Kneading Dough Podcast: Athletes Talk Openly About Money

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

Another podcast that I discovered late is Kneading Dough, where famous athletes sit down and talk openly about their finances. Created by UNINTERRUPTED (founded by Lebron James and Maverick Carter) and sponsored by Chase, guests over the three seasons range from Lebron James to Serena Williams to Simone Biles. The description sounded similar to Celebrity Money Diaries.

Despite the old saying about death and taxes, studies show that personal finance is actually the most difficult topic for most Americans to discuss. But while most Americans aren’t comfortable revealing their finances, athletes’ money mistakes are splashed across newspapers and the internet.

Chase’s Kneading Dough series connects the money challenges of average people to the hard-earned lessons of pro athletes. In exclusive, one-on-one interviews, famous athletes discuss how they learned to budget responsibly, balance the needs of career and family, and prepare for retirement.

You can view all of the shorter video interviews on this YouTube playlist, but the podcast version includes the full unedited interviews.

In the end, these are often people who were not born into wealth, so I did find them relatable and enjoyed the casual conversational style. You hear straight from Lebron how he handled the fame and responsibility of becoming the family breadwinner at age 18 (and how other athletes handled huge windfalls and learned to manage their budgets), but also how one navigates the more modest WNBA max salary of $110,000 a year (now higher but the average player earns $130k). There are amusing moments like how Serena Williams tried to deposit her first million-dollar tournament check at the local bank drive-thru window, which the teller didn’t know how to handle.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

The Money Hamster Wheel, Part 2: Multiple Solutions, Not Just More Money

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

In Part 1: Identifying the Problem, I shared Lawrence Yeo’s unique take on money and the hamster wheel metaphor, where we just keep spinning and can’t get off. Since then, I have thought more about how best to slow things down by instead attacking each step of the cycle. To be honest, I don’t know if I can properly explain Yeo’s concepts, so I came up with my own version of the hamster wheel. Here it is, rather hastily-drawn:

A common criticism of seeking financial freedom is that it’s all about money. Make more money. Spend less money. However, if you take a step back, money is just part of the flow between how you spend the time in your life. How are you making that money? Why do you want more money? Why are you spending the money?

Accordingly, here various ways that someone could lessen the impact of each part of the cycle.

  • Find better-paying work that is equally fulfilling and stimulating. Try to save the excess. Don’t make yourself more unsatisfied for more money.
  • Find more fulfilling and stimulating work, even if it pays less. Be happier, and thus need to spend less to replace that happiness.
  • Engage in non-work activities that provide meaning and stimulation. If you need a better job, work on a new skill. If you need more stimulation, start a side business and keep your current job. Or just find a new hobby/sport/language. Taking action is the key, as the right activities will energize you.
  • Reduce your intake of low-quality media. Stop consuming things that make you feel worse about yourself. The wrong activities will drain you, which encourages more spending.
  • Exercise more (try outdoors or with other people) and eat better food. This gives you more energy all day long.
  • Spend less money on the things that don’t matter, so you need less money. Cut out the mindless and unhelpful spending.
  • Spend more money on the things that truly matter to you. Now that you cut the mindless, you can spend more on improving interpersonal relationships, or energizing activities (see above).
  • The more you learn to control this cycle, the more you can use the concept of “Enough” to widen the gap between money in and money out. Decouple earning and spending. Invest in enough productive assets so that your required income is less and less.

Addressing the problem from one angle, helps free you up to attack it from another angle later. For example, if you eat and exercise better, you might have enough energy to take corrective action, and not just fantasize about that side business when you really just turn on the TV after a long day at work.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

The Money Hamster Wheel, Part 1: Identifying The Problem

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

I started looking into financial independence because I simply couldn’t imagine doing what I was doing every weekday at that time for another 30 or 40 years. Some people know exactly what they want to spend their life doing, and it also pays the bills and then some. I was always envious of those folks. Strangely, I never really felt that making more money was the final answer. I saved diligently in order to quit my job and go back to school and explore alternate paths.

