Great! Inspiring Quotes and Lessons
2/15/20266 min read
“A penny saved is a penny earned,” is a quote my Grandma Betty used often with me and with my Cousins. On the other hand, my Grandma allowed us Grandkids to pick out a package of candy or maybe a toy from the small-town store in Kensington, Kansas that is close to the farm where I grew up. My Grandma Betty would say to the clerk who was checking us out, “You can only spoil them once.” All the Grandkids heard my Grandma, and I believe we were proud to be “spoiled” likely even more than once!
At the time, it was a lesson that I did not quite understand. However, today I believe Grandma Betty was saying that it’s o.k. to get a treat, reward yourself, take a day off…However, don’t become accustomed to getting your way all the time and you should not always bow to every want. Sometimes, you will need to make choices and sacrifices.
Recently, I have been using a simple analogy in some of my business presentations. The analogy is something like: “Sometimes to make a decision you need to cut off a hand, because on one hand it’s this, but on the other hand it’s that.” Which means sometimes you have to pick one thing over the other. In nearly every decision, you are likely making some sacrifices because you cannot do everything all the time. Therefore, be sure you are focused on the right things based on your values. I encourage you to listen to Money and Meaning – What Faith Traditions Teach Us About Personal Finance from The Art of Manliness in my Books, Podcasts, Videos, and Lessons section.
Some great quotes about choices and money:
“Are you living to work, or working to live?”
"Money doesn't buy happiness – it buys freedom." – Naval Ravikant
"A penny saved is a penny earned." – Benjamin Franklin
“Are you living to save, or saving to live?”
“It’s not what you earn, it’s what you keep.”
“However, the more you earn, the more you can keep too.”
Maybe you can be frugal and yet splurge on some things. It is important to do both, but how?
I am going to break this Lessons and Learnings into 3 parts:
Investing
Saving
Spending
This week, I will start a 3-part series on Investing, Saving, and Spending. Later, I will have a series on Earning and Debt.
Before I start into some of the answers, I will state make my own definitions:
“Investing” means you might be spending money, but it’s more like “spending money to make more money.”
Where as, “saving” means you just don’t invest much or spend money.
Spending money is more about an exchange for thing “money” for another thing.
I am not a financial advisor and this website is for your entertainment. I highly recommend doing your own research and/or consider using a financial advisor. Here are some high-level thoughts if you are early or mid-career. If you are later in life and career, maybe pass my message on to others earlier in their journey or consider my comments about catching up, it’s rarely too late to start!
Part 1 - Investing:
Don’t wait! “The little things can make a big difference”, because those small incremental gains can add up significantly over time.
#1 It’s so difficult to pick and time the purchase of the right stock, fund, property, etc. I try it and enjoy trying, but I typically lose in comparison to what a solid low-cost fund can do over time.
I particularly like these funds and often hear about them from others as good investments too. Any reputable brokerage firm can help you set-up an individual account, retirement account, and a 529. Here are a couple examples:
Charles Schwab | A modern approach to investing & retirement | Charles Schwab
Here are some common funds that many in the investment community like due to their low expense ratios and good returns over time. These are:
VTI – Vanguard Total Stock Market Index Fund ETF (Exchange-Traded Fund) that is maybe slightly more stable than VOO.
VOO – Vanguard S&P 500 ETF is a little more tech heavy and volatile. If you want to be more aggressive consider Invesco QQQM to be more aggressive in Tech than even VOO.
SCHD – Schwab US Dividend Equity for growth and stability.
SPAXX – Fidelity Money Market most stable.
Based on your tolerance for risk, you can adjust the % you prefer in each fund. Generally, the younger you are, the more aggressive you can and should be. The older you are, you likely should be more balanced between aggressive and conservative funds.
#2 Start! - invest in some mutual funds or exchange traded funds (ETF), do it early, do it often, and make it automatic into your accounts. A few examples of how this approach adds up.
