Welcome to a journey where we unlock the truth about your money! You think it’s safe in your savings account? Think again. Today, we’re diving deep into why ‘Money Moves…Or It Dies!’ and how sitting on your cash might be the riskiest move you’re making.

Transcript:

[Music] hey everybody this is Steven Libman and welcome to let’s talk money this is going to be a journey where we unlock the truth about your money so let’s start things off today with you think it’s safe saving your money in a savings account think again today we’re going to take a deep dive into why money has to move or it dies and how sitting on your cash is actually negatively affec you and possibly the riskiest thing that you could possibly be doing and the way I’m going to do that today is I’m going to share with you we’re going to go online we’re going to actually look at an investing versus savings kind of calculator and I’m going to walk you through the different scenarios so you know what let’s go ahead and jump right into that right now what you’re looking at right here is a simple investment calculator now I’m going to use it a little bit differently to to show you some things the way I want you to see them because they are so radically different all right the first thing I want you to see right at the very top is we’re going to assume an initial investment of $100,000 now we have to remember one thing that when we’re making an investment usually that investment is in after tax money of course what do I mean by after tax money well you may have had to earn $150,000 in which to have 100,000 to be able to invest so we’re going to be talking about the two things that eat away at your money the most number one inflation number two taxes now let’s assume that you take your $100,000 and you just leave it sitting around doing nothing you have it in a box you have it in your mattress you have it in a safe but you don’t have it even in the bank let’s assume that 100,000 is sitting in that box for the next 20 years it’s earning absolutely nothing you’re not making any contributions and we’re just going to assume for the moment no tax and no inflation well if you look to the chart to the right what you’re going to see is 100,000 at the end of 20 years is a 100,000 okay now most people know that to be true and yet believe it or not often times people are sitting on their money not even keeping it in the bank well what if we took that money and we put it in the bank up till let’s say a few years ago how much were you getting on a savings account you might be lucky to get 1% on a savings account and that would mean that in 20 years your projected amount that you would actually be making is about $22,000 because you invested $100 you have about 122,000 now we’re going to go ahead and take a look at what happens if inflation is only 1% if inflation is only 1% and you’re only earning 1% you would think it’s a wash but it really isn’t because what’s ending up happening is that your earnings and your compound earnings are actually being wiped out so 1% to 1% still says you’re going to have $100,000 but you had a potential of earning considerably more so we’re going to change the numbers a little bit we’re going to change what happens when inflation is 3% and the exact same situation so now if your money is sitting in the bank earning you 1% and you’ve got 3% inflation you’ve got $67,000 at the end of 20 years so how much have you actually made you haven’t you’ve lost $33,000 and I know what you’re saying Stephen over the last little while you know what I can get as much as 3% in the bank so we’re going to go ahead and put 3% in the bank with 3% inflation you haven’t made any money but we also know that inflation is not 3% we know that the Consumer Price Index which doesn’t include gas and groceries we know that it’s currently 3.9 which means you’re losing $16,000 but those of us that actually buy groceries and actually go and buy gas we well know inflation is more like well 10% and that would mean that your 100,000 after 20 years is only worth 26,000 now I’m sure a couple of the Skeptics are going to say no no no it’s only 7% no problem you’ve only lost $54,000 but Stephen I can go and I can get 5 a half% investing right now in zero risk I can put my money in a high interest savings account and you would be correct so now you’re only losing 25,000 because the inflation rate is still outpacing whatever the rate of return happens to be now of course I haven’t touched tax yet let’s assume that you’re in a 30% tax bracket well congratulations now the monies that you’ve earned are being taken away by the tax Authority so you’ve got 55,000 from your original 100 so even though you’re earning 5 a half% inflation is seven and your taxes are 30 well guess what you only have $555,000 value at the end of 20 years of course A lot of people are in a 40% tax bracket because if you’re initially investing 100,000 you may have had to earn 150,000 and now it’s even worse so let’s look at some numbers to make it better let’s look at the numbers that we have to get so let’s forget about this ridiculous 5.5% what if you knew how to invest at 10% well if you knew how to invest at 10% and then you realize that if inflation is seven but your tax rate is 40 you’re still going to notice that you’re not making money so how much money do I have to really make well 12% I finally made a little bit of money 15% return I finally did a little bit better than that and I’m going to suggest to you that you need to be making at least 20 20% on your money I’m going to suggest to you that you need to find a way to reduce the income tax that might be applicable for example what would happen if we earn this money in a retirement savings account in the US let’s say a Roth IRA in Canada let’s say a tfsa well then your tax would be zero and if your tax would be zero your quarter million just became $990,000 so what if you knew how to do that better yet what if you said Stephen I don’t think I’m going to get 20 okay what if you could learn how to loan your money from your retirement accounts with little to no risk and generate 12% return you’re still making a qu million or better yet what if you learned how to make

15% just a little bit of a nudge on one side or the other changes everything now of course when it comes to investing you shouldn’t invest one amount and forget about it so let’s go back to that retirement savings account for a moment let’s go back to Simply 10% let’s leave it at 7% inflation let’s leave it at 0% tax because we’re going to use a tax-free account well we only have

$173,000 except you’re allowed to contribute to your tax-free account let’s just say this year which is about $7,000 so we’re allowed to contribute on an annual basis $7,000 a year just that $7,000 a year has dramatically increased the amount at the end of the day and of course if you can get a little bit better than 10% say 12 the numbers go up by almost 50% even though you’ve only increased your return by 20% I hope that you see the difference between what happens when you sit on the sideline and you have no rate of return and you have no additional contributions and even with a 0% inflation rate gives you nothing more than you had but if that inflation rate was 7% by sitting on the sidelines your 100,000 which you started with 150 is now worth all of 25 and that’s why I wanted to show you a simple calculator and not actually go into you know just talking about it I just wanted to share that with you so that you could see what happens that money moves or it dies well it doesn’t die quickly does it it it dies a slow painful death and to wrap things up I want you to remember that money is like a seed you plant the seed and you’re hoping for a mighty tree to grow some people plant the seed and the seed remains dormant and nothing grows you can’t wait 20 years to find out whether or not your seed grew or it didn’t by sitting on the sidelines by sitting on your money the very thing you’re worried about happening which is losing money in an investment is guaranteed to happen because you haven’t done anything with your money so if this video struck Accord if it resonated with you go ahead and hit the like button uh share with your friends and don’t forget to subscribe you can also visit me on our website at ww. stepen libman.com where you can also subscribe to our newsletter I’ve got some great tools to help you figure out money and join us next time where we continue the conversation about money and investing until then remember money moves or it

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