This week, I’ve been pondering a longread by Lawrence Yeo about his philosophy of money at How Money Forever Changed Us. It’s a very high-level exploration of how money both solves and causes various conflicts in our lives. This culminates into what he calls the Money Hamster Wheel:

The questions posed are slightly different than you may have seen elsewhere. Does working a job that doesn’t fulfill our need for purpose and meaning really take something away from our identity? Is that identity loss what we are really trying to replace by spending money? Why is it so rare to find people that are truly happy and aligned with their work and the rest of their lives?

You’ll have to read the entire article to understand all the spokes of his wheel (although I’m still not sure I do completely), and while Yeo admits that it is not possible to fully “get off the wheel”, you can do something:

When I look at each spoke on the wheel, I view them as potential opportunities to slow the whole thing down. If we are aware of each mechanism, we can notice when we’re operating under them, and lessen their impact in turn.

The hamster wheel is a great metaphor. Over time, I’ve accepted that financial independence will always be rare. I used to think that higher income = more wealth = more stability. But then I noticed that certain things don’t change when people make $75k vs. $150k vs. $300k a year. The neighborhood changes. The car changes. Yes, even average net worth changes (but rarely enough to 33x expenses before age 65). Unless they hit a huge windfall in the multi-millions, most of them will work until they are 65 or older. Most will say they like their job okay, but they would never do it for a 25% pay cut. Most will never be able to handle an extended period of unemployment. Earn more, spend more. Still spinning on the wheel. Maybe that’s just how it’s meant to be? Yeo presents a solution:

But if we take the time to look closer, we’ll see that a middle-ground exists. A place where our fears could be calmed, and our desires could be curtailed. A place where the quest for money falls only to what is essential.

In a world where neither scarcity nor abundance will do, perhaps the closest solution to the great paradox comes down to one principle:

The ability to recognize when we have enough.

Sounds easy, but shockingly hard. “Enough” is not encouraged in our culture. I still struggle with it as well, or at least I’m afraid I won’t be able to keep up the fight forever.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Forrager Podcast: Start Your Own Home-Based Food Business

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

If you enjoy listening to podcasts about entrepreneurial stories on a smaller scale (i.e. not tech unicorns), I recommend the Forrager Podcast about cottage food businesses, where people sell food made in their home kitchens (as opposed to a commercial kitchen). Depending on the cottage food laws in their state, you can learn from successful small (often solo) business owners selling their homemade bread, granola, nut mixes, cookies, pies, and other food products in both retail or wholesale environments.

The cottage food industry allows you to start small with minimal upfront investment. You keep your big potential upside, but you’ve minimized your downside. Being able to take asymmetrical risks like that is very powerful. You only need to hit it big once!

Here’s a quote from an episode with baker David Kaminer, who makes a living selling about 300 loaves of sourdough bread each week:

What’s so nice about the cottage food law is you have the opportunity to start small. Prior to cottage food laws existing, if I wanted to open up a bakery I’d be a quarter of a million dollars in before I could even produce my first loaf of bread. You can start making six loaves a week and trying to sell them on the weekends while you’re working your normal job and then see how it goes.

I feel like as long as you love making bread and you’re comfortable charging people for it and you understand the value of your time you could make a go at it pretty easily. For me it was starting like that just seeing if I could potentially ramp this up. So I feel like as long as you’re you’re ambitious and you love making bread you can pull off a cottage food business almost at any scale. It just all depends on defining how much you need and if it’s worth your time.

However, many people choose to keep it small on purpose. There is a common theme with the financial independence community of being able to work more on your own terms. Owning a cottage food business definitely won’t be for everyone, but it is more of a lifestyle choice that will be very attractive to a select few. Sound familiar? Here is a quote from an episode description with Lisa Kivirist who runs her own farm, bed & breakfast, and home bakery amongst many other things. It could very well be the bio for a personal finance author.

