So you think you know money

 kw: book reviews, nonfiction, finance, personal finance, money management

We'd all like to have a mountain of money. I get it. Two problems arise: what to do to obtain it, and how to keep from losing it. Kevin O'Leary gets it also, and he has advice on both fronts. His 2012 book may be twelve years old already, but it is exceedingly relevant.

In Cold Hard Truth on Men, Women, and Money: 50 Common Money Mistakes and How to Fix Them Mr O'Leary, AKA "Mr Wonderful" on Shark Tank, offers multifarious advice from one who may be a billionaire, but hasn't forgotten when he wasn't one.

I could get into the weeds on many points. I'll touch only on a few (of the 50!), because you really won't learn much from me, but you can learn much by reading for yourself, and by taking notes where he suggests that you do so.

One point is reiterated, because it's a hard one to learn. Emotion and envy are enemies of effective finance. I'd put it this way: Emotional decision making is a very expensive hobby, exceeded only by Envy. One tool offered to counteract these enemies is this list of questions to ask yourself about any durable purchase, from a book or a tool to a house:

1. I have given this purchase sufficient thought?
2. Buying this item will not create debt for me or anyone else?
3. I not only want this item, I need it?
4. This item is more valuable than the interest I'd earn if I saved the money instead?
5. This item will matter to me in a year?

If you can't answer with five YESes, don't buy. Questions one through four are also relevant to consumable purchases (food and drink, tobacco, lawn fertilizer…), but ongoing maintenance purchasing is taken up elsewhere in the book. Particularly for purchases which have the potential to create debt (Q#2), these questions need to be answered YES by both you and your significant other. I don't mean, "It's a good idea to consult with…" but "NEED"; a requirement. These questions are accompanied by a pledge card that O'Leary wants you to sign, cut out, and keep with you, on page 50.

Here is an idea that never occurred to me, from his advice to his daughter: "Have a separate no-fee, low-limit credit card for purchases online." This limits the damage a fraudster can do if (when) an online account is compromised (hacked). This is something I'll discuss with my wife. Getting a credit card is a meta-purchase, a facilitator of purchases.

On the "gaining money" side of things, he has advice about investing. Of course, you may have heard that it is best to first invest in yourself and your skills, by obtaining as much education or training as you can afford…but not more. Going into debt to get a degree hasn't worked well for most people (I have a good friend with four degrees, a BS, two MS's and a PhD, and his wife has a BA and MFA. He worked at a great engineering company, making lots of money, and it took them until the age of 50 to pay off all those student loans. I worked my way through, so it took seven years to get a BS and another six to get a MS. When I was in my thirties, my wife and I were debt free, and this friend and his wife were just beginning to dig their way out.).

But what about investing. Your education is over. You have enough income to save some; this can always be the case if you are careful with money, and Mr. Wonderful has excellent advice about just what "being careful" really means. Anyway, what to invest in? He recommends dividend-bearing stocks. He writes, "The culture of companies mandated to pay dividends is different from that of those whose mandate it is to simply grow market share and create profit." (p.70) Their CEO's pay attention to maintaining a balance sheet that keeps paying dividends to stockholders. This make a company both stable and prone to gradual, balanced growth. 'Tain't sexy, but it's effective. I encountered similar advice long ago, and it has worked for me.

The other half is hanging on to whatever you have gained. I know someone who won several million dollars in a lottery. After a few years, they confessed that it nearly ruined their life. They had to fend off grasping relatives, "acquaintances", and frivolous lawsuits by random people. They were cheated by money managers. They also found how easy it is to pick up expensive habits. They managed to learn a few things very fast, and sock away some funds before everything was gobbled up. They didn't quite lose everything. It could have been even worse. O'Leary has advice about dealing with all these things and more.

One final item I'll mention: consumable, large expenses such as weddings. Do you really need a $30,000 open bar at your wedding or anniversary party? O'Leary mentions on page 171 spending a total of $10,000 on his wedding. To me, that is a lot. My wife and I are both quite frugal, she even more than I. Our wedding "venue" was the house of a friend. One of her friends made a dress for her. Her sister made a wonderful cake. I cooked a main course for 100. One of my friends baked the bread and made salad. Another prepared a vegetable course. Nearly everyone present was a teetotaler, so no alcohol needed to be bought; those that wanted a drink were free to head to a tavern afterward. Our honeymoon was at a cabin near a national park; we both love walking and hiking. That was 49 years ago. No regrets.

I note that four of O'Leary's five books are Cold Hard Truth on money in various aspects. If you really want to know money, particularly if your life experience indicates you don't know it well enough, any or all of these four books will fill plenty of gaps.