So what does “A stitch in Time saves nine mean. it is said to mean that it is better to act or deal with problems immediately, because if you wait and deal with them later, things will get worse and the problems will take longer to deal with. Immediately. Thats why thinking through and building a solid Financial stability pyramid is so important!
Ive heard the 8th wonder of the world is …….compound interest
You thought we were going to say it was the pyramids. Well the pyramid of Giza in Egypt is one of those wonders but today we are talking about the 8th wonder and how a pyramid fits right in with it. The 8th wonder of the world is again Compound Interest!
Saving early and consistently is one of the most powerful financial tools available today. Tune in to learn about this powerful concept and learn how you can put it to work by saving your money the right way to build a consistent stream of ever-increasing wealth over time.
The strategy grandma used to build a solid financial pyramid not an upside down pyramid that could fall on her at any moment.
The UPSIDE down Pyramid
Now, most people have their wealth invested in very little safe and accessible. This creates an upside down pyramid where the top part, the investing part, is way bigger than the bottom, the foundational part, the savings part. Because upside down you got a really small part pyramid part at the bottom and you got a really big pyramid part at the top.
Then when if a strong wind blows, any kind of emergency like a flat tire or an a medical expense pops up the pyramid might just topple over and crash.
Grandma’s pyramid is very stable. She has most of her money in safe and accessible places. She’s created that strong foundation of savings, and she only gambles with the little money she can afford to lose. That’s a nice top part of the pyramid that comes to a nice little peek there at the top. I would totally rather walk around grandmas pyramid than that upside down one that one Id be afraid could fall on me at any moment.
She was someone who did the 10, 10, 10 savings strategy. to build it.
The Financial Stability Pyramid
If you choose to let your money just sit in a bank, it will make less than 1% interest. Thats no good. Remember Compounding interest is your future nest egg – and you can start utilizing it’s potential starting today…just like Grandma used to!
Remember to download Grandma’s free wholesome wealth recipes book by dropping into http://www.grandmaswealth.com. Time-honored wealth strategies served with a helping of balance and trust.
If you’d like to see how Grandma’s timeless wealth strategies can work in your life, schedule your free 15-minute coffee chat with us by visiting https://www.grandmaswealthwisdom.com/call…just like Grandma would want us to do.
A hearty welcome to Grandma’s Wealth Wisdom with your hospitable hosts, Brandon and Amanda Neely. This is the only podcast for strategies to grow your wealth simply and sustainably like grandma used to. Without further ado here are your hosts.
Amanda: Hi, I'm Amanda and welcome to Grandma's Wealth Wisdom where we help you build wealth grandma would be proud of.
Brandon: Hey, I'm Brandon. Today we're going to be talking about another of grandma's wealth proverbs. The title is Stitch in Time Saves Nine. That's probably a proverb grandma would be saying it's, "Stitch in time stays nine".
Amanda: Try to say that five times fast.
Brandon: A stitch in time saves nine... I'm not going to do that. This episode is all about savings. Before you hit the next button on your app or the "I don't want to listen to the because it's about savings", hear me out. We all know savings isn't a hot topic today. Even though we'd like to go shopping there, some people, if you're 20 or 16 or 12.
Amanda: Or really like band T-shirts.
Brandon: Yeah, there you go, that's exactly it. We live in an instant gratification culture. If we want something we get it now. Thank you credit card companies and banks for giving us exactly what we want.
Amanda: And at a high cost. The credit card companies, the banks, they get paid the big bucks. There's also that one internet company out there that created the one click purchase, that when we want something we can get it with one click and it's delivered the next day. Made it way too easy for us to give our money to those credit card companies and to the internet company who shall not be named right now.
Brandon: Again, savings isn't that fun of a topic, but I believe by thinking through our financials and building a solid foundation we can have a more empowered and a stress-free life and still get the things we really desire.
Amanda: Yes, and it all starts with thinking about gambling, oddly enough. Grandma loved to go to preachers, the pastor at the local church, whoever, any preacher she'd come across and ask them what their opinion of gambling is. Never fails, the preacher would always answer, "It's of the devil" or "It's the root of evil" or, "It's really bad you should not do it", maybe go on a long diatribe of how gambling leads to all kinds of debauchery.
