The 3 Tools That Actually Build Wealth

Summary

Podcast Summary: "The 3 Tools That Actually Build Wealth"
Money Guy Show
Hosts: Brian Preston and Bo Hanson
Release Date: June 13, 2025

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In the episode titled "The 3 Tools That Actually Build Wealth," hosts Brian Preston and Bo Hanson delve deep into the fundamental principles of wealth creation. Steering clear of common misconceptions, they unveil a straightforward yet powerful framework centered around three pivotal tools: Discipline, Money, and Time. This comprehensive summary captures the essence of their discussion, enriched with insightful quotes and actionable advice.

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I. Introduction to Wealth Building

The episode begins with Brian and Bo addressing the everyday challenges of managing finances, such as handling unexpected expenses during family trips. This relatable start sets the stage for a deeper exploration into effective wealth-building strategies.

II. Distinguishing Wealth vs. Rich

A central theme of the discussion is the critical distinction between being rich and wealthy. While many equate high income with wealth, the hosts clarify that true wealth is measured by net worth and assets, not just earnings.

• Bo Hanson: “Wealth and rich are completely different because just because you have a big income, a big shovel, if it doesn't actually turn into assets on the net worth statement, you have missed out.” [02:22]

III. The Three Tools to Building Wealth

A. Discipline: Living Below Your Means

Discipline forms the foundation of wealth creation. It involves consistently spending less than you earn, thereby creating a financial margin that can be invested.

• Bo Hanson: “Number one, this is discipline. The first thing you have to do is live on less than you make.” [02:57]

The hosts emphasize that discipline is not about making monumental financial sacrifices but about making small, consistent decisions that lead to significant long-term benefits.

• Guest Speaker: “If you can just make a small decision, given enough time, those small decisions can have a huge impact.” [05:02]

B. Money: Investing Wisely

Once a disciplined approach to saving is established, the next step is to put that saved money to work through investments. This means not letting your hard-earned money sit idle but instead leveraging it to generate additional income.

• Bo Hanson: “The second ingredient... is don't squander the opportunity of actually taking that margin and actually putting it to work so you can see the benefits of what margin creates.” [13:28]

C. Time: Harnessing the Power of Compounding

Time is the third and perhaps the most powerful tool in wealth creation. Starting early allows the benefits of compound interest to accumulate, significantly enhancing your investment growth over the years.

• Bo Hanson: “Everybody, if you're young... you have something that older people just don't have. It's that legacy of time.” [20:55]

• Guest Speaker: “It is, in fact, the eighth wonder of the world, compounding interest.” [25:26]

IV. The Importance of Early Saving and Time

The hosts highlight the exponential benefits of starting to save and invest at a young age. For example, a 20-year-old saving $95 monthly can potentially become a millionaire by retirement, whereas delaying to 30 requires saving $350 monthly to reach the same goal.

• Bo Hanson: “For a 20 year old, $1 has the potential, if you put that money to work to be 88 times over in retirement.” [06:34]

V. Savings Rate vs. Rate of Return

A compelling case study contrasts two hypothetical savers: Sal the Savant and Manny the Mutant. Sal saves 10% with a 25% return, while Manny saves 25% with a 10% return. The analysis reveals that higher savings rates can be more impactful than higher returns over time.

• Guest Speaker: “Sal would have to make 25% every single year for a decade to make up for what Manny was able to do just by increasing his savings rate.” [18:06]

This underscores the message that controlling your savings rate can have a more substantial effect on wealth accumulation than chasing high investment returns.

VI. Understanding Compounding Interest

Compounding interest is described as a "magical" force that allows your investments to grow exponentially. As interest accumulates, not only does your initial investment earn returns, but those returns also generate their own earnings.

• Guest Speaker: “If you think about a hundred dollars and you make 10% on a hundred dollars, you now have $110... this compounds over and over and over.” [25:26]

VII. The Role of Consistency

Consistency in saving and investing is vital. The hosts caution against being swayed by market fluctuations or temporary setbacks, emphasizing the importance of sticking to your financial plan to harness the full power of compounding.

