Pod Insights Money Guy Show How to Lose $5M in 5 Days (and How to Avoid It) About this episode Through the story of twin sisters Polly and Molly, we demonstrate how 5 everyday financial decisions made in just 5 days can lead to a staggering $5 million difference in wealth over 30 years. We break down crucial choices about housing, retirement accounts, car purchases, and investment strategies that everyone faces in their financial journey. This eye-opening episode shows that building wealth isn't about getting everything perfect - it's about being intentional with your major financial decisions and understanding how small choices today can compound into life-changing results tomorrow.
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Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Speaker 00 I don't know what I'm doing.
0:01 Speaker 01 Need a break.
0:02 Speaker 00 Forget it, I quit.
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0:13 Speaker 03 You stay classy, San Diego.
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0:24 Speaker 02 You just have to know where to look.
0:26 Speaker 01 Escape to Pluto TV. Stream now, pay never.
0:30 Speaker 04 Para los grandes, para los chicos, para los bajos y los altos, los pacifistas, los valientes. Para los optimistas y los pesimistas, los que valoran lo de adentro. Para los que están lejos, los que no ven de lejos, y los que no ven de cerca. Para los introvertidos y los extrovertidos, para los que piensan y los que hacen. Para los que nos mostraron el camino. Coca-Cola, para todos. Compra una Coca-Cola en una tienda cerca de usted.
1:00 Brian Preston? How to lose $5 million in five days, no kidding.
1:08 Speaker 06 Brent, I am so excited to talk about this because sometimes what seems like a small decision, what seems like maybe even an insignificant decision can have a huge impact downstream. And we're going to walk through that very thing in today's episode.
1:24 Brian Preston? Here's what I love about my job. We get a front row seat to see what makes successful people create the wealth that they have. And I think, you know, the thing, if you ask anybody successful, I know there's a lot of great content, asking people what they do for a living, how did you get your money? But here's the reality that I have found in my own journey, plus working with all these clients. You're not going to know what small decision, big decision, which is actually the dollars that led to your millions. It's actually going to be the culmination of a bunch of different decisions. And what I've often thought, if I could just teach a young person or a middle-aged person just how to change and shift their mindset, to see the opportunity of what money can become
2:07 Brian Preston? and what the decision, the difference between consumption versus building is. It will change the way you handle every dollar that comes in your life. That's why we have the wealth multiplier. That's why we talk about 88 times over. And this show is going to be the perfect launch point to bring all this together.
2:23 Speaker 06 So what we're going to do is we're going to walk through a case study for the entire episode, kind of showcasing two different decision makers. We're just calling this a tale of two sisters. And let us introduce you to our characters for today's show. First, we have Polly and second, we have Molly. They're both 35 years old. They're both in the exact same financial situation as they sit today at age 35. They both get brand new jobs in a brand new city and they're going to make the average household income, the median household income in this country of $80,610. And they're both faced with five decisions, just five decisions over the course of five days.
3:06 Speaker 06 And what we want to walk you through is how those five decisions can have a huge impact on what their future lives look like.
3:14 Brian Preston? Now, look, I need you guys to suspend because the first thing you're probably thinking when I looked at this, I was like,
3:18 Speaker 06 No one's thinking it.
3:19 Brian Preston? These sisters don't like each other.
3:21 Speaker 06 Nobody's thinking it.
3:21 Brian Preston? Because a financial mutant, they're going to room together. So suspend that. They love each other, but they decided since they're mid 30s, they need a little separation.
3:31 Speaker 06 I thank you for that context. I think that helps. That helps. So here we go. Let's start out on day one, what do they have to do? Well, we just said they got a brand new job. They're moving to a brand new city. So one of the things they have to do is figure out where are we going to live? And Brian has already acknowledged, they still get along, but they don't want to live together. So they're going to live in different places. So Polly decides that she is going to get the nicer apartment. She's 35 years old, new city, new her. She wants to establish new roots. So she is going to get an apartment that's going to cost $2,250 per month in rent. That represents 33% of her gross income.