Brandon: It's horrible.
Amanda: Grandma would just listen patiently when they were finished with answering her question about what their opinion is on gambling. She would simply ask: "Well don't you gamble every time you get into a car?". Of course, the preacher or the pastor or whoever she was talking to would not know how to answer. They would often be lost for words. Grandma knew, when you get on the road in the car you never know what the other drivers are going to do. You got to be on the lookout, you got to be safe, wear your seat belts, drive the speed limit, be cautious, keep an eye out. She also knew that that applied to her finances too. She did not believe that you have to speculate in order to accumulate. You might have heard that before, you got to speculate to accumulate.
Brandon: In today's time all the time.
Amanda: All the time, but not in grandma's time. She knew that you had to be serious about saving in order to accumulate. You have to be serious about it. Speculate to accumulate is the lie that those who want to make money off of you, they want to make those fees that you pay when you're putting your money out there, and gambling, that's a lie they want you to believe so they can make those fees off of you.
Brandon: You really have to ask yourself, who's winning in these cases. Really take an inside look at yourself and your finances and again look and say who's winning in this scenario? Is it me or is it them? Oftentimes it's going to be actually them and not you. That's why we want to create this podcast, to help you win in this game.
Amanda: Because if you're gambling, then you might want to consider is the house always winning with that gambling.
Brandon: In a casino, as we know, the house always wins. There might be a few outliers that do win over time, a couple here and there just to make the game interesting, but overall and in the grand scheme of things, the house always win.
Amanda: Lots of people gamble with money they can't afford to lose by putting it in the stock market.
Brandon: The stock market.
Amanda: We finally said it. There's a big difference between saving and investing. Savings it's all about accumulation. When you save, you want to create a nice solid foundations of savings of liquid accessible money that's safe, that you know is never going to decrease in value. Whereas investing is all about speculation. You put your money out there, you might get a big return or you might lose all of it, you don't know. When you're thinking about accumulation you save to accumulate, you invest to speculate. These are two different things.
Brandon: I feel like oftentimes we mix those two up a whole lot. Again, thinking about it as two separate things not the same thing.
Amanda: Yes. This brings us to the financial stability pyramid. Now, most people have their wealth invested in very little safe and accessible. This creates an upside down pyramid where the top part, the investing part, is way bigger than the bottom, the foundational part, the savings part. Because it's upside down you got a really small part pyramid part at the bottom and you got a really big pyramid part at the top. That when if a strong wind blows, any kind of emergency like a flat tire or an a medical expense pops up the pyramid might just topple over and crash. When any kind of small thing comes up ,the perceived stability, you've got all this money out there in the stock market, shows itself for what it really is. I don't have access to it, I get fees or penalized if I borrow it, it's not going to grow. All those kind of things show themselves for what they are in how most people build their financial pyramid.
Brandon: I don't want to be walking around that pyramid if it's going to topple down or any of that stuff, I would rather be as far away from that as possible.
Amanda: Right, and maybe close to grandma's pyramid. Grandma's pyramid is very stable. She has most of her money in safe and accessible places. She's created that strong foundation of savings, and she only gambles that with the little money she can afford to lose. That's a nice top part of the pyramid that comes to a nice little peek there at the top. That's the money she is gambling with, and I would totally rather walk around grandma's pyramid than that upside down one that I'd be afraid could fall on me at any moment.
Brandon: For sure, that's a lot safer for me and you, of course. We could walk around it together and we would be enjoying life as opposed to fearful of our death.
Amanda: Correct. With the pyramid built as grandma has it built, this is how rich people are actually able to invest. This is how rich people set up their financial lives. I heard someone recently talking about the sharks on Shark Tank, the TV show on MSNBC or CNBC, one of those things. The sharks, they have to have their money accessible and liquid and safe that when they see a really big opportunity come their way in terms of the person pitching them, that they have to be able to put in the $100,000 or the one million dollars to be able to take advantage of that opportunity that's coming. You might think they have all this money invested in the stock market just like everybody else, but in fact, they have a lot of just cash ready, accessible, ready to go when they want. I bet if you looked at their lives overall, you might see the pyramid look a lot more like grandma's than any other way.