• Guest Speaker: “There's not, there's, it's not a straight line. There's a lot of ups and downs. But do you realize that if you continue saving at that same clip, $583 a month, it would only take you about 5.4 years to make the next hundred thousand...” [27:30]

VIII. Practical Tools and Resources

Brian and Bo introduce practical tools available on their website, moneyguy.com/resources, such as the Wealth Multiplier tool. These resources are designed to help listeners visualize and plan their financial growth effectively.

• Bo Hanson: “If you are missing out, if you don't go to moneyguy.com/resources, just go get the free stuff.” [31:12]

IX. Conclusion and Final Insights

In wrapping up, the hosts reiterate that the trio of Discipline, Money, and Time forms a robust framework for wealth creation. They encourage listeners to take actionable steps today—no matter how small—to set themselves on a path toward financial freedom.

• Bo Hanson: “Every dollar has potential. Become 88. When you're 30 it's 23. That's still an amazing thing but drops a lot.” [24:40]

• Guest Speaker: “The goal is to save 25%, you may not be able to do that today, but what you can do is... improve 1% and then can I prove 1 more percent...” [20:30]

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Key Takeaways:

1. Discipline is Fundamental: Consistently living below your means creates the financial margin necessary for investment.
2. Invest Your Savings: Putting your saved money to work is crucial for generating additional income.
3. Time Amplifies Wealth: Starting early allows compound interest to exponentially grow your investments.
4. Higher Savings Rate Trumps High Returns: Prioritizing how much you save can be more effective than seeking higher investment returns.
5. Consistency Matters: Staying the course despite market volatility ensures long-term financial growth.

Recommended Actions:

• Assess Your Savings Rate: Determine what percentage of your income you are currently saving and identify areas to increase it.
• Start Investing Early: Even small amounts can grow significantly over time thanks to compound interest.
• Utilize Available Tools: Visit moneyguy.com/resources to access calculators and tools that can aid in your financial planning.
• Be Consistent: Maintain regular contributions to your savings and investment accounts, regardless of market conditions.

By embracing these three tools—Discipline, Money, and Time—listeners can embark on a structured and effective journey toward building lasting wealth.

Transcript

[Brian Preston]

Going on vacation. We're here for it. With kids who turn a back seat into a courtroom drama over whose tablet is louder, whose charger is faster, and why. Watching the same cartoon for the hundredth time as a human.

[Bo Hanson]

Right?

[Brian Preston]

Yep. We totally have vehicles to handle that. Because whether it's a road trip or a business trip where your flight's delayed, Your phone's at 2%, and your dinner, whatever's open. Yeah, here for that too. Enterprise. We're here for it.

[Guest Speaker]

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[Bo Hanson]

Hey, Meta, how bougie is Jade Garden? It's a trendy spot. What's a color that pairs with this top? Consider dark, earthy colors, charcoal or black. What are some good first date topics? Consider discussing favorite travel destinations or your favorite books.

[Guest Speaker]

Get suggestions, inspiration and answers from your glasses. Ray Ban Meta Glasses Iconic style meets Meta AI.

[Bo Hanson]

Ever been curious on what tools? Specifically three tools they'll help you build wealth.

[Guest Speaker]

Brent, I am so excited to talk about this because we both know that wealth building is incredibly simple. But that doesn't necessarily mean that it's easy. But I think a lot of people are fascinated to recognize it's not all that complicated of a formula.

[Bo Hanson]

Yeah, I mean, I don't care which path you are. I don't care if you're just starting out or if you've had some accomplishment with your financial assets or even maybe if you're a multiple seven figure person, you're going to recognize that we are giving you the keys to the kingdom by talking about these three tools. These three key ingredients go into everybody's journey on building wealth.

[Guest Speaker]

And I think a lot of people have a misconception around this. Like, okay, well, in order to be wealthy, I got to got to do this or this has to be true. And a lot of people think, okay, if I'm going to be wealthy, I must just have to be in a big income. I must, I need to have a huge shovel and that's the only way that I'm going to be wealthy. But that, in fact, is not the case. I mean, look at this stat. Nearly 80% of NFL players, these are professional athletes, face significant financial strain in the first three years once they get out of the league. So right there it should tell you, okay, having a huge income, having a huge windfall, having a huge payday may not be the thing that necessarily leads to wealth.

