A hearty welcome to Grandma’s Wealth Wisdom with your hospitable hosts, Brandon and Amanda Neely. This is the only podcast for strategies to grow your wealth simply and sustainably like grandma used to. Without further ado here are your hosts.
Amanda: Hi. I'm Amanda. Welcome to Grandma's Wealth Wisdom, where we work with you to build wealth that grandma would be proud of.
Brandon: Hey. I'm Brandon. Today's episode is Episode 37 - Trying to Get Ahead. My apologies in advance if today's episode comes across a little bit like a rant because it pretty much is a rant. We're going to be talking about one of my biggest pet peeves and the reason Amanda drives it more than me, actually, because it's a big pet peeve of mine. I think it's my dad's as well and it's hereditary. [0:01:02.1]
It's drivers who swerve around to try to get ahead of everybody else. You know those ones, those ones with the red cars, the fast ones that try and get ahead and you're just watching them swerve in front of another person with an inch in front of them. You know what I'm talking about. It happens to also be one of grandma's pet peeves too. Hers is a bit more of a safety concern, probably because of that inch thing. If you're listening in the car right now, grandma might ask or remind us to keep your hands on the wheel between 10 and 2 and eyes on the road and drive nice and obey all the traffic laws, except maybe you can go 9 miles per hour over the speed limit a little bit because you know those crazy drivers that go 120 miles over the speed limit.
Amanda: Just be careful.
Brandon: Be careful. You'll see them now that we talked about it in the beginning of this episode. [0:01:59.4]
Amanda: You probably already see them and Brandon's side of this is one that I hear all the time when we're traveling around the city and people like create lanes where there isn't one. Brandon complains to me about it every single time. We're running around the interstate and cars are swerving in and out of lanes, really close to other cars. I just say what I heard my dad say all the time growing up. He would always say, "Go on, bird brain. We'll walk." You know, kind of the person that's going fast, we'll stay, you know, slow, "Go on, bird brain. We'll walk." I just kind of brushed it off. Brandon gets frustrated and he can go on and on about it and on and on.
Brandon: I mean it's frustrating to me that people try to get ahead of everyone else, but end up slowing everyone down. We saw this when we were in Texas. These types of drivers cause others to have to brake and slow down and they slow down everyone behind them. Typically, the driver trying to get ahead doesn’t get very far ahead anyway.
Amanda: Yeah. So we promise there are financial lessons in all of this. We're going to get there. There has been some very important research done on if changing lanes in particular ….
Brandon: It's very important. [0:03:08.2]
Amanda: Yeah. You'll get the joke there in a second. Actually, so if changing lanes, in particular, actually helps you get to your location faster or your destination. We're going to start there and we promise we're going to get to the Grandma's Wealth Wisdom behind this analogy. So Brandon, what was this important research that was done?
Brandon: It was on an old episode of Myth Busters, the TV show. We saw this a long time ago, but it was something that stuck with us, of course, because we're talking about it in a podcast. Now, we apologize if we get some of the details wrong. We're going off of memory and if you want to, you know, you can fact check us by going to Myth Busters and researching it. What they did is they had actual drivers drive the same interstate route. Some drivers stayed in the same lanes and others got to change lanes whenever they wanted to try to get to their destination faster. [0:04:07.0]
Amanda: If we remember the episode right, the Myth Busters found that the ones who changed lanes, they did get to the destination faster but just slightly faster than the ones who stayed in the same lane. It might have been like a few minutes faster.
Brandon: Or seconds.
Amanda: No. I think it was a few minutes, but they were going a long desti… a long journey.
Brandon: But there was even a more important finding. The drivers who switched lanes underwent lots more stress than the ones who stayed in the same lane.
Amanda: Yeah. This is kind of an unexpected result that they found. Because they were doing this test multiple times on multiple routes, some drivers got to experience both parameters of the test. Some, they would stay in the same lane on one trial and then they'd try to switch lanes on the next trial. They got to experience both, the same driver. When they were told to switch lanes and try to get ahead, they reported that they had increased heart rate and anxiety, that when they got to their destination, they were a lot more stressed out. [0:05:10.8]
Brandon: So the Myth Busters episode definitely makes me think differently about driving. Maybe that's another reason Amanda drives after I watched it. Is it more important to get to my destination a few minutes faster or to keep calm and composed, which might even help me live longer?
