have earlier on in life. Or maybe it can provide you with freedom. Now you get to make decisions because you want to make decisions, not because you have to make decisions. You get to do what you want to do, the way you want to do it on your terms. Or maybe money is just that thing that provides you with opportunity. It allows you to do things that you've always dreamed of that you were not able to do previously.

5:12Brian Preston:But it only does that if you steward it well. If you recognize that it's a tool to be wielded for use, it's not a goal in and of itself. Well, it's a powerful tool if you manage it and do it well and you actually implement and start using it early enough. And that's why we always talk about this concept of wealth multiplier is because we talk about the three ingredients to wealth building. And definitely time is one of those most valuable resources. But here's the thing. You think about somebody, we always talk about like debt can be chainsaw dangerous. You think about all these financial concepts that these are complex.

5:50And I think about it, all the things that we in our lives that are complex, nobody is actually getting into these things unless they had some type of instruction manual or guide to tell you how to do it well. Otherwise, I mean, can you imagine if you get into, you know, I've often thought like semi-trucks or cranes you see on construction sites. These are things that you like, it's magical what these things can do, but I don't think I could get in there without somebody telling me how to do it and even crank this thing up. That's exactly what we've tried to create with the financial order of operations is you don't have to go all by yourself.

6:24If you're 22 years old and you don't come from money and you don't know how money works, we got you covered with the financial resources. If you're 40 years old and you just finally caught on, we got you covered. This is an all-terrain vehicle that's going to help you no matter where you are in your financial journey.

6:41Brian Preston:So if money is a tool, then we want to give you the instruction manual so that you can use that tool as efficiently and effectively as possible. If you want your free copy, you can go to moneyguide.com slash resource. Or if you just want to do a deep dive on what the financial order of operations is all about, you can go to learn.moneyguide.com. And that brings us to our second. So once we recognize that it's a tool, and once we recognize it's a tool that can be used efficiently and effectively, there's another reality we have to recognize. And that's secret number two, Brian, that money in and of itself does not buy happiness.

7:16Now, I know there's gonna be a lot of trolls that crawl out from under the bridge and say, yeah, but he could buy me a boat because I've heard there's a song out there that says that. And I'm going to give you some thoughts on that in a minute. But I think that first, before we give you that additional context, we ought to give you some stats that we know so that we're not just throwing out headlines and you go, how is this connected to this reality that money doesn't buy happiness? Well, check this out. 71 % of Americans say that having more money would solve most of their problems. That's the perceptions.

7:47but Bo, what's the reality?

7:48Brian Preston:We're not even just talking about it would solve little of their problems. Look at this. 26 % of Americans say that they would need $150 ,000 of annual income to feel comfortable. So it's not like, oh, I just need a little bit more money to solve more of my problems. No, no. Most people think that they need a lot more money. 63 % of folks said that they would need an income greater than$150 ,000. in order for them to either feel rich or even attain financial freedom. So there's this perception that, okay, yeah, money doesn't buy happiness, but man, if I made more money, if I had more income, boy, would it solve my problems.

8:30Brian Preston:And boy, would I be a lot happier. But Brian, we know in reality that's not the case. Well, yeah, I mean, that's what's funny. This is the perception once again. Look, I've been there, done that. When I graduated college, I was making under$30 ,000 a year with my first job. And if somebody had told me, hey, what do you think you need? I would have said$100 ,000,$150 ,000. You just choose the number that people, it's more than what you currently have. But here's the reality. When you actually go open up the curtain and see what people who have now reached that mountaintop of$150 ,000 of income and more, it's not as golden as you think it is because 20 % of households with over$150 ,000 of income are living paycheck to paycheck.

9:13Brian Preston:So clearly it didn't solve the cash flow problem, more money, and they're still trying to make ends meet from one pay cycle to the next. 29 % of those earning over$150 ,000 can't come up with$1 ,000, and 6 % have nothing saved at all. So more income did not solve the problem of discipline. It didn't create an environment where these high-income earners are living on less than they make and stacking up money for the future. They're in no different of a position than they were before they made$150 ,000. And then for all of you who are making like you're just starting out, this next stat's going to blow your mind too, is that a quarter of people making$175 ,000 or more, so we went even higher, say they feel very poor, poor, or things are really tight.

9:56Brian Preston:So it seems that just earning a high income doesn't necessarily change your life circumstances. So the question becomes why? Why is this true? Well, the reality is money does not change who you are. Rather, it amplifies it. There's a great quote from Henry Ford that says, money doesn't change men. It merely unmasks them. If a man is naturally selfish or arrogant or greedy, all the money does is bring that out. And we see this all the time with financial mutants. Those folks that are able to be good stewards, that are able to be disciplined, that are able to create margin at lower income levels are often able to continue to do that same thing at higher income levels.