[Bo Hanson]

Isn't that funny how, what a false mirage that somebody thinks having the huge income, that's rich, that's not wealth. Wealth and rich are completely different because just because you have a big income, a big shovel, if it doesn't actually turn into assets on the net worth statement, you have missed out. And that's why we have talked about this for years. And we're just going to go ahead and open up the playbook of all the things that are super successful. We want to give you the three ingredients to wealth building. Number one, this is discipline. The first thing you have to do is live on less than you make.

[Guest Speaker]

That's exactly right.

[Bo Hanson]

Use that discipline of living on less than you make to create the margin that actually yields the money. And guess what? You actually put the money to work. And then that's where the third and most powerful ingredient actually comes into play. If you give that money enough time, it will work harder than you can with your back, your brain, and even your hands, because it is truly the eighth wonder of the world.

[Guest Speaker]

So let's dive into each one of these ingredients and what you need to know about them. The first one, Brian, is discipline. You already said this. This is the idea of living on less than you make. And in our opinion, how much discipline you have is probably the most pure indicator of future wealth or future success. Because at the end of the day, of all the ingredients, the. This is the one that you by far have the absolute most control over.

[Bo Hanson]

Yeah. And this is the one we got to make the good habits as easy as possible. Make the hard habit, the hard, bad things in your life that much harder. And that's why I think it is the clearest indicator, will you be wealthy if you can conquer and have discipline?

[Guest Speaker]

And yet, even though it's so important and so powerful, the majority of Americans out there fail at this. We know that right now, 59% of Americans, according to Bankrate.com cannot come up with with $1,000 for an emergency. That means that 6 out of 10Americans are failing on putting aside a little bit of today for tomorrow. They are failing on having that little bit of discipline to keep their financial life out of the ditch.

[Bo Hanson]

I think back even before I started doing the podcast in 2006, I used to enjoy going to high schools and trying to talk about good personal finance habits. And if you asked me and what I actually talked about, I actually created a whole presentation for high school kids on deferred gratification because I really this. That's really another way of saying discipline. But if you can teach somebody, it really is the leg day of personal finance. If you can teach somebody to give a Little bit of today, meaning you actually instead of living in the moment and you resist the temptation of going for the present bias of rewarding myself right now and just do little things for your great big beautiful Mara, it will actually change your life.

[Guest Speaker]

And the beautiful thing about deferred gratification is it does not have to be huge decisions, does not have to be monumental things that you're doing. If you can just make small decisions, given enough time, those small decisions can have a huge impact. So one of the questions we want you to ask is when you think about your financial life and how you're going to change what you're doing now or how you're ultimately going to end up is in how you're ultimately going to end up where you want to be is what small decision, what, what little thing can I change today? Well, what's the small impact I can have on the decision making process I'm doing today that's going to lead to that great big beautiful tomorrow? And it doesn't have to be a big one, it can be a small one done consistently through time.

[Bo Hanson]

Well, I want my young people to lean into this a little bit more. And the fact that a lot of you guys are feeling like the system's rigged against you and I get you, I get it, I mean there's been a, we've post pandemic post this inflation we've had. There are a lot of things out there that you're probably like, man, this system is just rigged against me. But I want you to know the good news of the fact that you guys have something that older people just don't have. It's that legacy of time that allows you to Every dollar of opportunity that you can invest is worth so much more than what all your peers have. And that's why we talk about for a 20 year old, $1 has the potential, if you put that money to work to be 88 times over in retirement. Nobody in their 30s can do that. Nobody in their 40s can do that. That is for you in your 20s, maximize that incredible opportunity.

[Guest Speaker]

And the earlier you can figure this out, the easier the path is going to be. You get to choose how difficult you want it to be. Do you want it to be slightly difficult today or do you want it to be really, really difficult tomorrow? Because a lot of people say all the time, oh guys, what doesn't make sense to save because it's going to be so hard to get there. And I don't need to do you talk guys talk about a million but why would I even care about a million dollars? Because I need 55 million, 10 million. Well, you can't get to 2 million, 3 million, 4 million, unless you get to that very first million. And when you think about getting to that very first million, do you realize that for a 20 year old, if you want to get a million dollars in your investment accounts by the time that you get to age 65, you've only got to save about $95 a month. Less than $100 a month for a 20 year old can make you a millionaire by the time that you retire. But if you do not defer gratification today, if you do not exercise discipline today and you wait until you are 30, instead of being able to save $95 a month, you have to work four times harder, saving almost $350 a month to get to that same million dollars by the time you reach age 65.

