We should’ve bought Facebook and Bitcoin stock: An investing story

“Over your lifetime, you’ll actually miss more deals than you’ll catch onto.”

Two of the principles of my blog are “Long-Term Thinking/Delayed Gratification”, and the teaching of “Financial Literacy” as money and investing are topics that I ponder and study quite a bit these days.  I wasn’t taught a lot about them as a youth and strive regularly to fill that space in my personal toolbox.  Learning about investing money is actually critical for all employees who are responsible for saving into their own “Defined Contribution” plans.  A third principle of my blog is “Creating Ecosystems of Success” – helping others to be successful.  This particular story involves all three principles and focuses on two investing opportunities from years past – both of which could have drastically changed my life today if I had been in position to take advantage of them.

This post was inspired by two people.  One is a mentor who has literally adopted me and whom I regularly meet with to talk about the content of my blog, economics, current events and everything else under the sun.  Everyone should have a mentor like this.  The second individual is a long-time friend from our hometown of Buffalo, NY.  He worked in the banking industry, and has always had a bit of an entrepreneurial mind.

Instead of diving right into the story, for context I’ll go back to my brief high school basketball career – one of the best times of my life.  One of the things our coaches tried to stress to us was “boxing out” on defense.  That is putting a body on your man once a shot went up from the opposing team.  By committing to boxing out as a team, any team almost certainly could position itself to get the rebound and limit shot opportunities for the opponent no matter their height or leaping ability.  It was a simple and effective technique if used consistently and for our young minds, that was the hard part – doing it consistently.  All it took was being mentally alert, and positioning oneself at the right time.

Okay, let’s talk about Facebook and Bitcoin.  I’ll start with a reading assignment my mentor gave me about three months ago.  One of the topics we discuss regularly is investing money – something he is very experienced at and has taught his kids to do – something I’m playing catch up on.  At the conclusion of one of our mentoring sessions, he gave me a book to read titled “How To Turn $100 Into $1,000,000: Earn, Save and Invest by James McKenna and Jeanine Glista with Matt Fontaine, the creators of Biz Kid$.  When he first handed me the book, I made a comment about it being a, “Children’s book,” to which he quickly snapped back at me, “Do you know everything thing in this children’s book?”  Eager to know more of what he knew, I didn’t take offense, but instead appreciated his coaching.  He tasked me with reading the book prior to our next mentoring session.

As I read through the book, the initial chapters started with basic money lessons youngsters should have – ways to legally earn money such as through doing chores or eventually getting a job, and also planning and goal setting – some lessons many children aren’t taught at an early age.  Later the book delved into investments in a very simple and digestible way – charts, diagrams, pictures and all.  One caption that stood out for me was something on page 106, which told the story of Facebook’s Initial Public Offering (IPO) back in 2012.

“We should all pool our money together and buy Facebook stock,” my friend described earlier said enthusiastically.  It was the holiday season up in our hometown of Buffalo, NY.  He had worked in the banking industry for a while and had knowledge of investment vehicles that myself and my brother, and probably most of his family didn’t have.  We were all at his grandmother’s house where his relatives gathered to fellowship as they did most years.  I watched as he floated around his grandmother’s upper unit telling everyone, “We should pool our money and buy some Facebook stock.  They’re about to have an IPO.”

At that point, Facebook had completely eclipsed Myspace as the number one social media site and most everyone was on it.  While most everyone was using it to reconnect, share the most intimate details of their lives, and other unscrupulous things, its creator Mark Zuckerberg, was cleverly devising ways to monetize his creation through selling advertising space.  It never occurred me, and I would guess the majority of the users, to invest in it.

A mischievous guy at times, I thought this was just another one of my friend’s bright ideas that he was trying to suck us all into.  But was it?  As described in How To Turn $100 Into $1,000,000, Facebook’s initial stock price in 2012 opened at $38 per share.  Shortly thereafter the stock price decreased to $17.55.  When I heard that the stock price went down, I laughed internally at the prospect of all of us “pooling” our money to buy this Facebook stock, and the fact that my friend was lobbying so hard for us to do it.  But that was just the beginning.

Facebook’s stock rebounded over the next five years from that $17.55 per share drop and eventually appreciated to around $100 per share in 2015 when How To Turn $100 Into $1,000,000 was published.  Just before crafting this piece, I checked the business section of the Washington Post for stock prices and to gauge the health of our economy – a regular exercise now.  There I saw that Facebook’s stock is now trading around $170 per share, that’s right $170.  It’s also now considered one of the “Four Horseman” of technology stocks – the other three being Amazon, Apple, and Google.

So let’s put this all in perspective.  What occurred to me when I read that passage in the book was that if I simply had $2,000 lying around and ready to invest in 2012, I could’ve purchased just 100 shares of the Facebook stock for a total value of $1,755 (plus the cost per trade).  Holding onto that stock for another five years, those 100 shares would have appreciated to a total value of $17,550 which could either be cashed out for another purpose, or held for more appreciation.  There would of course be the potential of loss too as with all investments, but Facebook has become a very strong company.  But if you were positioned to get into the game at that point, you would’ve been rewarded later on.