4:09 Brian Preston? Hmm.
4:10 Speaker 06 Her sister Molly, however, recognizes that she wants to be frugal and make prudent financial decisions. So she's going to go 10 minutes further out from the city and she's going to find an apartment that she's able to rent for just Seventeen hundred dollars a month, which is exactly 25% of her monthly gross income.
4:26 Brian Preston? What I love about this, because this, this is everybody. I mean, I think about now, there's, there's good and bad on both sides of this. When I first got married, my wife and I bought a house 45 minutes from my job because we got a better deal.
4:41 Speaker 06 Sure, it's cheaper.
4:42 Brian Preston? Now, that 45 minute commute destroyed my soul. So there is a balance here between what Molly and Polly are doing, but I will tell you, I love how the content team, when we, when we crafted this, a 10 minute sacrifice is not going to change, especially if it's going to have dramatic changes in your financial life. But there is a balance. There can be too much of a good thing if you are spending 35 to 40 minutes in the car, even though that's great podcasting YouTube, you're not really watching while you're driving, but it's still great content, you know, digestion period. I still want you making balanced decisions for your financial as well as your quality of life.
5:23 Speaker 06 So let's think about how this decision affects Polly and Molly's immediate cash flow. So we know that they both make the same income, live in the same locale, so they're going to pay the same amount of taxes. We're just estimating a 20% tax rate for them. Well, Polly has to spend 2250 per month on her apartment, so she has $3,156 left over after that decision. Molly, on the other hand, recognizes I can get into a less expensive apartment. I'm going to spend $1,700 on the apartment, and with that additional 550, so that we can keep cash flow equal, Molly is going to decide she's going to put that $550 every month to work for her. So that's decision day one. All right, you ready for decision day two, Brian?
6:03 Brian Preston? Yeah, what I love about this is this is, everybody deals with this.
6:06 Speaker 06 Yep.
6:07 Brian Preston? I mean, think about, and what's, let me go ahead and ruin another thing for you. One day you're going to wake up and you're 45, 50 years old, and you're going to look at your peer group, and you'll say, man, we all made about the same amount of money. Why does one of us have money? And why does the other group not have money? These are decisions. Do you see the first thing Polly has already gone astray on, Bo? She has exceeded 25% of her living expenses and I get it, but we're going to see how this this haunts her later on.
6:34 Speaker 06 Now, remember they're moving to a new city because they're taking on a new job. So decision day two is, okay, what am I going to do with my old 401k? They've both been diligent savers and they've been saving since the age of 22 years old. So now at age 35, they both have $80,000 in an old 401k that they get to decide what to do with. Well, Polly sees this as an opportunity. She says, man, there's some purchases I have not been making. I can now access these dollars, so I'm going to go make those purchases. And I'm also going to go on that vacation I've been waiting to go on. And I need new furniture for my nice new apartment. So I'm going to spend $30,000 of that $80,000 rollover and I'm going to roll over the remainder.
7:19 Brian Preston? I know a lot of people are going to be like, nobody does this. No, I'm telling you guys, a lot of people do this. I mean, if you even look at the stat, 41% of people cash out at least a portion of their 401k. A lot of them cash them all out. I can tell you just from my own personal experience, because we do 401ks for employers. I've seen swimming pools be built with 401ks. I've seen new cars being bought with 401ks. I've seen people just saying, hey, this is going to be the easy thing. It's going to help me out on this new transition in life. So I'm just going to take the cash. Guys, this is not, should not be the first lever you pull when you change jobs. And we're going to show why this is going to haunt her in the future for making this poor decision.
8:02 Speaker 06 So Polly decides she's going to spend that $30,000. And because she's so excited about the new apartment and the new furniture and the trip she's going to go on, she also doesn't pay attention to what she does with those dollars when she rolls them into the IRA. She's just going to let them sit in the cash equivalent, high yield, stable value option inside of her IRA. Now Polly, she, or Molly, she does something different. Molly recognizes, I don't need that money right now. I'm going to fully roll over all $80,000 into an IRA rollover. All over and I'm going to invest those dollars. I'm going to invest in a moderately aggressive portfolio where I believe that I can earn somewhere around nine percent on average over the long term. So when we think about their cash flow, we look at this, this decision doesn't really
8:47 Speaker 06 affect cash flow a ton, right? They're, they're not spending any more or less money out of their paycheck on this decision, but it's still a very important and very impactful decision.