Lisa talks about living off the land, moving away from the corporate life-style, creatively packaging products, diversifying income streams, advocating for your laws, and everything in between.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Father’s Day Advice from Jack Bogle

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

Art Carey of the Phildelphia Inquirer shares some great quotes from a past interview with the late Jack Bogle, in which Bogle shared the advice he would give his own son: Vanguard’s John Bogle gives tips for life on Father’s Day. The advice is inspiring and has very little to do with investing in particular. The entire interview is worth reading if you can, but here are some partial excerpts:

[…] First, don’t forget your family, because in the end, that’s all you really have. Next, be a decent human being, and don’t think you’re better than anybody else, no matter what your condition of wealth or importance.

Never let things — the material possessions you may come to accumulate — become the measure of your life. It is an easy trap to fall into during these days of such material abundance in America, or at least in the privileged part of America that we see — with grander homes, bigger stores, more powerful cars, smarter phones, more exotic rock concerts, more sophisticated toys for children, and more elaborate toys for grown-ups, a cornucopia of things almost beyond measure.

And never forget the important role of luck in your life. Never, never, never, never say, ‘I did it all myself.’ Nobody does it all themselves. And when somebody has the temerity to tell me they did, I say to them: ‘That’s wonderful. I’m not sure I’ve ever met anybody who did it all themselves, but could I ask you one question: How did you arrange to be born in the United States of America?’

Above all, never give up your idealism. No matter how dark things get, keep your eye on the brighter side of things. Never let your determination falter. Even when the world turns against you and ridicules your ideas, ‘Press on, regardless.’ […] You don’t say, ‘I’ve arrived, I’m here.’ You say, ‘I’ll try to do a little better tomorrow, and all the tomorrows after that.’

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Live Cheaply and Invest In Yourself

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

The The Money Diaries series at Wealthsimple continues to offer periodic interviews with an interesting mix of people sharing about their financial lives. I’d never heard of Carson Mell, but I appreciated how he cared most about doing what he wanted with his time as a young adult, and how he lived cheaply in order to invest in himself. (His most well-known project is probably Silicon Valley on HBO.)

The power on knowing the cost of your minimum viable lifestyle. My advice to a young ambitious person would be to figure out exactly how little you can live on. Mell’s monthly expenses were on the order of $1,150 a month:

[…] after a few months, I’d saved up some money and I made a decision: I’d quit my job and live as simple and frugal a lifestyle as I could, so that I could invest my time and energy in my own work. I had my own small apartment and paid $700 a month for it. I found that beyond rent, I could get by on 15 bucks a day. A nearby taco place had a $2.75 special for huevos rancheros — I ate there every single day. While I prided myself on throwing myself into my art instead of filling my days working mundane jobs, I learned quickly that meant becoming a cheap bastard.

Once you establish at level at which “I know I can survive on $XXX”, that can create a certain type of self-confidence. For example, I once knew that having $20,000 meant that I could cover my expenses for a year, and thus once I amassed that amount, I could take all the risks with my TIME that I wanted for a year. I could start a new business, learn a new trade, change the direction of my life.

Maybe cheap eats is key too? Beside my apartment, there was a restaurant that sold two eggs any way, hash browns, and toast for $1.99. I lived in the same rundown apartment and ate those over-easy eggs when I made under $20,000 a year, and when I made over $60,000 a year.

I decided that the thing to do was to keep investing in myself — living simply, being a cheap bastard, and putting my time and effort into my work.

Finding the motivation. Some people equate spending thoughtfully with being caring a lot about money (bad). However, it can really extend from caring a lot about how you spend your limited time on Earth (good).

As for myself, I no longer have the headache of hewing to a budget of 15 bucks a day. These days, I don’t mind paying to park in a parking structure, or leaving my car at the valet if it looks like finding a free space will be a pain in the butt. Anything that saves you time is worth spending money on, because your time is an invaluable resource. But I’m extremely mindful of where I spend my money. Here’s the thing: In TV, you don’t know when the next job will come. And I never want to have to take a job just to cover the cost of an upgraded lifestyle. I want to continue to have the chance to invest in myself — my own ideas, my own projects.

