Bitcoin Halving Hits Next Week – What's Next?

Predictions and anticipation surge around Bitcoin's price in the wake of halving

Ric Edelman: It's Friday, April 12th. On today's show, the Bitcoin halving is coming next week, and here's the details about it. Plus, a conversation with a millennial. Well, April 16th is the projected date right now. That's next week, April 16th, Bitcoin's block mining reward is going to be cut in half. This Bitcoin halving occurs every four years, and it is a hugely anticipated event within the crypto community. 

This is not the first time, it's actually the fourth time that Bitcoin has experienced a halving. Here's how it works. According to the computer code that was written to created Bitcoin back in 2009, the number of Bitcoins that gets produced every 10 minutes gets cut in half every four years. When Bitcoin was first launched in 2009, every 10 minutes, more bitcoins come onto the marketplace. 

I'm not going to bother wasting your time explaining how those block rewards are created and the computer algorithm that makes it so, all you really need to know for practical purposes is that roughly every 10 minutes, back in 2009, 50 new bitcoins became available on the marketplace. It's kind of like mining for gold. Just imagine that every 10 minutes, an ounce of gold gets pulled out of the ground. I'm not going to bother going into details about how people find the gold, or the equipment they use to do it, or the expenses they incur in getting it done, and what do they do with the gold once they find it. All those are important details for sure, but all you really need to know is that every 10 minutes they pull an ounce of gold out of the ground. That's my analogy.  

Similar to Bitcoin, every 10 minutes, 50 new Bitcoins are produced. That was back in 2009, but the computer algorithm and software that was originally created, which is still in place today regarding Bitcoin, said that roughly every four years, the number of Bitcoins that are produced every 10 minutes gets cut in half. 

So in 2012 was the first Bitcoin halving, and suddenly, instead of getting 50 new Bitcoins every 10 minutes, you only get 25 Bitcoins produced every 10 minutes. That was followed by another Bitcoin halving in 2016, the number of Bitcoins produced fell from 25 to 12 and a half. That was cut again in 2020 to six and a quarter, and next week on April 16th, or give or take a day, number of coins being produced every 10 minutes will be cut from six and a quarter to three and an eighth. 

Now, whenever this happens, everybody in the crypto community asks a very basic question. What does this mean for the miners? In other words, if you're mining for gold and you know that every 10 minutes you're pulling an ounce of gold out of the ground, but suddenly, for reasons we're not going to get into, you're now going to pull not an ounce of gold out of the ground, but half an ounce of gold out of the ground. You've got to ask yourself, what's the implication on the gold miners? I mean, we all know that there's only one reason people are mining for gold. It's because gold is valuable. That the ounce of gold, we'll call it $2,000 an ounce, that's pretty terrific. You spend a lot of time and effort. And spend a lot of money to go find that gold, and you're rewarded every time you pull gold out of the ground. If you're pulling an ounce out, every 10 minutes you make $2,000.  

But suddenly, for some inextricable reason, you're not pulling an ounce out, you're only pulling out half an ounce. That means you're not pulling out $2,000 worth of gold, you're only pulling out $1,000 worth of gold. Your profit, your revenues, just got cut in half. 

But the cost of your operation didn't get cut. You're still spending the same amount of time and effort and money to find and mine that gold, but your profit of doing so just got cut in half. That's what's happening with Bitcoin. You were receiving six and a quarter Bitcoins every ten minutes. Now you're only getting three and an eighth. 

So the question people are asking is, what does this mean for the Bitcoin miners? What's this doing to their profitability? And it is because of this scenario that there has been an interesting observation regarding the price of Bitcoin. Since the number of Bitcoins produced is getting cut in half, in order to protect the profits of the miners, the price of Bitcoin has doubled. 

In other words, if you were getting one ounce of gold at $2,000 and now you're only getting half an ounce of gold, well, then that half ounce needs to be $2,000, which means a full ounce is now $4,000. And that is what has happened to Bitcoin after every halving in Bitcoin's history. And for this reason, a lot of people have been getting excited and enthused about the coming halving, which is now set to occur next week, and in the anticipation of the halving, the price of Bitcoin has already been rising on the attitude that, we don't have to wait for the halving to occur for Bitcoin's price to go up. We're going to buy Bitcoin now, knowing the price will rise later. And many argue this is a contributing factor to Bitcoin's recent price increase. It's up 60% year to date. And in fact, if you look at the historical performance of Bitcoin, you would discover that in the months prior to the halving, and the months following the halving, Bitcoin's price rises dramatically. 

