Ep. 33 Stop Investing Until You Do This (The $1,000 Rule)

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Most people are hamstrung by "analysis paralysis". They want the gains of the stock market but live in fear of a single car repair wiping them out. In this episode of the Net Wealth Nest Podcast, Jim breaks down the brutal truth: Savings is for stability, not wealth. If you are investing while carrying high-interest credit card debt or without a $1,000 emergency fund, you aren’t building wealth... you’re treading water with a weight tied to your ankle.

In this episode, we cover:

• The Stability Trap: Why your savings account is actually losing value every day.
• The Toxic Debt Filter: Why your 20% credit card interest is killing your 8% market gains.
• The Wealth Sequence: The exact order you must follow: Emergency Fund  > Employer Match > Debt Elimination > Long-term Investing.
• Compound Interest: Why "Ownership" is the only path to the 1%.

STOP THE CYCLE: Building your Net Wealth Nest isn't about luck; it's about the boring, consistent execution of a superior plan.

Take the next step: Join our private community for one-on-one coaching and accountability to break the paycheck-to-paycheck cycle.

#FinancialFreedom #InvestingForBeginners #EmergencyFund #WealthBuilding #NetWealthNest #MoneyMindset #PersonalFinance #ExitTheRatRace

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Transcript

Jim 0:00

Savings is a tool for stability. It's not the final destination. It's not how you invest, and it's not designed to grow your money. everybody says invest early, but most people, don't even have a thousand dollars saved in an emergency account. So what comes first? The key is some people are just scared and that's what hurts them. there's this fear of losing money and then there's this fear of falling behind and it sometimes hamstrings people into this analysis paralysis where they're not sure what to do. here's the key. It's not an either or question. You should do both. But it's about sequence and balance. Let's talk about that today. So why does this question cause so much confusion there's a couple different reasons. older generations, older advice, they overemphasize cash hoarding, save all your money. You still hear stories about some older Americans that put money in a box or under their mattress Don't even put it in a bank, right? So you hear that and then you look at the new age and the younger individuals when you start talking about, 20 year olds and social media over glamorizes investing, and they don't give a whole lot of context. It's about day trading and it's about putting money in stocks and massive returns and buying Lamborghinis and all these things. And so people are kind of all over the place where they don't wanna miss out on these gains that they're seeing everybody getting, but they also don't wanna be in massive debt. Where do you lie? And there's this difference between liquidity and having cash and then growth with investments and your money actually working for you without you having to work. that's really key you should have both, but there is a sequence that will help you get there. let's talk about what savings is actually for. Emergency funds should probably be the first thing you save for, and an emergency fund is not necessarily something that is a wealth builder. You shouldn't rely on that to build your wealth because if it's a true emergency savings, which means you can access that cash very easily at almost a moment's notice to pay for something that is unexpected. Then you're not going to get a whole lot of interest on it, and sometimes you won't get any interest at all It's really for not getting into a debt spiral, for not having to make a stressful decision, not being forced to sell investments. You have to pay for an emergency. And it also is not a hedge against inflation, if you put an a certain amount of money in a bank, the interest rates that banks are gonna pay, you are gonna be at or below inflation. So your money's actually not growing, how much it'll pay for over time, and more often than not, it's losing its value. and so that's where the investing piece comes in. Savings is a tool for stability. It's not the final destination. It's not how you invest, and it's not designed to grow your money. I would recommend you get your emergency account set up first, and then you work towards those other things. That way you're not using those funds when an emergency comes up you don't wanna sell any investments you have. 'cause the key with investments, they need time to grow. you want that emergency fund to do that. understand that saving is either for stability when we talk about emergency funds or it's for maybe a down payment on a large purchase in the short term future when we talk investing, We're talking about long-term ownership of something and compounding growth. compounding growth is where all the magic happens. That is where you are not trading hours to make your money grow. this is why people talk about the stock market or maybe real estate, but the timeline is so much longer than what you're doing with a savings account and that compounding is. Getting time to grow. And what you typically see when you see compound interest is it starts off really, really, really, really slow. And then you start to see a kind of what they call hockey stick up. And that's because every time you increase, you're not only increasing what you originally have invested, but the gains prior to that. And so the easiest way to explain that is let's say you have a hundred dollars and over the next. 30 days. the value of whatever you bought, whatever asset it is, whatever investment it is, grows 10% value. So for 30 days, you go from a hundred dollars to $110. let's say the next 30 days, it does the same thing. So you grow another 10%, but you're not growing 10% on the original hundred. Now you're growing 10%. On the $110. So instead of just adding $10 like you did the first time, you're adding $11 And that continues, and it's small amounts at first, but as that grows, it gets bigger and bigger. It's how people can make significant amounts of money by putting a little bit away every single month. And the key is that time is really important. You need a long timeframe and investing is great but you don't want to have to sell