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Old 07-05-2021, 06:56 PM   #41
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Bernie Madoff pulled off one of the biggest cons convincing high net worth highly educated and successful in their field to fall hook, line and sinker in his scam.
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Old 07-05-2021, 07:13 PM   #42
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Got interested when I started my own business. Knew that I was going to have to up my game with understanding everything. The lady who was my Dad's accountant when I was growing up took care of me both with the business and taught me about personal finance; SEP's, Corporate taxes and Social Security etc. Also gave me lots of book recommendations for homework.

Without her I can only imagine where my wife and I would be. I knew nothing before her and I grew up in a house that was always financially stressed and honestly thought that was normal.


Bless you Pat!
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Old 07-05-2021, 07:16 PM   #43
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It’s interesting to hear so many talk about the medical profession specifically. That was my first thought when I saw the title of the thread.

I distinctly remember graduating from undergrad and thinking on my first ‘real’ salary (all of ~30k in the Bay Area) that I could finally have a nice apartment and buy real furniture. Reality hit fast and I was quickly making the rounds at garage sales to furnish my apartment.

I think med students end up living a suspended life for so long that by the time they’re done with residency and have a good job, they go through similar magical thinking and overspend on the life they feel they should have. And have huge loans on top of it. After delaying for so long, I can understand wanting to be in the same place as their peers.
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Old 07-05-2021, 07:27 PM   #44
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It’s interesting to hear so many talk about the medical profession specifically. That was my first thought when I saw the title of the thread.

I distinctly remember graduating from undergrad and thinking on my first ‘real’ salary (all of ~30k in the Bay Area) that I could finally have a nice apartment and buy real furniture. Reality hit fast and I was quickly making the rounds at garage sales to furnish my apartment.

I think med students end up living a suspended life for so long that by the time they’re done with residency and have a good job, they go through similar magical thinking and overspend on the life they feel they should have. And have huge loans on top of it. After delaying for so long, I can understand wanting to be in the same place as their peers.
Medical professionals may get used to the saying " I will see you in court! " which adds to the stress of theIr roles in the medical field.
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Old 07-05-2021, 07:28 PM   #45
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Last night, we had dinner with a friend, whose father was a Goldman Sachs bond trader in Manhattan for 32 years. She grew up with limousines and even helicopters on demand. I know that her privileged upbringing causes less sympathy but she is a hard-working attorney and fully responsible person, whom we love as an amazingly good friend. We always assumed our friend would inherit many millions someday, and she might have assumed that, too. It turns out, she learned last week that her father was essentially wiped out through a margin call last year when the Covid recession struck. Beyond that, she doesn’t know how he was invested. He’s developed depression and other maladies and his remaining assets are being spent down so that he can go on Medicaid! We were shocked and saddened by her story.

This was in the same week that my 81 y.o. DF, thankfully, reached out to me before liquidating his brokerage account with Bankers Life to buy some exotic whole life policy that his Bankers Life agent was trying to pimp him. In that process, I discovered this agent has my dad invested 100% in a single high fee growth tech stock mutual fund. Apparently, this agent works the modest-income retirement community my DF lives in. As gently as I could, I explained the risks of this portfolio and he agreed to ask his agent if Bankers Life carries target date or retirement income funds. Sickening.

My dad is an engineer who has worked his entire life, and even continues part time employment at 81. He is good with numbers but could never be bothered to read a basic book on personal finance. He does seem to have avoided debt, thankfully, and he owns his little condo outright. He once had an IRA, which he liquidated 30 years ago to buy a cabin, which is now long gone.

Sadly, no matter how I slice the numbers he’s finally provided me, he’s looking at a 50% lifestyle reduction once he finally stops working. I’m just slack-jawed by these two examples of financial irresponsibility. Serenity Prayer time, I guess.
Thanks for the post. Sorry to hear of your friend’s and father’s situations

I think lack of financial understanding is rampant. Many people in my circle are examples. I think the people on this site are at minimum in the 90%ile of financial knowledge, or higher.
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Personal finance ignorance among the otherwise intelligent
Old 07-05-2021, 07:41 PM   #46
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Personal finance ignorance among the otherwise intelligent

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Now I am curious. How much Life Insurance was the salesman trying to get him to buy, and how much does that amount of (whole life) Life Insurance cost per year to maintain for someone who is 81 years old?



No way can it be cheap or cost effective for your father, and I have a hard time believing the insurance actuaries would allow his heirs to come out ahead on this bet.


I don’t know the payout amount but my dad said BANKERS LIFE (I want to get the word out about these people) wanted him to buy a “Single Premium Whole Life Policy” by liquidating nearly all of his $82,000 brokerage account. I’m sure my dad would have made my brother and me beneficiaries but it’s more important to us that he has some money live on. That policy had all kinds of bells and whistles and it was guaranteed to return 4.5% per year (woopee do). And they said he can always get his money back (uh huh.). Fortunately, he called BANKERS LIFE back and told them he would not proceed.
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Old 07-05-2021, 07:43 PM   #47
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I think lack of financial understanding is rampant. Many people in my circle are examples. I think the people on this site are at minimum in the 90%ile of financial knowledge, or higher.

