Turn $1,000 to $2,000 – Episode 201

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[00:03] Welcome to the Prosperity Podcast, fresh alternative personal finance talk for independent thinkers who prosper outside of Wall Street. Here’s your host, bestselling author, Kim D.H. Butler and No BS Money Guy, Todd Strobel. Hey everybody, welcome back to the Prosperity Podcast. This is No BS Money Guy, Todd Strobel. And again, we have the president of Partners for Prosperity and bestselling financial author Kim Butler with us today. On a recent podcast, we were asked a question and that was, if you took $1,000 and you earned 20% interest on that compounded annually, how long would it take for $1,000 to grow to $2,000? Now just because I’ve seen enough numbers, I was able to get the question approximately

[01:02] right, but we wanted to share the exact process that we would go through using a financial calculator and show you what the exact right answer is. How about that? Absolutely. And I really have to give you credit because I grabbed the wrong calculator, which is never going to get us going in the right direction. And so you wisely helped me figure out what one is needed. And so this is a time period calculator. And of all the financial calculators out there, and we’re just talking basic financial. We’re not talking special truth concepts calculators, but of all the financial calculators out there, the time period is the one that gets used the least. However, in this case, it was perfect for it.

[01:46] So we put in $1,000 as a present value and we put in no payments because the question was actually about debt, not about an account. We put in future value of $2,000 and a 20% annual interest rate, and we left the compounding on annual, which I will state is a little unusual, but that’s the fact pattern that we were given. And then we asked for the time, and the time was 3.8 years. And earlier, Todd had guessed that it would be somewhere between two and four. And so this is just an interesting fact. If you have a $1,000 account and it’s earning 20%, it’s going to take 3.8 years to double. If you have a $1,000 loan and it’s costing you 20% and you don’t make any payments on it and it’s amortized annually, then it’s going to take 3.8 years to double.

[02:37] So it really doesn’t matter whether it’s debt or an account, as long as all the other fact patterns are the same. But I think this tells a very important story in that, yeah, I mean, this is factually correct, but then what? Like, what about the human element as it relates to work with our finances? And Todd, you’ve done some reading recently about some of the robo financial advisors that are out there and how artificial intelligence is supposed to be helping us with our finances. Give us an update on that. Well, it’s causing a tremendous amount of controversy. I mean, there are people that are, you know, literally creating their own mini networks and cutting their houses off from the outside or the internet, whatever

[03:32] you want to call it, because of the fear of AI that eventually there will be an inner intelligence that manipulates all of the devices. I can tell you that it is a fact now that anybody that has a smart television, the government has the technology to reverse watch you through the camera. So, I mean, to see a fat guy eating popcorn, I don’t know. If somebody wants to do that, I’ll make a channel for it and sell tickets. But anyway, so some of it and then some of it is a positive in that a computer’s ability to handle multiple calculations simultaneously surpasses our human ability. So our kind of mission or message or whatever is to figure out how do we use computers to make our lives better, because more complex is not always better.

[04:39] I’ve seen a lot of people make fortunes out of taking complex things and making them simple, not taking simple things and making them complex. Absolutely. And I really feel very, very strongly that the arenas around artificial intelligence will contribute to societal good, that it will benefit us as human beings in some form or fashion. And I get a lot of my thinking from Peter Diamandis. We’ve mentioned him before. If he’s not somebody that you’re familiar with, I would encourage you to grab a Ted talk or a book or a email of his. So it’s Peter Diamandis. D is in dog I-A-M is in Mary A-N-D-I-S. Peter Diamandis. And he talks a lot about artificial intelligence. I attend an event every year that he provides in January out in Beverly Hills

[05:34] that talks about all kinds of things, technology, but he talks about all the benefits that we’ll get from AI. And interestingly enough, the financial arena is one of them. And when you think about how many people don’t really know their finances because the things like QuickBooks and Quicken and other accounting programs don’t truly give us enough information in the right way. Well, wouldn’t it be wonderful to have AI sort through that and help us with it? Wouldn’t it be wonderful to have AI help you balance your checkbook? Wouldn’t it be wonderful to have AI check your credit card statement against your normal historical activity, et cetera, et cetera? So we want to be looking for the good, but we also need to be very,