I spend money very thoughtfully, and because I save money, I can be selective about what jobs I take or don’t take, and where I put my time and energy.

I forget the exact quote, but to paraphrase – Once you find your “why”, the “how” becomes so much easier.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Creative Business Idea: Selling Baked Goods Online via Etsy

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

My family enjoys watching Kid’s Baking Championship on Food Network, and I’m always impressed how many of these 8-13 year-old contestants have a side baking business! Last weekend, the WSJ article How Etsy Became America’s Unlikeliest Breadbasket profiled home bakers selling their baked goods online through Etsy. That could be a perfect business education for a teenager, including concepts like business plans, accounting, customer service, online marketing, and basic coding.

Cottage food laws. Many states allow exemptions that don’t require you to use a commercial kitchen to sell “non-potentially hazardous” items like bread and other baked goods. I knew about “cottage food laws” in terms of church bake sales, but I wasn’t aware that some states have much more relaxed laws than others. For example, some states require you to sell in-person and you must hand-deliver it yourself to a customer within your home state. However, the following states allow you to sell bread and other baked goods via online marketplace and deliver them via mail:

  • Colorado
  • Idaho
  • Iowa
  • Maine
  • Maryland
  • Nebraska
  • Ohio
  • Oregon
  • Pennsylvania
  • Tennessee
  • Utah
  • Vermont
  • Virginia
  • West Virginia
  • Wisconsin

Source: Forrager.com, May 2020. Note that some states will require an annual home inspection and/or permits.

The WSJ article profiled the Etsy shop ChickensintheRoad by Suzanne McMinn. She lives in West Virginia, which has some of the most open cottage food laws. McMinn shares some of her Etsy history in this blog post. Both an experienced baker and soapmaker, she realized that the competition was much more intense in the soap category. She now specializes in fresh baked goods as well as various dry food and seasoning mixes.

What is a hand-crafter worth? Can you buy biscuits–or cookies or fudge or soap or bread of whatever–for less at the grocery store? YES. But you don’t get the hand-crafter. You don’t get the individual batch per order. You don’t get homemade. You don’t get that attention to detail. You don’t get that packaging that makes every order of a dozen biscuits (or whatever) look like a present under the Christmas tree. That is what you get from a hand-crafter on Etsy.

Making the most out of your valuable knowledge. Thanks to a recent profile on Good Morning America, it looks like McMinn isn’t even taking any new orders until late June. She’s booked solid! Her skills are definitely valuable, but I can’t help but notice that if she is not baking, she’s not making money. She’s still selling her time for money.

What I would love to see her do is create a series of online videos for making some of her specialties, and then charge for access. Yes, there are many videos for free on YouTube, but what about those superfan customers that want to recreate her exact biscuits? The best part is that it would only take a one-time commitment of say, 10 hours. After that, the upside is unlimited.

Actually, you know what would make the most money? A full digital course that would teach others how to start their own online home baking business. For example, her blog post also revealed the triple-wrapping method that keeps her biscuits at maximum freshness even when delivered in a USPS box. I’m sure she has make many mistakes along the way that would be valuable to know ahead of time. You could charge anywhere from $100 or far upwards depending on how much detailed, step-by-step content was included. Again, the upfront cost is fixed and the upside is unlimited. She could make $1,000, but she could also make $100,000 if she sold 1,000 copies over time. She could always keep on baking, but now she’d also be making money 24 hours a day, even when she’s sleeping.

Indeed, she’s pretty funny and I appreciate her sense of humor:

Remember that year, when I first moved to Sassafras Farm, and all the pipes froze, and I had no money, and it was like, Kids, be happy we have running water, that is your Christmas present? This year is almost like that, but with running water, and it’s like, Kids, be happy there are a couple leftover cookies after I make this batch I’m shipping, cuz other than that, you can just starve! OR PAY ME BECAUSE I CHARGE FOR FOOD.

