Habits, Resolutions, and Following the Crowd – Episode 068

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[00:00] Welcome to the Prosperity Podcast, fresh alternative personal finance talk for independent thinkers who prosper outside of Wall Street. Here’s your host, best-selling author, Kim D.H. Butler and No BS Money Guy, Todd Strobel. Hey everybody, welcome to the Prosperity Podcast. This is No BS Money Guy, Todd Strobel. Once again, we have our best-selling financial author and my co-host, Kim Butler with us today. Welcome, Kim. Thank you, Todd. It’s great to be here and totally excited about what we’re going to share because it’s different, it’s fun, and it really is going to resonate with everybody that gets a chance to hear it. Super. Well, today we’re going to be talking about habits, resolutions, and following the crowd.

[00:48] We try not to time stamp a lot of these, but we’re moving into the time of year where a lot of us are going to be making resolutions on things we want to change, things we want to improve, and we’re probably analyzing our current habits and seeing what works and what doesn’t. And we also want to talk about following the crowd in that, wow, we really want to improve those good habits, but we want to make sure that we think first and we think independently so that, honestly, the results that we get are not the same as everybody else. Because if you want the same as everybody else, you’re going to under prepare, you’re going to get less than the rate of return that is currently out there available to

[01:30] you, and you’re going to take above average risks that put your principle in jeopardy. And honestly, one of those three could be deadly, and most folks are doing three out of three. Kim? Well, it’s so interesting. As I listen to your words, if you removed the financial aspect to your words, it’s still a totally accurate statement. So let’s hit them. Rater prepare. That’s what a lot of people do. They really go through life just kind of bumbling along, and consequently, they don’t get a good rate of return. Now, you meant so financially, but it’s true in all areas of life. It’s not just interest rates or dividends that we’re talking about in terms of a quote return. It’s return on life. It’s return on the energy that you expend.

[02:19] It’s return on the time that you spend on things. And so one of the things that’s been such an important part of my life is avoiding TV and avoiding the typical news media that’s out there and the sources that news creates because the rate of return, and I’m not talking financially, but I certainly could be, is too low for me. I don’t get a good rate of return on TV time and typical news media time. Yeah. Like, you know, setting out in the morning saying, boy, today I really would like to have a substandard marriage and make sure that my kids are below average in everything they do. Right. So anyway, to get back to our point on the habits, let’s start because we’re talking about habits, resolutions and following the crowd.

[03:09] I would say that a habit is something that you’re able to move from your conscious mind to your subconscious mind. So it’s a repetitive motion, whether it be exercise, diet, automatic savings. So many times listeners will hear us talk about, we’re not a big fan of the traditional 401k. We’re not a big fan of the traditional financial planning process. They’re thinking that we’re advocating, spend all your money today and have nothing for tomorrow. Nothing could be farther from the truth. The habits are the first ingredient to the equation. What do you think? Well, it’s so amazing to watch somebody that has good habits. So whether that habit is saving money, whether that habit, like you said, is working

[03:59] out, whether that habit is eating vegetables all that time, whether that habit is drinking the water that they should be drinking, whether that habit is giving first every time they stand up in front of a crowd or meet somebody. Whether that habit, I love these little words, is being a Ted or a Ting, T-I-N-G. Are you interested being a Ted or are you interesting being a Ting? And just think about that for a little bit. When you’re having a conversation with somebody, is your habit to try to be interesting and to monopolize the conversation and be the cool person in the room? Or is your habit to be interested and ask questions of others, let others shine, help others get good, knowing that that’s going to come full circle to you?

[04:47] All of these things are habits and it’s true throughout our entire life. One of my coaches, Dan Sullivan, a strategic coach, has a comment that I absolutely love and he says, you are 100% disciplined to your current set of habits. And so when we think about that, people will often say, oh my gosh, I need more discipline. No, you don’t. You’re 100% disciplined. You just need different habits. And we all know that the best way to install a new habit is to just start focusing on what it is that you want and developing a good habit, thereby filling up all the space and all the time to get rid of the bad habit. So I’m going to give two examples. Let’s say somebody wants to stop smoking and now I have to admit I cannot personally

[05:40] attest to this because I never started. But if somebody wanted to stop smoking, they could be all focused on stopping smoking or they could just be focused on developing a new habit like going for a walk. And so every single time they wanted to smoke, they would just get up and go for a walk real quick, even if it was just a two minute one out to the parking lot and back. So the habit is go for a walk, go for a walk. Every time they think about their habits, it’s increasing what they want, focusing on what they want to add, not focusing on what they want to get rid of. And in time, the installation of that new habit of going for a walk is going to fill up the space, block out the time and cause them to stop smoking.

[06:24] Let’s use a financial example. If you have a habit of shopping and you would rather have a habit of saving, if you will save first, focus on saving, study saving, study strategies to save and get into an automatic and habitual organization around saving so that saving is a habit, then it will literally push the not so good habits, the shopping, if you will, off of the table. And when we work on our habits and we work on having good habits, we already know we’re 100% disciplined to our habits. All we need is the good habits to be 100% disciplined to those. Saving seems to be one of those words that just no matter how you say it, it hurts. So I prefer the term cash flow, which is really what we’re talking about here.