Amanda: Not to mention the importance of asking a question grandma might ask - is it more important to get there a few minutes early or to get there in one piece? How many times have we heard a grandma type figure ask us that question or kind of say that kind of thing, "Drive safe now. You want to get there in one piece rather than quickly." It's commonly known - reckless and hurried driving causes accidents. Even if you don’t cause an accident, it could actually get you pulled over by the police, and that could slow you down from getting to where you want to go. Drive safe. It's more important to get there in one piece than to get there just a few minutes earlier. [0:06:09.6]
Brandon: So those are good points. Now that we have explored this pet peeve of mine, let's get to how this applies to our money because it actually does apply to our money. What does trying to get ahead financially look like and how do people try to swerve in and out of financial traffic to possibly get more money, possibly get more money?
Amanda: Yeah. To keep this simple, we're going to pretend that the person trying to get ahead at all costs is the hare and the person who stays in their lane is - you guessed it - the turtle or the tortoise. We're going to say the turtle because it's a little easier to pronounce. Let's pretend that we do not know who wins the race yet. It could be the turtle. It could be the hare. Remember this is a financial race, not a race race. So it's a little different than the child's fable. Pretend you don’t know who wins yet. [0:07:03.4]
Brandon: Sounds good. So the hare's financial strategy might look like this: So he spends Sunday reading the paper and deciding what stocks or exchange traded funds to buy and what to sell, depending on the news of the week and how things are looking for reputable companies. Like he's going to decide on Sunday. On Monday, the hare begins his trading activity for the week. He's always worried about trying to get ahead of the information that other people have and he wants to make better decisions than anyone else.
Amanda: He's actually doing pretty well. Sure, sometimes he loses a little bit of money, but overall the decisions he makes to buy and sell are good ones and he sees his account values increasing. Plus, he's a regular saver and a responsible spender - two very important things. Over the long term, his financial path is moving up and to the right like he wants. [0:08:00.4]
Brandon: Until January 31 comes and he gets a 1099 from his brokerage firm.
Amanda: The 1099 you can see as maybe a speeding ticket if we're using traffic analogy. The 1099 - dunt…dunt… dunt… sorry, go ahead. That just popped into my head.
Brandon: He has to use some of the profits he has made this year to pay taxes on those paper profits to that police officer. He didn't use the money…
Amanda: The Internal Revenue Service.
Brandon: … still has to pay taxes on it. Good thing he has some stocks he can sell to pay those taxes. It's a small dip into his account value, but he hopes he can recover it quickly by doubling down on the research and his buying decisions. [0:08:46.0]
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Amanda: So paying taxes is kind of like paying a ticket. That was a fun analogy. I think it's really important. He did not use the money, but he still has to pay taxes on it - a very important point there. But then by the time his first bunny child gets ready for college, he's amassed a good amount of money in the brokerage account. He's really excited about the wealth he is building until he sees the expected family contribution that Rabbit University is expecting because they factor the brokerage funds into the family contribution for college. This is kind of like rather than a ticket, he gets an increase in his insurance, you know like car insurance. This would be like the equivalent of that. He has to pay more for college because he has the higher net worth that is showing up and is impacting what the university says he has to paying. Again, it's time to dip into his account value so he can help cover the cost of tuition for his little bunny children. [0:10:16.4]
Brandon: There are so many other examples of the setbacks hare experiences in life. I mean, he's trying to get ahead. He wants to buy and hold as much as possible, but life is always changing. Companies he thought could be long term investments go downhill. There are always legitimate reasons to sell stock and help his family - a new car, home repair, the trip of a lifetime, and on and on.
Amanda: Plus, hare's strategy is subject to what others are doing. There are other drivers on the same road. They're trying to get ahead too. They seem to buy or sell their stocks in much the same way as hare, which keeps him from seeing the growth he really wants. Then every few years, the fees charged by the brokerage firm change and hare can't predict what changes will hit in December each year when they charge those fees. [0:11:08.4]
Brandon: Hare is trying to get ahead but he's stressed and anxious about the decisions he is making each time he buys and sells. He also notices his heart race whenever there's a big unexpected or expected dip in the market. If only he was ready to pounce and buy a lot during those dips, then he could really see a lot of growth in his account and get ahead of the curve once and for all.
Amanda: Yeah to kind of stretch this car analogy a little bit, it's almost like there are accidents that happen, those dips in the market and sometimes he can see them coming but he can't brake fast enough and he ends up being part of that accident anyway. Instead of being able to maybe swerve around it and get ahead of it or stop and help the people or whatever might happen… [0:12:03.3]
Brandon: That actually happened to us where we were stuck on the freeway for an hour, I think, because of an accident, two lane road. We couldn't get off either.
