Episode Transcript
[00:00:05] Speaker A: Hey, everybody, you're kicking it with the Homeboys and the Homeboys podcast. And today we are talking about turning a dollar into $8, or every dollar for that matter, into $8. Pretty excited about this.
[00:00:19] Speaker B: It's so much easier than you think. And you got us thinking about this. How long would it take simply to turn a dollar into $8 by saving it? Is it worth it? Is savings worth it? Why aren't more people saving? And then we're going to talk about how easy it could be to save up for that first house, for new home buyers or even an investor setting some money aside for that first investment property. And it can be so much smaller than you think when you include compounding interest. So this is a pretty fun topic for us.
[00:00:52] Speaker A: It is a fun topic, and I think that it really speaks to people that think that it's too hard to save or I can't save. It just, there's just I can't do it anymore because things are too hard. You have to have a plan and you've got to start somewhere. And we're basing this off of a 20 year career, basically. You know, say you work for 20 years. What, what would a dollar turn into in 20 years? So explain the math a little bit.
[00:01:19] Speaker B: Well, it's real simple. After eight years, after 20 years, around 20 years, 21 ish years, if you had saved a dollar at the beginning, it's turned into eight by that time. And that's based on 10% interest, which again is high.
[00:01:32] Speaker A: 10% interest. There's no way you're getting 10% interest.
[00:01:36] Speaker B: Well, it's high, but the average s and p is well above that. So it's very achievable over any historical period. If you're looking backwards, I say that as a joke.
[00:01:46] Speaker A: We hear that a lot. You know, we talk about 10%. It's a good round number.
And, you know, we get a lot of comments, a lot of feedback, people saying there's just no, there's no accounts that pay you 10%. Well, Google S and P 500 average return, and that is 10%. So this is thinking that you are going to invest that money somewhere like the S P 500. It could be other things. It could be stocks, it could be bonds, could be mutual funds, ETF's, it could be a lot of different things. It could be real estate.
And you know, a lot of times we're on this show talking about how real estate returns can be much higher than 10% over time. So yes, every dollar that you save eventually turns into $8 that's based off of 20 years.
[00:02:32] Speaker B: Right? And keep in mind, if you just did that every day, if you skip that dollar, you know, the McDonald's $1 soda, if you skip that every day and save that after 2025, after 20 years, you'd have over $25,000. So in a 20 year span, just a buck a day turns into 25,000. Now, that may sound like a little to some people, that may sound like a lot, but the point is, is that you only saved about seven grand of that, 16,000 of that is dollars. Your dollar went out there and created for you. You didn't go work for them. Your dollar went and earned them for you and brought them, brought it to the party. He brought seven guests. Each of your dollars brought seven guests.
[00:03:15] Speaker A: I like that thinking. And that's what got my brain initially going, was, so whenever you're buying something, it's not just the cost of whatever it is you're buying. Say you're buying a car, and today there's many, many cars out there for $50,000. You know, you think that if you're out buying that car, every dollar you spend, you know, for that car to spend 50,000 on a car, it's not just that dollar that goes out. It's if you had that dollar working in an appreciating asset savings account, the stock market, you know, it would grow over time. Instead, every dollar that you're putting into that car is going into a depreciating asset. So that car is not just 50,000. When you look at it like this, that car is actually $400,000.
[00:04:04] Speaker B: Right? The. The technical term is the opportunity cost.
[00:04:07] Speaker A: Correct.
[00:04:08] Speaker B: But you. You saving that dollar instead of spending it does so much for people. And I want, especially young folks out there, out there to understand why folks like us, us are such big savers and so passionate about it. It's because we can only work so many hours in the day. We can only create so many dollars with our time. So when we earn a dollar, we need to get that out there working for us. Because there's only one of me, but each of my dollars can go out there and earn another dollar.
[00:04:39] Speaker A: And I know you and I live by this principle. I know for me, I would much rather be comfortable now, as a middle aged man or as an elderly man, be financially comfortable than to have a fancy car. You know, I don't really care about that, that fancy car. You know, we're in points of our life that we could retire. You know, if we wanted to, and that's because we adopted this principle at very young ages and got our money working at very young ages. And now it affords us financial freedom. Whereas had I bought a Porsche whenever I could probably first afford one, which is probably about, you know, my upper twenties, around 30.
Think of all that money that, you know, that the money that I invested in the market instead of buying that Porsche, what it has grown to today.