8:57 Brian Preston? Yeah, I mean, this is cash flow is your, you know, tied to your income statement. That's more of a net worth adjustment is that they're taking an asset and you're essentially consuming it down. The other thing that I struggle with, with this was, you know, we mentioned that when they did the rollover, Polly just let it sit in cash.
9:15 Speaker 06 That's right.
9:15 Brian Preston? And you're like, guys, you've really got to be more honest with what's happening in this scenario as you're setting the table on this. You do realize Vanguard came out with research that showed it was like a close to a third of their IRA assets were just sitting in cash and it wasn't for like a few months because they're waiting for the second part of the transaction. This carried on for years. So this is something that we want to draw attention to. Do not let these behavioral traps or these slight mistakes define your future financial life.
9:46 Speaker 06 All right, now let's go to decision day three. And the third day, they have to decide, we need a way to get to and from our job. And we're in a new city, so we probably need to buy a new car, some reliable transportation. So again, Polly recognizing it's a new area, new friends, new social setting, she's going to go buy a nice car. She's going to spend $47,200 on an Acura MDX. That's the car that she lands on. And her sister Molly instead decides, you know what, I am going to buy a $21,000 Toyota Corolla. Molly says, I'm going to follow the 238. I'm going to do this the way that I'm supposed to. But Polly says, you know what, I recognize that I don't want all of
10:27 Speaker 06 my money going to my car. So I'm just going to stretch out how long I borrow money on this car. And I'm going to do a loan that is going to be 68 months to pay off this nice Acura.
10:38 Brian Preston? These numbers don't do this justice because if you pull up the cash flow, here's what Here's what I can already see how this sets itself up is that you think about Polly. She goes and she's like, you know what? I've been in school for all these years. I've sacrificed. There's a reason I have $80,000 in my 401k at age 35 is that I'm tired of sacrificing. And look, I saw a commercial. There was this drive time commercial. He said, I can make the deal myself. I can make my own deal and I'm going, you know what? It, it, what would it hurt if instead of these knuckleheads on, on YouTube are telling you to do 36 months? I don't need to do 36 months. I can push this thing out to 68 months because you know what that does?
11:20 Brian Preston? Makes it so much more affordable. So now that when my, my, my square sister over here, Molly, who seems to do everything right. She's mom's favorite. You know, I'm looking at her payment, my payment's only $810 a month. Whereas old square Molly, you know, her payments, $534. That's not that different. So what does this matter that I'm even doing this? I owe it to myself. I've worked so hard. I've deferred so much. Let's celebrate. I should have a nicer car. By the way, I know somebody sitting at this table who when they started their first job, they went out and bought an Acura and I get it. Acura seems like it's such a sensible car. It's just a fancy Honda.
12:00 Speaker 06 That's just a fancy Honda.
12:00 Brian Preston? What could this be? What could hurt for making this decision? We could have gone BMW. We could have gone Mercedes, but we went the sensible Acura. And even a sensible Acura can be a trap to your financial life.
12:12 Speaker 06 So when we think about their cash flows, Polly is spending $810 a month on her car payment. She was spending $2250 in her apartment. So she now has about 2346 remaining in her cash flow. Molly, again, we want to keep everything equal because her car payment is only $534. That roughly $250 to $300 extra, she gets to add that to her investment. So now she's investing $826 a month. She already has her money working for her. They're at the same capital outlay so far. That's day four. All right, Brian, let's keep going on.
12:48 Brian Preston? Day three.