[Bo Hanson]

Well, this is the thing. I want to go a little deeper on what you're talking about because I think there's so many voices out there telling people, look, live your best life now because you don't worry about your 20s, you'll be able to save money in your 30s or 40s when you have big pay raises, big promotions. But Bo, you just said something really powerful you think about. Because I got excited when I was in high school when I had that economics teacher with a one off statement. He said $100 a month will turn you into a millionaire. And it really did turn. Something that was so elusive in my mind at that time seemed impossible to where it was right here in front of me for 100 hundred dollars a month. But look at what you just shared. Four times harder for a 30 year old. Imagine you're surprised if you're somebody who does live your best life in your 20s and 30s when you find out to become a millionaire by the time you're 40s, instead of saving $95 a month like the 20 year old, you have to save $1,000 a month, that is 10 times harder. So it's back to the point. If you can be disciplined, you get to choose your hard. If it's much easier to take just a moment, just a little tiny portion of today to build that great big beautiful tomorrow. But if you procrastinate and wait, you can still do it. It's just going to require a lot more of you and a lot more of your hard sacrifice and discipline.

[Guest Speaker]

So what is financial discipline? Well, it's simply a lived behavior that then turns into a habit Again, discipline is a lived behavior done over enough time that then it becomes a habit. This is what financial discipline is not. We've already alluded to this. It's not an income. We know that 60% of people making over $100,000 a year claim that they live paycheck to paycheck. 60,000. I mean, 60% of people are having to make sure the next paycheck comes in so that they can make ends meet. So financial discipline is not an income.

[Bo Hanson]

Well, it's also. Think about those professional athletes. We just said within five years, 80% of them are out of money.

[Guest Speaker]

Yep.

[Bo Hanson]

Second thing, it's not. It's not the huge trust fund. When I was younger, I thought that everybody was wealthy, came with a silver spoon, that they got this because of what was given to them. Imagine my surprise when I read Millionaire Next Door. And then I think about everyday millionaires came after that. And then I started thinking about all of our millionaire surveys we've been doing with our clients. And the data is consistent. Approximately 80% of millionaires are actually first generation, meaning that somehow they have figured out they don't come from money, but they use the power of discipline to take that little bit today to build something pretty spectacular.

[Guest Speaker]

And look, discipline is also not luck. It's not just winning the lottery. We know that 33%, one out of three jackpot lottery winners end up going bankrupt. So it's not an income. It's not huge trust sign or a background. It's not luck. So then what is financial discipline? How do you define it? What are the things you know? Well, we've already said it's living on less than you make. Well, how do you do that? How do you actually live on less than you make? Brian, this is a concept you've talked about forever. If you can figure out how to implement forced scarcity into your life, it will naturally create that behavior that can turn into a lot.

[Bo Hanson]

When we talk about forced scarcity, really what we're saying is I want you to have a plan for every dollar in your army of dollar bills. That actually automates the process, meaning you're automatically putting the money into work for you. Because once again, it makes the good habits that much easier because the behavior is just happening. It also, when you're doing for scarcity, since the money already has a plan, it already has an obligation of where it's going. It makes the bad habits of just letting money drift off that much harder.

[Guest Speaker]

And then as you're doing that, as you're implementing this for Scarcity. The thing you have to be aware of is not. Not to let your lifestyle begin to creep. Just because you have that behavior in your 20s does not mean that it needs to adjust and improve as you move into your mid-20s, into your 30s, so on and so forth. So you want to make sure that you're not running up high interest debt, that you're not living off of credit cards, that when you spend money, you're actually spending with intention. There's nothing wrong with your lifestyle improving. So long as the discipline that you're exercising in your financial life improves along with your lifestyle, you do not want them to begin to diverge from one another, or else you're never going to be able to live the future life that you want to live.