According to Compound Interest Calculator | Bankrate
Save $150 per month (~$5 per day) for 18 years at 10% interest compounded quarterly = $88,510 ($32,400.00 contributed and $56,110.11 interest)
Let’s do another example that might be more like a retirement scenario:
Save $400 per month (~14 per day) for 35 years at 10% interest compounded quarterly = $1,474,587 ($168,000 contributed and $1,306,587 interest) change that to 40 years it’s a whopping $2,446,937
Compounding is an amazing thing, here is a powerful example to teach us a good lesson
Doubling a single penny ($0.01) every day for 30 days results in an astonishing total of $5,368,709.12.
The amount crosses the $1 million mark only on day 27.
If you do one have 40 years ahead?, don’t cry or get discouraged. Start! Do what you can do with what you have and if you have contributed to Social Security, it’s still o.k., but get going. Think "if it is to be, it's up to me"
I really like the Roth IRAs, even though it’s “after-tax” money, the interest earned is tax-free upon withdrawal. However, the principal (contributions) can be withdrawn in case of an emergency without incurring taxes or penalties.
I would consider taking only contributions out of the Roth IRA in an emergency.
If you have the means and income, there are some more methods like using catch-up contributions if older than 50 and/or a “mega back door” option to get into Roth IRAs.
#3 If you work at a job that offers a retirement investment match, always invest enough to get your employer’s investment match. Always get any investment match!
Often, companies offer you the opportunity to invest into a pre-tax 401K which means the contributions lower your current taxable income. However, the contributions and earnings are taxed upon withdrawal.
I like the idea of a blended approach of using a pre-tax 401K and post-tax money into a Roth IRA. No matter what, always get any possible company match to your investments.
Some might be a little less familiar with the Roth IRA. It’s an investment using after-tax money. However, the earnings can grow significantly. I especially like that most kids can earn money from a part-time job and contribute to a Roth IRA too. This is a great opportunity for kids to start early and see the power of doing a little over a long period of time can really add up in all ways, even beyond money.
#4 If you have the opportunity to contribute to a Health Savings Account, invest in a HSA.
“A Health Savings Account (HSA) provides a triple tax advantage: contributions are tax-deductible (or pre-tax via payroll), investment growth is tax-free, and withdrawals for qualified medical expenses are tax-free. This allows users to save on income taxes, avoid taxes on investment gains, and pay for healthcare, including deductibles and prescriptions, without paying taxes.”
There are some more sophisticated intricacies of when a HSA expense occurred, who paid, and then when you reimburse yourself. Best you look this up on your own, but for all I recommend contributing to an HSA.
#5 I recommend the investment into one’s children’s education using an account called a 529.
It’s the reason, I chose the $150 per month for 18 years listed above.
Save $150 per month for 18 years at 10% interest compounded quarterly = $88,510
Check out your State’s 529 plan than might offer some State tax incentives or use another 529 that might give you more investment options. You don’t have to use your State’s 529 plan.
There are also some new options for the beneficiaries, if the money is not spent on schooling or there is money left over. Again, best to have a look if you are in this scenario. Just start investing a little in the 529 and you are helping your children in many potential ways.
#6 Many recommend having 3 to 6 months of cash on hand for emergencies. This money should be in a bank or brokerage account. Use something conservative like SPAXX in your Fidelity account.
I consider most digital currency, gambling right now and I consider gambling at casinos, powerball(s), etc. money that I will never get back. In my mind, I gamble very little, infrequently, and only for fun to be in the game and it’s a game that I don’t mind if I lose. That said, I am rather competitive, so it’s best I don’t gamble!
My son and I invested a little money in a digital currency, just to learn and understand. I considered that an investment in learning and not an investment to make money. Also, maybe an investment in learning that gambling is not a good investment.
I just talked about the investing hand and in this series, I’ll talk about the saving and spending hand. I don’t think we are living to work, we work to live. However, we need to focus and make some sacrifices from time to time, so we live a rich life.
Yes, Grandma Betty, I agree, “a penny saved is a penny earned”. And with the right planning, you can spoil “them” once in a while too!