Grandma might tell you this old saying Six of one, Half Dozen of the other and we would be wondering what is she talking about. But then it would dawn on us its the same thing. You have the debtor and you have the saver. Saving versus Financing . whats the difference really?
Today, there are generally three main ways people make major purchases; with cash, leasing, or financing. Whether it’s a new car, a bigger house, or a new smartphone. And it all boils down to the same thing: You have the debtor and the saver.
A cycle of earning to spend and a hamster wheel that starts and always returns to zero.
In today’s episode, Brandon and Amanda share with you some of Grandma’s strategies for breaking the ‘earn-spend cycle’ so you can build everlasting wealth. A golden goose that replenishes your monetary reserves every single month.
The debtor and saver staircase
If the first option is called the debtor’s staircase, where you’ve got a staircase leading to zero, and the second way is called the saver’s staircase. So you’ve got a staircase leading away from zero, but then both end up going back to zero.
The accumulators staircase
This way is called the accumulator’s staircase, or for fun we like to call it grandma staircase. It starts with asking this question. we like to ask what if questions, daydream with us for a minute. What if your money could do two things at once? Could your money do two things at once? What if you could save up, you know, you’re starting maybe at zero but you start to save, you get that savings built, and then rather than taking that savings out. what if you could borrow at a super low interest rate, say like, 1%, with your savings as collateral.
So, you borrow some money from somewhere. They are re willing to give you a much lower interest rate because you’ve got that savings there. They know if anything were to happen to you or the thing that you’re buying, that you can still pay off that loan because you’ve got the money sitting right there. Meanwhile, your savings is going to grow at a larger rate, say maybe like 5%, 5.5%, while you’re only paying 1% on the loan so then your savings continues to grow while you’re paying off that loan, and this staircase, this way of doing things, looks a lot different.
Here Are The Best Bits of the episode:
– Brandon and Amanda’s eye-opening backstories ([1:25])
– How your ‘trusty’ bank could be stealing your money ([10:30])
– The ‘too good to be true’ wealth accumulator staircase anyone can step onto ([14:00])
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 http://www.grandmaswealthwisdom.cm/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.
Brandon: Hey, I’m Brandon, and welcome to the second episode of Grandma’s Wealth Wisdom where we help you build wealth grandma would be proud of.
Amanda: And I’m Amanda your co-host. Today we’re going to help you understand that the two main ways that people make purchases are really the same thing. They’re six of one, half dozen of the other.
Brandon: So I was trying to figure that out as I was looking at the title, “Six of one, half dozen of the other”, and I was like, “Am I supposed to do math here or… what’s going on with this title,” and then I realized; it’s the same thing.
Amanda: Yup, half dozen is six, same thing.
Brandon: So, before we jump in, I thought we would let you know a little bit about us. Let you know kind of who we are as your hosts, because we’re talking a lot about grandma and what grandma thinks, but maybe you would like to know a little bit about who’s talking on behalf of grandma.
Amanda: Yup, so the first thing you should probably know about us is that we’re not brother and sister, we’re married, we have different grandparents, different grandmas, different parents.
Brandon: Second: We just had a new baby and he is four months old and he is awesome, and we also have our mother-in-law, my mother-in-law...
Amanda: My mom.
Brandon: Amanda’s mom, that lives with us as well and she is an awesome caretaker, so shout out to Mary when she listens to this. So, that’s a little bit about our home life.
Amanda: Third: You should know that we’ve been working together as entrepreneurs for over seven years. We’ve been married for over twelve years, but just the seven years working together.
Brandon: And we’re still married after working together for seven years.
Amanda: Yup, we only fight like, sometimes, but mostly we get along.
Brandon: And we work together like, all the time.
Amanda: Yeah our desks are in the same room together, it’s where we’re recording right now, but our first venture that we started was a coffee shop and it was actually our first iteration of “Grandma’s Front Porch”.
Brandon: Yeah, so the reason I thought about a coffee shop, and it was kind of my idea and Amanda helps make things happen, was I’m originally from the South, southeast Texas to be exact, and my grandma was all about, you know, bringing people together, there’s a lot more in community and relationship, and we gathered a ton, all the time, over food and drink, and so for me I though building a community was about creating a place that we gather over food and drink, and so logically, in my mind, a coffee shop would make the most sense.