12:48 Speaker 06 Day three. I don't count very good. That's day three. Let's talk about day four. Remember, they have a brand new job in a brand new town. So one of the things we have to figure out when we have a brand new job is what am I going to do with my future savings? How am I going to set up my new 401k? Well, fortunately, because of Secure 2.0, we know that now when you're a new participant in a 401k plan, you get auto enrolled. And Polly says, you know what? That's good enough for me. I'm going to ignore all these HR emails. I'm not going to pay attention to them. And I'm just going to do the auto enrollment feature. I'm going to get 3% of my pay automatically going into my 401k. And I'm just going to do whatever default investment option is there, probably some moderate target date type allocation.
13:33 Speaker 06 Now Molly thinks a little bit differently. She says, you know what? I, I listen to the Money Guy Show. And I know that they say that I should save 25%, but I can't quite do that yet. But you know what I can do? I can save 10%. So I'm going to self enroll in the 401k and I'm going to save 10%. And then I'm also going to recognize that every year as I get pay raises as my income changes, I'm going to increase it 1% every single year until I hit 25%. It's going to take me 15 years to get there, but I'm going to go from saving 10% of my pay all the way up to 25% of my pay.
14:04 Brian Preston? I love that because you know, yeah, we get a lot of flack for our 25% savings rate. And I get it. When you're in your twenties, it's aspirational. Truthfully, even in your twenties, you don't even have to save that. The typical American doesn't start saving and investing until their thirties. So if you're in your twenties and you're doing 5%, you're doing 10%, you're way ahead of the curve. But I love how Molly does the sensible thing. Let's just do something. Let's get the ball rolling in the right direction and then I'll get better every year as I get pay raises and I invest more into my future self.
14:36 Speaker 06 So let's look at the cash flow difference. Now we have Polly who's only investing 3% of her pay. So she's investing $202 per month compared to Molly who's investing the extra from the apartment and the extra from the car and now 10% of her pay. She now has a 22% savings rate, saving almost $1,500 a month because she recognizes what that can do long-term for. Now, when you look at their remaining cash flow. Molly only has about $1,700 left. Polly is probably feeling great. She has $2,100 left over that she can now go spend and do the things in the new city that she wants to do. And it's probably going to get to the point where Molly thinks to herself, man, it seems like Polly is doing a lot of stuff I don't get to do and having a lot of experience I
15:21 Speaker 06 don't get to experience. And that's the trap that I think we all fall into because we don't get to see everyone's cash flow. We just get to see the results of their consumption decisions.
15:30 Brian Preston? I disagree. I don't, I don't think that they probably feel that different. I mean, because I think that, because they're sisters and we've already said they, they, they still love each other. They're hanging out. It's just that, you know, they're making sensible decisions. It's not that different. $2,100 versus the $1,700 is not that much money. That that's probably just shows up is that Polly gets a few extra drinks when they're out. Molly's a little more sensible with her choices on the menus when they're eating out or when they shop at the stores. It is easy for a few hundred dollars just to disappear with consumption. So I actually think it's the opposite. I think that they probably live very similar lives with these slight differences, but are
16:10 Brian Preston? going to have dramatic future lives to look at and experience based upon these small decisions.
16:17 Speaker 06 All right, then let's look at day five. So day five, they decide they're just going to stay the course. They recognize that the decisions that we have been making, we're going to continue making. So Polly is going to continue to live an elevated lifestyle and never course correct and never adjust her investments and never revisit the strategy that she's implementing. Molly also is not going to change her decision. She's going to keep investing and keep earning 9% and she's going to increase her savings rate to 25% and they're going to stay that course from age 35 all the way out until age 65.
