SORRY MOM AND DAD!
In a recent post I reviewed JL Collins’ “Stock Series” and wrote: “I will make the bold statement at this point to say that if my own parents had given me the advice that Jim gave his daughter and we had followed it, we would already have comfortably achieved financial independence and be retired by now.” Well I know that my parents are reading the blog because soon after publishing this post I got an (I’m pretty sure at least half-joking) e-mail from my dad saying “if you think your parents were giving you horrible investing advice, you should have told them to mind their own business.”
Let me at this point state publicly that I am extremely fortunate to have the parents that I have, even if they do on occasion get a bit overly sensitive. 😉 If you scroll through the blog and read our series about getting started on the right foot financially, I could pretty much hear my parents teaching me the lessons that I am passing on through the blog about avoiding debt, valuing education, building a loving and supportive marriage and avoiding the trappings of trying to buy your way to happiness through material things like the fanciest car or the biggest house. These things are incredibly important to living a quality life where you are not constantly stressed waiting for the next mini-disaster like your furnace dying, your car transmission going or being out of work for a while with no idea how you will feed your family. Learning these lessons allows you to live what most people consider the “American Dream”: home ownership, raise and educate your kids, a couple weeks vacation each year, retire securely. They are your financial foundation.
But there is so much more you can do with your finances. There is so much more to life that most Americans simply don’t see lying right before them because we become so trapped in the ways of conventional thinking. When I make statements like the one that I opened this post with, it is backed up by numbers.
We showed in one of our earliest posts that we paid about 2% of our assets for horrible financial advice. This came to about $8,000 for one year. In some years we may have paid more, in some less. To be conservative let’s use the assumption that we paid $7,000/year. In another post we showed how we paid $8,750 less in taxes last year by maxing out contributions to our tax advantaged accounts for the first time, which we were advised against by our advisor. Again, let’s use a nice round but conservative number and say that we paid $8,000/year in excessive taxes due to bad advice. Thus following the recommendations of our advisor, we paid on average $15,000 extra fees and taxes every year unnecessarily. The fact is that most people starting out get a bad deal, as we did, from the financial industry as they are fed half-truths and sales pitches passed off as financial advice.
Simply saving that money would accumulate $150,000 after ten years. Assuming a reasonable annualized return of 8% this would amount to $217,298 after 10 years. Adding this to our current assets, we would be financially independent right now. Over the next 40 years, this money alone (without adding one penny more) would grow to $4,720,695 using the same assumptions. This amount of money is the difference between staying a wage slave or being financially free years or even decades earlier. It is the difference between an average life and a life of possibilities. It is all available without sacrificing one additional dollar of spending or taking on any increased investment risk. In short, this is life changing.
I had no intention of ever becoming a personal finance blogger. In fact, I think that we are the least likely people ever to have a personal finance blog. First, until a few years ago when starting this journey we had absolutely no technical knowledge regarding finance and investing. Second, I was a “C” student in high school English who could barely get through 100 level writing classes in college, yet I do 90% of the writing on the blog. To top it off, we are clueless when it comes to using social media. We don’t even have a Facebook account let alone know how to build a blog with people who will find us, follow us and share our message with others.
Quite frankly, we didn’t even want to become DIY investors. Once we realized the errors of our ways in paying far too much for bad financial advice our first inclination was to just find a better advisor. After talking to people we trust and respect, we realized that everyone we knew was making the same or similar mistakes to our own. We only changed course out of necessity. We realized that the advice we received wasn’t especially horrible. It was actually the standard advice that anyone with a low net worth would likely get when starting out. After developing relationships with advisors when starting out, it is the advice most would continue to receive even after they could do much better because they wouldn’t even know to look elsewhere.
So in conclusion I want to publicly apologize to my parents for anything that I say on this blog that offends them and makes it appear that I feel anything less than 150% lucky to call them Mom and Dad. Believe me when I say that I give thanks every day for the opportunities and circumstances I have been born into. I don’t think my parents or anyone else making the same mistakes we did are dumb or naive for using a financial advisor and following their advice. I think they are trusting people who had no idea of the conflicts of interest inherent in the financial industry. All we are doing with this blog is identifying an issue that many people have in being financially unaware and trying to do whatever we can to help those people to better their lives.
In our own lives,we are trying to reach financial independence as quickly as possible. We don’t want to devote the vast majority of our adult lives to work, while neglecting our relationships with each other, our daughter and other family and friends. We want to give our daughter the best life possible by being able to provide for her, educate her and spend time with her. We want to provide a loving and supportive house where she will witness a stable, fulfilling marriage that can serve as a model for her relationships for the rest of her life. You do realize that it is not just about having more money to eventually go buy a bigger house or fancier car, right? It’s about something a bit more important!