How Saving SAVES Families – Episode 147

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[00:01] 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 to another edition of the Prosperity Podcast. This is No BS Money Guy, Todd Strobel. Once again, we have my co-host and bestselling financial author, Kim Butler with us today. Today we’ve got kind of what I think is a cool topic. We’re going to talk about how saving saves families. Welcome, Kim. Thank you, Todd. Happy to be here. And boy, isn’t that the truth. It’s a little bit of a tongue twister, but it’s a critical habit that families are either in or not in.

[00:50] And it’s funny because just recently I had a chance to talk with a young friend in college about the habit of saving from a verb versus a noun. So savings is obviously a noun. We think about it usually that way. OK, I have a savings account. I have dollars in savings. But I was talking with him about it as a verb, like the act of saving or the habit of saving. And we were talking about something that Dan Sullivan, my mentor, has shared with me, and that is that you are one hundred percent disciplined to your current set of habits. So let’s just start there. What do you think of that statement? I think some people are kind of challenged by it. A hundred percent disciplined to your current set of habits.

[01:40] Well, I mean, to me, it makes perfect sense, I guess. I mean, whatever habits that you have, if it’s something that you routinely do without thinking about it, that would be my definition of a habit, then whatever you have in your life that falls under that category is where you are currently. Now, I would also argue or not maybe argue so much as state that it’s possible to change those as well. The better or the worse. Yes, absolutely. So I agree that whatever habits we’re in, we are in them. Now, you could say that a young person might need more, quote, discipline. But I think most people once they hit 16, 18 years old, they’ve got all the discipline. It’s just how are they around their habits?

[02:33] And so this friend was saying, well, I’m not really in the habit of saving. And I said exactly that’s where the challenge lies, is you need to gain that habit. You need to add that habit. And so many people work to take away bad habits. I know we’ve talked about this on our podcast in the past, but it’s so much more exciting to add good habits. And the really critical distinction around this saving habit is are you saving to spend or are you saving to save? And a lot of people save to spend. And there’s nothing wrong with that either. If you save up for a new set of skis and then you go pay cash for that set of skis and you enjoy the set of skis, that’s awesome. But what about saving to save?

[03:20] What about the saving saves families ideas that you started with? The way that savings saves families is if they’re saving to save. Now, they can save to spend also, but saving to save actually builds up that good habit. So now we’re back to the verb of saving. And then it also builds up the noun called savings. And at the beginning of somebody’s addition of this habit, to me, it’s not so important where the money gets saved or the fact that it may or may not have a whole lot of interest being added to it right now. What’s important is that habit. And I just love our family’s approach to this because we’ve had a very consistent and persistent method of saving money. And both of my kids knew when they got jobs that they saved 10 percent

[04:16] of their income. It just wasn’t even a question. And it was really cute. The other day, my daughter actually got a second job. She’s in a gap year between a couple years of college and working at various things, trying to figure out what’s next. So she said, well, do I have to save 10 percent of this check too? I said, absolutely, because that’s part of your habit. Super makes me think of, I guess, one of the most famous movies of all time is The Grapes of Wrath. Are you familiar with this? No, tell us. But it’s basically about a migrant family that travels through the dust storms out west, trying to get migrant work and literally everybody was starving. And the mother of the family always said, you know, if things get too bad,

[05:10] I’ll just have to go down to the bank and take that money out of the bank. And she raised like eight children with the idea that they had this savings in the bank that no matter how bad things got, it was okay. She had that savings and you didn’t find out till, you know, like the day she died that there literally was no savings, but there was no bank. There was no anything, but she had used that concept to hold the family together and create confidence that we can get through this today. I love that. I’m so glad that popped into your head. Yeah. It is amazing. The peace of mind that having savings does, and that was the entire focus of our title of today’s talk is that savings saves families.

[06:02] And I think not only the habit of savings, but actually having savings there. And for our family, one of the best ways that we’ve found to reinforce this habit is to have whole life insurance premium bills show up every month or automatically debit out of our account every month, or even the larger ones show up once a year that we strategize around and know they’re coming and prepare for because our family would not have the discipline to save and leave it in a bank. I think most families really struggle with that. It’s the banks are good place for savings to spend, but if you’re truly wanting to save to save, it’s so much easier if it’s in a life insurance company, because though it’s still only seven days away, and though

[06:56] I too, like that mother constantly think, oh, okay, we’re all right because we have this cash value of life insurance, the fact that it’s seven days away, the fact that I have to make a phone call to actually get it rather than just tap a couple buttons on my iPhone or whatever it may be to move money from a savings account to a checking account adds that extra amount of human element and the discipline that’s necessary to leave that money alone, or at least to think carefully about it before I withdraw it or borrow against it. And then the next most important thing that the life insurance industry helps us over and above the banks is when we do borrow against it, first of all, our savings, our cash value continues

[07:44] to grow because all we’ve done is borrow against it. We haven’t withdrawn it. And then secondly, that loan is there to pay back. And we’re going to do another show on the importance of paying back loans here very shortly. So keep an eye out for that, but the loan payback structure forces our family to realize that, Hey, maybe before we tackle this next project, we should get the first project paid back. And people in the era of the depression used to borrow against their savings account at a bank. And they actually talked about paying themselves back. And you don’t hear that in today’s world at all. But if you went and asked grandparents or great-grandparents, they would absolutely talk about paying themselves back.