Sometimes in the past, thousands of percent in a single year. So there's a lot of excitement in the crypto community about this, and this is one of the reasons people argue that the price of Bitcoin has been rising. We also have enjoyed the fact that we now have Bitcoin ETFs on the market for the first time ever, making Bitcoin more widely available to investors via financial advisors and the billions of dollars of inflows have also contributed to the price increase. 

So we've had two happy circumstances in 2024 regarding Bitcoin, the availability of the new ETFs and the widely anticipated Bitcoin halving, which only occurs every four years and now coming this coming week. But before you get too excited, you have to keep two facts in mind about whether or not the upcoming halving is truly going to create the big price appreciation that everybody's calling for. Number one, and perhaps this is the most important statement, past performance doesn't guarantee future results. Merely because Bitcoin's price rose in the prior halvings doesn't necessarily mean that it will with this halving. And here, is a big reason why it might not. It has to do with the halvings themselves. You see, back in 2009, if you were getting 50 Bitcoins every 10 minutes, you have to remember that at the moment in 2009, Bitcoin was brand new. So, if you suddenly produced 50 Bitcoins every 10 minutes, pretty soon, you had dozens, hundreds, thousands, then tens of thousands of bitcoins and when the first halving occurred in 2012 and the mining reward was cut from 50 bitcoins to 25, that was a huge implication. 

A massive reduction in mining reward from 50 to 25 at a time when there were relatively few bitcoins available in the marketplace. But you fast forward now to 2024? At this point, 95% of all the bitcoins that will ever be mined already have been mined. They're already in the marketplace. And we aren't producing 50 every 10 minutes, we're only producing 6 and change. 

And starting next week, 3 and an eighth. In other words, the cut from 6 to 3 isn't nearly as significant. As cutting from 50 to 25, especially when you consider that of the 21 million Bitcoins that will ever be mined, 19 million of them already have been. So is the having as big a deal today as it was in the past? 

This is an open question, and we don't know the answer. Many people in the crypto community continue to believe that, yes, it is going to be an issue. It continues to be an issue because the Bitcoin miners are still dependent on mining new Bitcoins for their profitability. And bottom line is their profits are getting cut in half because the number of Bitcoins they're mining is getting cut in half. 

That fact alone trumps everything else and is why you're going to see a doubling in Bitcoin's price. It's hard to refute the logic. My point is simple. Past performance doesn't guarantee future results. And the number of Bitcoins being mined on a 10 minute basis is only three and an eighth, whereas it used to be 50 or 25. 

And coming up on the show, a conversation with a millennial. 

----- 

Ric Edelman: You're listening to the truth about your future. Joining me on the program right now is Mary Dawson. Hello, Mary.  

Mary Dawson: Hey, Ric. How are you? 

Ric Edelman: So what are you doing here? 

Mary Dawson: I am here to talk to you about securing your future. 

Ric Edelman: And why am I allowing you to do that with me?  

Mary Dawson: Because I'm your favorite neighbor and best friend. 

Ric Edelman: You told my producer, that when he asked for your bio, you told him that your bio predominantly consists of, A, bothering Ric at family dinners. And B, keeping Ric up to date on all the latest pop culture news and trends.  

Mary Dawson: All, all accurate. How do you think we got here today?  

Ric Edelman: So, just for context, how old are you, Mary? 

Mary Dawson: 26.  

Ric Edelman: 26 years old. So, we could double your age and you would still be 10 years younger than me. So what do you want to talk about?  

Mary Dawson: Well, of course, the one and only Taylor Swift and how she's saving the US economy. I know that's one of your favorite topics. Well, also maybe diving into securing your future in your 20s and kind of creating a foundation now to set your set yourself up for success in the future. 

Ric Edelman: So let's talk about Taylor Swift first of all, and yes, I do know who Taylor Swift is.  

Mary Dawson: I'm proud.  

Ric Edelman: But no, I have not been to a Taylor Swift concert. I presume you have? 

Mary Dawson: Not a great financial decision to buy those tickets. But don't stress, I am going again to Miami and I've already been to once. 

Ric Edelman: All right, so  the first concert you went to was where?  

Mary Dawson: Vegas.  