I’ve come to realize that life is all about positioning similar to the way smart basketball players position themselves to get rebounds when a shot goes up, as opposed to simply leaving things to chance.  When I look back to where I was in 2012, I honestly wasn’t in position to safely buy stock of any kind.  I was still lugging around a considerable amount of debt from school, and from mistakes made shortly after starting my federal career – paying too much money for some real estate investing trainings (discussed in another post).  I was recently out of a tumultuous relationship where money was an issue – my not spending enough.  I further had no emergency fund (see Dave Ramsey), and I hadn’t started funding my government retirement plan at least up to the point where I would get my 5% matching contribution – something all employees should position themselves to do if employers offer it.  What’s more is that I didn’t understand much about the stock investing game other than you want to “buy low” and “sell high” whether or not you get into an opportunity when it’s first offered, or if you find something of value at a discounted price and chances are it will appreciate – stocks, real estate, whatever.

But there is so much more to it than buying low and selling high.  There are lessons which take time and commitment to learn – this is part of positioning one’s self.  Furthermore, there are often sacrifices to be made to have money to invest – sacrifices such as not buying a car if public transportation and Uber can be used, taking one’s lunch to work more often times than not, and not “Turning Up” at the club on a regular basis.  As a man, another position might be not having a girlfriend for a while, or at least finding one who isn’t high maintenance.  These are examples of the positioning one must do to be ready to take advantage of the next Facebook if and when it ever comes around.

My friend was right in that it would have been good for us to take advantage of the Facebook IPO.  Coincidentally a couple of years later, he came back to us and told us that we should take advantage of something called “Bitcoin”, a new cyber-currency which I thought was another one of his silly ideas.  He was very enthused about it, but one of the issues was he couldn’t clearly explain to us what Bitcoin was and why it was important going forward.  This brings up another very key point.  A very important investing rule of thumb is that one should never invest in something they don’t understand.  It turned out though that he was right again.  Two to three years later, Bitcoin seems to be paying off for those who positioned themselves and invested in it when it was dirt cheap.  See the recurring theme here?

This post is not about buying Facebook or Bitcoin today in 2017 per se.  Those ships have arguably sailed, and you’d have to have enough money readily available even just to buy 10 shares of Facebook stock today.  In terms of getting into these opportunities early when they’re affordable, you have to position yourself, and that’s the central point.  Either you’re in a position to take advantage of an opportunity when it’s presented to you, or you’re not.  This involves knowledge and resources – studying your investment of choice, minimizing your debt, saving for emergencies, and then allocating money to invest – money you won’t be adversely affected by the if investment doesn’t work.  If you’re not in position to take advantage of a particular opportunity, you can always position yourself for the next one, and the one after that, and then the one after that.  It’s all about foresight and positioning.  Before starting discretionary/speculative investments, it might also be worthwhile to see a trustworthy financial planner (or someone knowledgeable whom you really trust) to make sure you’re on sure footing.

For the people who were in position to get into Facebook and Bitcoin, it wasn’t magic.  They had the resources and they were probably spending time studying those opportunities so that they were able to strike at the right time.  It all takes some time and effort, and how you spend your time will determine if you’re in position to take advantage of the next Facebook.  In closing, I highly recommend How To Turn $100 Into $1,000,000 to youngsters who have the aptitude for money and finance, and for adults like myself who’ve needed to play catch up.  I’ve personally started sharing copies with those in my inner-circle.

Thank you for taking the time to read this post.  If you’ve found value here and think it would benefit others, please share it and or leave a comment.  To receive all of the most up to date content from the Big Words Blog Site, subscribe using the subscription box in the right hand column in this post and throughout the site.  Lastly follow me on Twitter at @BWArePowerful and on the Big Words Blog Site Facebook page.  While my main areas of focus are Education, STEM and Financial Literacy, there are other blogs/sites I endorse which can be found on that particular page of my site.

Father’s Day 2017: reflections on some of Dad’s money and life lessons

Last month I wrote a piece in celebration of Mother’s Day, so it’s only fitting that I write something in celebration of Father’s Day as well.  The Mother’s Day post was about a specific piece of advice my mother gave me about my engagement and looming marriage a couple of years ago.  As jokingly stated in that post, Dad didn’t give me much advice in that particular instance.  He did give me lots of guidance throughout my life though.  Over on my “Heroes and Quotes” page, his is the first quote which was some advice he gave me at a young age about how to succeed academically.

There was much more though, particularly in way of advice about money, women and other things – lots about money and women.  He sometimes consciously taught me things, and some things I learned simply from observation.  With two of the key principles of my blog being “Creating Ecosystems of Success”, and “Empowering Others”, I’m going to reflect on some of his money lessons and some of their deeper and associated life meanings/significances – some of which I had to question.  As in most cases, I didn’t understand everything that was being said then as I do now.

