Money and Freedom
The best things in life are free
But you can give them to the birds and bees
I need money (that’s what I want)
— Barrett Strong, Berry Gordy, Janie Bradford, “Money (That’s What I Want)”
Freedom’s just another word for nothin’ left to lose
Nothin’, don’t mean nothin’ hon’ if it ain’t free, no no
And, feelin’ good was easy, Lord, when he sang the blues
You know, feelin’ good was good enough for me
Good enough for me and my Bobby McGee
— Kris Kristofferson, Fred Foster, “Me and Bobby McGee:”
If you came to this blog post thinking, “Woo-hoo, I’m about to learn the secret of how to score big-time $wagmoney and retire early!,” Well… sorry… you’re out of luck. I can give you a few thoughts to help you out if you think you want to be an entrepreneur. But beyond the obvious Ben Franklin and Horatio Alger-style encouragements to work hard and to be diligent and thrifty, I really don’t have much direct advice for you on how to make money. Maybe you’ll get really lucky, which, tautologically, would be quite fortunate. Or maybe you have a large trust fund, in which case, congratulations, you won the genetic lottery and you should consider practicing a religion that venerates your ancestors, because not only are the odds immensely against your mere existence, the odds of your being born into significant wealth…? Apparently (I didn’t do the math), lower than 1 in 10^2,685,000: a number way… way… larger than all of the atoms in the known universe. So it’s absolutely a miracle that you’re even alive. And if you’re already financially well-off from family money, remember to thank great-grandpa for his genes, for his good sense in marrying great-grandma, and for all that sweet cheddar he left you.
This post is, essentially, just a few comments on how to think about money and an encouragement to learn from a few guys who really understand how to make, save, invest and manage money. But before I go any further, you must read a series of great financial literacy posts on this blog by my friend, Steve Blum ’74, the Senior Director of Strategic Initiatives at the Association of Yale Alumni and a dedicated teacher of financial literacy and career guidance. Steve will set you straight, so, go on, head over and read his posts. Don’t worry, I’ll wait.
[I’m whistling that infectious “Money (That’s What I Want)” opening hook while you read.]
Welcome back. Hopefully you picked up some useful advice from Steve.
Okay, like I said, in this post I’m not actually going to tell you anything useful about how to make, or save, or manage, or invest money. Which is a really good thing for you… trust me on this. But I will make a few comments about freedom and money. For your best chance of being truly happy and free, you will need enough money to cover at least the base of Maslow’s “hierarchy of needs” . But, beyond that…? Well, it’s complicated. After you have secured the basics, having a ton of money doesn’t really guarantee your happiness — and it may in fact entrap you in Maslow’s “penthouse,” meaning that you may equate self-esteem, love, belonging, even your sense of who you are, with money. As philosopher, The Notorious B.I.G., posits so succinctly, “Mo money, mo problems.” But if you can keep a thrifty handle on your personal cash “burn rate,” your lifestyle, your material needs, your spending[An example]; if you can tuck away savings, bit by bit, over a lifetime; and if you can prudently invest and grow this nest egg, then you can be truly, psychically, financially free. Will you be happy…? That’s up to you — and well beyond the scope of this already rambling blog post — but, ahhhh, freedom! Freedom to not have to nail a job offer at Goldman Sachs or McKinsey (unless of course that’s what you want to do) in order to “win at life.” Instead, you’ll have the freedom to pursue your career as an art critic, a novelist, a future celebrity vegan chef, a public school teacher, or to take a risk and become an entrepreneur (see above plug for my earlier blog post on this topic.) With financial literacy and prudence learned from these sources below, you, and not your student loans or peer pressure, will determine your future.
