Financial Reflections

Sometimes it’s the mistakes we make that teach us the most.  I just read an article from someone who made a small fortune out of a much larger fortune, and the lessons the author learned from his experience provide some powerful lessons on investing.  I thought I’d comment on them and add a few of my own lessons.

Bruce “Tog” Tognazzini became a millionaire when Apple computer went public way back in 1980 (apparently there was money to be made in the stock market before the internet). He then promptly began looking for ways to maximize his fortunes, and stumbled along the way.  He wrote a list of nine lessons learned.  Here are my favorites:

“The only way anyone other than you can make a single penny from your stock is to get you to sell it.”  Oh, wait, I don’t own any stock outside of a pittance in mutual funds.  But when I do own some stock, I’ll have to remember that lesson.

“$1000 is not pocket change”  I think this applies to everyone, right here, right now.  Budgeting has taught me how I used to spend lots of money thinking of it as small chunks.  For most of us I think $100 is small change, but $1000 will work fine, because a million is just 1000 times 1000.  Start with a cool million in the bank.  Blow a grand a day (you know it’s possible) and you’re broke in 3 years.

“Don’t devour your chickens before they hatch”  Delayed gratification is a wonderful thing.  I really wish I had practiced this a few times over the last few years.  Want something?  Save for it.  That brings me to my own life lessons:

“Avoid credit cards like the plague”  That’s my opinion anyway.  It goes right along with the $1000 lesson and the chicken devouring lesson.  It is very easy to drop a grand on a credit card (new TV, Computer, furniture) and feel like nothings happened - at least that’s my experience.  What’s worse is that you end up paying interest and loose the opportunity to earn with that money.  Currently, I’m getting rid of my credit card debt.

“Invest in your future” Retirement, college, rainy days, weddings (or some combination of those) lie in our futures.  “Tog” may have had a few missteps along the way, but he had some cash left at the end of it all.  And for all he knew, Apple stock could have tanked in the 1980’s leaving him with nothing.  That’s one of the risks in keeping your employer’s stock.  But I’m certain there are people who’ve gotten rich on stocks, the lottery or inheritance that blew it all and ended up in bankruptcy court.  I think it’s better to take the risks of the market than face certain financial doom.

If you haven’t read it, Tog’s whole article is here.  Enjoy, and good luck investing!