[Bo Hanson]

Now, let me tell you, I want to caution all my financial mutants. You're going to get excited about watching your money start to build. And you do have to make sure you avoid. You do have to cover your risk. Because a lot of you guys, once you see how powerful your dollars can become, you'll want to throw the whole kitchen sink. But don't skip out on building that emergency fund, making sure you understand, like term life insurance and other things, because we don't want you making desperate decisions just because you went so far out on the risk spectrum trying to make your army of dollar bills work that much harder.

[Guest Speaker]

All right, so the first ingredient to wealth creation is discipline. And what that discipline does is it then begins to create the second ingredient necessary, which is money. Now, I know a lot of you are probably thinking, well, duh, if I want to be wealthy, of course I need money. But that's not exactly what we mean when we talk about money as this ingredient.

[Bo Hanson]

This is one I've thought a lot about is because. Because I'm just going to be honest. And there's a reason we said discipline was the leg day of personal finance. It's hard. You actually have to put in the work to be disciplined, to spend less. But if you do the work of discipline, I don't want you to squander this second ingredient, which is money. Because I grew up in a household where my parents were great with discipline, but they never put their money to work. And that's really what the second ingredient, if you want to encapsulate what does this mean, is don't squander the opportunity of actually taking that margin and actually putting it to work so you can see the benefits of what margin creates.

[Guest Speaker]

Because what you want to happen is you actually want your money. To get to the place where it works even harder than you do. And as you begin to build this margin, a few things happen in your financial life. Number one, you have flexibility. As you begin to have margin, you now have freedom to choose how you adjust course and choose how, how you improve your lifestyle and choose how you make the financial decisions that you make. You no longer have to make decisions out of necessity, you get to make decisions out of choice.

[Bo Hanson]

You also get to security. You don't have to make the desperate decisions, the more money you have. And look, here's the cool thing about being disciplined, but then also putting your money to work. That second ingredient is that even if your goals change, you still get access. That's why that flexibility. I came out of school thinking at 22 years of age, I don't like working that much or I just can't imagine my 50 year old self loving to work. So I'm going to save as much as I can so I can do what I want, when I want and how I want. Imagine my surprise when I realize I absolutely love what I do for my day job. But now I get to make flexibility. I get to make security decisions off of what I want to do because I actually made those hard decisions when I was earlier. This makes the hard decisions get easier for you versus you getting squeezed. If you defer and procrastinate, you'll have to make the harder decisions and there'll be less and less options for you to make those decisions.

[Guest Speaker]

And then as you are continuing to create that margin, what it allows you to do is it allows you to begin to accelerate your financial journey. It may seem like that margin you're creating early on isn't doing a whole lot, but as you continue to do that over and over and over again, it allows you to move more quickly and more quickly and more quickly towards your ultimate financial goal. So when you think about, all right, I understand what margin can do, it can create flexibility, it can create security, and it can accelerate my financial journey. How do I do it? How do I create margin? How do I impact that? Well, when it comes to financial decision making, we really only have two options for affecting and impacting our margin.

[Bo Hanson]

Yeah, I always think this is like a Captain Obvious thing, but it really is important for you to kind of zoom out and think about money in general terms because sometimes we overcomplicate things with money. In reality though, when you are trying to figure out how can I create more money to put to work, you really only have two options. You can either make more money, meaning we increase the income, you make, the shovel you have at your disposal, or you can get extra discipline and actually pull the lever down of spending less money. That is, if you can look at your life and go, can I make more? Can I spend less? This is how simple it is if you really want to zoom out and figure out what components you control when you're creating that margin of money.

[Guest Speaker]

And so as you're thinking about building margin and how you're approaching this financial decision, you need to recognize that early on in your journey, no matter where you're starting, your ability to impact margin is greater than outside forces. We say this all the time. That early on in your journey, when it comes to impacting your wealth, your savings rate is exponentially more important than your rate of return. How much you're choosing to defer, how much margin you're creating actually matters more than what your money is doing. You are actually able to work harder than your money early on. And if you do that well, you give your money the ability to work harder than you later on in your journey.