Amanda: So we had lots of cookies there and coffee, and that’s kind of the atmosphere we want to continue with this podcast. You’ll probably be able to tell, we are really inspired by grandma. Yes, her love of coffee and cookies, but also she was like, minimalist before it was cool, and she does cool things like grow her own food and can the food so that she can use it over time.
Brandon: I learned a lot about that as I was a kid growing up with her.
Amanda: She lives close to the earth and she loves to care for it, you know, she’s gardening and that sort of thing, and we aspire to be more like her, especially in that minimalism and her sustainable bend, and what those mean for her financial life. She does her financial life very simply and sustainably as well, and that’s the kind of thing we’ve been inspired by, we’ve aspired to be like, and that’s what we’ll be talking about in this podcast, but one of my favorite things about grandma is that she can see a fake or a lie. She can spot it like, instantly. You know, she’s been around the block a few times and so you might try to outsmart her but you’re not going to.
Brandon: I tried that a couple times.
Amanda: Probably when you’re like five, and you’re trying to pull a practical joke, which you still do to this day, but grandma can see right through it, and she might have played along with your practical jokes but she knew what was going on and was just humoring you.
Brandon: No I think- No I’m just kidding. No, she definitely knew what was going on.
Amanda: Yeah, she knew, especially with your silly antics Brandon, but a grandma can also see who’s trustworthy and who’s not, you know, even among adults. Often she can tell us just within a few minutes of meeting someone. Now, I grew up in a small town and there was this hotshot guy that everyone thought was like, the cat’s pajamas, except for grandma. Grandma could tell that he was really just arrogant and full of himself and wanting everyone to adore him, but in reality he wasn’t all that trustworthy and eventually the entire community found that out too, but grandma knew it all along. That’s how smart she is and how much she can spot the fake or a lie, the six of one half dozen of the other. There’s this common conception that grandpa brought in the money and that grandma runs the household, yet grandma knew how to save, she knew how to spend, she know when and how to do one versus the other, and Brandon has a story about how his grandma also knew how to bring in the dough.
Brandon: So my grandma wanted to buy this furniture, she wanted a new set of furniture, and so she asks my grandpa, which we called pawpaw, can she get this furniture and he said, “You can get it as long as you get the money.” Well, she ran the household, she didn’t have a job, so what she did she was she’s like, “Well I’m talented, I got some skills,” so she became a seamstress and she made these dolls, she did all kinds of stuff, to get that money. So she basically became an entrepreneur before the word entrepreneur was cool, and she got that furniture. So my grandma was one of those people that made it happen, because that’s what she wanted, she wanted that new furniture and she got it, without going into debt.
Amanda: Wasn’t an option for them, they didn’t want to go that route even if they could, which they might not have been able to back then.
Brandon: Yeah exactly.
Amanda: The whole invention of credit cards, we’d have to go back and see if they were even around then for them, but let’s talk about this: Three ways that people typically pay for major purchase, you know, a whole new set of furniture for their home or a car or maybe for the home itself, big things that we want to buy that are going to cost us lots of money. So, the first way that people do this is that they rent or lease, they pay someone else to use their property. People do this most often with homes or cars, you know, they rent that apartment or that home, they pay for, you know, someone else to use the thing that that other person owns, or with cars they lease the car, and then at the end, once your done renting that home and your going to move somewhere else or your done with that car, you’ve got nothing to show for it, you actually have to give back the car or the home and all of the money that you gave to that you don’t get that either. You know, renting or leasing you kind of, you’re not making a purchase, so we’re going to kind of set that one to the side and we’re going to focus on these other two ways that people actually make the purchase.
Brandon: I remember my mom had this Lincoln that she leased, and we loved that car, but then the lease was up, and then we didn’t have the car anymore.
Brandon: That was sad.
