Here is a thought experiment. If I could go back in time, what would I have done and what could they have done (the adults) better regarding money decisions? This makes a person think deeper on the subject as we trace decisions going back many, many years (62 for me). As I lay this out over my lifetime, I encourage you to think about what you would have done with new insight. If only.
I am going to start on the day I was born, October 18th, 1963. It would have been great if my parents bought me $100 worth of Phillip Morris stock (now it is Altria Group). Since everyone smoked at the time, that probably explains why the stock was booming. Then, in May 1965, they could have bought stock from a start up called Berkshire Hathaway run by a young man named Warren Buffett. If only.
Or, they could have bought me an actively managed mutual fund like Fidelity Magellan that turned out amazing results over time thanks to another wiz kid by the name of Peter Lynch. A problem with that idea is the 8.5% upfront load (commission) my parents would have paid with every contribution at that time. Sticking with the budding genius out of Omaha (Buffett) seems like the better idea. If only.
Let's be clear, I am not blaming my parents for not getting me started early. They had no knowledge of investing. Their options were limited and full of high fees (actively managed mutual funds and crappy whole life and annuities) or high risk (individual stock run by some guy out of Omaha nobody ever heard of). Without the knowledge, they could only do one thing. Invest in a CD (about 4% in 1963). If only.
Here is where things get interesting. With some education from John Bogle and a little luck, my dad (mom died when I was two) could have invested in a brokerage on my behalf in the 500 Index Fund at Vanguard on September 1, 1976 (first publicly created index fund). The expense ratio was very low at .43% with no load. This was dramatically lower than managed funds. That expense ratio is .04% today. If only.
That would've been a game changer. If dad had invested a small amount every month ($50 would have been plenty at the time), little Michael would be set as the next few decades played out. That is, if my dad taught me about personal finance and managing investments, ultimately leading to financial freedom. I wrote The Path to Prosperity explaining it all to dad. I wish I could send it back to 1963! If only.
Dad could have taught me the Rule of 72 and if I would have understood the importance of it, it could have changed the way I saved and invested as an adult. He didn't teach me because he didn't know. I think if he would have known, he would have drilled it into my young developing brain. Same with the index fund. I would send him this spreadsheet. Owning appreciating assets creates wealth over time. If only.
Now we go to the later part of 1983 (I am 20), if I had the right education from the right people (John Bogle), I would never have gone to the "free" dinner. I would not have signed up for the high fee whole life policy and the high fee managed mutual fund. My lack of knowledge on the subject cost me a great deal of money until I finally started learning about the subject six years later in 1989. If only.
Not long after making that boneheaded mistake, I bought a new car. I had a perfectly fine used car, but the salesman convinced me that the new car could be mine with a 5-year loan at 13.5% with an extended warranty attached to it with the same interest rate. That bad decision cost me dearly. The right financial education would have taught me to keep driving that used car throughout my 20's. If only.
In early 1989 (age 25), I picked up my first financial book and read all about investing to include index funds. My lack of knowledge (just beginning) steered me toward low fee actively managed mutual funds with the idea that they would beat the market. I was wrong and it would take me more than a decade before clearly understanding why an all index portfolio is the smart way to go. If only.
By the time I hit 40, the foundation was built (I am a slow learner).The all index portfolio was in place with an overweighing toward small cap value. It was great to have that knowledge, but I sure wish I would have listened to John Bogle here. That delay in understanding how fees tear down my portfolio, cost me a whole lot of money. How much? It was well over $1 Million. If only.
I bought a home in 1993. I thought it would be a good investment. I was wrong. I was brainwashed into this kind of thinking without considering all the costs that go into home ownership. I ended up losing money (after costs) on this "investment" over the 16 years I owned it. I enjoyed it, but it cost me dearly. Financially I would have been smarter to have rented. Lost at least $1 Million here as well. If only.
The next piece of the puzzle that changed my entire thinking on the matter was the book Your Money or Your Life. I learned about the concept of enough and the fulfillment curve. It allowed me to stop chasing after more money and more stuff. This provided me the time and energy to help others. Giving became the mantra. Paying it forward followed. Thegivingsolution.org became the platform. If only sooner.
Do I wish I could go back in time and change how finances were taught to me? Sure, but all in all, it turned out fine. Could I have gotten to enough much sooner with the right education from the right people? Yes, but those days are in the past. Now it's up to us older folk to help those young people get the kind of start that will catapult them to a better future, minimizing the mistakes. No if only for them.
We can learn the hard way (school of hard knocks) or we can learn the easy way (the right teachers followed by action). Join me as we commit to helping the younger generation learn the easy way with us as a guide. It's the least we can do. We have been helped at different stages of our lives (John Bogle for example) and now it is up to us to help others. Embrace the art of giving back. An amazing future awaits!