[Bo Hanson]

We, I think people, they see that we, we, our goals out there. We have, you know, how much you should be saving. If you go to moneyguy.com resources, we call it what 25% will do for you. But really it will talk about how much you should be saving by age. And I'm always amazed when people see in their 20s that we're saying you, we'd love for you to aspire to save and invest 20, 25%, we get it. I know that's hard, but the reason we put such a stretch goal for you is because when you understand what every dollar in your army of dollars could become, you will be on fire to figure out how you make this happen. And we created a great case study because a lot of you guys, I think when you're younger, you, you spin your wheels and focus your effort on the wrong thing. You're thinking, if I can just go find the greatest and latest investment that's popping off right now, that's what I need to do. And we want you to know, no, don't waste the calories, don't waste the effort. What would be better is you to think about those two levers we just covered. How do I make more money? How do I spend less money? Because it doesn't have to be hard. I just need to save more. Because those good decisions will be rewarded. So, Bo, show them the case study on why we can say with such conviction that savings rate is greater than your rate of return.

[Guest Speaker]

So let's think about two savers. Let's think about Sal the savant and Manny the Mutant. Let's assume that both of them begin their saving and investing journey earning $50,000 a year as their salary. And let's assume that every year their wages increase by 3% so they keep up with inflation. Let's assume that south of Savant has a 10% savings rate, but is a savant and it can actually earn a 25% annual rate of return every single year. As a reminder, if we think about what the s and P500, the 500 largest companies in the United States has done on average over the last 60, 70, 80 years, it's somewhere between 9 to 11%. But let's say that Sal can nearly triple that at 24.5percent rate of return. On the flip side, you have Manny. Manny's going to save 25% and man is going to make the average rate of return of 10%. So Sal is going to save 10%, make 25%. Manny's going to save 25%, make 10%. Do you realize that on the course of their financial trajectory, Sal does not pass manny for over 10 years. Years. Let me say that again. At that differential between savings rates, Sal would have to make 25% every single year for a decade to make up for what Manny was able to do just by increasing his savings rate. What Manny was doing saving was way more powerful than what Sal was doing in trying to accommodate his rate of return.

[Bo Hanson]

Well, and let's talk about the elephant in the room. Room. Nobody is going to get 25% every year for 10 years. If they were out there, we'd all be loaded up on it. But more than likely, whenever you do see these one off stories, they turn off to be the Bernie Madoffs. They turn off to be the crooks that were basically promising it was too good to be true and people fell into the trap. And that's why we want to focus on the fact of what can you control? It's of course, that discipline. It's creating the margin, it's the money. And if you can get your savings rate of 20 to 25%, as we just told you, which is aspirational, but it's so good if you do this long enough. The compounding on this is just so incredible and it gets us so excited that I just want you to know, focus on what you can control so you can see how powerful this is in your future.

[Guest Speaker]

And remember, the goal Is to save 25%, you may not be able to do that today, but what you can do is, okay, what can I save? How can I improve? Can I improve 1% and then can I prove 1 more percent and then can I slowly build towards that 25%? Because remember, the earlier you start, the more time you have on your side, the more powerful it can be. And that's exactly what the third ingredient of wealth creation is. It's time.

[Bo Hanson]

Yeah, everybody, if you're young, here's what I love. We just did a show recently and I found out that 87% of our audience is under 50 years of age. Majority of you in your 20s. Hot dog. I mean, because you are a billionaire of time. For all the jealousy you might have for your bosses or co workers who are a little bit older and have a little bit more money, maybe make a little bit more money, they are just as jealous of you with that opportunity time. In a lot of cases, that time is going to be more valuable than even what they've got in their Roth ira because you have the potential for it to grow exponentially upon itself.

[Guest Speaker]

Remember at the very beginning we said that for a 20 year old, $1 has the ability to turn into $88. That's why we have all the koozies, all the swag that talks about that. Because we understand that when you can apply discipline and margin through time, it can multiply your wealth. We even have a tool called the wealth multiplier. You can go to moneyguy.com resources and you can play with this. You can see, okay, if I'm 25 years old, what does every dollar I save turn into? By the time I get to 65, I'm 35 years old. How much can every dollar I save turn into? And what you're going to recognize is that the earlier you figure this out, the earlier you recognize the power of your dollars, the larger your wealth multiplier can be. And it's because you are now taking advantage of that powerful ingredient that is time.

