Monday, October 16, 2017

Lessons in Pragmatism

Somehow Still Calm Gremlin here with a few general updates and thoughts on the future.  So, the update is that there is now a Lil Gremlin living in my house.  The Lil Gremlin even has an online profile stating that he likes milk, long walks - so long as you are holding him, car rides, things similar to car rides, and sleeping (just kidding, but if one did exist it would probably say that).  I was there when Lil Gremlin was born and it was a powerful experience.  It is something I would not have missed for the world, and it is the type of event that is beyond life altering.

This new addition has gotten me thinking, what will I teach Lil Gremlin as he grows.  To start there is the obvious stuff - how to tie your shoes, how to ride a bike, the best flavors of ice cream, how to rock at Tetris, etc.  What I mean is, what will I teach him about personal finance?

My wife and I have a good idea of what kind of education Lil Gremlin will get in school.  However, personal finance only receives limited coverage in school.  Most of what I have learned is from my own trial and error, with some extras from friends and family.  What I learned came later in life than it should have; that information would have been amazingly valuable had I learned it sooner. 

First, I plan to teach him how to save and why to save.  It is one thing to have extravagant plans for investing, but it is impossible to accomplish those goals without having the capital to do so.  I surmise this will require small lessons such as how you can save money such as by biking places.  In the syllabus will be how to save on the every day things, getting the best value on the big ticket items, and most importantly not caring about what the Jones' have.  After all, it does not take a lot of money to get the most enjoyment out of life.

Second, I plan to teach him the power of compounding and investing.  This will be done by establishing an account for him and for him to see the power of it via my accounts.  I will continue the focus on dividend growth stocks and work on establishing for him a bank of stocks and or funds that work for him and us.

Third, I plan to teach him the power earning more.  As powerful as saving can be, earning a higher income is the 2nd punch that really can propel people to financial independence.  Lots of things contribute to improving earnings - having a side hustle, professional certifications, advanced education, fields studied, and hard work of course.

Finally, I plan to teach him to lookout for bad advice.  This is one that I wish was covered more often by those in the dividend growth community.  Some of the bad advice is easy to spot and can come from anyone - friends, family, late night advertisements, etc.  That advice usually starts with the phrase 'its okay you can afford / deserve it.'  Usually this is followed by statements that make it seem normal or expected to be in debt.

However, there is much more subtle bad advice out there parading around as if it was good advice (no not the Indexing vs Dividend Growth argument, I think they are 2 sides of the same coin that is made up of FU / FI money).  What I am talking about here are some popular platforms that have large followings.  Some such as the Financial Education Channel - on YouTube* have large subscriber followings, so you would think the advice given is sound.  It often is anything but sound; examples include the presenter concentrating his portfolio in 1 to 5 stocks or overly frequent re-balancing.  Other bad advice can come from those who often give good advice.  Here is an example from Dave Ramsay covering credit cards.  Ramsay is all about paying off debt (good), but refuses to see how small amounts of interest earned from things such as credit cards can help (he would laugh at many DGIers' side hustles).  His advice is clearly aimed at people in the community who need more rudimentary advice.  This all runs counter to my beliefs, which is every dollar counts - Mr. Money Mustache said it better in this article (one of my favorite articles of all time in any form).  Ramsay states that people spend more with plastic than cash, which is not necessarily true.  Having worked at a bar I know people who pay in cash usually tip significantly more.  There is merit to the idea that card users spend more money, but once again that is a mind set that a strong willed person can easily overcome.  The fact is the world is progressing away from cash at a steady rate.  Might as well learn how to deal with it now and take advantage. 

Naturally, Lil Gremlin will need to learn a lot of things for himself.  Sure I can try to teach him everything, but that does not mean everything will stick or matter to him.  I like soccer and hockey, he might prefer ping pong.  However, I can still attempt to pass on important financial advice that I wish I had when I was younger.

* There are some good dividend growth / investment videos out there, but it seems like the majority or at least the ones that pop up in searches first are not among them.

- Daddy Gremlin
- PS I do intend to teach him that pizza and ice cream are the best dinner - dessert combo on the planet!

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