Ric Edelman: So you flew from Virginia to Las Vegas to go see Taylor Swift in concert. How much did that event cost you?  

Mary Dawson: I don't want to say. 

Ric Edelman: I know you don't want to say, but you're here on the podcast and you're going to answer my questions, so... 

Mary Dawson: Okay. Our tickets we got with the code. So Ticketmaster sends out pre-sale codes and if you get them, you can get them at normal price. So for that, we were pretty good. We got our tickets for about $200. So not bad for Taylor Swift tickets.  

Ric Edelman: How much was the airfare?  

Mary Dawson: I think we had, I think it was like $600.  

Ric Edelman: And how many days did you stay in Vegas?  

Mary Dawson: Three nights.  

Ric Edelman: And how was, how much was the hotel?  

Mary Dawson: I believe it was around 300, $400 a night. 

Ric Edelman: So we're talking about a thousand bucks for the hotel? $600 for the airfare. How much did you spend on, you know, entertainment and food?  

Mary Dawson: I would say range from probably $200 a night, I'm guessing, from drinks and dinner.  

Ric Edelman: So we're going to call it since you think it's $200, I'm going to call it $400. So we're going to call that an easy thousand dollars over the three nights. And did you buy any swag, any merch from Taylor Swift when you went to the show? How much?  

Mary Dawson: I got a sweatshirt. I got a t-shirt. So, and I got my friend a t-shirt, so probably walk away with 150, $200 merch.  

Ric Edelman: So a couple hundred bucks there. So all told, it looks like we're at $2,000 plus. And you’re going again to see her where? 

Mary Dawson: Miami. 

Ric Edelman: So you'll spend $1,500 going to Miami to see Taylor a second time. And this is being known as Swiftonomics, you told me. So, I checked it out and let me just share with you some statistics that perhaps, you know, but I suspect many of the listeners of this podcast, since they are closer to my age than yours, may not be aware of.  

Mary Dawson: And that's why I'm here. I'm here to educate, you know, some pop culture trends.  

Ric Edelman: Thank you, Mary. I appreciate it. Forbes says that Taylor Swift is now the second richest self made woman in US music history. She has conducted 140 concerts in 2023 and will have by the end of 2024. 140 concerts, 54,000 fans, attending each concert on average at an average ticket price of $254. Now, as we know, fans themselves are spending a lot more. That average ticket price is when you go through Ticketmaster. These shows are grossing $13 million a piece. That's a grand total of $300 million that Taylor Swift is generating from ticket sales alone, plus another $1.8 billion in sponsorships and merchandise sales. One study says that in Colorado alone, when Taylor Swift did two concerts in Denver, the state's GDP rose $140 million. The Federal Reserve Bank of Philadelphia says that Taylor Swift's tour stimulated travel and tourism in the Northeast region when she was there last May. It produced the strongest month for hotel revenue in the city since the pandemic. Las Vegas said the same thing. Chicago says they set a record for occupied hotel rooms when she was there, with a 97% occupancy. $4.6 billion in consumer spending injected into the economy, the world of economics is now Swiftonomics. And your point to all of this is? 

Mary Dawson: She's saving the US Economy 

Ric Edelman: As opposed to Joe Biden saving the US Economy. What else do you want to talk about?  

Mary Dawson: I have a bunch of people that always asked me, and I don't know why they asked me, is always what's a good credit card? What credit card should you be getting? And I'm like, there is so much information out there. There's credit card information overload.  

Ric Edelman: So these are friends of yours, people in your cohort, in your mid 20s, asking you for financial advice? 

Mary Dawson: I don't know why, I don't know why, don't ask me... so I'm asking you. so I can actually tell them. But there's so much information out there being like should I get one based off what airline I use? Should I get one based off if I get free precheck? Should I get one based off that they give me free uber eats? But I don't think that's really what we should be looking for.  

Ric Edelman: I want to how many credit cards do you have, Mary?  

Mary Dawson: I have two.  

Ric Edelman: And how did you choose them?  

Mary Dawson: First one was what I got when I was a teenager. It was a USA card to kind of start creating my credit score. And the second one was a Marriott Bonvoy card that my dad referred me to because he wanted the free referral points. And the way they set it up was that my allowance was through that credit card. So they maxed it out like a certain number. I wasn't able to spend over, and that's how they would pay it off each month. So they would start building my credit score.  