Brandon: Yes, I think it's probably for theirs, is a lot more stable and then they're able to take advantage and add whatever investment that they put in for that business to the peak of the pyramid, and then they're able to build their foundation even stronger, and there's a little bit of a cycle there, but they don't invest with money they don't have.
Amanda: They can't afford to lose.
Brandon: They can't afford to lose, they want to stay on top. I would think that's probably how they've become so successful.
Amanda: We've got pictures of these pyramids in the show notes at GrandmasWealthWisdom.com. You can go check out those images to really help you see what we're talking about here with these different ways to form your financial life.
Brandon: What if you could have some guarantees? What would you be willing to do?
Amanda: Yeah, so savings might not seem sexy or fun, it lends itself more to discipline, but maybe you'd be more motivated to do it if you knew that there could be some guarantees or that it could grow and make you some awesome money. And this is where we get into uninterrupted compound interest. We teased at the end the last episode we're going to talk about the eighth wonder of the world, this is what it is. Uninterrupted compound interest. Now some people say that Albert Einstein was the one to call uninterrupted compound interest eighth wonder of the world but when I tried to verify that and Snopes told me that probably Albert Einstein didn't say this. You can do your own research to figure out who coined uninterrupted compound interest as the eighth wonder of the world. But what I want to do is share some fun math with you.
Brandon: I think Amanda said that. Amanda Neely coined that term.
Amanda: No. I definitely heard it from somewhere else. Yeah. But let's do some fun math. Yes, I said "fun" and "math" in the same scenario, but let me just show you how fun this gets with uninterrupted compound interest.
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Amanda: So let's say you've got $10,000 and you're able to put into a vehicle that saves it or grows it at 10% interest every single year for 40 years. So let's say you're 30 years old, you put this $10,000 away, you don't touch it, it compounds each and every year 10% without interruption. At 70 old, when you're ready to retire, you're going to have $411,000.
Brandon: That's huge.
Amanda: That's amazing. $10,000 turn into $411,000 over 40 years. But it only gets better. After the 40 years, the growth explodes. By year 50 it grows to just over a million dollars, and by year 60 it grows to three million dollars. That's the power of uninterrupted compound interest where you get that 10% every single year without fail, you know that it's going to be there, and it becomes the most effective the longer you're able to let it grow and compound. Now grandma knew that good things take time. She bakes rather than microwaves, she is able to slow down and savor the good things in life, and she is able to slow down too, to create something better and that gives grandma a huge leg up financially that she's able to take advantage of this uninterrupted compound interest, that eighth wonder of the world.
Brandon: You think about Thanksgiving dinner, it takes a lot of time, like she might start preparing for it weeks ahead of time, a couple days ahead of time, but that dinner is so memorable. Whereas we go to our fast food chain and we have that food, it's quick and easy, we don't remember it very well, but that time that it took to build that meal was of a huge memory, at least for me thinking about Thanksgiving and Christmas and all those kind of fun holidays.
Amanda: Or sometimes even just supper on Friday night.
Brandon: Oh yeah, there are some suppers times that we had a great... Beans and rice was a good one, I love her beans and rice.
Brandon: We're Southern, so that's what you have.
Amanda: With cornbread, right?
Brandon: With cornbread.
Amanda: So if you think about this, saving you might not think it's fun, it's not sexy, it requires some of the discipline, but what would you be willing to do if you knew the impact that it could make for you or for your children or for your grandchildren? If you knew that there were guarantees backed up by credible sources that your money could grow with uninterrupted compound interest, even while you make major purchases like homes and cars, like we talked about in the last episode, what would you be willing to save? How much of your income would you be willing to commit? Now, again, we live in a time where we believe you have to speculate in order to accumulate. According to the U.S. Bureau of Economic Analysis, the savings rate of Americans at large in June 2018 was 6.8%. Actually they had to adjust their statistics because they actually had it lower, but then they found that some rich people were saving more, and so they brought it up from like 3% or so to 6.8%.
Brandon: Because the rich save more.
Amanda: The rich save more, yeah.
Brandon: Which makes them richer.
Amanda: Anyway, so 6.8% is the official number for June 2018. If you go back to the 1970's.