your investments to cover an emergency, which is why savings is important and why you should start with building your emergency savings and then investing. The other thing that gets people in trouble and keeps them from putting money in the stock market or even sometimes skip their 401k, is they feel like they don't know enough. They feel like it's too risky. They feel like it might be rigged at points. that's where it's important to understand that ownership is where you build wealth, not saving. when you buy stuff in a 401k at a job, you go out and buy, diversified index. Funds from, a company like Vanguard or Fidelity you are buying tiny bits of ownership in these different companies with the anticipation that over time these values of these companies will grow. typically when you buy a large amount. Of, these items. many of the companies, you don't have to buy big pieces of them. You can buy microscopic, tiny little pieces of each company and spread that out across a lot of different companies. That's what an index fund is You typically see, if you look at any of the charts for the Dow, the s and p 500, nasdaq, any of those, indices. They always have this up until the right growth, and that's what you want to get in on it no matter where you get in on your hope is that you continue to see that up until the right growth. And so even if you feel like that it's risky, I would challenge you to say, even though it's a little risky, would you rather have the known that you will have less money than what you started with? when I ask that question, many people look at me confused. okay, so let's say you put some money into the s and p 500. You're just gonna buy an index in the s and p 500, and it's a thousand dollars and you're just gonna let that ride, or you're gonna put an additional thousand dollars in your, savings account, which is returning a 2% interest rate. Okay. that's probably a decent interest rate. If you do that, you're guaranteed that at best you're praying that inflation never goes above 2%, because if it does, then inflation is when things become more expensive, and then it's always happening over time. That thousand dollars will actually be worth less than a thousand dollars. Five years from now, it'll be worth, maybe 25% less. Now it'll still be a thousand dollars plus all the interest you made, but things will have gotten more expensive and you will be able to buy less with it. And that's where people get confused. They're like, well, the money didn't go down. Yeah, but what that money allows you to purchase is you can purchase less stuff. And so if you invest it. It has been growing and the typical growth rate is somewhere between six and 10% every single year in the s and p 500. Now, there are down years, but when you go over a five or 10 year period, you always see that graph kind of moving up. It spikes a lot but it's always kind of going up. And so there's some risk on when and how much that's gonna grow, but you're almost guaranteeing you're going to have less money if you just put it in the bank. Again, I'm not saying you should not have a savings account. You should absolutely have a set amount of money. Usually we say three to six months of whatever your expenses are in a savings account at the best interest rate you can find, just letting it sit there because if something bad happens, an emergency, a medical bill, you get laid off You have the capability to have an emergency fund where you're not losing your apartment or your house or let's just say you lose your job from that job to your next job. and so that's where the sequencing of it is important. And what I would say is before you invest anything, you should have at a minimum, a thousand dollars. In a savings account for an emergency. if we zoom out and we look at the bigger picture, and we don't just look at savings, we don't just look at investing, we look at the order of what you should be doing, right? Like the first things first is get that emergency fund, get it set up so that you do not have to put anything on debt or any of that. Eliminate as much of the high interest debt that you possibly can. It's toxic even if you are investing a lot of money and you have. Credit card debt, you are losing money because more often than not, the credit card interest rate is higher. Sometimes double or triple of what you're making on your investments. Get rid of that high interest debt as fast as you possibly can. If you have a 401k, you should match that immediately. That is free money, You want to take advantage of that. Look at your emergency fund If you can get your emergency fund up to that three to six months, quickly do that. If it's gonna take you a little bit longer, take some of that money and start investing it. if you're listening to this now, and you're not investing anything now. Your goal should be inside of a year that you are investing into your future and working to build money to work for you. that's why we talk over the order of what to do, So again, if we had to boil it down, savings, keeps you safe. It keeps you from derailing off the financial track and having an emergency come up that totally wipes out all the work that you're doing. investing is what grows your wealth. And we'll eventually give you freedom and decisions down the road. The goal is just knowing what order to put them in and then attacking that order and knowing when to do each. Thanks for listening today. I hope this was helpful. If it was, please make sure you're subscribing to our YouTube channel, or if you're listening to this as a audio podcast, whatever your podcast player of choice is, apple, Spotify, whatever. Please make sure that you are on there. If you, are able to leave us a review, reviews, help us get to more people, and so we can share our message and our knowledge with more people. Help more people break outta that paycheck to paycheck cycle. If you have friends and family that need some financial help or have a lot of financial questions, share this information with them. The goal is just to get. Info knowledge mindset into the hands of people so that they can make better decisions and fix their financial picture, so that they can not only get outta that paycheck to put your cycle, but we want everybody to grow their wealth. Thanks for joining today. My name's Jim. Bye everybody.