Ric Edelman: So your parents transferred your allowance into the card instead of giving you the cash. Do you ever get cash from anybody?  

Mary Dawson: No, but I always do carry cash. 

Ric Edelman: Why?  

Mary Dawson: Because you never know if you need it.  

Ric Edelman: What might you need it for?  

Mary Dawson: Sometimes, like, you go to get gas, and the gas pump's credit card's not working, you need cash. I always think it's important to at least just have 50 bucks on you for emergencies.  

Ric Edelman: That's I assume an uncommon trait among friends of yours? 

Mary Dawson: Yes. They're always like, I'll just Venmo.  

Ric Edelman: Venmo versus PayPal?  

Mary Dawson: Yes, always Venmo.  

Ric Edelman: Why?  

Mary Dawson: Don't know why. To be completely honest, I do not know why.  

Ric Edelman: Do you have a PayPal account?  

Mary Dawson: Nope.  

Ric Edelman: You know they're both owned by the same company.  

Mary Dawson: I did not.  

Ric Edelman: So let's go back to the credit card conversation. How do you choose a credit card? It is entirely depending on your spending habits. Some cards have a low annual fee or even zero where you have, you have the card, you use the card at no cost and they charge you interest for the balances that you accumulate that you do not pay off at the end of the month. Other cards have a very high annual fee, but the interest rate is much lower. So it really depends on the way you use the card. Here's the ideal way. The ideal perfect way of using a credit card is that you get a card that is free. There's no annual fee. You use the card for purchases. And as soon as the bill shows up at the end of the month, you pay the bill in full. You don't make the minimum payment or a partial payment. You pay it off in full. By doing so, within the grace period of the bill itself, meaning within just several days, you are not going to incur any interest expense. This in other words, gives you free use of the card. You're not paying an annual fee and you're not paying any interest. That's the best way to do it. Most people don't do that. Most people, instead of paying the bill in full, they make the minimum payment required. In fact, if you notice on the credit card bill, the minimum payment required is a very big number on the page. The total amount owed is a much smaller number and harder to find because the credit card company doesn't want you to pay the bill off in full. They want you to make the minimum payment so they can charge you interest. And the interest is going to be 15, 18, 24 percent, almost as high as 30 percent, just below 29.9 percent is going to be the maximum interest a credit card charges. When you go beyond that, you get into usury laws that gets them in trouble with the federal government. So some of these cards are going to charge 25 to 29 percent in interest, and that's how they make their money. So you don't want to incur that massive amount of interest. So you should, bottom line is, not use a credit card unless you know you can afford to pay it off at the end of the month. Too often people are not doing that because studies have shown that when people make purchases with a credit card, they spend more than if they're using cash partly because they're limited by the amount of cash in their pocket. You've got 50 bucks your friends have less. Also because cash feels like real money. Plastic is just a piece of plastic. It doesn't really feel like you're spending anything. And people forget by the 20th of the month that they had already used the credit card 10 times earlier in the month, and they don't realize what the current balance is that they've racked up because they've gone from store to store and bar to bar and restaurant to restaurant, and they are shocked at the end of the month when the bill shows up as to what the total of balance is on the card, and even if they wanted to pay it off in full, they can't afford to. Forcing them to carry a balance into the next month, and all of a sudden, they're not paying interest. And if they don't pay the bill off by the end of the second month, now they're going to be paying interest on the interest. And it becomes a downward spiral to debt and right now $1.2 trillion in total credit card debt in this country, exceeded only by student loan debt and mortgage debt.  

