How FIRE Is Different Today--Lessons From My FI Journey
My earliest memory of investing occurred when I was about six or seven years old.
I was looking at a statement from a mutual fund (this was circa 1967 mind you). My dad talked to me about what the numbers meant and how there was an account for me. What stuck out for me were the four digits to the right of the decimal point. How do they figure out things that small? The precision of the statements stuck with me to this day.
I really don't have any idea what mutual funds my dad invested in. Based on the year and my dad's penchant for early adoption they may have been 1960 "go-go" funds. I really don't know what happened to them.
Lesson: It’s never too early for you to start talking with your kids. You never know what will stick with them.
Planning
In the early '80s, in the military, I had an Operations Officer in my Squadron who took it upon himself to talk to every young officer about our financial future. I loved his ideas. He talked about creating building blocks of wealth in $10,000 increments.
The first was to be designated as a "life happens" block. He had purposes for each of the next several blocks including housing, savings for planned purchases, and finally investing. Homes for each of the blocks were savings accounts, which were earning 4-5% at the time, CDs earning 9-10% at the time, and individual stocks. There was no discussion of asset allocation or mutual funds, but the core idea of different buckets of money for different purposes stuck with me.
Lesson: Simple is good. Save with a mission.
Getting Help
In 1986/87 I was steered by a friend toward a full-service financial planning company that focused on the military customer. They did a lot of great things.
They focused on a financial plan that included investing via a rudimentary asset allocation model, funding retirement, funding education, planning for life events, life/home/auto insurance planning, and most important in the end--doing all the paperwork. Times were a little different. They recommended some things that would amaze the FI community today. I had front-loaded funds, active management, and high fees.
They put me and Mrs. Accidental FI in large-cap US funds in our IRAs. And large-cap US funds outside of our IRAs. We also had some aggressive US funds and a tiny bit of international funds. At the time, paperwork and the mechanics of investing were a challenge.
It involved filling out forms with a pen, US mail, checks, faxes, and visits to payroll, and to keep track of it I had to transcribe paper statements into Quicken. This vendor got me into some things I never could have done on my own at the time--Asset Allocation, IRAs, Roth Conversion, and 529s. They gave me a plan and the confidence it would work based on modeling and analysis.
Lesson: Paying for advice and help is good when you need it.
Penny Stocks?
The last memory I'll share is about Individual Stocks. In 1986, my buddy and I decided we had some extra cash and would make an investment in penny stocks. We jumped in my Fiat Spyder and drove from Kaneohe, HI to Honolulu. We went to a broker which we found in the yellow pages.
"Hot tip boys, CHOPP computer, that’s your ticket." We talked a bit and for a $75 fee (I very distinctly remember this fee) we got 100 shares each at about $9 a share.
Later that year, my buddy and I were in Yuma, Arizona for a training class on October 19, 1987. We quickly called a broker on the 20th and loaded up on some more shares. Fees for each of those shares were about $35. And I was able to get a few thousand shares.
I was in about $1,600. CHOPP had some neat product ideas (I emphasize ideas), several lawsuits, splits, reverse splits, and a name change. Eventually, they settled into the pink sheet markets. Years later, I abandoned the shares for a total loss.
Lesson: I am sure everyone reading this knows--you can’t beat the market!
Wrapping it up
Maybe some things aren't as different as we remember. Money is something that teaches us valuable lessons at every stage of life. I think these lessons apply as much today as they did when I learned them. Of course, there are some key differences you may notice between now and then. Things such as interest rates, information availability, brokerage costs, and academic studies are very different today than in my memories. Obviously, this list is not complete, but you get the idea. So I have two more Lessons for you.
I intentionally read and listen to books, magazines, radio shows, and podcasts about changes in the rules of finance. Try to make sure you weed out the charlatans; I do that by trying to learn from people who give freely without expectations of returns.
Lesson: Read, listen, and learn.
We all know many of these people who can help in our personal lives and many in the public eye. Seek them out. They will help.
Big lesson: Take advantage of the tools that can get you to FI.
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