I learned personal finance in reverse.
It seems, at least to me, that the natural progression in personal finance land tends to be:
1. Get in a financial crunch
2. Have an epiphany
3. Concentrate on getting out of debt
4. Learn the language of corporate and institutional finance
5. Start investing for a good retirement
Some of those may be mixed and matched, but personal finance tends to come before investing. For me, finance came in reverse.
I’ve always been interested in money. When I was younger, I wanted lots of it. But it wasn’t because I wanted to spend it; it was because I learned quickly that money begets more money. Having money is, in many cases, a pre-requisite to having more money.
Elated as a youngster of having my own savings account, I was stoked at the possibilities for making money with money. The concept was mind blowing. I remember earning 5-6% per year on my savings (weren’t the 90s great?!), and I longed for the day that I could earn $1 in interest each bank statement, then $2, $3, etc.
The Breakthrough
A few years after stuffing my savings account full as a six or seven year old, the internet bubble was in full force. It was at this time that my dad, then a mortgage broker, would turn on the TV to check Treasury rates while I was in the room.
Ahh, beautiful Bloomberg. I didn’t know it then, but this would be a long trend toward nerding out on all things finance. I learned that day that the 10-Year Treasury bond could be used to extrapolate the next day’s interest rates. The difference between the two, my dad told me, was the “risk premium.”
Woah! This was all too much.
Then there were all those ticker symbols scrolling across the bottom. They were green or red, indicating a positive or negative movement for the stock that day. Up 1/16th, down 1/4th (remember fractional quotations? So old school!). These were huge, multi-national corporations which my dad explained could be purchased by ordinary people like me. I could own my share of some of the largest companies in the world.
Owning a multi-national? Sheesh! That’s 10x better than a savings account.
Evolution of Finance
Thanks to my dad for guiding me through what must have been months of non-stop, 24/7 questions about the financial markets. I spent the years that followed learning everything I could about money and investing.
Really, I’m glad to have learned finance in reverse. In working first with numbers in the billions, I realized that it never really made sense to set your sights too low. The United States has a GDP worth $14 trillion. I need nothing more than a slice of this giant pie to have it all.
I also learned that the biggest difference between rich and poor is not annual income. It’s how they choose to use it. With the simple equation we all learned in middle school algebra, you can make every purchasing decision in the word. Rate of interest/100 + 1^number of investment periods. The long-run cost of any spending decision made today is massively huge.
Patience offers the best return on investment.
Strength in Naivety
Truthfully, naivety may be my best attribute. I haven’t yet had to experience paying for a mortgage, nor have I had the burden of debt on my shoulders.
Being able to think about these concepts without experiencing them is a little like living life in a bubble.
Naivety has enabled me to accept risks in an abstract sense. Naivety is the reason why, even though I don’t have a mortgage, I know I’ll never pay it off. It’s also why I tend not to be put off by risk, whether I’m outrunning campus police, or shopping around for supposedly “high-risk penny stocks” for my investment portfolio.
I’m glad that I didn’t have to learn personal finance the hard way. I’m happy to have started young before I could accumulate negative experiences with the many personal finance evils. I won’t be restricted by a fear of debt, or a necessity to budget. I haven’t yet had to enroll in the school of hard knocks (knock on wood!).
Going forward
I look forward to sharing my experiences on my blog, and growing with the Yakezie network. I think we can all agree that the world needs more people to make finance cool again. Yakezie is doing just that.
It’s encouraging to see so many Yakezie blogs sharing their money stories from all kinds of perspectives. I look forward to meeting every member and challenger here.
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It’s 2015 and the bull market continues. Make a decision to be wealthy by taking control of your finances!
Regards,
Sam
Neat post JT. You’re lucky that your dad was able to teach you about money at such a young age, and that you took those lessons to heart. It sounds like you’ve been able to avoid many financial traps that so many others fall into. Hope you can keep it that way!
Hi JT!
First off–I just went to the zoo two weekends ago (with free tickets, ofcourse:)), and I saw a green mamba!!!!
Anyhow, welcome to the Yakezie. I really like the different perspective in your article. I can relate in that I have always had a firm head on my shoulders, patience, and a long-term view towards finances (and life in general). However, both of my sets of parents declared bankruptcy while growing up, and so I have also had a fear of money/debt/etc. that was not from any of my own decisions. Honestly, even though my financial past is spic and span clean, I still carry that fear around with me today.
Hi JT,
Let me say that I’ve blogged about your online activities before I even knew you existed! You are playing what I consider a perfect entrepreneurial game and it will be interesting to see where you take it.
Good luck new Yakezie member friend :)
Welcome JT! I was very similar to you in that I was always interested in money. I did a few dumb things, but nothing to put me in a financial bind.