[07:11] It’s simply disciplining yourself to have a positive cash flow. And that doesn’t necessarily mean sacrifice. Most of us are in careers where somehow or another next year we end up to make up a little more or a lot more or some more than we did the year before. If you can simply stop your expenses at their current level, you can increase your cash flow. If you take a hard look at your income taxes that you’re paying, perhaps create a home-based business that would allow you to deduct some of your current expenses, you can increase your cash flow. So we’re not always talking about sacrifice because sacrifice can breed resentment, but there are positive things that you can do right now. Unfortunately, our media would instruct us that the time to spend your next

[07:59] raise is six to 12 months before you get it, and that’s bad habit. It sure is. Well, what’s so amazing too about the saving is everybody talks about saving for a rainy day. Okay, yes, we all need to have what we would call emergency savings, two, three, call it up to six months, even a year of our expenses. But that’s so boring and blase to save for. If we’ll switch gears and make our habit about saving for opportunities. Let’s say you want to save for a vacation. Let’s say you want to save for a nice Christmas. Let’s say that you want to save to be able to do investing. Let’s say you want to save to buy a home. Let’s say you want to save to have an opportunity to travel or whatever it is that’s important to you.

[08:42] You’re going to be so much more engaged in the habit of saving if that’s what you’re saving for is an opportunity. So I’m always talking with people about let’s build your emergency slash opportunity fund because it’s so much more fun to talk about the habit of saving when it’s for an opportunity fund. And yeah, by the way, we’ll solve the emergency fund along the way. Super. And again, and along that same line of savings, perhaps we have managed to save some money and we have that money either buried in the backyard or in the bank, which is probably not much different. I think if you have one hundred thousand dollars, you might be up to a quarter or three tenths of a percent taxable wise. If you were to find a safe place to put that money that perhaps paid four to five percent,

[09:31] what is the new statistical or percentage difference between point two five and five point oh. Well, let me just grab a truth concepts calculator. Were you setting me up for that? And let’s put in twenty five basis points. So that’s point two five percent. And what’s interesting, folks might like knowing that you need to use a financial calculator to do this because a regular calculator will not help you with this. But if you put in point two five percent as the present value, that’s the fact that its present value isn’t important. That’s just where it goes. I guess it is important, but it’s don’t get caught up in the term present value. But point two five is one interest rate that you could earn if you had your savings at a bank.

[10:21] OK, it’s taxable, but we’ll set that aside for a minute. And then you put as the future value four percent. Let’s say that you owned cash value of life insurance. It was at a mutual company. Whether you’re making premiums or paid up additions doesn’t matter. Let’s just say that you got as you would in the year 2015, 2016, a dividend of an internal rate of return. So this is a net dividend after the cost of the death benefit, after the cost of expenses, after the cost of the insurance agent’s commission. You got four percent on that money. And let’s say that you could do that every year. In other words, instead of earning a quarter percent taxable, again, setting taxes aside, you could earn four percent,

[11:01] which as we know inside life insurance, it’s not taxed. But again, setting taxes aside. The difference between those two is fifteen hundred percent. It’s not three point seven five. It’s a three point seven five percent spread, but it’s a fifteen hundred percent difference. And so that’s where people can have so much more of an impact with their savings. No wonder nobody wants to save these days. It’s not only boring, it doesn’t get you anywhere. In fact, as we know, point two five percent being taxable. And then you throw inflation on top. You’re going backwards fast. But if you can have it in whole life insurance cash value, you can at least maintain and possibly even get ahead because dividends will tend to raise if inflation raises.

[11:52] And that enables people to let their savings really be working for them instead of going backwards. If we shifted back to, say, the relationship category or the health category, how many times do you have an opportunity to have a fifteen hundred percent improvement in one of those areas? But on a financial opportunity, this can be done every day while maintaining that same level of safety and liquidity. Yeah, very well said. Aren’t we grateful? Super. So, again, let’s just kind of wrap it up if you would, so we can move on here and just show how we’ve talked about habits, resolutions and not following the crowd. So on the not following the crowd part, the critical thing is to just start thinking.

[12:40] And as we know, the first principle of prosperity of the seven that we have is to think. And so that means don’t follow typical advice. Don’t follow typical, oh, just max out your 401k plan and hope it works. Don’t follow the buy term and invest the difference advice that’s out there. If you need term insurance, buy term insurance, but then also buy a whole life so that you get the best of both worlds. And almost frankly, anything that’s out there in the typical media, I would say don’t follow because the typical media follows the crowd. And it doesn’t matter whether it’s talking about health or about finances. The crowd is not where the good results are typically. And it doesn’t mean that there isn’t some good out there.

[13:24] But for the most part, I know I’ve lived my life going against the grain in all of the areas that we’ve talked about today. And I feel like I have good results because of that. So it’s OK if you want to follow the crowd, but follow the crowd because you thought about it and made your own decision, not because it was just the thing to do. Super. I can’t think of a better way to wrap this up other than saying that no one will ever care about your money more than you do. So don’t delegate that responsibility to anybody else. Once again, this is No BS Money Guy Todd Strobel for the Prosperity Podcast. Special thanks to Kim Butler. Take care, everybody.