Amanda: Yeah. We might talk about that in the next episode because we're going to keep this car analogy going. Now let's get to the turtle. What about the turtle? How is her financial strategy different and you know, we're using that she's picking a lane and staying in that lane. What is that lane that she picked and is helping her get to her destination?
Brandon: So turtle spent time a few year ago mapping out a financial path that could account for all the cycles of her and her family's lives. She has a strategy for college, for weddings, for purchasing a car, for repairing their home and for eventual retirement to Shellville. Now all turtle has to do is stay the course.
Amanda: Turtle intentionally chose financial tools that did not require active management but would be reliable and consistent enough to provide financial security. [0:13:06.5]
Turtle is more concerned about making sure she reaches her financial goals than she is about growing her money the fastest she can.
Brandon: So far, things are going very well. Her account value never goes down and the numbers she has shown when she started her path are very close to accurate. In fact, they're only $0.02 off the original estimate. Just like hare, turtle's path is moving up and to the right, just maybe not as quickly as his.
Amanda: Yet, turtle starts to catch up to hare because her funds are growing tax deferred. She does not have to reduce her account value to pay income taxes on money she is not using and when turtle's kids go to college, her account isn't even seen by Shelly university so her kids get plenty of grants and scholarships. Still, her path continues to go up and to the right. [0:14:04.8]
Brandon: Turtle still lives in the same world as hare and is subject to all the same life challenges - job switches, car replacements, home repairs, family vacations and so forth. Yet, each time turtle uses her savings to cover these costs; she doesn’t skip a beat in the growth she was expecting.
Amanda: That's a very important point. Turtle gets the same growth, even when she needs to use her funds and then on top of that, turtle can play hare's game any time she wants. When we go into the next recession, turtle's got a big pool of money that won't go down because of a stock market crash. Then she can swoop in and buy low when everyone else is just trying to hold on. That's a big advantage turtle has. It's almost like her car can turn into a plane and she's above the financial turbulence but ready to land when the opportunity presents itself. [0:15:00.9]
Brandon: Now, we want to be honest. Sometimes hare's accounts have more money than turtle's. Who knows - maybe hare will end up with lots more wealth than turtle. Unlike the children's fable, the story with their money is more complicated, but here's the main point today - who do you think enjoys their path more than the other? Does hare enjoy the stress, anxiety and constant maintenance of his account? Does turtle get bored waiting for her funds to grow? We'll let you decide.
Amanda: We want to leave you today with some thoughts to chew on, maybe the next time you're sitting in traffic. Perhaps because someone was trying to get ahead and caused an accident. Here's some questions to ponder: What kind of driver do you want to be for your financial vehicle? Do you want to be swerving here and there trying to get ahead? Would you rather stay in one lane and see predictable movement with the option to change lanes for the right opportunity? Neither path is right or wrong, ethically speaking. They're both moral and good, but they do have their pros and cons, and depending on your goals and frankly how much stress you want in your life. [0:16:11.4]
Brandon: Sorry to mix metaphors, but another helpful way to think about it is that you'll drive differently depending on what kind of transport you choose. What kind of financial vehicle do you want to use? Maybe you like a car because you can control each turn. Maybe you like a train because you have a predictable schedule. Maybe you prefer a plane to get you above the financial storms. Different financial tools make your money do different things. Decide first what you want your money to do for you and then pick the tool that best fits. The wholesome health recipes at Grandma'sWealthWisdom.com can help you do just that. Just go to Grandma'sWealthWisdom.com and download it there. [0:16:58.5]
Amanda: Yeah. The big thing about these wholesome wealth recipes, the main entrée is just questions that help you pick a financial vehicle that fits what you want your money to do for. If that's something that you're like I'm not sure what I want my money to do or I'm not sure what financial vehicle matches what I want my money to do. That is the main entrée in these recipes. So please, go get that download and then we'll talk to you again in the next episode when we'll be sharing about what we have learned about money from road tripping with a 15-month-old versus road tripping when we did not have a kid yet. So be sure to subscribe and stay safe on the road and with your money.
Brandon: Until next time, keep building your wealth simply and sustainably for your own future and the future of our grandchildren's generation.
The topics presented in this podcast are the general information only and not for the purposes of providing legal, accounting, or investment advice. On such matters place consult a professional who knows your specific situation.
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