10:41Brian Preston:But those folks who are unable to have discipline, unable to create margin, unable to live on less than they make when they have lower incomes, even as their income increases, so too does their lifestyle and they find themselves in the exact same position. Well, I think it comes back to the Chris Janssen song is that it can buy me a boat. When I see this, when people think that money can buy them happiness, look, I will give you an agreement that money can cover the basics. Sure. It can pay some bills. You said that. That's what it can pay the bills. It can cover the basics. But even on that Chris Janssen song, even if you had the boat, it's got to be some friends that are going on that boat to drink the Coors Light with you.

11:25It's got to be the blossoming memories that come from that. Money is all back to that first secret that we've already shared. Money is just a tool. If you don't have all the other elements of the blossoming memories, this is not going to be the magical end-all thing. It really is exactly what Henry Ford had figured out and everybody else. I wish when you get on the other side like Bo and I have and you get up to the mountaintop and you realize, no, money is nothing more than a tool to help you amplify who you are. And kind of, so that way, yes, you can use this to create better memories with your family.

12:01Yes, you can help make things, but if you don't have the why, and if you don't have the purpose behind it, it's going to feel really empty. And that's where all this unhappiness actually comes from.

12:11Brian Preston:But here's the good news. When you recognize that, when you begin to understand that, you get to understand and realize, secret number three, that when it comes to money, a little bit can go a long way. The secret to building wealth is not making a million dollars a year. If you're someone who makes a million dollars a year, but you spend one million and one dollars a year, you are still going to be broke. But if you're someone who only makes a hundred thousand dollars a year, but you only spend$75 ,000 a year, you have the ability, you have the propensity to build wealth. And the earlier you figure this out, the longer your timeline, the easier it is and the further that money can go.

12:54Yeah. I mean, it's the margin that allows you to actually create the secret sauce. That's why when we talk about ingredients to wealth building, discipline and deferred gratification is step number one, because how do you ever have the money to create margin and then use that powerful tool of time to actually build something, but we wanted to go a little bit deeper in that. We wanted to show you why, yes, this margin, it doesn't take a lot because I think a lot of you probably resemble Bo and myself. We come from humble beginnings and we don't have a lot. And you look at the people in front of you and you go, how am I supposed to have a million dollars?

13:29How am I supposed to have two or three million dollars when I don't have two nickels to rub together? Well, that's what we want people to know. A little can go a long way in the fact that if you'll just do something, you can build this this is i think about because we all know my mr morrow moment where i said i had an economics teacher in high school who shared with us wasn't even part of the curriculum he just threw out there a comment i think out of his own regrets he said if you could save a hundred dollars a month you guys would all be millionaires and i was working fast food at the time thinking holy cow what seemed impossible now seemed right here in front of me we have an illustration and We didn't even take the 20-year-old.

14:08We didn't take the 18-year-old. We said, let's be a little more realistic and say, let's get somebody out there in their work career, and they're 25 years old, so that way they had a few years to kind of get their feet under them before they realized this wonderful world of personal finance.

14:21Brian Preston:Yeah, for a 25-year-old, if you could just save$159 a month, this assumes no increased savings, no pay raises, no change in circumstance, but at 25, you just start saving$159 a month, And over the course of your 40-year working career, let's say that you can average an annualized rate of return of 10%, just saving that$159 would lead to a portfolio value of over$1 million by the time you retire. It did not take$1 million to get to$1 million. It just took a little bit of discipline. It just took a little bit of margin. It just took a long enough timeline to be able to build that. But, Brian, we talk all the time about how money can multiply and it can stack.

15:09Brian Preston:But let's think about this in a slightly different manner. Let's say that, okay, instead of thinking about what money can turn into, let's think about what money can do for us because one of the things that money unlocks is freedom. And we talk all the time about, hey, if you can start saving 25 % of your income, the earlier and the sooner you do that, the more powerful and impactful it can be. And so we looked at the math. It's okay, if you're a 30-year-old, do you recognize if you can start saving 25 % of your gross income? And let's say that on average, you can make 9.5 % per year starting at 35, but it decreases by a tenth of a percent every single year.

15:49Brian Preston:So nine and a half at 25, going down by one-tenth of a percent every year. A 30-year-old that can save 25 % of their gross income, that single year of savings, That one year of deferred gratification can buy them two and a half years in retirement. I'm going to say that again. One year of saving 25 % can buy you two and a half years of retirement living expenses. This is the value of, we've always tried to come up with creative ways to show people why you need to start early and do it often with saving and investing is because if you think about it, do you imagine what a superpower it is when you realize every week you saving your 20s and 30s is buying years in the future.