So, without further ado, here are the three (literally only three) books (well, one isn’t even a book, it’s a pamphlet at most) that you should read in order to know everything you need to know about money:
- Click on the link to download Adam Glick’s, A Child’s Guide to Money. Of course you will also want to watch the video and hear what famous investor and hedge fund baron, Bill Ackman, has to say on the topic. In fact, if you can swing it, you really should sign up for the whole Floating University course: it’s brilliant and it was conceived of and designed by the aforementioned Adam Glick, Yale ‘82. Adam is a good friend, an astute investor, a musician, a philanthropist, a crazy-smart autodidact polymath, and he taught the famous Yale seminar, “Great Big Ideas.” If you didn’t take GBI while it was taught at Yale, that’s unfortunate but, hey, there’s still the Floating University online version. Sign up.
- Andy Tobias’, The Only Investment Guide You’ll Ever Need: It literally is the only investment guide you’ll ever need. Even though he slacked his way through Harvard and he bores us with his partisan polemics every four years as the Treasurer of the Democratic National Committee, Andy is an amusing and engaging writer who, astonishingly, makes even topics like insurance and 401K plans interesting. Just buy it and read it — it doesn’t take long to get through, and you will thank me. Disclaimer: Andy is also a good friend. But this isn’t all log-rolling, I have never met this next guy, and you should also read his book.
- Peter Bevelin, Seeking Wisdom: From Darwin to Munger: Read everything uttered by Charlie Munger, who is famed investor-billionaire, Warren Buffett’s, long-time business partner. While not as specifically practical day-to-day as Andy Tobias’ book, or as pithy as Adam Glick’s pamphlet above, Munger’s observations will make you think more clearly and invest more wisely. Nassim Nicholas Taleb, risk-analyst and author of financial best-seller, The Black Swan, calls this book, “sort of Montaigne but applied to business.” He’s right, it’s a great book to leave by your bedside, to pick through and ponder. It will make you wiser, about finances and about life.
Well, that’s it. Read Andy Tobias’ book, download and read Adam’s pamphlet (and, while you’re there, listen to Bill Ackman too) and, if you can manage it, read some of Charlie Munger’s speeches. And don’t ignore Ben Franklin and Horatio Alger either. All those other business and personal finance books…? Meh! Spend your time on something more useful and fun… like reading more Careers, Life, and Yale blog posts.
Here’s an example from my own life. I know that it may seem insignificant, but buying your daily coffee(s) at Starbucks rather than making your own coffee at home really adds up! And remember that $3.50 you spend for a cup of coffee at Starbucks out of your paycheck actually means that you have to earn $5.00 to pay for it (assuming you are in a 30% federal plus state tax bracket.) Instead, buy the huge 28 oz. can of Colombian Supremo at Trader Joes or, even better, pay $6.00-7.00 per pound for good coffee beans at Costco: yes, that’s a half-pound of coffee beans for the price of one cup from Starbucks! And if you want to guarantee that your coffee is both cheaper and vastly better than Starbucks’, use some of your vast coffee savings to invest in an Aeropress coffee maker for $30, plus $30 to buy a burr grinder for the beans (yes, it matters), and, heck, why not another $30 for a temperature-controlled electric water kettle. Your Starbucks savings will cover the cost of these items in a month or two, you will go on to save a bundle and become an insufferable coffee snob. Or just go for the hipster vibe and buy an old-school coffee percolator ($20, but extra credit if you find one for a buck at a garage sale) and a can of ground Chock Full O’ Nuts.
I could give more examples: buy a used car rather than lease a new one (tip: affix a Grateful Dead sticker to the back window of your beater and everyone will know how much cooler you are than that dweeb in the new leased BMW), always (always!) pay your credit card balance on time, and always max out your annual IRA or 401k contribution. But all of this and more is in Andy Tobias’ book. Read it! By the way, Andy would be delighted if you saved the cost of his book and just borrowed it from your local library. Lastly, if you really want to go hardcore frugal (your friends will think you’ve gone nuts, but just think of the freedom!), check out The Tightwad Gazette. Used on Amazon for $0.33 plus shipping.