I agree. Especially when it comes to the stock market. I have friends that have literally lost hundreds of thousands of dollars in the market over the last decade. Constantly trying to time it and get sucked into the headlines of the day as a strategy for long term investing.
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Old 07-05-2021, 07:49 PM   #48
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I think med students end up living a suspended life for so long that by the time they’re done with residency and have a good job, they go through similar magical thinking and overspend on the life they feel they should have. And have huge loans on top of it. After delaying for so long, I can understand wanting to be in the same place as their peers.
I am not a doctor but among the financial web sites whose podcasts I listen to is The White Coat Investor because it’s very common-sense. One of the things Jim Dahle, the founder of the site/podcast tries to disabuse young doctors of is just what’s described above. He preaches continuing to live like a resident until student loans are paid off to get back at least to zero net worth (from a negative worth) before even thinking about starting to live in a manner befitting the high income of the medical profession.
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Personal finance ignorance among the otherwise intelligent
Old 07-05-2021, 07:52 PM   #49
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With your friend's father - is he also in his 80s - and retired? He may have done something at this age in life, which he would not have done in his 50s. It is my understanding that the ability of some to handle their finances declines with age. (I am trying to take this into consideration by having some income on auto pilot as we age.)



Some, never had the ability to handle finances in the first place, i.e. they could have spent a great deal of time fostering their careers without giving their retirement assets/ income adequate thought.



With your Dad, I hope he postponed SS? Can that cover his basic expenses? You may be able to supplement him with little treats w/n your budget from time to time. (i.e. taking him out to lunch once a week), buy him some high end groceries, if his dishwasher blows, replace it . . .


Thank you. You seem on the right track about my friend’s father’s mindset. Yes, early 80s, was on his second marriage and the new DW was a high consumer/high maintenance type. Apparently, they’d been living beyond even their considerable means for some time, so the DF rolled the dice for one last big win. Instead, he got the devastating margin call and two years later he has dementia and is in a facility, so one wonders if he should have had his hands on the controls at all.

As salt in the wound, DW #2 told my friend last week that she no longer loved DF, was selling their home and would be moving back to Manhattan, essentially abandoning him to his subpar memory ward in NJ., or leaving him to my friend to manage from Minnesota somehow. I don’t see how DW II could legally keep the proceeds from the sale of their residence while her spouse is on Medicaid but my friend thinks the Medicaid laws in NJ are more generous than elsewhere. All kinds of life lessons in this story.


My dear see money-spend money father, of course, took SS at 62, even though I suggested that he wait. Yes, I’ll be glad to help him however we can.
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Old 07-05-2021, 07:53 PM   #50
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Regarding the GS bond trader in the original post. That’s on him. It’s bad decision making and he knows it. It remains a very unfortunate for him and his family.

I am headed down the path to help an elderly family member exit a 3% AUM fee RayJay account. Earlier this year I encouraged another elderly out of a 1% AUM fee advisor relationship that he had been in for 25 years. He is glad it is finally done.

Peter Lynch is spot on - anyone can do it (be a successful stock investor).

Last, think about the 10,0000 hours to mastery concept from Malcolm Gladwell. Whether it is 1,000 hours or 10,000 hours, how much time does the average 50 year old have accumulated in his/her lifetime on personal financial management skills? I think not many hours for most people. Skills take time. Taking time is work. Work is sometimes hard. But it pays off, literally and figuratively.
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Old 07-05-2021, 08:06 PM   #51
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I seem to remember we had a doctor/surgeon who was an active member of this board for a few years, who had saved a lot, but was very risk averse. All of his money was in very safe low-yielding investments.
I do remember him. He was an OBGYN and did a lot of volunteering with Doctors without Borders, right? He had all his money in CDs or something like that? If you're extremely risk-averse, I guess that's what you'd do. My former boss moved all his money in his 401K to a short-term fund (or was it a stable value fund?) in 2008, after the stock market crashed. He got laid off right after that (and his wife had quit working a few years earlier) but he bought a house in a dip (200K?) and he tells me his SS and his wife's SS have been fully covering all of their living expenses. He still has his money in his 401K, etc. - About a million total in CDs and stable value funds. If a person is extremely risk-averse and not hurting, there's no reason to venture out IMO. If I had, say, 10 million dollars, I would have no need to put any of it in the market.

I hope the OBGYN person is still doing all right.
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Old 07-05-2021, 08:15 PM   #52
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As an experienced trader, he should never have margined and created a high leverage trade. It's too common to hear hedge funds get wiped out in the millions.

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Last night, we had dinner with a friend, whose father was a Goldman Sachs bond trader in Manhattan for 32 years. She grew up with limousines and even helicopters on demand. I know that her privileged upbringing causes less sympathy but she is a hard-working attorney and fully responsible person, whom we love as an amazingly good friend. We always assumed our friend would inherit many millions someday, and she might have assumed that, too. It turns out, she learned last week that her father was essentially wiped out through a margin call last year when the Covid recession struck. Beyond that, she doesn’t know how he was invested. He’s developed depression and other maladies and his remaining assets are being spent down so that he can go on Medicaid! We were shocked and saddened by her story.