[Bo Hanson]

Well, but I want to be. And I think it's appropriate for me, since I'm in my 50s, to throw the cold water. When I started my business, stamps.com made my life easier and made me feel like we had leveled up to the next tier of success. Fast forward. We're much bigger, with much more complexity. And stamps.com is still our all in one mailing and shipping solution.

[Guest Speaker]

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[Bo Hanson]

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[Guest Speaker]

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[Bo Hanson]

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[Guest Speaker]

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[Bo Hanson]

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[Guest Speaker]

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[Bo Hanson]

Every dollar has potential. Become 88. When you're 30 it's 23. That's still an amazing thing but drops a lot. See the drop off? I mean it was it basically you, you cut it in a quarter and then fast Forward to the 40 year old because you put it off. And this goes back to my point when we were starting the show. Now it has a wealth multiplier of around 7. Still incredible but such a tenfold difference from the 20 year old. And then you get to my age when you're 50 years of age and you have to round it up to even get to three, I mean, guys, don't squander. The opportunity is you have the potential for every dollar in your army to be so powerful for you that you'll think about spending differently. You'll think about how you're saving, you'll think about the investing time. Is that powerful?

[Guest Speaker]

And so how does this happen? What's going on in the background to cause this? Well, it is, in fact, the eighth wonder of the world, compounding interest. And this is the way that it works. If you think about a hundred dollars and you make 10% on a hundred dollars, you now have $110. But then if that $110, that $100 you started with, plus the $10 in gains, grows at 10%, now you have $121. So at the first year, you had $10 in gains. And then not only did the money that you invested make money, but the money that it made also made money. So now you have $11 in gains. And this compounds over and over and over and over. And the more time you have for this to happen, the more powerful it can be and the faster it begins to work.

[Bo Hanson]

Well. And that leads us to the next point. Is that. And look, I know I mispronounce everything in the world. That's the beauty of being Southern, because I think people kind of expect it. But I talk about the bowling point of where your money actually starts building. And my biggest regret or fear for my young people who are watching this content is you're gonna get excited from watching this show, but then you're gonna have a downturn in the market or something is gonna happen in the first 10 years that you go, I hear what those guys are saying, but you got distracted by something. It happens to everybody. So, Bo, I feel like we need to. When I talk about the bowling point and I'm trying to get people excited, we always say that first hundred thousand dollars is super valuable because you got to get those small decisions start growing upon themselves. But we want to create an illustration to show you when we talk about compounding how this magical thing of it building upon itself, you got to stay consistent. You got to stick with it no matter what the market does, no matter what happens in your life. Promise me you're not going to give up. And I think this next illustration, maybe you print it out, take a freeze frame, take a screenshot, and then print out this next illustration so you don't lose focus on what happens. After year 10.

[Guest Speaker]

So think about this. Let's assume that you're someone who's going to just max out a Roth IRA every year. You're going to save $583 a month, every month for every year. And let's say that on average you can earn 8% no matter what age you're starting at. Let's assume that that's what you're, what you're going to do. If you began doing that, it's going to take you about nine and a half years to get to $100,000 again. $583 a month, every single month. It's going to take you nine and a half years to get to that first hundred thousand.

[Bo Hanson]

And there's a potential for a lot of quit in there.

[Guest Speaker]

That's right.

[Bo Hanson]

It scares me to death. I don't want you to quit.

[Guest Speaker]

There's not, there's, it's not a straight line. There's a lot of ups and downs. But do you realize that if you continue saving at that same clip, $583 a month, it would only take you about 5.4 years to make the next hundred thousand to go from 100 to 200. After that point, it would only take about 3.7 years to go from 200,000 to 300,000. It will only take about 2.8 years to go from 300,000 to 400,000 and only take about 2.3 years to go from 400,000 to 500,000. So what has happened is the race to 100,000 has gotten shorter and shorter and shorter and shorter, where you now have gotten from 0 to $500,000 in 23.8 years. But that's only half the story.