16:50 Brian Preston? What I love drawing attention to day five, because it's, it's the hypothetical is that you just stick with this, that's. It should not be the reality is because good news is we all make mistakes and you can course correct at any point in time. That's why you don't have to get stuck into the sunk cost fallacy and just be stuck in the bad decisions of your past. You can choose today to actually fix it and improve. But I can tell you from experience, when we have people come through the doors, when I look at your old 401k statements, I see you have the exact same investments from the early 2000s. When I see that, you know, you talked to somebody who set up a Roth IRA when they were in their late twenties and they never increased or they never invested more. You see these types where we get stuck in the moment and
17:34 Brian Preston? we never get to be better versions of ourselves. And that's exactly what day five represents is that these two sisters kind of set it and forget it and never use the chance to kind of improve in the future. Now, at least Molly and her set it and forget it was automatic for the people and actually had some behaviors in there as she got pay raises, she increased her savings. So her plan is going to be better. And now is probably the time to show where the fruit falls from these trees. What do these numbers look like?
18:04 Speaker 06 Yeah, if you just look at these five decisions they made over these five days, by the time you go from age 35 all the way out to age 65, it equates to a 5.2 million dollar difference in ending portfolio value. These five decisions had a $5 million dollar impact.
18:26 Brian Preston? Yeah, that's not a mispronounce. Bo didn't make a mistake with that. I mean, $5 million, even for all my inflation hunters that are out there saying, a million dollars just ain't what a million dollars used to be. $5 million is a lot of money.
18:39 Speaker 06 Still a lot of money.
18:40 Brian Preston? Lot of money. And these sisters, same cash flow. This is what happens every day in America. When you look around at your friend group or you look around at that neighborhood that's right down the street that's a little bit nicer, you go, how do they have this and I don't have this? As a child, I was always told they were born with it. But we know the reality of the world is 80% of millionaires are first generation. So that means that nope, it's not because they were given this by somebody. It means that they made different decisions than everybody else. They broke the matrix. They didn't have the same view of consumption that social media is telling us.
19:21 Brian Preston? They said, I'm going to choose today to make a small decision here. That's going to have the ripple effect of creating dramatic, huge differences in my future financial life. And that's why, Bo, I'm excited now. We're going to go a little deeper in these numbers. So people can see how you can actually change this in your own personal life, too.
19:40 Speaker 06 Yeah, you may be asking, okay, well, how does this equate to $5 million? Let's dive into each of the days. So let's start right here at day one, picking apartments. We already said Polly decided that she wanted to live in the nicer apartment. So her monthly payment came out to $2,250 per month, which represents 33% of her gross monthly income. We've already established that if you have one third of your income going towards your housing, there's not a whole lot room left for a whole lot else. So it already immediately puts you in a pretty precarious position. Molly, on the other hand, who recognized, okay, I can get my rent down to $1,700 a month. It's going to represent 25% of my gross income. And because of that, I have an extra $550.
20:23 Speaker 06 The difference in what Polly's cash flow is, that I can now begin putting to work, that I can now have invested on my behalf every single month. And because I'm young, because I'm only 35, if I can earn 9% on average over the long term, that small decision of $550 can stack up pretty substantially over time.
20:43 Brian Preston? Yeah, I mean, I think it's pretty powerful. We chose a case scenario where this person started at 35. That resembles America.
20:49 Speaker 06 Yeah, absolutely.
20:49 Brian Preston? A lot of people don't realize that they could even how powerful their money could be until they're in their mid 30s. So this, this ties, we could, we could have amped this up even more going back to the 20s. The other part, I think, is I want to take a moment to pause this million dollar difference.
21:06 Speaker 06 Cause that, that decision was a Million dollar decision.
21:09 Brian Preston? This million dollar decision doesn't just have to be apartment choices because some of you go back. I live in a city where it's just naturally going to be this expensive. What it does kind of, you could slice and dice this any way you want. It could be the decisions on meal prep versus eating out. Using the apartment gym versus signing up for the fancy gym down the street with the spin classes and all the other stuff. It's the clothes you wear. It's, there's all kind of consumption. It's you making the decision of looking at your money, every dollar from your army of dollars that comes in and saying, I'm going to be deliberate, I'm going to pay myself first and I'm going to have a life that reflects that so that I can live my best life.
21:50 Brian Preston? It's not only in the moment, but also my future self will give me that sloppy bear hug because it's so happy with how I did deferred gratification and planning for the future, but also living for the moment.