This was in the same week that my 81 y.o. DF, thankfully, reached out to me before liquidating his brokerage account with Bankers Life to buy some exotic whole life policy that his Bankers Life agent was trying to pimp him. In that process, I discovered this agent has my dad invested 100% in a single high fee growth tech stock mutual fund. Apparently, this agent works the modest-income retirement community my DF lives in. As gently as I could, I explained the risks of this portfolio and he agreed to ask his agent if Bankers Life carries target date or retirement income funds. Sickening.

My dad is an engineer who has worked his entire life, and even continues part time employment at 81. He is good with numbers but could never be bothered to read a basic book on personal finance. He does seem to have avoided debt, thankfully, and he owns his little condo outright. He once had an IRA, which he liquidated 30 years ago to buy a cabin, which is now long gone.

Sadly, no matter how I slice the numbers he’s finally provided me, he’s looking at a 50% lifestyle reduction once he finally stops working. I’m just slack-jawed by these two examples of financial irresponsibility. Serenity Prayer time, I guess.
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Old 07-05-2021, 08:26 PM   #53
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I am not certain why we would presume someone is competent with personal finance simply because the person has a good education and/or a good income.
How about if they were a Goldman Sachs bond trader for 32 years? I would expect some competency then.

However in the case of aging, that could easily undo any money smarts.
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Old 07-05-2021, 08:38 PM   #54
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How about if they were a Goldman Sachs bond trader for 32 years? I would expect some competency then.

However in the case of aging, that could easily undo any money smarts.
Sounds like he routinely lived above his means. Sometimes your luck runs out...
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Old 07-05-2021, 09:15 PM   #55
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I'm sure I'm the outlier here but in 1st grade a lady from the local bank came by and had us open a savings account (likely illegal now...forcing kids to deal with one bank); she also came by each week to collect our nickels to add to our account. (Hi Miss McMahon!)

In 6th grade we were taught how to balance a checkbook. In 7th grade we were taught about compound interest.

In high school we had some guy come in every month or so from an investment house and explain the basics of the stock market (I must have been asleep a lot; witness my questions on this forum!), how to read a balance sheet, inflation, the differences between bonds and stocks etc. We even had an investment club where we played with fake money/investments.

Of course this was a private school.

When my then girlfriend now my wife and I were juniors in HS we signed up
For an elective class called “consumer education and personal finance”. I have no idea why this wasn’t a required class from junior high through high school. We learned about investing, compounding interest, banking, insurance etc. I got more out of that one semester class than 4 years of other subjects combined. When HS graduation day came I searched out that teacher and thanked him for teaching this class. A few years later when I was just starting my business he hired me to do a bunch of work for him. I like to think that class helped seal the deal and convince my girlfriend to marry me!

I still remember a quote that teacher said. He said “rich people stay rich by living like they are broke. Broke people stay broke by living like they are rich”.
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Old 07-05-2021, 09:22 PM   #56
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I agree. Congress can't even abide their own budget and they should teach about personal finance?
I agree with this. I have worked for all kinds of people in our local government. It surprises me how many of them struggle to pay their personal bills yet somehow they are in charge of our finances.. Sad.
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Old 07-05-2021, 09:30 PM   #57
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I have worked for all kinds of people in our local government. It surprises me how many of them struggle to pay their personal bills yet somehow they are in charge of our finances.. Sad.
No reason to think lack of personal financial skills is limited only to the public sector. Our CFO had his car repossessed from the corp HQ parking garage.
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Old 07-05-2021, 10:02 PM   #58
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I know that this forum scoffs at AUM fees that people pay. The good part about legitimate money managers, not Bernie Madoff type, is that people don't lose their entire investments. Whether it is the ignorance or people who want to be one step removed from making knee jerk buy/sell decisions, wealth management would work well for them. As long as the market is up, it is not difficult to pick winners. It is when the market is down, it will separate the people who are good level-headed investors vs. panic sellers. Wealth management companies provide that protection against panic selling - buy high / sell low.
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Old 07-06-2021, 04:25 AM   #59
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I read an article this year which posited that your success with money is more about your mental attitude than your financial skills. It told of an average person (perhaps a school teacher) who built a multi-million dollar estate through LBYM and many years of regular investing, and an executive from Merrill Lynch who went broke in 2008-9 from conspicuous consumption and leveraged exposure.
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Old 07-06-2021, 05:37 AM   #60
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Mental attitude is all that in regards to financial skills and everyday life. A brain surgeon can perform a task in surgery that many cannot due but if he doesn't give a hoot to learn or care about his financial skills then all bets are off. A guy who is a business executive that graduated from a prestigious MBA school hardly cared about changing his oil in his car. He advised he just waited for the oil light in his dashboard to come on to remind him.
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