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Old 04-25-2013, 12:04 PM   #41
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I think DH and I fall in the lucky fools category.
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The most important advice I ever got
Old 04-25-2013, 12:06 PM   #42
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The most important advice I ever got

The most important advice I ever got came from my father a ninth grade educated machinist who worked ten hours a day and lived on coffee and Camels filter-less...always spend your last dollar first. Stuck with me my entire life. You really think about how you spend the last dollar in your pocket if you are a couple day away from payday.

People in general don't think that way and have been conditioned to be acquisitors. They are taken in by the real estate salesman's "...but it's only another $200 a month" (on the thirty year mortgage for a house which was beyond their affordability and from which they will refi so as to buy the car they "need"), or say "I NEED the iphone 5". They may want it, but they certainly don't need it. I want a pony but don't need it .

I think most folks here from the short time I have been here are the 1% who have a goal, a clue, and the know the difference between want and need and have been willing to forego immediate gratification to make it happen.
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Old 04-25-2013, 12:12 PM   #43
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IHOP or even Chili's.
That's fancy.....I'm more Subway.

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4. People think they know more than they know. The classic example of this in my experience is physicians. As clueless as many attorneys are at finances, physicians are 100 times worse. I can't tell you the number of times I've seen physicians who invested in some screwy deal that was supposed to be so smart and make so much money and the physician didn't realize that the people setting up the investment were making all the money from the physician. My perception is that the physicians were very uncritical, believed everything they were orally told, and didn't read the actual documents and just signed what they were handed. I often felt that they thought that because they were so smart at medical things that they were smart at everything else.
Your perception of physicians agrees with what I've observed, I work at a medical school. I think it comes from their training where they absorb a lot of information and don't really have to think critically. Most doctors are not like House, they just implement standard procedures given a set of data. If the data doesn't fall into a pattern they recognise they pass you onto a specialist, who then applies the same approach. Critical thinking is often discouraged in medicine as it can lead to more trouble than benefits.
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Old 04-25-2013, 12:26 PM   #44
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I remember in my mid-20s getting a job in a firm and there was another young lawyer who also got a job. She was very interested in the firm's Keogh plan and was berserk when the head of the small firm we were with didn't make contributions. I thought she was nuts. At that point, I had no interest in retirement. I figured that we needed to concentrate on doing well and making money and there would be plenty of time later to think about retirement.
Wow, I think you hit something there.

Heck yes, the LAST thing we want to worry about when fresh out of school finally making money was retirement. And then one day you wake up, and have a "holy ----" moment, and it is possibly too late. I think that is a factor.

For me, my parents were frugal. A few VERY good things they did.
1) Dad and Mom bought me and my siblings 2 company stocks, 1/2 of their money, and 1/2 of my savings. I hated that my bank balance went down. We were about 10 years old. Every day, Dad had me look the price quotes. One stock was a utility - boring, but we were on dividend reinvestment. That was fun to watch. The other was speculation. It was an oil exploration stock. It was the 70's. 2nd crisis hit and it went up. We sold it and plowed it into the utility. I learned a TON from this experience. I suggest you young parents do this with your kids. It doesn't have to be much money, ours wasn't. But it keeps interest.

2) Dad and mom were thinking about retirement, and some of their friends started moving away. This was when I was in high school. They had me late in life. This helped me wake up to retirement a lot. If your parents are young, you'll miss this.
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Old 04-25-2013, 12:26 PM   #45
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Triggered by another thread, this phenomena has always puzzled me to no end. It's been noted here countless times, but the "why" has not often been discussed.


While I had some employees who unfortunately may not have been capable of handling money for themselves, many with HS educations could. But even more, I have some technically accomplished friends who are almost clueless about investing, retirement planning and even personal finance. Among them (most without pensions):
  • An attorney
  • A small IT company owner
  • Several engineers
  • Several doctors, medical specialists
  • An accounting manager (this one really amazes me)
  • A small business owner
I know them well, and it's obvious from the questions they ask me, especially since I retired early, how naive they are about money. Some of them contribute 10% to a 401k and invest in target funds, and then assume all will take care of itself. They've never even estimated a portfolio goal or annual spending. One just sends his money to his guy at EJ and knows little else, couldn't tell me what it was invested in, but wondered if I had any "hot stocks" for him. Another has been paying Mass Mutual 1% per year for well over 20 years to manage his money! I met with his MM advisor, a nice guy who was clearly just parroting MM recommendations without much underlying knowledge of his own - charging 1% per year!