Hey JT- Love your backwards approach as I did the same thing! I was also fortunate enough not to have to start out fighting a mountain of debt. Good change of pace to hear personal finance from a different perspective.
Money Mamba is one of my favorite blogs, and I remember the story of your chase with the campus police. ;) Thanks for making finance entertaining and fun! :)
Great to see your intro post JT – and I think you’re one of the lucky ones that learned the cheap way about personal finance. Glad to hear it and hopefully you can teach others how to learn about money without mistakes!
You are extremely lucky and smart to learn about personal finance at such young age. You personify – the earlier you start, the better off you’ll be. We’ll teach our kid about saving and investing at a young age too. Thanks for sharing!
Batching this because I have a tendency to double post:
@ Mike – I’m definitely lucky to have access to someone who could answer my questions and keep up the excitement in learning about finance. Eventually I outgrew his answer bank (and his patience!) but having someone available to answer my questions was awesome. I couldn’t repay him enough for it.
@ Frugal Confessions – Of course free tickets! Ha, “Mamba” was actually the result of searching for a word that would work after “Money.” I searched google for animal names that start with M, and figured that Mongoose and Manatee probably weren’t going to cut it. Mamba it was!
@ MoneyReasons – Hmm…interesting. I’m not sure if that’s a general reference to me/elements of my business or if its direct, but depending on the reference you might see some changes to a few things soon. ;) Thanks for the encouragement! Best of luck to you as well!
@ TCI – I’ve screwed up too; we all mess up. Make the losses smaller than the wins, though, and you don’t have much to worry about. :)
@IIW – Thanks, man. And thanks for letting me guest post a while back. It was fun, and to date it’s been my only one. Keep in touch; I enjoy your perspective on money/political matters.
@ Jeff – That’s the goal! If personal finance is all about saving/managing your money, then it shouldn’t cost too much to learn, right?
@ Retireby40 – I am very appreciative of the luck I’ve had. There really is a lot to starting early and hopefully avoiding unnecessary mistakes. I’m sure your children will grow up to be real estate magnates if you catch them early enough, LOL.
Great to read your intro post. I think you’re really luck to have learned a lot starting at a very young age, but the thing that stands out to me is how you seem to be able to identify how others seem to learn about personal finance (and investing) through other situations in life…such as their own experiences.
Really, while sometimes direct experience can be invaluable, it’s often better to avoid certain mistakes and truly, genuinely learn vicariously through others experiences.
Great post, it’s so great to learn something so in depth when you’re young, I’m sure you were WAY ahead of people your age (and many of those 40 years your senior)!
JT, I really like what you’re doing with your blog, but I really want to commend you on your blog commenting and twittering skills. You are definitely one of the best commenters I get and one of the most interesting people I follow on twitter. Keep it up!
I’ll have to agree here. JT’s comments in general are always quite thoughtful in either argument or direction. They belie his age. You can agree or disagree, but one thing is for sure, he’ll have an opinion!
You are very fortunate that you had someone to learn all that information from. A head start is exactly what more people need! With that said, I believe that there are still people who had a chance at a head start but did not take advantage of that information so kudos to you for seizing the opportunity. I really enjoy reading your posts because I always feel smarter afterwards :) Keep up the good work!
I feel the same way as you — I learned it in reverse. I’ve always been a natural saver and investor, and I opened my first mutual fund brokerage account when I was 17 (I needed a parent signature.)
My one and only mistake was pouring money into mutual funds during the height of the bubble, then being (voluntarily) unemployed during the ensuing bear market so I couldn’t invest further in the recovery. But, like you, I love strategic, smart risk and I totally dig the idea of owning a piece of big companies.
JT, I knew you were a prodigy when I first started reading your stuff. I really like your take on finance and investing. You are so right about taking risks when you are young… awesome way to build long term wealth! You certainly have the stomach for the volatility. Interesting read.
Hi JT,
Welcome to the Yakezie! Don’t worry about not having any negative financial experiences yet. In due time you will. But, it makes us better because of it. It’s just the way life goes. You’ll be prepared for it.
Hope to see you around the private forums. Shoot me an e-mail at some point.
Best, Sam
BTW, do grades still not matter? :)
That’s great that you learned finance in reverse like that. Sounds like your dad is a great guy. Hopefully you never take a class in the school of hard knocks :)
You’re one lucky guy for learning these lessons in reverse. I am the traditional get into debt, get myself out, and then invest for the future. Lucky for me, my wife and I weren’t completely stupid and didn’t have that much debt to speak of. Now we purchased our first house and can probably pay it off in 3 years (for sure less than 5). After that is wealthy street! :)
Personally, I just want to know what JT’s ultra secret second of third website is so that I can stalk you properly. When JT says, “the biggest difference between rich and poor is not annual income. It’s how they choose to use it,” I heard angels sing because it is 100% true. The Pew Research study that covered confirms it.
