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>> Ramsey: THE RATE OF RETURN,
OR THE INTEREST RATE, THAT YOU
GET ON YOUR MONEY IS VERY, VERY
IMPORTANT, AS WELL.
IT'S SOMETHING TO LOOK AT.
SEE, HERE'S AN EXAMPLE OF THAT.
IF YOU TAKE $1,000 AND YOU PUT
IT IN THE BANK AND YOU MADE 6%
ON YOUR MONEY AND YOU PUT IT IN
THERE AT AGE 25 AND YOU LET THAT
COMPOUND INTEREST WORK, YOU COME
BACK 40 YEARS LATER AT 6%, THAT
$1,000 WILL BE $10,000.
IF YOU DOUBLE THE RATE OF RETURN
FROM 6% TO 12%, IT DOESN'T
DOUBLE THE RESULTS -- DOES
IT? -- 'CAUSE COMPOUND INTEREST
IS A MATHEMATICAL EXPLOSION.
1 PLUS 1 DOESN'T EQUAL 2.
SO WHEN YOU GO FROM 6 TO 12, WE
DON'T GO FROM $10,000 TO
$20,000.
WE GO FROM $10,000 TO $93,000.
AND WHEN YOU TRIPLE IT AND YOU
GO FROM 6 TO 12 TO 18, IT
DOESN'T GO FROM $10,000 TO
$20,000 TO $30,000.
IT GOES FROM $10,000 TO $93,000,
AND YOU MADE 18% ON YOUR MONEY.
YOU'D HAVE $750,000!
"DAVE, YOU CAN'T GET 18% ON YOUR
MONEY.
YOU KNOW THAT."
WELL, I SORT OF DO.
I'VE GOT SEVERAL MUTUAL FUNDS
THAT HAVE AVERAGED OVER THAT FOR
20 YEARS.
I REALLY DON'T THINK THAT'S A
REASONABLE AMOUNT TO EXPECT IN
THE COMING YEARS, AND I DON'T
RUN MY CALCULATIONS FOR MY
FUTURE BASED ON 18%, BUT I'VE
ACTUALLY OWNED SOME CONSERVATIVE
INVESTMENTS THAT HAVE DONE THAT.
WE'LL TALK ABOUT THAT IN ANOTHER
LESSON, BUT I HAVE FOUND A PLACE
WHERE YOU REALLY CAN GET 18% ON
YOUR MONEY.
IT'S, UM...
CALLED PLASTIC SURGERY.
[ CHEERS AND APPLAUSE ]
BECAUSE MATHEMATICALLY NOT
PAYING OUT 18% IS SUSPICIOUSLY
LIKE RECEIVING IT.
[ LAUGHTER ]
YOU SEE, WHAT HAPPENS TO US IS
THIS.
YOU KNOW, WE TAKE THE $1,000
DOWN TO THE BANK, AND WE OPEN UP
A BANK ACCOUNT.
AND AS WE DO THAT, WE PUT THE
KEY IN THE ENGINE OF THE MOST
SOPHISTICATED AND WELL-FUNDED
MARKETING MACHINE EVER KNOWN TO
MAN AND WE START THE MACHINE.
THE MACHINE IS CALLED THE
FINANCIAL INSTITUTION.
THEY SPEND MORE MONEY SELLING
THEIR PRODUCT AND ARE MORE
SOPHISTICATED AT SELLING THEIR
PRODUCT THAN ANY OTHER INDUSTRY.
THEY ARE ABSOLUTELY PROFESSIONAL
MARKETERS.
THEY ARE VERY, VERY GOOD AT WHAT
THEY DO.
SO IF YOU GO OPEN A SAVINGS
ACCOUNT, BY THE TIME YOU GET
HOME, IN YOUR MAILBOX, IS ONE OF
THESE, ISN'T IT?
AND IT'S IN THERE, AND YOU GOT A
LITTLE LETTER, AND IT SAYS,
"WELCOME TO THE FAMILY.
WE WANT TO BUILD A RELATIONSHIP
WITH YOU."
AND I GOT THAT THING OUT, AND I
READ IT, AND IT SAID 18%.
AND I WENT, "NOBODY BORROWS
MONEY AT 18%.
THAT WOULD BE STUPID.
I'M NOT GOING INTO DEBT AT 18%."
I WAS IN MY 20s, AND I TOLD MY
WIFE -- I SAID, "HONEY, I GOT
THIS STUPID CREDIT CARD AT 18%.