So this is a big deal and why your friends need to pay really close attention to how they're doing this. But what I just described is the ideal. Zero card cost and zero interest expense because you're paying it off in full every month. A couple of other pieces of fine print, Mary, you need to be aware of. Number one is that cards offer, in many cases, some array of benefits. They'll give you discounts on travel. They'll give you access to a lounge at an airport. They will give you cash back. You can use the cash back in a restaurant or in a supermarket or Uber Eats as you suggested, etc. So what you have to decide are two things. What's the percentage of the cash back? Obviously, the bigger percentage you get back, the better. It's like a rebate or a discount on your purchase. But more specifically, what are the terms and conditions of the cash back? In other words, some cards will give you a 5 percent cash back. But only on gasoline. Well, if you don't drive very much, that's not really of huge value. If you aren't using Uber Eats, a cashback on Uber Eats does you no good at all. So you want to make sure that the cashback program is something you'll truly use and use often. That's the first point. The second point is the comment you made earlier that you got a credit card at age 16 in order to build your credit. That's a really good idea, to build a credit record. When you go to buy a car, most people can't afford to pay cash. They're going to get a car loan. When you go to rent an apartment, the landlord isn't going to rent to you unless you have demonstrated a history of paying your bills on time. If you go to buy a house, you're certainly going to need to get a mortgage. And similarly, you're going to have to demonstrate credit worthiness. So building a credit record is really important, but you have to recognize something really important. If you get a credit card, charge items, and then pay it off at the end of the month, and do that consistently, you're not building a credit record. You're building a payment record. That's good. That's helpful. Companies want to know that you have a history of paying your bills on time. But what they really want to know is that you pay your debts on time. So if you use the credit card and pay it off in full every month and you're never paying interest, you're never actually borrowing money. You're not actually building a credit record, which means it's a limited utility in proving to future potential lenders, like car companies or home sellers, that you are trustworthy when it comes to borrowing money. Because the use of a credit card isn't really borrowing. Debit cards have the same problem. A debit card isn't a loan either. You're just actually debiting money from your own bank account. You're not borrowing from anyone. So you're not really using, you're not really generating any credit history by using a debit card. It's convenient. It's safer than carrying cash, but it doesn't really solve the problem.  

So what you might want to do, and this is counterintuitive, is actually go to a bank and ask for a loan of $2,000 that will be repaid over one or two years, that will cost you 5 or 10 percent in interest. Bank loans are cheaper than credit card loans. And knowing that you are actually willfully incurring an interest debt, you're doing so in order to build a true credit record. By paying off that bank debt on schedule every month for 12 months or 24 months, you'll be demonstrating to the credit industry that you are mature and responsible and that you incur debt, but then you pay them off. You take the $2,000 that you borrow from the bank, put it back in the bank, earning 5%, you lose money on the deal, not very much, or... 

Mary Dawson: Could you borrow the $2,000 and go to the Taylor Swift concert.  

Ric Edelman: Or you could do something incredibly stupid and foolish and spend the money on a Taylor Swift concert. It's better than using your credit card to do it, I'll give you that. So that's what you should tell your friends. They need to pay attention to whether they're going to pay the balance off in full. If so, they don't care what the interest rate is, the bank charges, they'll never pay it. They should go for a free credit card. On the other hand, if they're going to carry a balance month to month, they should seek a credit card with as low an interest rate as possible. And who cares what the annual fee is? That'll be trivial in comparison.  

Mary Dawson: So is there any truth to what they always say that your ratio, how much? 

Ric Edelman: There are lots of ratios. There is a debt-to-income ratio, that is really important. What a creditor is going to look at if you're looking to borrow money to get a car loan, or if you're looking to borrow money to get a home loan, the lender is going to take a look at your total income, going to take a look at your total outstanding debts. And that creates a ratio. For example, let's say that you have a hundred thousand dollars in income and this car is forty thousand dollars that you're buying and that is a ratio a hundred thousand to forty thousand that gives you a five-to-two ratio. That number is something they pay a lot of attention to; in other words everybody pretty much acknowledges, I'm willing to lend you money, it's pretty good likelihood you'll pay me back, but if I lend you so much money, it'll overwhelm you and you won't be able to pay it back. So I only want to lend you as much as you can afford to repay. So how much money you already owe other people matters. As I'm looking to give you a loan. So the mortgage lender wants to know about your car loan and your student loan and your credit card loan, because the more you owe to all of them, the less the mortgage lender is going to be willing to give you. So you do want to demonstrate that you have had debts. You have paid them off. You have current debts and you are current with your bills, but you don't want to have so much total balance owed to all of your debts that it eliminates your ability to get yet another debt. It could interfere with your ability to buy a car or to buy a house. So within all of that, a couple of other huge rules apply. You must always make the monthly payment on time. You must never be late. You must never miss a payment or skip a payment and you must never ever bounce a check.  

Mary Dawson: What if you overpay? You, sometimes they always say like if you pay more and pay that your debt down faster. That sometimes that can hurt. Is that just a rumor?  