16:35I mean, you quickly realize, holy cow, this is something that ought to be on mountaintops, rooftops, and just yelling it on loud. There ought to be morning announcements, just like you had in grade school, but for the general population, every morning at 830, we have loud broadcasts of, hey, do you know what a week can buy in years if you'll just save a little bit. But here's where it's kind of cruel. We did this for a 30-year-old, just taking a quarter of their earnings, can buy years, two and a half years in the future. Look at what happens when you're 40. The same thing, you save 25%. Now, it's still pretty exciting because you're basically, you're quadrupling it and then some.

17:18You can turn this into over a year, but watch what happens when you get in your 50s. now it's 0.57. And then in your 60, you're a parity. I mean, there's no benefit because you're now at the retirement age. Do you quickly see how you need to get busy saving and investing early and often so you can take advantage of this powerful tool of time?

17:40Brian Preston:And the earlier you figure it out, the easier the path is. If we're going to think about this concept of buying time, I want to conceptualize this for you. Let's assume that you need$100 in retirement to be able to live the life that you want to live. Well, do you recognize that for a 25-year-old, you would only have to defer$2 today to have that$100 later on in retirement? If you wait until you're 40 now and you still need to have$100 to be able to spend in retirement, you can't do the$2 at the 25-year-old. Now, you need to save$14 at age 40 to be able to replace $100 in retirement. And then if you wait out until age 55, well, now it's almost 50-50.

18:27Brian Preston:If you need $100 in retirement and you're starting at 55, you got to put$50 at work today. And Brian, you already said this, by the time you get to retirement, by the time you get to age 60, it's one for one. So if you're going to use money and think about money as a mechanism and a method to buy your time back. The earlier you can start making deposits into that future, the bigger the discount you're going to get in that time, the bigger the sale you're going to get, the more impactful your dollars are going to be. It's why we say all the time, Brian, the absolute best time to start saving and investing was yesterday, which means by default, the second best time is right now today.

19:08Well, and that's why I want to close out this point, and then this will set up the secret number four, is that a lot of you guys, you're young, and I get it. With this post-inflationary period, housing's expensive. You feel like a lot of opportunities are being pushed away from you. This is what you need to understand is your superpower, is don't get mad. Power up what your true opportunity is, is that if you're in your 20s, if you're in your 30s, yes, I know there's some difficulties facing you, but you are a billionaire of time, which your 40-year-old, your 50, your 60-year-old, your boomers that you know are out there, you feel like blowing things up, you have something they don't have anymore.

19:50And that's just that you have, you're a billionaire of time, turn it into something. Use this as an opportunity. And I think you'll see a little goes a long way and that's what's going to change your journey. And that leads to secret number four. So good, so good, so good. New markdowns up to 70 % off are at Nordstrom Rack stores now. Stock up and stay big on shoes, tops, dresses, accessories, and more must-haves for summer. Join the Nordiclub to unlock exclusive discounts, shop new arrivals first, and more. Plus, buy online and pick up at your favorite rack store for free. Great brands, great prices.

20:27That's why you rack.

20:31Brian Preston:Study. And play. Come together on a Windows 11 PC. And for a limited time, college students get... The best of both worlds. Get the Unreal College deal. Everything you need to study and play with select Windows 11 PCs. Eligible students get a year of Microsoft 365 Premium and a year of Xbox Game Pass Ultimate with a custom color Xbox wireless controller. Learn more at windows.com slash student offer. While supplies last, ends June 30th. Terms at aka.ms slash college PC. Yeah, secret number four is a reality we've recognized, not just in the lives of our clients, But we've also recognized that, Brian, in each of our lives individually, that how your journey starts does not define how it ends.

21:15Brian Preston:What's beautiful about money being a tool is that it's a tool that's available for everyone. And if you figure out how to wield it, how to use it, and you do that early on, it can literally change your trajectory. We already talked about this once, Brian. This idea of the wealth multiplier is so powerful that we know for a 20-year-old, every dollar that they can invest for the future has the ability to turn into$88. So you may be someone who starts out, and you may be someone who comes from humble beginnings and is a crew chief at Hardee's. But that crew chief at Hardee's can recognize, man, if I can just walk away from$1,$10,$100 today, what I'm going to allow my future self to do is live a life that I never thought possible.

22:02Brian Preston:Money is literally a tool that can change your entire life trajectory. Well, and I think a lot of people, they think that, you know, look, I have to make, we heard it in an earlier stat, I need to make$150 ,000. I'm here to tell you that is just not the truth. Now, look, there's a lot of negativity being preached out there to young people right now, but I'm here to tell you, you can take an average income, but you just need to have above average discipline, and you will be A-OK if you really harness this power of time. And look at what we're talking about here. When you're 20, 88 times over. For a 30-year-old, it drops down to 23.

22:38For a 40-year-old, 7. For a 50-year-old, it's 2, close to 3. You see how quickly this thing is a cliff. It literally falls off a cliff. So use every second of your billionaire of time to create opportunity for your future.