WE DON'T NEED THE THING, BUT I'M
GONNA PUT IT RIGHT HERE JUST IN
CASE THERE'S AN...
>> EMERGENCY!
>> Ramsey: OH, NO.
YOU DID IT, TOO.
[ LAUGHTER ]
AND WE'RE SITTING THERE DOING
THE BILLS ONE WEEK, AND THERE'S
SWEAT ON THE UPPER LIP, AND
WE'RE FIGHTING, AND WE'RE NOT
GONNA MAKE IT, AND WE'RE GOING,
"OKAY, HONEY, I GOT A PLAN.
WE'LL EAT EVERY OTHER WEEK."
[ LAUGHTER ]
"WE'RE JUST BARELY MAKING IT,
YOU KNOW?"
ALL THE MONEY COMES IN.
ALL THE MONEY GOES OUT.
ONLY THE NAMES ARE CHANGED TO
PROTECT THE INNOCENT.
ANYBODY BEEN THERE BUT ME?
YOU KNOW WHAT I'M SAYING?
AND MONDAY MORNING, WE MAIL ALL
THE BILLS OUT, AND THEN THEY'RE
OUT THERE, FLOATING AROUND IN
THE MAIL.
AND ABOUT THURSDAY, I GO TO
START THE CAR, AND THE CAR WON'T
START.
[ SIGHS ]
IT'S GOT A BUMPER STICKER ON IT,
SAYS, "I OWE, I OWE, SO OFF TO
WORK I GO."
I'VE GOT TO HAVE THE CAR TO GET
TO WORK.
I MEAN, HOW AM I GONNA GET TO
WORK TO PAY THESE BILLS IF I
DON'T HAVE THE CAR?
STUPID CAR WON'T START.
IT'S A $422 ALTERNATOR.
SO WE TAKE THE TAHOE DOWN TO THE
MECHANIC.
TURNS OUT HE'S NOT A NONPROFIT
MINISTRY.
[ LAUGHTER ]
HE ACTUALLY WANTED TO GET PAID.
AND HE SAID, "WELL, JUST THIS
ONCE, WE'RE GONNA FIX THE
CAR..." 'CAUSE WHO KNEW THE CAR
WAS GONNA BREAK?
[ LAUGHTER ]
"...AND WE'RE GONNA PUT IT ON
THIS THING, 'CAUSE THIS IS
AN..."
>> EMERGENCY.
>> Ramsey: YEAH.
AND WE'RE SITTING THERE ABOUT
AUGUST, AND THE KIDS COME IN THE
HOUSE KIND OF LIKE THIS -- "DAD,
DAD."
[ LAUGHTER AND APPLAUSE ]
"DAD, DAD, WE'RE GETTING READY
TO GO BACK TO SCHOOL, AND, DAD,
THIS IS A PROBLEM.
DAD, WE'RE EITHER GONNA HAVE TO
BUY CLOTHES, OR YOU'RE GONNA
HAVE TO PAY FOR COUNSELING."
[ LAUGHTER ]
AND WE'RE GOING, "OH, NO!
THE CHILDREN GREW!
WHO KNEW THIS WAS GOING TO
HAPPEN?!"
[ LAUGHTER ]
SO WE GO DOWN TO TARGET, THAT
FINE FRENCH STORE...AND TAKE
CARE OF OUR CHILDREN AND BUY
THEM CLOTHING, 'CAUSE THEY
SURPRISED US BY GROWING.
[ LAUGHTER ]
WE HAVE NO MONEY, AND SO WE PUT
IT ON THIS, 'CAUSE THIS IS AN...
>> EMERGENCY.
>> Ramsey: I'M SITTING THERE IN
NOVEMBER, EATING MY THANKSGIVING
DINNER, AND ABOUT HALFWAY
THROUGH IT, I ALMOST CHOKE ON MY
TURKEY...
[ WHEEZES ]
'CAUSE I SUDDENLY REALIZE THAT,
THIS YEAR, CHRISTMAS IS IN
DECEMBER.
[ LAUGHTER AND APPLAUSE ]
ISN'T IT AMAZING, HOW CHRISTMAS
SNEAKS UP ON US, LIKE THEY MOVE
IT OR SOMETHING?
IT'S ALWAYS THERE.
IT'S NOT A SHOCK.
THAT'S WHERE IT IS.
IT'S DECEMBER.