Amanda: That’s how that works. So, the way to keep the car at the end of the time is to finance it, is one option, where you can take out a loan to make that purchase and you pay interest because someone else is giving you the money to buy it and you’re going to pay them back over time with interest, and of course anything you put on a credit card and don’t pay off right away falls under this category too, but most of the time we’re thinking about major thing like homes where you take out a mortgage, or a car where you take out a car loan, and with this you’re at zero or maybe you have a little bit of money for the down payment, but you go and you buy the thing and you’re immediately below zero, you’re in debt, and then as you make those small payments it’s almost like you’re taking little steps, like building a staircase, back to zero. When you have that car paid off you’re back at zero, you’ve paid off your home, and that’s typically when people celebrate. They’re really excited they’re finally debt free.
Brandon: Yeah, I find that really funny. So, they did the student loans, they did all kinds of things, and they finally pay it off, and they have zero net worth, and you’re like, “Well, wait a second. You have zero net worth, how is that so exciting to be? I mean, I guess maybe it’s fun but to be at zero?” I don’t know, I find that crazy how many people celebrate and do these wild parties.
Amanda: Well I would celebrate too. You know, you burn the paperwork because you’re done with it, the contracts over, you paid it off, that is something to celebrate.
Brandon: Yeah it is something to celebrate but...
Amanda: The thing I think that is, in your words Brandon, crazy, which I don’t know if I’d call it crazy either, that’s kind of not a word that grandma would like to use, but what I find interesting is that oftentimes people get to that time, they’re finally debt free, and then two weeks later their car breaks and they need a new one, and they start all over. They go get a new car loan.
Brandon: Oh yeah, that’s crazy, right? Oh right, I shouldn’t say crazy, never mind.
Amanda: It’s fascinating that this is kind of the cycle that people get into where they finally get to debt free and maybe they stay there two weeks, two months, two years, it doesn’t really matter, because they then go right back to being in debt when that car breaks, or they need a bigger home as their family expands, or their kid goes to college, or whatever it is, and with this scenario who wins? The lender, the person that’s giving you the money to buy the thing that you want. Maybe even they make more profit than the person who sold you the car in the first place.
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Amanda: Now we can move onto the second way that people make most major purchase: They pay cash. Now, this is how it works, they save up kind of like they’re starting at zero, and they make these little stair steps where they put in, you know, $500 here $100 there, whatever it is, they save up as much as they can then they have the money, they’re ready to buy the thing, they go buy it, and boom they’re down back at zero. They have this new thing, let’s say it’s a car, but their savings account is back down at zero.
Brandon: So that savings account’s not making any money anymore either.
Amanda: Exactly, they’re losing the interest that they would have made had that money stayed right there in their savings account, and maybe they’re doing this for a car, maybe it’s a down payment on a home, maybe it’s just how they pay their taxes every year. There’s lots of ways people kind of save up and then they lose it, and they’re always kind of working up from zero, and this way of making major purchases might seem better than the other way but if you look at the illustrations of both you’ll see that they look eerily similar.
Brandon: Yeah, and also we are going to have this little illustration in our show notes of this episode, so check out the website and check out the show notes.
Amanda: Plus in the meantime if you, you know, do the first option where you go into debt the bank my charge you 7%, 9%, to borrow money from them but when you’re saving up, you know, you’re going to pay cash for this thing as your saving they’re only going to give you 1%, maybe 1.5% if you’re lucky, on that savings account while you’re saving up money in order to buy cash to buy the thing. So, it’s kind of like the banks win either way.
Brandon: Yeah it’s crazy, they built that crazy system.
Amanda: Yup, whether you go into debt or you pay cash for those major purchases the bank either is going to make a lot of money as you’re paying interest to them, or when you give them the money they’re going to pay you very little interest while they then loan the money to someone else and make a lot of interest. That’s kind of how the whole system is rigged up.
Brandon: Yeah. This kind of reminds me; I like to go to the gym, and I go there fairly regularly, and on my fitness app they had me do this stair stepper, and I always hate the stair stepper because it’s really exhausting. You’re going for 12, 24 minutes, doing the stair stepper at a high speed, trying to get somewhere, and you actually don’t go anywhere, you know, and it’s very frustrating to me sometimes because I’ve expended all this effort, all this energy, and I haven’t even gone up any flights of stairs. I mean, I see it on the little screen that I have virtually gotten somewhere, but really I haven’t.