[Bo Hanson]

Well, think about that. I mean, fast forward. Look, you get to be my age, this seems common sense. If you go hang out in my neighborhood and you talk to people my age, anybody and everybody who started saving young, they look at each other and we're talking about just, hey, what's coming up? What's the next endeavor? What's the thing right around the corner? And I remember some of my buddies, we've been like, can you believe what's happened? It's like you're more money. Is this critical mass? Because yes, it was a 20 year journey to get to whatever that critical mass point is. But once you get the stone rolling down the hill and it catches momentum, here's the magical thing, is that the next to go from 500,000 to a million. Now remember, it took us 20 close to 24 years to get to that first $500,000. We somehow make it to millionaire status. Two years less mean we do it in 7.8 years than it took us to raise our first hundred thousand dollars.

[Guest Speaker]

Wild.

[Bo Hanson]

For all my trolls who say a million dollars, nothing anymore. That 1996 Millionaire Next Door, what are you doing? Give it. Giving us that stat. You know what's even faster than 7.8 years to go 5.500,000 to a million? It's gonna take you less than 7 years to go from a million to 2 million. You're gonna go even faster. 2 million to 3 million. This thing is catching so much momentum that it's, it's just, this is the part that gets me excited. But I, like I said, a lot of quit. A lot of people who look at the journey to building wealth will look at this stat and say, wait a minute, you mean it's going to take me 10 years to get to my first hundred thousand dollars? No, it doesn't have to. Because guess what? Every one of these assumptions we did was very conservative. You're going to. Once you get addicted to building wealth and you understand the power of every dollar, you're not just going to max out your Roth ira, you're going to start increasing your contributions. Every year you get a pay raise. Here's the other thing. We used 8%. You know what we could have done to blow this projection up even more? We could have put 10%. Sure Bo just told you the S&P 500 historically somewhere between 9 to 11%. We could have put 10 to 11% in here. It would have blown this number and made it that much faster. But we wanted to on purpose put a governor on this so you could see the powerful, the powerful nature of your behavioral decisions, that every incremental decision you make is what actually is going to flip the script on what creates your success.

[Guest Speaker]

And here's the beautiful part. Do you recognize that if you can do this over this 30 plus year period, by the end of your journey, of that million dollars that you have created, 82% of it is growth. $820,000 of the million is your portfolio growing. So that first hundred thousand, you had to work really hard. A lot of that 100,000 was your $583 a month going in. But if you let your money begin working for you, it can actually work exponentially harder than you can so that by the end of the journey, 80 to 90% of it is money you did not have to save. Discipline that you did not have to exercise because you gave it enough time to begin working for you.

[Bo Hanson]

This is why I love what we get to do. I, I, I don't think when I started doing this show in 2006, I knew what a juggernaut of opportunity we were going to create for the public. And that's why, guys, if you are missing out, if you don't go to moneyguy.com resources, just go get the free stuff. And because it really is this abundant cycle of what started as just this passion project to educate the masses, I felt guilty that I had a minimum as a fee only fiduciary advisor. So I was like, you know what? I could open up a classroom. I can start loading it up. I didn't realize that this was going to be the greatest marketing idea in the world because I thought I was just like, just get the education, just make the wisdom as free as possible. And guys, that's what the abundance cycle is. Get in there, get it. Because this is going to be easier than you think. You just have to make small decisions today and it will start stacking and you'll start seeing success. And then one day you're going to wake up and you're going to be well on your way to crossing into seven figure status and you're gonna start having complexity, you're gonna start having decisions. You're right. There has to be a better way. And I've only done this once. Is there anybody out there sharing how you actually do money in the best possible way? You remember who planted the seeds, who planted the portion of what compounding growth is what a dollar has the potential to become. And that's when you remember, you know what? It was those guys, it was Brian and Bo. They are the ones that caught fire and helped me figure this out. I bet they're going to know how to handle deferred comp. They're going to know how to do RSUs. They're going to know how to do Roth conversions. They're going to know how to avoid required minimum distributions. They're going to know how to do Medicare planning for IRMAA and all the other discussions that come in. We've got this figured out for you. We'll leave the porch light on. You just consider giving us that opportunity. I'm your host, Brian Preston. Mr. Bo Hanson. Moneyguy team out.

[Guest Speaker]

The Moneyguy show is hosted by Bryan 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.