WHY IS THIS A SHOCK?
AND THEN WE GET ALL STUPID,
RIGHT?
"OH, WE HAVE TO GET
LITTLE JOHNNY SOME PLASTIC
STUFF.
WE HAVE TO RUN DOWN TO
TOYS"R"THEM AND GET SOME PLASTIC
STUFF FOR LITTLE JOHNNY, 'CAUSE
LITTLE JOHNNY'S LITTLE
SELF-ESTEEM WILL BE DAMAGED IF
HE DOESN'T GET SOME PLASTIC
STUFF.
AND IF HIS LITTLE SELF-ESTEEM IS
DAMAGED, HE WILL KILL 87 PEOPLE
WITH AN AX.
[ LAUGHTER ]
AND HE'LL -- HE'LL BE IN THE
PRISON, AND THE PRISON
PSYCHOLOGIST WILL SAY,
'LITTLE JOHNNY, WHY DID YOU KILL
87 PEOPLE WITH AN AX?'
HE'LL SAY, 'BECAUSE I DIDN'T GET
AN ELMO WHEN I WAS 4.'
AND IT'LL BE ALL MY FAULT."
AND THIS IS HOW PARENTS THINK.
AND THE KIDS ARE GOING, "I JUST
WANTED AN ELMO."
[ LAUGHTER ]
AND SO WE GO DOWN TO THE MALL
WITH NO MONEY TO BUY PRESENTS
FOR PEOPLE WE DON'T REALLY LIKE.
[ LAUGHTER ]
AND 68% OF YOU -- THAT'S 7 OUT
OF 10 OF YOU -- WHILE YOU WERE
DOWN THERE, SHOPPING WITH NO
MONEY FOR PEOPLE YOU DIDN'T
LIKE, BOUGHT YOURSELF A GIFT!
[ LAUGHTER AND APPLAUSE ]
JUST 'CAUSE THEY MIGHT FORGET, I
GUESS.
I DON'T KNOW.
AND WHAT DO WE DO?
WE PUT IT -- WE PUT IT ON THIS
THING, 'CAUSE WE DIDN'T KNOW
CHRISTMAS WAS COMING, SO IT'S
AN...
>> EMERGENCY.
>> Ramsey: SO, WE'RE SITTING
THERE IN FEBRUARY.
THE BILL COMES.
THERE'S $1,000 ON THE VISA BILL.
WE YELL THROUGH THE HOUSE AT OUR
SPOUSE, "GET IN HERE!
WHO PUT $1,000 ON THE VISA?
WE WERE NOT GONNA USE THE VISA."
AND YOUR SPOUSE GOES, "UH, THAT
WOULD BE YOU."
[ LAUGHTER ]
AND YOU'RE GOING, "WASN'T ME --
IT WAS YOU."
AND YOU HAVE A GOOD VISA FIGHT.
WSHH! WSHH!
AND IF YOU HAVE A REALLY GOOD
ONE, YOU DO A FULL AUDIT ON THE
THING TO SEE WHO CAUSED THE
PROBLEM.
AND WHEN YOU DO THIS, YOU WILL
DISCOVER NOT THAT YOU BOUGHT A
REALLY NICE H.D. TV, NOT THAT
YOU BOUGHT A ROSEWOOD
DINING-ROOM SET OR WENT TO
HAWAII.
YOU WILL DISCOVER THAT LIFE
HAPPENED WITHOUT A PLAN, AND
VISA CAUGHT YOUR SLACK.
GUESS WHO HAD A PLAN.
>> VISA.
>> Ramsey: THINK ABOUT IT --
HERE'S WHAT WE REALLY DID,
FOLKS.
WE REALLY TOOK $1,000 OF OUR
MONEY, AND WE TOOK IT DOWN TO
THE BANK, AND WE LOANED IT TO
THE BANK AT 6%, IF WE GOT A
REALLY GOOD ACCOUNT.
AND THEN THEY LOANED US OUR
$1,000 BACK AT 18%.
NOW, THAT'S A BARGAIN.
[ LAUGHTER ]
THAT'S HOW BANKS MAKE MONEY.
I'M NOT MAD AT BANKS, BUT WHEN I
REALLY GOT STOPPED AND STARTED
THINKING ABOUT THIS, I THOUGHT,
"YOU KNOW WHAT?
THAT'S STUPID.
THIS ISN'T WORKING."