Amanda: Yeah, you’re heart’s gotten beating really fast, you expended a lot of calories, but you’re, in fitness that’s really good, you’ve accomplished the goal there, but if you’re doing this with your money it can be really frustrating and stressful. Your heart gets beating for the wrong reasons.
Brandon: Yeah, I want to be going somewhere with my money, not just staying in one location.
Amanda: Yeah, absolutely, so this is what brings us to grandma’s way. If the first option is called the debtor’s staircase, where you’ve got a staircase leading to zero, and the second way is called the saver’s staircase, so you’ve got a staircase leading away from zero, but then both end up going back to zero. This way is called the accumulator’s staircase, or for fun we like to call it grandma staircase, but it starts with asking this question, we like to ask what if questions, daydream with us for a minute, what if? What if your money could do two things at once? What if your money could do two things at once? What if you could save up, you know, you’re starting maybe at zero but you start to save, you get that savings built, and then rather than taking that savings out what if you could borrow at a super low interest rate, say like, 1%, with your savings as collateral. So, you borrow some money from somewhere and they’re willing to give you a much lower interest rate because you’ve got that savings there and they know if anything were to happen to you or the thing that you’re buying, that you can still be off that loan because you’ve got the money sitting right there. Meanwhile, your savings is going to grow at a larger rate, say maybe like 5%, 5.5%, while you’re only paying 1% on the loan so then your savings continues to grow while you’re paying off that loan, and this staircase, this way of doing things, looks a lot different.
Brandon: So, Amanda this sounds too good to be true, or like it might cause a whole lot of paperwork that I’m not really interested in doing.
Amanda: Right, so you do have to find the people that are willing to give you a loan at a super low interest rate, and you do have to still save. You can’t just, you know, start this tomorrow without any savings built up, you do have to, you know, have a little bit of skin in the game so to speak. So, that is one of the downsides. If you’re not willing to save and be disciplined, or if you can’t find someone that’s going to give you that interest or that loan at a super interest rate then this system doesn’t work. Thankfully we know who to go to and they actually have very little paperwork for a loan. You know, unlike if you were to go take out a mortgage and you’ve got reams and reams of paperwork or when you do a car loan you’ve still got a bunch of signatures and fine print you have to read, when you’re wanting to take out a loan because you’ve got that savings built up it’s actually a two page pdf where you say, “Here’s how much money I want, here’s where I want it, and here’s my signature so you know it’s me and not someone else trying to steal my money,” and you send it to them and the money’s, typically, available ready to go for you within a week or so. That’s really how it works with the paperwork side of things, and the financial tool that we use to do this kind of thing, that grandma uses to do this kind of thing, is available widely, it’s not something crazy. In fact in grandma’s day about a third of Americans used this financial vehicle, and we’d love to share with you more about what it is. We don’t have time on the podcast, we’re nearing our 20 minutes to go through it here, but we want to talk with you, we want this to be a two way conversation. Please, reach out to us. You can schedule a call with us, just go to grandmaswealthwisdom.com/call and you can reach us, you can schedule a time, we’d love to talk with you, make this a two way conversation, share with you what it is we’re talking about and how it might apply to your unique situation. We would consider it an honor if you would do that with us.
Brandon: So, I want to wrap it up today. So when you’re paying cash, when you’re financing or leasing major items like your home or your car, you’re on a hamster wheel that starts and returns to zero over and over again, or like that stair stepper that I dread. Grandma knew how to break free of the hamster wheel and allow her money to grow while she was able to make major purchases. This is your invitation to break free from the hamster wheel or that dreaded stair stepper. It starts with a 15 minute phone call, with us; all you have to do is go to grandmaswealthwisdom.com/call.
Amanda: So be sure to join us for the next episode. Grandma has some pretty big opinions about gambling, and she also knows how to take advantage of what’s been called the eighth wonder of the world, but adding her own spin to it. So we’ll spill all the beans in the next episode. Hit that subscribe button.
Brandon: Until next time; keep building your wealth simply and sustainably for your own future and the future of your grandchildren’s generation.