[06:16] very clear that a computer, no matter what form it is, you know, the ones that exist today, you know, even something simple like Mint.com or what have you, a computer can only say so much. A computer can only give you so much information. And of course it’s garbage in, garbage out. So assuming that you put correct information in as an example, a computer can only tell you certain things and it has no idea what you as a human being are dealing with. And as an example, let’s say somebody comes up with a mortgage opportunity. They’re going to buy a home and they’ve saved, let’s say they’ve done an awesome job and they’ve saved 30% down. So whatever their home value is, they could put 30% down. Let’s just use a hundred thousand dollar home for easy math.

[07:05] So a computer would tell you, Oh my gosh, that’s awesome. Like a $70,000 mortgage is so much better than an $80,000 mortgage. Well, that’s not true because that $10,000 difference should go into your savings account liquid available for your use so that you could use it. If you needed to make payments, if you lost a job or somebody got ill or what have you, a computer is not going to know that. It’s not going to be able to think through that. And there are lots of other examples where a computer can give you the correct mathematical calculation, but that math has nothing to do with you as a human being, your family situation, and all the other ancillary facts and figures and emotions that need to be taken into consideration

[07:51] in order to make the decision. So I welcome the robo advisors, you know, if you want to use one to help you calculate a car payment or you want to use one to help you reallocate your 401k plan or rebalance something, you know, that’s great. Have at it, but it’s never going to give the advice that a human being could and consequently, I’m not worried about them taking over. Very well said. I think, uh, you know, the one thing that we don’t want to do is we don’t want to delegate the responsibility to, and this is one of the messages that you make so unique is not to delegate the responsibility to a robot or a human advisor, but to have that advisor function in an advisory capacity where they’re, I mean, investing is not as difficult as

[08:47] it’s made to look because once again, you know, the devil is in the details when there are simple ways to make good rates of returns and logical financial decisions without having to have an MBA. Absolutely. And so that people are aware if they are curious about getting some proper calculations done, the truth concept software is available for anybody to download free for 10 days. So truth concepts.com go to the support section, download it. You’ll have it in your computer. You can play with it. It’s free. We’re not going to follow up. We’re not going to bug you. It’s just there. If you want it, have at it. And we’ve definitely had some clients do that and find some beneficial things. And that is available again for anybody truth concepts.com, the entire

[09:39] suite of the calculators available for free for 10 days. And I will mention that these calculators were actually developed for professionals in the financial advising community. They’re kind of getting out into the public now, but there’s a lot of practices out there that are run pretty much exclusively on these. Absolutely. And I don’t know what I would do without them. I mean, they’re so valuable and helpful for me just to help me know that I’m guiding a client correctly on a particular subject matter, even though I may or may not go through the process of showing them to the clients, but while we’re talking about them, we also have a new one that my husband, Todd Langford has been working on now for quite some

[10:26] time and it will be added very quickly and it’s what I would call a holistic calculator and able to take all of somebody’s finances and put them in and particularly when you’re getting towards that phase of life where you need to turn on the income machine and make those future finances actually create an income from your asset base that, okay, so most people would call this retirement, but we don’t, that calculator will be brand new and we’re super excited to be able to offer it to our clients fairly shortly. Super. Well, I definitely would keep an eye on that. Go to partners, the number four prosperity.com. Great information there. Uh, if you want to send us direct questions that we can talk about on the podcast, what’s the best way for them to do that?

[11:17] That is at hello at partners, number four prosperity.com all podcasts, questions, comments, et cetera. We’d love to hear them again. Hello at partners, number four prosperity.com. All right. Well, once again, this is no BS, money guy, Todd Strobel, special thanks to Kim Butler and thanks again to all our listeners for listening to the prosperity podcast. Thank you for listening to the prosperity podcast to take control of your money and have it work for you. Visit us at partners for prosperity.com. If you liked this episode, make sure you subscribe and leave a review.