I’ve always been an advocate of financial education.
One of the reasons we had the financial crisis of 2008/2009 is because too many people are far too financially “unaware”: taking out silly mortgages they didn’t understand and couldn’t afford. I’m using a euphemism to disguise the word I really want to use for those people, but then again, to coin the famous expression: “There, but for the grace of God go I.”
When I was a kid, and thinking that money grew on trees, my mom sat me down at our dining room table one afternoon. She showed me my dad’s salary, the mortgage payment, the electricity bill, and described a few other “odds and sods” that comprised our family expenditures. I think I was about 14.
My dad was a mechanic, and my mom worked part-time at a retail store so she could have a flexible schedule—flexible enough to be around when her four kids came home from school.
Seeing our family’s finances was a good thing for me. I can’t say I really “got it”, but it planted a seed, and I’ve thought about it a lot since then.
But the world of money isn’t a fair one. I worked part-time at a supermarket in 1985, earning $10 a hour. On Sundays, they paid me $12 an hour. Meanwhile, my friend Joe worked at a restaurant as a cook, earning just $3.10 per hour. Arguably, he worked a lot harder than I did—yet I earned triple his salary.
I mention this because I’ve always touted that parents should fully disclose their personal incomes and expenditures to their kids—to keep it real. And I’ve always done the same. Ask me a personal question about money, and I’ve always given an answer. Keeping money-talk “private” leads to ignorance. And I’ve never been a fan of that.
But our world is a funny one. Teachers (arguably the most important professionals of all) can end up scraping by in certain U.S. states, while Hedge Fund Managers (who make the rich richer, or bleed them dry) get disproportionately huge salaries for the value they DON’T necessarily add to society.
Then there’s the question of investing money. Most people are so unaware of the fees they pay for the products they buy (actively managed mutual funds) because they haven’t learned better. David Swensen, Yale University’s endowment fund manager says, “…the market failure resulting from the mutual-fund industry’s systemic exploitation of investors requires government action.”
How about just exposure and education Mr. Swensen? Is specific exposure “indecent”? Sometimes? Always? Never? When does it cease to be educational and become indecent? I think investors should have the courage to ask their advisors, “Exactly how much do you make off me each year?” But we’ve quietly labeled money-talk as “indecent” or “crass”—so the exploitation can continue.
But how open should people be about salaries? When I exposed that I made $12 an hour on Sundays, and Joe made only $3.10, did that help him or hurt him?
Does a father, making a six figure salary, help or hinder his kids when declaring his income and expenditures to them?
And when a blogger reveals his or her wealth and investing profits on a blog, is that beneficial, inspirational, or occasionally disheartening to the reader?
As a schoolteacher, my job isn’t one that’s normally associated with a huge pay package. But my assets are more financially aligned (in dollar terms) with surgeons and lawyers than with teachers.
So, when revealing my personal finances on my blog, am I inspiring or demoralizing readers?
I have a lot of questions about money in this post. Do you have any of the answers?
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Andrew Hallam says:
August 11, 2010 at 8:04 pm (UTC 8 )
@Financial Cents
Hey Financial Cents:
Thanks for such a detailed, inspiring response. Your compliments were well-timed. During this blogging process, I’ve revealed a lot of financial information that made me uneasy. Even this post itself, for some reason, wasn’t a certainty for me. I kept asking myself, “should I really post this?”
It is odd, in many ways, that we have such a strange fascination with wealth. You put it in perspective when you said: “Money is just a tool that brings more opportunity and choice to your everyday life.”
Strangely, however, we often put God-like status on the rich. I may have shared this story before (forgive me if I have) but it’s one of the strangest (and coolest) experiences I ever had.
In 2005, I wrote Buffett a postcard in front of my students, and I sent it to Omaha from Singapore. I told my students that I wanted to meet Buffett, and that a quirky postcard might get his attention. As I mentioned to Mr. Buffett in the postcard, I was going to attend the Berkshire Hathaway AGM, and there wasn’t a hotel in Omaha….so…I asked if I could sleep in his garage or on his living room sofa. (Hence the “Sleeping on Buffett’s Sofa” title/subtitle to the blog) To make a long story short, Buffett read the postcard, sent a copy of it to the Wall Street Journal, then got back to me asking if the WSJ could write about my plea. They did. I met Buffett and Gates, got interviewed by Squawk Box’s Debbie Quik (sp?).
Anyway. When I got back to Singapore, I found out how revered Bill Gates was to the school community. My class wanted to know where I went, what I did etc. They knew about the postcard, but they went all “goo goo gah gah” when I mentioned the short conversation I had with Gates.
If they were doing it over his philanthropic efforts, maybe I’d understand. But they did it because he was the world’s wealthiest man. And that really puzzled me…the degree of reverence for a man they knew nothing about. All they knew was that he was rich. Of course, Gates and Buffett are now known to be building a much nobler legacy than that. And Gates had been doing that for years…they just didn’t know that (or care).
But was my reverence for Buffett the same as everybody else’s reverence for Gates? I don’t think so. I knew so much about the man (having read just about everything published about him) and I found his mind fascinating—far more so than his wealth.
Thanks Financial Cents.
Andrew Hallam says:
August 11, 2010 at 8:20 pm (UTC 8 )
@Kevin@InvestItWisely
Hey Kevin,
I like the fact that you’re such a thinker–and thanks for sharing those thoughts. You’re obviously so curious about so many things: history, finance, politics. Charlie Munger would love you. Do you know much about Munger? He believes that great investors need to be multi-disciplined. Benjamin Franklin is his hero, in that capacity.
One of Munger’s favorite terms is “Invert. Always invert”. He suggests to look at invesment ideas (and ideas in general) from every possible angle.
He’s a humble man who has had a much greater influence on Buffett’s investment ability than most people realize.
When I think of your interests, I think of a young Munger. But you’re a lot more polite than he is!
Thanks for another fantastic, detailed comment. Who knows? Like Munger, maybe your intellectual interests and fascination with compounding wealth will eventually make you a billionaire. At the rate you’re going with your blogging, you might even grow to be that “millionaire blogger” that I get to profile before the decade is up!
Andrew
Kevin@InvestItWisely says:
August 12, 2010 at 7:46 am (UTC 8 )
@Andrew Hallam
Hey Andrew,
I like that idea of inverting things, to look at them from different angles. I’ll tell you what; if I do become that billionaire blogger, I’ll have you over for a drink on my cruise ship… or even my humble seastead condo
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