22:03 Speaker 06 All right. So that accounts for one million, but what about the other four? Well, let's look at the other days. Let's talk about day number two, how they're going to handle the old 401k from their previous job. Remember Polly had $80,000 and she said, hey, I want to buy some things I haven't bought. I want to go on a trip, I want to furnish my apartment. So I'm going to spend $30,000 of that rollover. I'm going to roll over the remainder, but I'm not going to pay attention to it. So it's just going to sit in cash. It's going to sit in the high yield option. It's going to make 2%. Molly, on the other hand, recognizes that, hey, I've got $80,000. I'm going to roll that from my old 401k into an IRA. I'm going to invest it because I'm young, because I have a well diversified portfolio.
22:44 Speaker 06 I'm going to make 9% on average over the long term on that $80,000. So you may be thinking, okay, well, yeah, you know, 50,000 for Molly versus 80,000 or 50,000 for Polly versus 80,000 for Molly. Yeah, I get it. It's actually a little bit worse than that. When you look at it, whenever you make a decision that I'm going to pull some money out of retirement assets, when I'm going to pull some money out of a 401k, when I'm going to pull some money out of an IRA, it's not just as simple as pulling the money out. There are other repercussions you need to be aware of.
23:16 Brian Preston? Yeah, I had to bite my tongue on this one when we were setting it up the first time because as soon as I heard that they were going to pull some of this money out for a lifestyle, I was like, ooh, have they thought about that, that what happens when you pull money out pre 59 and a half? Not only do you have to pay income taxes, you have to pay early withdrawal penalties, anything, penalties, you want to make my, my, my skin just start twitching? Have the term penalty in there. And that's exactly what happens. You see $80,000 perfectly good 401k that you're trying to roll out, but you choose 30,000. You're like, hey, I'm still leaving majority of this money working for me. No. $6,600 is going to go to taxes. $3,000 is going to go down to penalties. So you're going to
23:59 Brian Preston? turn a perfectly beautiful $80,000 401k into $40,000. Half of your army of dollar bills just got slaughtered out there and you're not going to have anything to show for it because you used it on a trip, you used it on other lifestyle consumptions. This stuff happens all the time. Like I said, we've seen it with swimming pools. We've seen it with cars. We've seen it just because my life needed a little bit of extra to make me feel better about this moment. Guys, don't fall into this trap. Every dollar you save in those retirement accounts needs to have a purpose for the future. So you can live your best life, not only today, but also tomorrow.
24:38 Speaker 06 So when we think about what they have working for them, Polly has $40,400 remainder rolled into an IRA earning 2% over the long term. Molly has all $80,000 of her dollars earning 9% from age 35 to 65. And when you stack up what their dollars turn into, Polly's only turns into $74,000. That's less than she started with at $80,000. That's how devastating that decision was. But Molly, on the other hand, her money is now turned into all Almost 1.2 million dollars. So there is literally a 1.1 million dollar difference between these two decisions.
25:19 Brian Preston? Well, also, I can see how this happens. I've seen it happen many times in my own experience when you talk to people. And we've done react content on this as well as that you say, okay, but Polly had $40,000. Y'all really handicapped her. By letting that money just sit in a stable value fund. But here's how this happens. They get together at Christmas and, um, and they're comparing and contrasting because Molly's starting to, this is a few years in. And Polly's probably like, man, you know, Molly's making such good decisions. I can tell she's starting to get some traction in her life. You can just tell, even though she's driving not as nice a car, she'll live in a nice apartment. You just, she just seems happier. Something's different. And they start talking to Molly shared at Christmas. She was like, you know what? That old 401k, we, I rolled it out.
26:01 Brian Preston? You know, and, and, and Polly's like, I could roll mine out too. But Polly doesn't realize it's a two-part transaction. Just because you roll money out of an old 401k, when you roll it into an IRA, you have to invest the money because it's just going to roll in and sit into a cash equivalent type of investment, stable value fund. And that's where I see this happen. And we shared the results of that Vanguard research. This happens so often that I just need people take an active role in your financial life. It's a two-part transaction when you do a rollover transaction. Don't skip out on the investment.