Ric Edelman: It can hurt because the lender is in business to provide loans to people and they are building a business model on how much money they're lending, the interest rate they're charging, what the minimum payments are per month, and how much they're going to be receiving on a monthly basis. If you screw up their model by prepaying the loan, they're not going to be earning as much interest as they thought. The loan isn't going to last as long. They're going to end up with more cash available to re-lend than they were anticipating. You can kind of mess up their business model and they will ding you for that. If you are making a promise, say with a car loan, that you are going to have monthly payments for five months or for five years, at $500 a month, they want you to make the payments of $500 a month for five years. They don't want you to prepay it. Same thing with a mortgage loan. If you have a 30 year mortgage, they want you to make payments for 30 years. They know that the loan won't really last that long. You'll likely sell the house, and when you do, you pay it off. But they really don't like the idea of prepayments to a big degree and they could generate an adverse impact on your credit record. Doesn't always happen, the degree to which it happens may not have a huge impact on your credit score, I wouldn't be terribly worried about it. At the end of the day, if you're making a series of payments to a high interest loan, pay it off to get rid of that high interest. That's a better deal than tolerating it in order to avoid the potential ding for prepayments. 

Mary Dawson: So is there something like, when you were my age that you wish you did, like a $2,000 loan right now to start creating a higher credit score? Or is there something else that you wish you did today?  

Ric Edelman: There were a lot of mistakes that I made at your age. Let me ramble off several... not contributing to my employer's retirement plan to the maximum that I was permitted pretax. You have a 401k where you work?  

Mary Dawson: Yes.  

Ric Edelman: And you're contributing to it?  

Mary Dawson: Yes, maximum.  

Ric Edelman: The maximum amount that they allow, or the maximum amount pre-taxed?  

Mary Dawson: Maximum amount allowed pre-taxed. 

Ric Edelman: That's a great approach. So you should be contributing the maximum to your retirement plan at work regardless of the employer match that's free money, that's totally separate. By you contributing the maximum pre-tax you will hit the full matching contribution they offer because you contribute will always be bigger than what they do. The mistake that I find people making, the mistake I made when I was your age, is that I didn't contribute the maximum that I was allowed. And as a result, I wasn't accumulating as much wealth at an early age as I could have been. So contribute the maximum pre-tax. And the reason I emphasize pre-tax is that if you contribute more than that, which you are allowed to do in many cases, you're not getting any particular tax benefit for doing so. And therefore, there's not a really particular incentive or motivation for doing your saving inside the 401k. You might as well do it elsewhere where you don't have the rules and restrictions of the employer plan. So contributing 100 percent of your availability in a pre-tax account is great. Where did you invest the money? Once you put the money into the plan, what investment options did you pick?  

Mary Dawson: It's a bunch of different funds. I just picked the classic S&P 500 mutual fund.  

Ric Edelman: 100 percent into the S&P 500?  

Mary Dawson: I did 50 in the S&P, and then I did 50 in the European market fund.  

Ric Edelman: So, a foreign stock fund? 

Mary Dawson: Yes.  

Ric Edelman: So 100 percent of the money, however, is going into stocks.  

Mary Dawson: Yes.  

Ric Edelman: That, again, is perfect. Too often what we find is that people choose other investment options, such as bonds. Or a fixed account or a money market account, which are guaranteed in many cases. And that's what people focus on is the guarantee. They, however, don't realize that they are earning as a result of far lower rate of return over the course of their career than what they're likely to get from stocks. So choosing stock funds, 100 percent of your contributions, makes a perfect amount of sense for somebody your age since you're not going to touch the money for 40 plus years. So that makes a great deal of sense as well. So, those were a couple of mistakes I made... I didn't contribute the maximum. And then I made the worst mistake of all. After I left my first job, which I got straight out of college, two years later, left that job, had some money in the retirement plan at work, and they said to me upon my last day there, a classic question, what do you want us to do with the money in your retirement plan? I said, what are my options? And they said, well, you can leave it here. Or you can move it to your next employer, or we can just cut you a check and you can have the cash. And I said, well, how much cash is it? And they said, about $800. And I said, sold. And I took the cash, paid taxes plus a 10 percent penalty. So I lost almost half of it to taxes. And then spent the money on, I have no idea what, probably my generation's version of Taylor Swift t-shirts. So the big mistake I made is that I didn't save early enough, I didn't save as much as I could have, I didn't focus on the long term and I squandered probably 10 years worth of accumulated savings and compound growth that I wish I hadn't done. And I think it's fair to say that just about everybody who's my age would have the same lament and regret and would strongly encourage their children and grandchildren not to make that same mistake. So I'm really glad you've avoided it. How is it you avoided that though, Mary? 