Brandon: 40's, 1940's.
Amanda: Sorry, 1940's, if you go to 1940's, the savings rate was 27%. 27%. Now we don't know don't know for sure, but maybe, just maybe they saved more back in grandma's day in her heyday, because they were using safer for vehicles that had guarantees and they knew their money wouldn't get lost. In fact grandma, she had a whole savings formula, saving strategy that she followed. It's called the 10 10 10 savings formula or saving strategy. She would save 10% of her income for short-term needs, holiday gifts, taxes, car maintenance, repairs, that nice Thanksgiving meal, whatever it was. 10% short term, you're going to use it within the year or so.
Brandon: This really gets to me sometimes when people right in, I think it's around December 1st, they start freaking out because Christmas is coming around.
Amanda: Or Hanukkah or Kwanzaa.
Brandon: Or Hanukkah or whatever, one of those holidays, and they have to buy all these gifts and they're like, "I'm broke because I have no money or because Christmas and I got to buy all these gifts." And for me I'm like thinking, Christmas is, or Hanukkah or whatever, it comes every year at the same time, and you can plan for that. If you plan for that it will be a lot easier. So this idea of saving for short term things like Christmas, or taxes, every year people freak out before tax season, April 10th.
Brandon: 15th. I know the tax day, but like they start freaking out a little bit, ask for an extension, all those other kind of things. You're like, "Hello, it's at the same time every year. How are you freaking out about it? You should already know."
Amanda: So we followed grandma's 10 10 10 rule, then 10% of your income goes straight to these short-term needs, you're not freaking out with holidays, taxes, car, flat tire or oil change or whatever. Then another 10% goes to medium term needs like a whole new car, a home repair like a new roof, paying for college, different things that don't happen as often, you know, maybe five, ten, 15 years, or maybe just happen once. Hopefully, you know, college, they just go once or a wedding, they just get married once, those kinds of things. That's 10% medium needs, and then 10% towards long-term need in retirement. So of you take all of your income and you're saving 10% for short-term, 10% for medium-term, and 10% for long-term, that's 30% of your income. That might seem really scary, but if you knew that that 30% was going to go somewhere that will be safe, you will be able to use it when you need it, like for the holidays, like for that new car, like in retirement, it's safe, and if you knew it was going to grow with uninterrupted compound interest, would you be willing to do that? Would you be willing to put that money somewhere where you knew that over time it could grow pretty much exponentially as the years go on? That could be really powerful, that could totally transform your entire life. If you're willing to do that. I bet knowing that it's not going to go up and down, like gambling in the stock market would, but that it's only going to go up and it's going to go up with uninterrupted compound interest, just like dream for a minute what would life be like if that's what you did. Because now you're dreaming in grandma's world, and that's where we want you thinking. That's really what we're talking about here.
Brandon: When I also think, I mean if you have that 10% saved and 10% in the mid-term kind of, medium-term expenses, like if have that money there, it's going to be a lot cheaper when you actually go and get that car or when you get that house. You don't have to pay PMI insurance and all these other kinds of things.
Amanda: We're going to get into that in the next episode.
Brandon: Yeah, we'll get into that, but I just think there's a whole lot more saving side as well as the other side of things.
Amanda: We need to wrap up for today, though.
Brandon: So to wrap up today, savings might not seem very cool to do. You only live once, right? So it's hard to see the value in saving for the future. Plus if you're saving in a way that more like gambling, you don't even know how much you'll have or you'll need. Right? Yet what if you could harness the power of uninterrupted compound growth so that you could have savings available when you need it for life long way and then later in retirement, would you be willing to save more like grandma with 10 10 10 savings formula?
Amanda: So be sure to join us next episode. In episode four we're going to be tackling how to break that paycheck to paycheck cycle. Maybe listening to this episode you're like, "I could never save 30% of my income. I barely scrape by a month after month." If you want to get off that hamster wheel and reduce your stress, you're going to find lots of info, lots of value in the next episode. Plus we'll answer the question many of us are asking nowadays, "Will I ever be able to buy a home? Should I buy a home?"
Brandon: So until next time, keep building your wealth simply and sustainably for your own future and the future of your grandchildren's generation.