26:35 Speaker 06 So as we think about these days stacking up and we get through day two, we now have a 2.1 million dollar difference, just between the difference in the apartment and how, and how to handle the old 401k. So now let's dive into day three. Remember they decided that they're both going to buy a new car in their new city. And Polly said, you know what? I deserve it. It's my time. I need a nicer car. I'm going to buy an Acura MDX. It's going to cost me $47,200. I'm going to still put a pretty good down payment on there. I'm going to put $4,200 down, which means I'm going to finance $43,000. I'm going to do that over 68 months. And right now, because of where interest rates are, the interest rate is going to be 9%. So my monthly payment is going to be $810.
27:21 Speaker 06 That is very different than what Molly does.
27:22 Brian Preston? Well, Polly's also gonna feel good because she's gonna watch a bunch of YouTube comment, you know, content out there where people are bragging about their thousand dollar car payments. And she's gonna feel really good about herself, like, "Look at these suckers with their $1,200 a month car payments. Mine's only $800 and I'm driving such a sensible car. I'm driving an Acura. I'm not driving what those knuckleheads I see on YouTube doing." So she's gonna feel really good and have a false sense that she's been disciplined when they're decision making. Meanwhile, old financial mutant Molly's sitting over there still driving a very sensible car and stacking, I mean, literally stacking the money with these good decisions.
28:02 Speaker 06 Yeah, Molly is gonna follow 23/8. So she buys a $21,000 Toyota Corolla. She puts the same $4,200 down that Polly did, but this actually represents 20% of the car's purchase price. She only borrows $16,800. Her loan term is 36 months, same interest rate of 9%. So her monthly payment is only $534. So with that extra, the difference between 810 and 534, with that $276, she's able to begin investing. And she does that for the three years while she's paying off her car. And then, when she has the car paid off, then she gets to invest the entire $810 until Polly hits her 68-month timeframe.
28:47 Speaker 06 So that way, we have the same amount of capital outflow between the two. Well, when you look at the decisions that they each made, by the time you take that three years of saving a little, and then a few more years of saving the full car payment, and then not investing another dollar and just letting those dollars continue to grow, that one decision equated to almost $400,000. It's a $386,000 difference.
29:12 Brian Preston? Yeah, I mean, and they drove the same. Very reliable cars. I mean, and probably on paper, it didn't look like that 200-plus month difference was really that big of a deal. But you can see, it's multiple six figures. Don't drive your wealth. Here's something that is just, is worth repeating. Discipline today equals freedom tomorrow. And if you can understand that, you will think differently about these consumption decisions.
29:41 Speaker 06 So after day three, as these decisions are stacking, we now have a two and a half million dollar difference after they made a different apartment decision, a different old 401k decision, and a different automobile decision. So those are the decisions, right, that they're making as they think about where they came from in this new city that they're in. Well, then on day four, they make another decision. This decision is really more about their future self, and they look at setting up their 401ks, but they do it differently. Now, remember, we've already told you, they both make the exact same income, $80,610. Polly ignored the HR emails. She just got Oddwin rolled at 3%, and she goes in the moderate portfolio. And we're going to give her the benefit of the doubt and assume that a moderate portfolio
30:23 Speaker 06 inside of a default investment option is going to return about 6% over the long term. Molly does it differently, though. She listens to this show, she knows how powerful her dollars can be. So she elects to save 10% of her contributions, going to increase by 1% every year until she hits 25%. And because she's taking an active role, and she's investing in a portfolio that matches her unique risk tolerance and risk capacity, we're going to assume that she can make 9% over the long term. So when you look at the difference in their 401k balances when they get to retirement, Polly has still built some money. She's built $282,000, which is still
31:03 Brian Preston? More than the average American.
31:04 Speaker 06 Hundreds of thousands of dollars, which is great. But when you compare that to Molly, Molly has now built over $3 million. That is a $2.7 million difference based on the decision they made in one day.