'CAUSE IF YOU LOOK REAL
CAREFULLY AT THIS CHART, YOU
WILL SEE THAT LITTLE RED ONE
OVER 6% THERE -- IT REALLY
DOESN'T REPRESENT A LITTLE RED
BAR.
IT REALLY LOOKS MORE LIKE YOUR
HOUSE.
AND THAT BIG ONE OVER 18% LOOKS
MORE LIKE THEIR BUILDING.
[ LAUGHTER AND APPLAUSE ]
SO WHEN SHARON AND I DISCOVERED
THIS, WE SAID, "HUNH-UNH.
WE'RE NOT PLAYING ANYMORE."
I DON'T LIKE THE GAME.
IT'S NOT WIN-WIN.
IT'S THEY WIN -- I LOSE.
I'M OUT. NO THANK YOU.
[ CHEERS AND APPLAUSE ]
WELL, A TEENAGER NEEDS AN
EMERGENCY FUND LIKE ANYONE ELSE.
HOPEFULLY, THOUGH, THE BIG
EMERGENCIES WILL BE COVERED BY
YOUR PARENTS.
BUT WHAT WOULD CONSTITUTE AN
EMERGENCY FOR YOU?
MAYBE SOME CAR REPAIRS, MAYBE AN
UNEXPECTED TRIP YOU WANTED TO
TAKE OR AN UNEXPECTED TRIP YOU
HAD TO TAKE WITH FAMILY OR
SOMETHING.
SO A LITTLE BIT OF MONEY --
MAYBE $500 -- WOULD BE A GREAT
EMERGENCY FUND FOR MOST
TEENAGERS.
SO, WHAT WE'RE SAYING, IN SHORT,
IS THIS -- IF THE WATER IN THIS
CUP REPRESENTS MONEY, WE NEED TO
PUT SOME MONEY IN THE SAVINGS
CUP.
IF WE SAVE MONEY FOR EMERGENCIES
AND THERE'S AN EMERGENCY, WE
JUST FIX THE CAR, RIGHT?
IT'S NOT A PROBLEM.
IF WE SAVE MONEY FOR RETIREMENT
AND WE GET READY TO RETIRE AND
WE WANT TO DO THAT WITH DIGNITY,
WE JUST RETIRE WITH DIGNITY.
IF WE SAVE MONEY AND WE WANT TO
BUY SOMETHING REALLY NICE, LIKE
A LEATHER COUCH OR A BOAT OR
SOMETHING THAT YOU REALLY
WANT -- YOU SAVE UP AND PAY FOR
IT -- YOU JUST BUY THE BOAT.
IT'S NOT A PROBLEM.
YOU WRITE A CHECK.
YOU GIVE THEM CASH -- WHATEVER.
YOU CAN SAVE MONEY FOR YOUR
KIDS' COLLEGE, AND THEN THEY
WOULDN'T GRADUATE LIKE MOST
COLLEGE SENIORS WILL GRADUATE
THIS YEAR, WITH TENS OF
THOUSANDS OF DOLLARS IN
STUDENT-LOAN DEBT.
BUT WE DON'T PUT ENOUGH MONEY IN
THIS CUP.
MANY PEOPLE PUT, AS WE SAID, NO
MONEY IN THIS CUP.
INSTEAD, WE HAVE THE TENDENCY TO
USE THIS CUP, THE SPENDING CUP.
AND WE TEND TO PUT ALL OF OUR
MONEY IN THERE, SO THAT THERE'S
NOT ANY.
AND THE PROBLEM IS, WHEN YOU DO
THIS, THAT WHEN YOU PUT ALL YOUR
MONEY IN THE SPENDING CUP, THAT
IT'S GONE.
[ LAUGHTER ]
[ APPLAUSE ]
ISN'T THAT COMPOUND-INTEREST
STUFF COOL?
BEN AND ARTHUR -- THESE ARE GUYS
THAT'LL TEACH YOU SOMETHING.
IT WORKS OVER TIME.
SO, HERE'S THE RULES -- GET AN
EMERGENCY FUND, ALWAYS PAY CASH
AND NEVER BORROW, DISCIPLINE IS
THE WAY IT HAPPENS, AND USE THE
80/20 RULE.
PERSONAL FINANCE, MONEY, IS
80% BEHAVIOR, 20% HEAD
KNOWLEDGE.
SO MAKE SAVINGS A PRIORITY, AND
YOU'LL WIN.