There’s nothing like someone telling you that what you’re doing isn’t worth what you’re charging right when you’re dying of exhaustion from doing it.

Anyhow, I thought this was a cool example of how someone’s special knowledge can be turned into a living by taking advantage of new opportunities, in this case new cottage food laws and the Etsy online marketplace. I’m also always trying to show my kids ways to decouple time and money, and not forever work for an hourly wage.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

68 Bits of Unsolicited Advice by Kevin Kelly

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

The best thing I read this week was a “Things I’ve Learned…” list called 68 Bits of Unsolicited Advice by Kevin Kelly – a very interesting fellow (see his bio, about me pages) who must have secretly figured out how to freeze time given all the things he does! I’m most familiar with him as the editor of Cool Tools.

Certain items on the list will sound familiar and only a few are finance-related, but chances are you’ll find something new that clicks. Here’s a small selection:

– When you are young spend at least 6 months to one year living as poor as you can, owning as little as you possibly can, eating beans and rice in a tiny room or tent, to experience what your “worst” lifestyle might be. That way any time you have to risk something in the future you won’t be afraid of the worst case scenario.

– Don’t be the best. Be the only.

– Perhaps the most counter-intuitive truth of the universe is that the more you give to others, the more you’ll get. Understanding this is the beginning of wisdom.

– Separate the processes of creation from improving. You can’t write and edit, or sculpt and polish, or make and analyze at the same time. If you do, the editor stops the creator. While you invent, don’t select. While you sketch, don’t inspect. While you write the first draft, don’t reflect. At the start, the creator mind must be unleashed from judgement.

– Following your bliss is a recipe for paralysis if you don’t know what you are passionate about. A better motto for most youth is “master something, anything”. Through mastery of one thing, you can drift towards extensions of that mastery that bring you more joy, and eventually discover where your bliss is.

Definitely something to bookmark and read again.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Charlie Munger Daily Journal Annual Meeting 2020 Full Video, Full Transcript, and Notes

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

If you like hearing Warren Buffett and Charlie Munger talk at the Berkshire Hathaway (BRK) annual meeting, you should also watch or listen to Charlie Munger at the Daily Journal (DJCO) annual meeting. DJCO is his personal pet project, and each year he does a Q&A session where he answers any questions by himself. CNBC recorded the full 2020 DJCO annual meeting live (embedded below). I watched the entire 2+ hour session – it’s good but long… might be better as a podcast (although I like to take notes too).

Adam Blum of ValueWalk has generously shared his full transcript as well. It’s very complete so I am too lazy to compete with that. Instead, here are my (often paraphrased) personal notes and highlights:

  • Munger has no idea what the consequences will be that the biggest shareholder in all the biggest companies are index funds.
  • Munger likes the Daily Journal and Costco because it they try to do right by their customers, as opposed to casinos for example that make money by tricking people. You should always take the high road if you can. It’s less crowded.
  • Newspaper are going away, except for maybe the Wall Street Journal and New York Times. This is bad, as now you have misleading opinion media on both sides that just keep spewing hatred. Politics is even sillier than business.
  • Chinese companies are stronger with better growth prospects than US companies. Munger is invested there (and he jokes that you aren’t). Fish where the fish are.
  • Munger is partial to Canada and their working single-payer health care system, especially how they pay lower pharmaceutical prices.
  • There is too much wretched excess in investment management. There are troubles coming.
  • Index funds will still work best for most people, if you can be patient. He notes that the average holding period among Chinese investors is very short. This is not good. He is not a fan of the popularity of gambling among the Chinese.
  • Be a survivor, not a victim. Advocating for reform is important, but on a personal level it is important to to keep plugging along. Munger doesn’t like politicians that get ahead by trying to make everyone feel like a victim. Recognize you are in a bad situation and work to make it better.
  • Munger only knows enough about Crypto to know that he should avoid it. “Too hard” pile.
  • Regarding inflation and interest rates, we should all be modest about our knowledge of economics.
  • No new book recommendations.
  • Munger does not have a hostile attitude towards China. The US should try to get along with China. China should try to get along with the US. As an aside, Munger has admiration for Japan during their 25 years of economic stasis.
  • Learn to change your mind when you are wrong.
  • Tesla – Munger will never buy it, but also never sell it short. Don’t underestimate a man that overestimates himself.
  • We should appreciate our current living standards. What is extra money really going to do for you after you have enough to eat? Medicine has greatly improved. Even with more technological advances, will life be that much better?
  • Munger has no secrets to share about his longevity.
  • His only advice on parenting is to be a good example. Preaching to his kids never worked.
  • On negative interest rates, having worked once, governments will of course try it again, likely to excess.
  • The inversion process. Figure out the easiest ways to make yourself bankrupt, and then avoid them. (Consumer debt? Medical debt?)
  • Munger is known for being rational, yet he 96 years old, enormously rich, and cares a lot about what happens to a little company called the Daily Journal. He calls it insane.
  • Having a two-party political system is good. Power corrupts. It’s better when no one side gets too much power. The ebb and flow is good.
  • American healthcare, in many ways it’s the best in the world. It is powered by a lot of smart hard-working people. However, there is a huge amount of totally unnecessary activity that costs a lot and does nothing or even causes harm. Why? There are big financial incentives to make money with unnecessary care. Change the incentives. The insurance reimbursement system is too opaque. Kaiser system is an example of doing less unnecessary care.
  • People who are deferred gratifiers do better than the impulsive ones that demand immediate gratification. He is afraid the tendency towards one or the other might be genetic.

I actually appreciate when someone admits they don’t know something, as opposed to others who seem to form a strong opinion on everything under the sun. One of Munger’s lessons is that it is important to accept what you don’t know, and make strong bets only on what you do know. That’s the only way to get outsized results.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Pioneer Woman & The Magic of Untreated Boredom

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

I hope that everyone had a boring Labor Day weekend! I say that because boredom is a magical thing, especially when left untreated with a computer/TV/smartphone screen. I had a lovely quiet afternoon where I sorted out a big box of old electronics, and my mental wanderings inspired me to make some important changes in my daily schedule.

It turns out that Ree Drummond understands. Now, I’m more of a Barefoot Contessa fan myself, but the Pioneer Woman brand has grown into an empire. TV show, magazine, cookbooks, and I’m sure some sort of branded kitchenware. You’re not a real food celebrity until you have kitchen towels and cutlery with your name on it. Let’s see… Check and check!

I just stumbled upon this older New Yorker magazine profile, which revealed the origin story. Before that, she was a stay-at-home-mom that got pregnant on her honeymoon and continued to have four children. Then one day…

One morning in May, 2006, eleven years after Drummond arrived in the country, Ladd announced that he was taking all four kids, including one-year-old Todd, who would sit in the saddle with him, to work cattle. “He said, ‘You stay home and take time for yourself,’ ” Drummond recalls. “It was literally the first time I had been alone in the house for a several-hour period.” Usually, when she had a free moment, Drummond hopped on a homeschooling message board, which she frequented for adult interaction. But that day she decided “to start one of those blog things.” She had read only one blog, Doc’s Sunrise Rants, written by a homeschooling single lesbian mother of triplets in Oregon. But she thought it seemed like a fun, efficient method of keeping in touch with her mother, who had divorced her father and moved to Tennessee.

This struck a chord with me because it was similar to how this blog got started. My wife and I had just gotten married and moved to Portland, Oregon for her new job. I managed to get a remote working position, but that meant that there was no longer a nearby office for me to visit each day. I no longer had a desk. There I was, in a brand new city with no friends, no co-workers, and a wife that worked 60-80 hours a week. I became bored out of my mind! I also decided to start “one of those blog things”, which led to other related businesses, and so on.