31:18 Brian Preston? I love how we did this with the multiple days, because I think it's kind of interesting. Days one through three, in a lot of ways, are consumption decisions.
31:26 Speaker 06 Sure.
31:27 Brian Preston? Day four is where Molly is taking the driver's seat and saying, you know what? I'm going to take an active role and actually make sure that I'm putting some money for the future and I'm really taking an active stance with my 401k. And I'm not even just going with what feels safe because what's safe now could potentially in the long term be very risky. Right. And that's why a lot of times people, when they choose the, the stable value fund or the, the moderate fund versus the aggressive fund while you're young and you're young, you should take more risk in a, in a balanced way to understand what your risk reward and how you deal with those things. I love how we balance that because we have consumption decisions need to be thought about in the beginning, you don't have a lot of money. So think about how you're consuming, but then once you start catching traction and
32:12 Brian Preston? you think about the building, it all comes together. And that's the beauty of that's where $5 million can be created where nobody saw it. It happened in silence. Nobody, that's what, it is so much better to be rich than to look rich. And I feel like so many people get caught up in the moment of how you look, how you feel, what they think people perceive you as. And then one day you wake up and you go, how did Molly get so rich? Why is Molly, how was Molly able to retire or take that, that, that job where she's now doing service or she changed to a completely different thing that's a passion of hers? How did she do that? I feel like we, we grew up in the same household and we've made the same, we had the same income.
32:57 Brian Preston? Molly, Molly, Molly. That's, that's what, that's what happens. It's all built upon small decisions that have huge results for the future. And I, I, I hope this content, but I hope we gave it the love, the respect to let people see that your decisions, it goes back to that koozie that you have right there, that this $1 koozie cost me $88. If you guys are wondering, I don't know what is every dollar that comes into my command had the potential to become, if you don't know the answer to that, you can go right now to moneyguy.com/resources. We have a wealth multiplier tool as well as things that you can download, resources you can download that'll tell you exactly for a 20 year old, that $1 has a potential to become $88.
33:41 Brian Preston? For a 30 year old, $23. 40 year old, $7. 50 year old, like myself, 50, I'm actually older than that now. Three dollars. Don't just question, or if you're curious, you owed yourself to go to that website and check it out.
33:54 Speaker 06 The great news is it only takes a few small decisions to have a huge impact. And what's great is you don't have to get every single decision exactly right. You just have to make sure that you are making some of the right decisions and you're not burying your head in the sand. You have to take an active role in your financial future because if you don't own your financial future, then your financial future is going to own you.
34:19 Brian Preston? Yeah, there's a better way to do money, as we often share with you guys. We love creating this type of content. So go out there and check out all those free resources. Moneyguy.com slash, you know, resources. And then also, don't forget, we have courses. We just re-engineered the Financial Order of Operations course. We did the unthinkable. We made it tremendously better, and then we gutted the price. Who does that? You're not supposed to give more value and then cut the price, but we did that. If you go to learn.moneyguy.com, you can check out our courses, our tools. We're trying to help you accelerate your path to building wealth and your relationship with money. Because this abundance cycle works. We keep loving on you. We're going to keep doing this. We've been doing this since 2006, Bo.
35:04 Brian Preston? We have never been burned by being generous and being transparent about how money works. So we're keep loading you up. I'm your host, Brian Preston, Mr. Bo Hanson, Money Guy team, out.
35:14 Speaker 06 The Money Guy Show is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities laws and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through the Money Guy Show. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment, or legal advice. All investments involve a degree of risk, including the risk of loss.
36:17 Speaker 04 Para los grandes, para los chicos, para los bajos y los altos, los pacifistas, los valientes. Para los optimistas y los pesimistas, los que valoran lo de adentro. Para los que están lejos, los que no vende lejos, y los que no vende cerca. Para los introvertidos y los extrovertidos. Para los que piensan y los que hacen. Para los que nos mostraron el camino. Coca-Cola, para todos. Compra una Coca-Cola en una tienda cerca de usted.
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