Mary Dawson: So many family dinners, you know, that have, you've engraved it in my mind. 

Ric Edelman: So was it until those dinners you were not contributing at all to your future retirement savings?  

Mary Dawson: No, I would say, well... how long have we known each other now, 10 years? 

Ric Edelman: Yeah, you were barely in high school, I think when we first met. In K through 12, you didn't have any school teachers teaching you about money? 

Mary Dawson: No.  

Ric Edelman: Does the subject of money and savings and investing come up with your friends?  

Mary Dawson: Not really, I think it's a sticky topic... I don't think a lot of people like to talk about it. 

Ric Edelman: So people are intimidated by a subject that they don't know much about... are they afraid that they're not doing as well as their friends? 

Mary Dawson: It's more about like, oh, what are we doing tonight? What bar are we going to? 

Ric Edelman: So you’d rather focus on, what are we doing this weekend? As opposed to what are we doing in 50 years?  

Mary Dawson: Exactly. And I don't think it's a conversation that people bring up, which then gets them in trouble in the next 10 years.  

Ric Edelman: And is it partly surrounded by the fact that, hey, you're in your twenties. You got plenty of time to deal with this later.  

Mary Dawson: I think that's a mindset that people have. 

Ric Edelman: And how about the fact that you're only in your 20s, you're new in your career, you're doing well, but you're not doing as well as you will be doing 20 years from now. You're going to be making a lot more money in the future and a lot more capability of saving then. So we'll worry about it later. Is that a pretty much common attitude? 

Mary Dawson: I would say so.  

Ric Edelman: Do you think it's a valid attitude?  

Mary Dawson: I think I can get you in trouble, I would say, because today doing what you do right now can really set you apart in the future by having a compound in your early 20s and constantly accruing more on top of what you already accrued. Can really help you in the future. 

Ric Edelman: Well, I can, I can imagine if you're at a bar with your friends and you're drinking away and having a great time and suddenly you start talking about the subject of money and the need to eliminate debt, reduce debt, increase savings.  

Mary Dawson: It is a definitely good bar conversation. 

Ric Edelman: Oh, I don't know because how enticing would that be to go buy another margarita. I mean, at 15 bucks, is that what margaritas cost today? How much?  

Mary Dawson: Probably around 15 bucks.  

Ric Edelman: So I can see that these conversations are incompatible. How can we talk about the desire to reduce student loan debt and pay off other debts and increase savings? But let's order another beer.  

Mary Dawson: You got me there.  

Ric Edelman: So which is why I think you're not having that conversation about money very often.  

Mary Dawson: No.  

Ric Edelman: By the same notion I don't think you're going to be talking about how to lose weight while in a restaurant eating nachos.  

Mary Dawson: Definitely not.  

Ric Edelman: Yeah. Okay. And you're certainly not going to be talking about how to improve your credit record while shopping at Nordstrom's.  

Mary Dawson: I would say not. 

Ric Edelman: So maybe you need to have an elimination of cognitive dissonance where you are now paying attention to money on an ongoing persistent basis where it is guiding the decision-making process and all aspect of your daily life, from going to Starbucks to paying eight bucks for a cup of coffee... 

Mary Dawson: Did you see me there this morning? 

Ric Edelman: How often do you go to Starbucks?  

Mary Dawson: I don't want to answer that question.  

Ric Edelman: Come on, how often do you go to Starbucks?  

Mary Dawson: Probably three times a week, at least.  

Ric Edelman: Which means five times a week. And how much do you spend each time you go?  

Mary Dawson: Like five dollars.  

Ric Edelman: But there's more to life than money isn't there?  

Mary Dawson: Yes.  