[08:36] Now, in this case, we would be paying the life insurance company back because that’s technically who we borrowed the money from. But again, it’s still a habit. It’s an act. It’s a verb. And that’s the important thing is the money getting in there is a habit and then paying back for the use of that money to rebuild that available account. The account was there all along. The account itself, the cash value didn’t need to be rebuilt, but the availability of it needed to be rebuilt. And that’s what paying back those life insurance loans does. It rebuilds that availability. How about, and I have no idea what the statistics on this would be, but what do you think the effect would be as far as divorce, separations, and stress inside of families?

[09:29] How much of that would you estimate is financial? It’s a great question. I don’t know the stats either, but I have seen them before and I think everybody is well aware that a very, very high percentage of divorces are caused by money problems. And I guarantee you that some of those could be saved by savings. And I know in my own case, when there was a divorce that occurred, because there was liquidity and savings there, it made the transaction a lot easier and I’ve watched and helped other clients go through the divorce process that had cash value of life insurance. And again, because that liquidity was there, it was easier. So obviously in those cases, it didn’t, quote, save the marriage, but it can absolutely make the process easier and potentially stave off

[10:25] what could be a potential problem that possibly could be saved. If the savings are there, then maybe those arguments are not happening or maybe they’re unrelated to finances and the divorce is going to occur anyway. But I know for a fact, whether the divorce occurs or not, having liquidity, having the peace of mind that goes with the liquidity absolutely creates some good in those families’ environments. And so many times it enables us to use and reuse and reuse the money mentally, even though we might not actually use it. And this is kind of what was happening in that movie that you brought up with the Grapes of Wrath, because the mother was mentally using the money, even though she didn’t actually physically have it.

[11:13] And I love that distinction. So many times it is a mental game that we’re playing with ourselves. The other thing I guess we could talk about too, is the fact of, you know, the economy is definitely changing our guaranteed employment. The idea that we’re going to graduate from college, work for one company for a long period of time, retire and sit and fish for the rest of our lives. That’s just not the world that we live in anymore. And facing the fact that the world of tomorrow is not the world of yesterday and is probably not going to be the world of today, what does savings do for that? Well, it’s so important to give yourself flexibility around the working environment. And if you have a desire or a need to take a couple months off after

[12:10] a period of long work, savings propels that. If you have a desire to create a business, savings propels that. If you have a desire to check out an opportunity, savings propels that. And one of the things that I talk about all the time is having this savings account, which is your emergency slash opportunity fund, and it amazes me whenever anybody’s writing for us, they always want to take that word opportunity off, make it just an emergency fund, but nobody gets excited about saving for emergencies. And furthermore, after a certain period of months, three to six months is the usual recommendation, or even up to one year, you’ve got your quote emergency fund funded, saved for already, and yet we still need to make that

[12:57] habit a consistent habit. So you want to be able to turn for opportunities. And if you look at working your entire life, at least as long as you’re physically and mentally possible, what savings will do is let you pick your work, because maybe you can take a little bit longer to find that work. Maybe you can take a job that pays a little bit less, because when you earned a little bit more, you saved the extra. And when savings happens first, and we’ve all been told this, pay yourself first, then the lifestyle just fixes itself accordingly. Our family rarely talks about the word budget or budgeting. We just make sure that we’re saving first and then we spend the rest. And what that means is that sometimes we have, in fact, we even call them

[13:45] this, lean years, we have lean years and green years. And so we know as a family, if this is a lean year, well, then vacations are not going to be as fancy or, you know, Christmas gifts are going to be low key or maybe there’s none of that at all. And if we have green years, then we pursue opportunities. We pursue larger experiences, et cetera. But everybody can operate in that realm knowing that the savings happened first and there’s so much peace of mind that is there and flexibility around the work environment. And then additionally, the pressure is removed because if you’re going to keep on working, then you don’t have to, quote, save as much money. I mean, you should still be saving, obviously.

[14:32] And I think people should save well into their seventies, but the pressure is off if you’re only looking at, say, 20 years of not working, say 70 to 90 versus 40 years of not working or 30, I guess the math would be if it was more like 60 to 90. But I really do know some people who think they’re going to retire at 50. And if they’re going to live another 40 years, that’s just too long of a timeframe to save for. So if we have the shorter working timeframe, then that takes the pressure off our savings. Super. Well, before we wrap up, are there any resources or anything that you would direct our listeners to? Absolutely. We have an ebook that tells some really fun information about the financial planning industry, which talks very little about this savings.

[15:22] And we address that in this book. It’s called financial planning has failed. There’s an ebook as well as an audio book available. And it’s at partners number four, prosperity.com slash ebook. Awesome. Well, Kim, I really appreciate this message. And I think, you know, as tomorrow is always going to be different than the way that we planned it. This is just a fantastic subject for us to cover today. This is the no BS money guy for the prosperity podcast. Say and take care of everybody. 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.