Haha, I own more than a few. You’ve probably visited one and not even known it. ;) A new one is coming out soon, which will be on the blog. I guess that’s my way of saying, “hey, go subscribe!” :P
Hmm, I’ll have to go look for that Pew study, I’m assuming you blogged about it? I like how you write about personal finance as well as the big picture. Recently, the difference in net worth between races was interesting, to say the least.
@squirrelers – I try to “stand on the shoulders of giants” whenever I can. I often complain that there’s so much history to learn from, but yet we all like to see if other’s experience’s will play out in our lives. They always do, it seems–you can’t escape reality.
@STBS – I think so. Being able to manage your money, in my view, is more important than making it. At least to some degree…
@Kevin – Thanks, man. Your blog always seems to get me to write a page long comment. I like the controversy, and the way you just throw your opinion out there. It’s good. I wish more people would express their thoughts, and I’ve always thought the best part of any blog is the comment sections. They’re a blast.
@FSYA – I couldn’t be happier to have the headstart…it definitely helps. I think the best time to catch people is when they’re young. Makes a big difference! Your focus on financial success for young adults is great.
@Paula – I totally dig your use of “totally dig.” LOL. I love risk; it’s what makes investing and strategic decisions fun. And of course, it’s also what makes them rewarding. :D
@Barb – LOL, that’s taking it a little too far. Thank you for your encouragement in the comments here, and especially on my blog when it first started. Your comments kept me going, and I appreciate it. Hope you can settle in soon after your big move!
@Sam – I’ll always have an opinion, and I’ll share it if I have the opportunity. ;) I wish we lived in a world where opinions were tolerated as any other form of communication. Discussion, debate, etc., is a great way to learn. I’ll be in touch. And nope, grades haven’t mattered yet, so they still don’t matter. ;)
@Jackie – Fate says I’m already enrolled. In going back to Sam’s comment about grades, hopefully this is one place where I can 4.0 if I have to. Even though I haven’t yet been “schooled” in a financial sense, I’ve definitely made other mistakes that have taught me valuable life lessons. Learning is a process which is ingrained in failure first, right?
@LAMF – I’ve enjoyed reading your posts about your home shopping experiences, and I’m looking forward to reading as you pay off that mortgage. Wealthy street indeed!
To Yakezie in general, thank you for all your support. Blogging with a group of go-get’em types is a lot of fun, and I’m sure that there will be many success stories from this group. Working with a lot of like minded people is a blast.
That’s awesome you were able to learn so much from your dad so young and that you were interested in it. I was scared off by all that stuff as a kid.
Great post JT. I can relate your story. I too got myself into a financial crunch many years ago and had to learn my way out of it. I now make much better choices. Glad to hear another young person who has turned their future around. Best of luck to us.
What’s wrong with Money Mongoose? Great to learn more about you. Cool how you dad taught you so much about finance, I didn’t have that luxury. Great point about naivety. Another big reason to start early. Many people wait too long, beaten down by life or thinking it’s just too late to start already. Continued success and need to track down your ultra secret blog empire. Way to entice your readers. Everyone loves a mystery and a treasure hunt!
I too had an early fascination with money and what I could do with it. I am still fascinated with money, it is part of a huge strategy game called life. I enjoy reading your blog.
Very well written member post JT. I really enjoy your blog and your original ideas. I can’t wait to learn more about your BIG project, and have every confidence that it will lead you to even greater success.
My money lessons started at age 6. I bought shares with my first collected money in a piggy bank. My dad bought shares of my choice, and it was Whirlpool. It’s also in my ‘about’ page.
I could relate my history from yours. Great post!
I love your voice. It is so enjoyable to read posts where someone is speaking to me and not just regurgitating information. I will enjoy reading about your journey!
The very fact that you are doing things in reverse is the reason that your blog is so addicting! Your sector insights are both entertaining and wise beyond your years!
Great post! I’m fortunate like you to have a parent that has taught me a lot about PF
Thanks for sharing your story JT. Sounds like a great venture starting at a young age and I’m sure there’s much more to come :) Keep up the good work.
Im embarrassed to say that as an MBA graduate your general blogging knowledge is leaps and bounds above my understanding. Thanks for all your help along the way, proud to be part of the Gamma class with you.
Hey JT, I actually learned finance in reverse as well; although, I didn’t have anyone to learn from. It actually got me into trouble, because I never bothered to learn about personal finance until I already made a few huge mistakes.
It’s good to see that you had a balanced view of finance so early in life!