Ric Edelman: And this is one of the big concerns that your generation has raised about my generation. My generation tends to talk about the importance of saving and don't spend money frivolously and will tease you and argue with you about your Taylor Swift concert twice. But on the other hand, your generation will respond by saying, there's more to life than money and why delay pleasure and benefit throughout an entire life merely to accumulate wealth by the time I'm in my 70s where I'll be older and infirm and unable to enjoy myself? Why delay that round the world cruise into my 70s when I can enjoy that in my 20s and 30s? That spending money isn't necessarily bad if it's enriching and fulfilling as part of a broad life. It's the whole work-life balance conversation that my generation has failed miserably at because there is no work-life balance. There is only work. There is no life balance. Your generation insists on working from home because it affords a life balance to a much greater degree than commuting two hours into the city and spending a gazillion dollars on those commuting expenses, parking, lunch at the office and dry cleaning. So I think you're right. I think your generation is right about that fact. I'm not going to beat you up too badly about spending $2000 going to see Taylor Swift twice. What I will, however, complain about is when that's all that your generation is doing. That you are not also saving for your future. You're not also setting aside cash reserves. You're not also creating a financial plan and thinking ahead to the future. Contemplating marriage, the cost of children, owning a home, and other elements that are a natural part of life as an adult and affluent society. So my point is simply that you don't need to create a budget. You don't need to focus too heavily on how you spend money, provided you save first. Once you are saving the proper amount of money to achieve your future financial goals, you can then spend the rest of your money however you want, completely guilt free. Does that make sense?  

Mary Dawson: How do you decide what percentage is what you need to be saving for your future goals? Because your goals can constantly change.  

Ric Edelman: That's why you hire a financial advisor.  

Mary Dawson: At what point in your life do you think you should get one? 

Ric Edelman: Yesterday.  

Mary Dawson: Yesterday, okay.  

Ric Edelman: When should you go to a doctor?  

Mary Dawson: Yesterday.  

Ric Edelman: Right? The sooner you begin, the better off you'll be.  

Mary Dawson: Mm hmm.  

Ric Edelman: All right final point. You said you wanted to talk to me about girl math. 

Mary Dawson: Oh, man, have you heard of it?  

Ric Edelman: Vaguely. So what is girl math?  

Mary Dawson: It's basically just three common principles put together to get you girl math. So, cost per wear, sunk cost, and then perspective cost. But the idea is basically... so I bought those Taylor Swift tickets six months ago. The day of the concert that cost my head, it's gone. I don't remember it. That was six months ago. It was a sunk cost. That outfit I bought for it. Well, I'm going to wear it to concert. Well, I have an event the next week. I'll probably wear it again there. And maybe some other time. So if I'm going to get three wears out of it, it's definitely worth its cost. And then, perspective cost of it, it’s worth it. 

Ric Edelman: So you're talking about behavioral finance, actually, so let me ask you a question. You go into a department store. You're looking at a dress. It is $800, but it is on sale for $500. If you were to buy it... would you go home and say to your girlfriends that you paid $500 or that you saved $300? 

Mary Dawson: I'd probably say I saved 300 bucks. That's, that's girl math for you. 

Ric Edelman: It's called mental accounting, where you are rationalizing and justifying the expense. In the case of I'm going to wear this dress three times, not just once, you're amortizing it in an effort to say, well, it was a $300 dress, but since I wore it three times, it was only a hundred bucks each. So why do they call it girl math? That would, strike me as condescending, insulting, and incredibly sexist. 

Mary Dawson: It can be. 

Ric Edelman: Mary Dawson, whose claim to fame on her resume is bothering Ric at family dinners. 

Mary Dawson: Yes.  

Ric Edelman: Thanks for joining me on the podcast.  

Mary Dawson: Thank you for having me. I had a great time and a lot of fun. I hope you did too. 

----- 

Ric Edelman: So halving is coming up. It's going to be an exciting day for crypto, and 2024 is expected to be a continuing exciting year for it as well. It's the Bitcoin halving. It's coming next week. 

----- 

Subscribe to podcast updates: https://form.jotform.com/223614751580152 

Ask Ric: https://www.thetayf.com/pages/ask-ric 

----- 

Follow Ric on social media: 

Facebook: https://www.facebook.com/RicEdelman 

Instagram: https://www.instagram.com/ric_edelman/ 

LinkedIn: https://www.linkedin.com/in/ricedelman/ 

X: https://twitter.com/ricedelman 

YouTube: https://www.youtube.com/@RicEdelman 

----- 

Brought to you by: 

Invesco QQQ: https://www.invesco.com/qqq-etf/en/home.html 

Schwab: https://www.schwab.com/ 

Disclosure page: https://www.thetayf.com/pages/sponsorship-disclosure-fee 

-----