[00:05:33] Speaker B: It'S mind blowing for sure. You know, it's more than just the fact that we, we could retire now. That's a, that's a neat thing in, at our age, to be able to be in that position. But more importantly, when I lay my head on my pillow at night, I don't have to think about money or bills. You know, my whole life, you know, I grew up without money just like you did. We scrapped and made it. And so I know what it's like to stress over money. It's this cloud that just literally hangs over every aspect of your life. Every aspect. And it feels like you can never get out of it. And we want people to understand that there's. It's easier to get out of that feeling than they may think. And sure, we just talked about how to save $25,000. That's not a life changing amount. It's a great start. And hey, it's better than nothing. But we took this a step further and I started thinking, okay, well, what's the average down payment on a house in America? It's around $34,000. That's the median. Median down payment on a house is $34,000. If you tell a young person that, who has no money, they just think that is unachievable. I don't have $34,000 and I'm never going to get a check for $34,000. Well, I thought, well, how much a day does that mean that you need to save in order to buy a house in five years? A very short period. So, pretty aggressive. So you're starting with zero, you have no money and you want to buy a house in five years. All you have to save is $15 a day. That's it.
[00:07:01] Speaker A: There's a lot of people out there that spend $15 a day on coffee.
[00:07:05] Speaker B: Doordash, a million other things, all the.
[00:07:08] Speaker A: Subscription services, all of that. I mean, literally, if you took an audit of all of your outflows that are going out the door every month, my guess would be you're going to find dollar 15 a day, probably more than $15 a day, right.
[00:07:24] Speaker B: And maybe you have to get that side hustle and that, hey, I understand you. You want to have fun in your life, but there's probably a couple hours that you have room for to do a side hustle and still have all the fun in the world and have a great time and work towards that financial freedom that you can have later on. That deferred, that deferred pleasure. Yeah, it seems so far off. But when you reach it, isn't it amazing when you've reached it, when you actually feel it? And five years, again, a house, think about that. You could own a home within five years if you save that $15. And in America, most people's wealth is in their home. And it's not just that, okay, now I own a home. My rent's never going to go up, which is great, but you're also have an appreciating asset now. You're also paying down that debt every month. That mortgage you're paying down instead of paying in rent to a landlord. So you start to build wealth through that property itself at an even faster rate. So $15 a day to get you the down payment is the gift that keeps giving even afterwards.
[00:08:34] Speaker A: Right. And not to mention the tax benefits that you get, you know, along the way, you know, as well all of your interest on your mortgage is tax deductible. There's lots of reasons to be able to be motivated to save up that money, you know, for a house. But, you know, our driving point here, every dollar turns into eight. I think that's very powerful. I know it makes me, it's good just hearing that information myself because it makes me want to watch a few of my dollars going out.
[00:09:03] Speaker B: Right.
[00:09:03] Speaker A: You know, it's, it's very powerful.
[00:09:05] Speaker B: Yeah. And, and every dollar turns into 16 in less than double that time. Because all of those dollars your 1st $8 brought to the party are working faster and harder. Now you have $8 out there. So if you want to move, shift that window even further and say, okay, well, I'm going to work for 25 years. I'll work for 25 years. You know, get a job when I'm 25, work till I'm 50. Most people would dream of retiring at 50. And so you can. The power of compounding interest gets stronger the longer it's saved. You know, time is the most important factor with savings. So get started today with small amounts. And I don't even care if you, if you put a dollar in a, in a ceramic piggy bank at your house to build those habits to get started, at least. But eventually, you've got to get that money working for you. And there's all kinds easy ways to do that. There's apps out there like Robinhood and acorns, and you can go find a financial advisor.
There's many local banks that will help you with conservative investments and savings accounts right now that earn as much as 5%, maybe even over 5%. So there's some cds even. There's all kinds of ways that you can do this. The first step is building those habits. And if you have no idea where to start, check out things like acorns and Fidelity and Robinhood. They have these really low cost ways that you can, you can start to build these habits and get those dollars working for you. I think that you will feel as passionate about it as Clint and I do. When you see the power of that money earning you money again. There's only one of you. There's only one of you. Make your dollars. Go out there and work for you. Skip that coffee. Don't buy that car.
[00:10:46] Speaker A: I'll challenge everybody with this. It's not just a seven or eight dollar cup of coffee. The opportunity cost that cop. That cup of coffee is actually $50. It's powerful stuff if you look at it that way. And every dollar counts. I don't care. You know what? Anyone says, well, I want to live my life. Well, you can live your life and still save.
[00:11:07] Speaker B: That's a good way of thinking of everything. Every time you spend a dollar, you're not spending $8, you're spending it. You're not. Every time you spend a dollar, you're not spending a dollar, you're spending eight that you could have later.
[00:11:17] Speaker A: That's right.
[00:11:18] Speaker B: It's a great way to look at, and I think that's a great way to wrap this show up.
[00:11:21] Speaker A: Well, that is our show for today. We thank you for joining us. Make sure you check out the homeboys on TikTok, Instagram and YouTube. Till next time, homies. Happy investing.
