Money Guy Show: "Time and Money: It can be your best friend"

Host: Brian Preston (with Bo Hanson behind the scenes)
Date: February 18, 2008

Overview

This episode centers on the powerful theme of how time, when combined with disciplined saving and patient investing, can become your greatest ally in building wealth. Inspired by Warren Buffett’s wisdom and recent volatility in the financial markets, Brian Preston uses memorable quotes, personal anecdotes, and historical data to illustrate that the secret to financial confidence and eventual independence is long-term thinking. Emphasizing that it's never too early—or too late—to start, he also delivers a cautionary message about prioritizing the right financial tools at the correct life stage, notably in the realm of life insurance.

Key Discussion Points & Insights

1. The Power of Patience: Wisdom from Warren Buffett

[04:40–12:30]

• Brian quotes Warren Buffett extensively to reinforce the idea of long-term investing and delayed gratification as drivers of financial success.
• Key Buffett Quotes & Takeaways:
  • “If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period?... Prospective purchasers should much prefer sinking prices.” (1997 Annual Letter)
    • Brian's breakdown: Young investors should not fear downturns; price drops are opportunities, not threats.
  • “Uncertainty is the friend of the buyer of long-term values.”
    • Brian: “I noticed a trend... Warren Buffett talked about time and patience.” [04:00]
  • “The stock market is designed to transfer money from the active to the patient.”
    • Brian: “It’s optimism that is the enemy of the rational buyer.” [06:25]
  • “Someone is sitting in the shade today because someone planted a tree a long time ago.”
    • A call to action: Start early—“plant the seeds of your success now.”

2. Start Early: The Mathematics of Wealth Accumulation

[12:30–19:40]

• Compounding in Action (using 10% annual return assumption):
  • To retire a millionaire by 65, here's what you must save, monthly:
    • Starts at 1 year old: $14
    • Age 10: $35
    • Age 20: $95
    • Age 30: $263
    • Age 40: $754
    • Age 50: $2,413
• Memorable Story:
  • Brian recalls a high school economics teacher telling students, “If we could save $100 a month, we’d be rich someday” [15:55].
    • Brian: “I remember thinking, ‘Hey, $100 a month, I can do that.’”
  • Message: Small, consistent investments early on make an outsized difference due to compounding.

3. The Cost of Waiting: A Tale of Two Savers

[19:40–22:50]

• Illustrative Example:
  • Saver 1 starts at 22, saves $2,000/year for 9 years, then stops.
    • Invests: $18,000
    • Ending at 65: $579,000 (at 9% return)
  • Saver 2 starts at 31, saves $2,000/year for 35 years.
    • Invests: $70,000
    • Ending at 65: $470,000
• Lesson:
  • “The one that got out and started saving immediately, their portfolio will be worth $579,000… That is how powerful this compounding interest is.” [21:35]
  • Brian’s emphasis: Starting early is more important than saving more later.

4. Market Volatility: The Long-Term Perspective

[22:50–26:00]

• Historical Market Returns (1950–2007):
  • Annual returns fluctuate, but over five-year periods, 94% of the time, a 90/10 stock/cash portfolio is positive.
  • With more diversification (60% stocks, 30% bonds, 10% cash):
    • “For any five-year period, you would have made money 100% of the time.” [25:47]
• Behavioral Trap:
  • The Dalbar study (1984–2002):
    • Average investor made 2.57%/year (below inflation), while S&P 500 returned 12.22%.
    • Cause: “Average holding period… was less than 2 years. That’s the stuff that’s killing your performance.” [26:52]
  • Brian: “Don’t get caught up in the performance of one year, three years, or even five years…”

5. Insurance: Protecting (Not Hindering) Your Financial Progress

[26:00–29:00]

• Case Study:
  • Brian recounts someone sold an expensive whole life policy ($750/month) while struggling with debt and lacking retirement savings.
    • “They weren’t able to save anything for retirement… but instead, they were having to put $750 a month into this whole life policy.” [27:23]
    • Message: For young families or those with debt, term insurance is usually the best route until other basic financial goals are met.
  • Brian: “If you have credit card debts, you’re not saving what you need to be saving for retirement, that 15-20%, and somebody comes in… and pushes a permanent life insurance policy on you, get up and walk out of the room because they’re not your friend.” [28:07]
• Clarification:
  • Permanent life insurance has its place (estate planning, etc.), but only after basic goals are achieved.

Notable Quotes & Memorable Moments

| Timestamp | Speaker | Quote | |-----------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | 06:40 | Brian | “You don’t lose money in investing until you really pull out and sell those investments.” | | 08:13 | Warren Buffett (via Brian) | “The stock market is designed to transfer money from the active to the patient.” | | 14:59 | Brian | “If you’re a young person or if you have children, grandchildren, get them saving as fast and as soon as possible because it’s just going to make success that much easier.” | | 21:35 | Brian | “…the one that got out and started saving immediately, their portfolio will be worth $579,000… That is how powerful this compounding interest is.” | | 26:52 | Brian | “The average investor… only made 2.57%. …We’re trading way too often. The average holding period… was less than two years. That’s the stuff that’s killing your performance.” | | 28:07 | Brian | “…if somebody comes in… and pushes a permanent life insurance policy on you, get up and walk out of the room because they’re not your friend.” |

Timestamps for Important Segments

• [00:45–04:30] Introduction and context for episode; inspiration from Warren Buffett and focus on young investors
• [04:30–12:30] Warren Buffett quotes on patience, long-term value investing
• [12:30–19:40] Monthly savings needed to become a millionaire at various starting ages; personal story from Brian’s youth
• [19:40–22:50] Saver A vs. Saver B: impact of starting earlier vs. saving longer but later
• [22:50–26:00] Historical investment returns and the importance of diversification and patience
• [26:00–29:00] The right use of insurance at different life stages; caution against overselling whole life insurance
• [29:00–End] Final remarks, resources, and episode outro

Key Takeaways

• Time is your best asset: Investing early is simpler and far more powerful than “catching up” later.
• Ignore short-term noise: Market dips are opportunities for long-term investors, not threats.
• Be patient and consistent: Frequent trading and emotional decisions destroy returns.
• Get appropriate protection: Insure adequately—but don’t let high-premium policies crush your basic financial goals.
• Financial confidence comes from simple, disciplined practices—not complexity.

Closing Thoughts

Brian wraps the episode by encouraging listeners to use these disciplined, long-term strategies to stop worrying about money and start living a more fulfilled life, reminding everyone: “Bring confidence to your wealth building with simplified strategies—and let your assets do the heavy lifting.”