Now, I don’t have a global media/cutlery empire, but I still think that boredom can be a powerful thing. According to this Wired article, academic research agrees. When you are in a constant state of stress, when you are constantly putting out fires (or changing diapers), all you are doing is reacting. Occasional, extended boredom gives space for your creativity to grow. When was the last time you really let yourself get bored?

Comic source: XKCD

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Berkshire Hathaway Post-Shareholder Meeting CNBC Interview 2019 Full Video, Full Transcript (Buffett, Munger, and Gates)

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

On the Monday after the recent Berkshire Hathaway shareholder meeting, Becky Quick of CNBC did another 2-hour interview with Warren Buffett, Charlie Munger, and Bill Gates. CNBC has thankfully posted the entire interview online along with a full transcript.

As usual, I like things directly from the source, so I watched the entire thing. Here are my notes that deal with investing:

Warren Buffet-style value investing distilled. You start out by picking a good business first. Then, you pay attention to the price. If the price is good, you buy. If the price is not attractive, you don’t. You can’t predict the mood of Mr. Market, he may be depressed or manic. (If it’s not a good business, then skip it no matter the price.)

But we watch the prices of things we do more than current events. Because in the end– we aren’t buyin’ ‘em because what’s gonna happen next month or next quarter. You know,we’re really buying ’em because we think they’ll be good businesses ten years from now. If somebody came to us with a good business today, we’d buy it. And we’d buy it regardless of what’s going on in the tariff situation. We might this wouldn’t be the case. But you might– we’re more likely perhaps to get something when other people are– fearful. You see that in a big way instantly in the market, you know, in the market for businesses. It’s– but it’s–still there in people’s minds.

On share buybacks and Apple. Share repurchases, or buybacks, are when a company buys its own shares outstanding. People argue about how this is “good” or “bad”, when really it’s all just rather pointless.

Repurchases can be the dumbest thing in the world or the smartest thing in the world. and I’ve seen both but they’re just — repurchases by the company are just like purchases to us, they’re dumb a one price and smart at another price. And I like it when companies — I like it when we’re invested in companies where they understand that. Many companies just repurchase and repurchase, you know, it’s the thing to do, and they’re encouraged to by some shareholders and by their brokers. Repurchases can be dumb. They can be smart. At Apple, they’ve been smart.

Berkshire has never bought at stock at IPO. Here’s a simple thought model that shows why buying a new-issue stock on IPO is nothing to get excited about.

WARREN BUFFETT: Well, because I looked at it, I really don’t want to discuss Uber. And I don’t have any special feelings about it than any other coming to market. But I would say that in 54 years — well, I don’t think Berkshire’s ever going to – I mean, the idea of saying the best place in the world I can put my money is something where all of the selling incentives are there, commissions are higher, you know, the animal spirits are rising. I mean, that’s going to be better than 1,000 other things I can buy where there is no similar selling enthusiasm and the desire to get the deal done on extra commissions. That’s the single best thing to buy on a given day. I mean, it’s –

CHARLIE MUNGER: And I can’t think of a time we’ve ever done it.

WARREN BUFFETT: Yeah.

BECKY QUICK: Ever bought an IPO.

CHARLIE MUNGER: Yeah. Never will.

When asked about a book recommendation, Buffett said The Moment of Lift: How Empowering Women Changes the World by Melinda Gates. There are some other practical observations about topics like politics and healthcare, if that floats your boat.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Charlie Munger: Financially Independent at Age 38 in 1962

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

Despite the fresh packaging, we should remember that the “FIRE” concept (Financially Independent, Retire Early) is anything but a new concept. Even I can’t help being a little intrigued by the clickbait title “This Secret Trick Let This Couple Retire at 38”. Such an article could have been written about the 95-year-old Charlie Munger before he started investing alongside Warren Buffett:

The first 13 years I practiced law, my income [from practicing law] was $300,000 total. At the end of that 13 years, what did I have? A house. Two cars. And $300,000 of liquid assets. Everyone else’d have spent that slender income, not invested it shrewdly, and so forth.