I want to just shake them and ask WTH, but I know better than to provide investing advice to family and friends, especially when they haven't even asked.

I have never understood how otherwise very smart people can be so uninterested in their own financial security
How do you suppose that any of us would know? It is about like asking a compulsive bather how people can let themselves get stinky.

Uh, I don't know, do you?

Ha
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Old 04-25-2013, 12:30 PM   #46
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I never got anything financial-wise from my mom, but I did watch her struggle, which was education enough for me!


As far as it being taught in school, I can't put the weight on it all being ignored by the system. We were required to take two financial classes for graduation from my high school, which taught about retirement savings, compounding interest, saving money, even the average salaries for varying degrees and occupations, pensions, social security, vehicle loans, mortgages, just about everything up for discussion here.

You had to take one freshman year, Keystone, and one senior year, Capstone, or no graduation for you. To this day on Facebook, people I graduated with complain about how 'these are things we should have been taught in school!' I distinctly remember them sleeping and spitballing their way through both of those classes. We graduated only two years ago, and they've already forgotten that they even took the classes, nonetheless the content.

So even when the education is shoved in our faces (It helped me, just by paying the slightest bit of attention), people just don't seem to care until they've already dug themselves into a pit of despair.
I graduated HS way back in the dark ages in 1973 and college in 1977. My perspective is from that era. I know that I resolved at a very young age to not be in the position where utilities were being cut off because of money issues, like I observed several times growing up. Growing up, family finances were a taboo topic for we the children to know about or discuss.

I have a son in HS now. His school has a personal finance elective course but he elected not to take it before I found out it was available.

I am glad that there are signs that the education system is slowly started to address this important life skill area. Thanks for sharing!
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Old 04-25-2013, 12:30 PM   #47
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....(snip)...
I have never understood how otherwise very smart people can be so uninterested in their own financial security
Me too. I'm afraid "smart people" are a dime a dozen. Financially smart people are rare in my experience.

You don't have to be smart to save. You don't have to be smart to live a balanced frugal lifestyle. Just disciplined like maybe some invocations of Boglehead type thinking.

You do have to be financially smart to invest successfully in stocks/bonds and achieve above average returns. And if you invest, you don't know that you made smart (or lucky) decisions until well after the fact. So I guess the test of whether you are financially smart in this way is administered by the markets. And you don't really know until near the end of your life if you passed that test.

P.S. I've enjoyed reading all the other theories and experiences in this thread.
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Old 04-25-2013, 12:31 PM   #48
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I have posted on this before. I have found in my experience that the smartest people often see to have the hardest times managing their own finances. And, it's NOT because they are not smart enough, or they are lazy, etc. Money is a strange animal. Some people that are 100% logical in the rest of their lives can't deal with personal finance and investing. Money is a very personal, intimate, emotional deal for these very smart people, and many have a hard time dealing with it.
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Old 04-25-2013, 12:35 PM   #49
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On a brighter note, one of my adult children has solicited my advice on budgeting and finance matters. My high school son has told me he wants to teach him how to budget and manage finances.
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Old 04-25-2013, 12:35 PM   #50
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"Why are so many smart people clueless about the IT that they rely on so much?

Why are so many smart people clueless about health, nutrition, fitness, etc.?"

Because....they all know who the Kardashians are and how many times they've been married, and who is being "kicked off the island"...and what the latest expensive gadget is they can own for "only a hundred dollars a month-that's less than cable!!!"

And they BUY things based on the monthly payment, and lastly, they do the "no money down" and then chase depreciation for the rest of their lives.


That's what I think!
Great thread we have here. Lots of fine posts to read through, keep them coming.

I agree with you, lcountz. Way too many people know way too much about the most inane things. Sometimes, when I am at my ladyfriend's place, she is watching the tail end of one of those garbage shows like "The Voice" or "American Idol" and the first thing I tell her is that I can feel my IQ dropping a few points as the show airs LOL!