I just think it was, to me, it was as natural as breathing, and of course I knew how compound interest worked! I knew when I saved $10 I was really saving $100 or $1,000 [because of the future growth of the $10], and it just took a little wait. And when I quit law practice it was because I wanted to work for myself instead of my clients, because I knew I could do better than they did.

Net worth analysis. According to his Wikipedia bio, the 95-year-old Munger graduated from law school in 1948. Let’s say he practiced law from 1949 to 1962. At the end of those 13 years, he states that he had $300,000 in liquid assets, a house, and two cars. The median value for a Los Angeles area house in 1962 was about $15,000. The median cost of a new car in 1962 was about $3,000. Adding this all up means his net worth in 1962 was about $321,000.

That was a significant amount of money in 1962. According this CPI inflation calculator, that is the equivalent of $2.7 million in 2019 dollars. In other words, the Munger household was financially independent when he was 38 years old.

Income analysis. He also states that in those 13 years as a lawyer, he made $300,000 total. For the sake of simplicity, let’s just say he earned the same income every year. That works out to $23,000 per year. This was a relatively high income – $193,000 per year in 2019 dollars. According to this source, the median family income in 1962 was $6,000 per year. That means he was earning about four times the median average household income.

Super-saver, super-investor, or a little of both? Maybe he shared this somewhere else, but I don’t know his saving rate or his investment return. He does boast of both not spending all that “slender” income and also about investing it “shrewdly”. We have his annual income and his final ending net worth, so you can set one and figure out the other using a compound return formula. I’m assuming everything is after-tax for simplicity again.

  • Let’s say he was a super-saver with a 50% saving rate. That means he saved $11,500 every year and invested it for 13 years. That would work out to an 10.5% annual compounded rate of return.
  • Let’s say he was a super-investor with a 20% annual compounded rate of return. That would work out to an annual savings of $5,500 per year, or a 24% savings rate.

I found that the annualized return of the S&P 500 index from January 1949 to January 1962 was about 18% when you include dividends (source). Thus, my guess is that he was somewhere between these two markers: 50% savings rate/10.5% annual investment return and 24% savings rate/20% annual investment return. These stats are definitely admirable and impressive, but also show that he didn’t hit the lottery or anything crazy.

Munger’s example reaffirms that if you have a relatively high income, save a high percentage of that income, AND invest that money into productive assets, your net worth will grow quite quickly.

A criticism of financial independence seekers is that it is pitched to “everyone” but only works for the rich. It is absolutely true that it is the easiest for high-income earners. How could it be any other way? At the same time, there are many households that earn high incomes that spend 95%+ of it every year. If these folks realize they have financial independence within their grasp, and then change their behavior to achieve it, I still view that as a positive thing. It’s always hard to spend less than the people you hang around with.

In our case, we both eventually earned six-figures, but not the entire time. When we earned a combined $60,000 a year, we lived on $30,000. When we earned a combined $100,000, we lived on $50,000 per year. When we earned $200,000, we lived on under $100,000. Would we have been able to maintain the 50% savings rate on a $60,000 income for 15 years? I’ll never know. I know it would have been much more difficult, and I’m glad we didn’t have to try. I’m also glad we started when we were young and without kids.

Managing expenses (frugality) alone will not get you there, but I still believe it is an important factor once you get your income to a certain level. I would argue that a household earning $100,000 and spending $50,000 per year is much better off in the long run than a household earning $150,000 and spending $125,000 or even $100,000 per year. Now, if someone is making minimum wage, it will be hard to have a lot left over to invest. Your efforts would be best focused on the income side of the equation.

Bottom line. Charlie Munger was born in 1924 and reached financial independence at age 38 from his earnings as a lawyer (before he became partners with Warren Buffet). While he is now best known as a billionaire investor, he took a familiar path to financial independence: solid 9-5 income, consistently high saving rate, and prudent investment of the difference. The same formula he started using in 1949 remains available 70 years later to someone starting in 2019.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.