I was an economics major at NYU in the 1980s, so I always had an interest in this stuff. I did not grow up in a particularly financially savvy or wealthy household, but my mom did show me about basic financial stuff when I was a kid simply by helping her prepare the monthly checks to go out. She also listened to a man named Dr. Bernard Meltzer who had his own radio show back in the 1970s and 1980s. Bernard Meltzer - Wikipedia, the free encyclopedia She learned a lot from him and passed along to me a few good nuggets of advice. In 1990, after I bought my co-op apartment (using advice she got from Dr. Meltzer; stop throwing away money on rent when you can deduct most of the housing costs on your taxes) she pointed me in the direction of Fidelity Investments so I could earn tax-free interest through muni bond funds.

She knew she had planted a seed in my mind and it would soon grow into a broader knowledge about investing and investments. Sadly, she would pass away in 1995 at age 59 and not see me become rather wealthy and retire at 45 in 2008. But she also made sure in her final months to make sure my less savvy dad would on firm footing financially. Happily, he his still around to see the result of her gentle but good guidance she gave me.
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Old 04-25-2013, 12:41 PM   #51
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Me too. I'm afraid "smart people" are a dime a dozen. Financially smart people are rare in my experience.

You don't have to be smart to save. You don't have to be smart to live a balanced frugal lifestyle. Just disciplined like maybe some invocations of Boglehead type thinking.

You do have to be financially smart to invest successfully in stocks/bonds and achieve above average returns. And if you invest, you don't know that you made smart (or lucky) decisions until well after the fact. So I guess the test of whether you are financially smart in this way is administered by the markets. And you don't really know until near the end of your life if you passed that test.

P.S. I've enjoyed reading all the other theories and experiences in this thread.
There was woman from MS, Oleola James, I think, that gained a little fame a few years ago. She had spent a lifetime washing and ironing laundry for very little money. She had never finished high School, IIRC yet she amassed enough savings that she established a scholarship fund at one of the state universities with her life savings of between $100-$200k.

She wanted to be an inspiration to young, under educated black girls that they can work hard and be successful.
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Old 04-25-2013, 12:53 PM   #52
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Before the age of 5, I learned there are only two questions to ask any adult - How old are you?, and how much money do you have?
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Old 04-25-2013, 12:56 PM   #53
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I often felt that they thought that because they were so smart at medical things that they were smart at everything else.

This reminds me of an article talking about the dangers of being a "sophisticated investor" (i.e., a doctor, executive, or lawyer):

The Hidden Danger of Being a Sophisticated Investor - On Retirement (usnews.com)
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Old 04-25-2013, 01:00 PM   #54
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Before the age of 5, I learned there are only two questions to ask any adult - How old are you?, and how much money do you have?
I'm curious as to the range of answers you got on those bomb shells when you got above age 13.
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Old 04-25-2013, 01:05 PM   #55
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This reminds me of an article talking about the dangers of being a "sophisticated investor" (i.e., a doctor, executive, or lawyer):

The Hidden Danger of Being a Sophisticated Investor - On Retirement (usnews.com)
Great article. And, yes, I have seen this as well.
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Old 04-25-2013, 01:25 PM   #56
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I'm curious as to the range of answers you got on those bomb shells when you got above age 13.
I don't remember any of the answers. I just observed from listening, that these were very important questions to ask.
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Old 04-25-2013, 01:35 PM   #57
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I'm very glad my current brokerage firm offers training on multiple areas of investing. I can now support us through retirement. Until they offered the training though, it was very difficult to find good education.
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Old 04-25-2013, 02:08 PM   #58
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Also, I think there is a conceptual divide between spenders and savers -

That is, spenders see money as something that you spend. Savers think in terms of capital - you can only spend what your capital returns.
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Old 04-25-2013, 02:10 PM   #59
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And there are people who see money as a bit of both.
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Old 04-25-2013, 02:23 PM   #60
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This reminds me of an article talking about the dangers of being a "sophisticated investor" (i.e., a doctor, executive, or lawyer):

The Hidden Danger of Being a Sophisticated Investor - On Retirement (usnews.com)
"Sophisticated Investor" is one of my most favorite terms! The actual meaning of the term has nothing to do with sophistication. It's usually a synonym for the SEC "accredited investor". http://www.sec.gov/answers/accred.htm

As actually applied in pitches:
A "Sophisticated Investor" is one whose pockets are worth picking; someone with more money than sense; a muppet...
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