As I go through some of this stuff, keep in mind that fathers are important – biological, step-, or mentors of all sorts.  According to data from Kid’s Count in 2015, 66% of African American kids were raised by a single-parent while the national average was 35%.  My parents divorced when I was three-years old and I thus grew up in a single-parent household for the majority of my childhood.  While I’ve sometimes looked back and wondered what it would’ve been like to have my father in the house, the blessing was that while he wasn’t physically there, it was important for him to be as visible and accessible as possible.

“Always make sure your children know who you are.”  He tried hard to keep up with the words of his own father who died during his teens.  It sounds like a simple thing, but as I grew into adulthood myself, went through college and even started dating, I realized that not every father did this, especially in the black community.  The results often times were catastrophic with long lasting ramifications, especially in dating or ‘pair-bonding’ – a separate topic all in itself.

*  *  *

“You just did something I don’t like.  You didn’t count your change.  How do you know that the cashier gave you the correct change?”  I was an early teen when this discussion took place.  I had just paid for something, took the change the cashier gave me and immediately stuffed it into my pocket.  A stern man, his words, “You just did something I don’t like,” stopped me dead in my tracks.  I didn’t think he was paying attention, but sure enough he was – in general Dad was always paying attention to the most minute details even when you thought he wasn’t.  He also remembered things long after you forgot them and would bring them back up when you least expected it.

When I discovered what he was unhappy about, it made sense to me and I started counting my change.  I even started calculating in my mind the change I was supposed to get back from cashiers before they gave it to me.  The lesson here was to be careful with my money, and to trust no one.  Years later he observed that I was in fact careful with my money.  I told him that I had gotten the behavior from him.  He replied saying something very profound, “Well son, when you have to make child support payments, you have to be very careful with your money.”

“You always keep your receipt because you never know when you’re going to have to return something.”  I don’t know which came first, this lesson or the change counting lesson, but they weren’t far apart.  His father had gotten on him about this when he was younger.  He had allegedly gone into lower Manhattan to buy some underwear and returned home without the receipt resulting in his getting scolded.

“When you get paid, you want to account for all of your expenses.”  This was an early lesson about budgeting.  We didn’t sit down and do one right then and there, and I wouldn’t master it until at least ten years later, but I always remembered the discussion.

“You always pay yourself first.”  This lesson came shortly after I started working, though again as a teen, I didn’t grasp the power of this advice until later.  It had tremendous implications in one’s prime earning years where diligent individuals save for both emergencies and investments and build wealth while others spend all of their income.

“You don’t quit your job unless you have another one to go to.”  Dad gave me this sage wisdom between my junior and senior years of high school after quitting my very first job at the Denny’s Restaurant, near the Buffalo airport.  I lasted three months at that job which consisted of washing dishes, cleaning up the restaurant, and taking out the garbage.  I didn’t last long enough to have to shovel snow in the winter.  The place where I really wanted to work for my first job was McDonald’s.  At the time it looked fun to me.  I was happy to have an income, but after a while I grew tired of working at Denny’s – coming home sweaty, greasy, and exhausted.  Without talking to anyone, I quit that job right there on the spot with no other job to go to.  It was then that I came to the understanding that I had no more cash flow – a sign of immaturity.  The only positive thing about that situation was that I was still in high school and wasn’t required to contribute to any of my mother’s household bills.  Some adults quit their job without having a replacement and put themselves in a pickle; often burdening those around them.

“You always keep money in the bank because you never know when an emergency is going to arise.”  There’s a very funny story behind this lesson and it involves a woman – something very dramatic and stressful according to Dad.  For my own safety, I’ll just stick to the lesson.  At an early age, Dad stressed the importance of having money in the bank due to unforeseen emergencies which inevitably happen to you, or to someone around you.  In this particular quagmire he had gotten into, having some money in the bank helped him get out of it.  He also regretted once not having $5,000 available for a mortgage down payment on a house he was renting.

“You can keep dating her if you want to.  You might have to miss your electric bill.”  This sobering advice came during my first year in graduate school in my mid-twenties.  It was one of my first experiences learning something that Dad had talked about for most of my childhood – women and money.  At least most of the ones we knew came with a price tag, and wanted to be wined and dined.

I had, unfortunately, taken a liking to someone whom I dated for one to two months who openly admitted she was needy, which I didn’t understand at the time as she had already started her own career.  Inexperienced at dating, she grew frustrated with my meager finances and my lack of understanding of what was expected of me.  Dad’s advice here, which came in a hurtful and mocking tone, was simply communicating that I needed to determine whether or not I could afford this particular female.  I decided that I couldn’t.

It’s an important set of questions for all men to ask themselves when meeting a potential partner.  Can I afford her?  Does she line up with my priorities?  Will she tank my finances?  This was also one of the first times I could personally feel the pain, the scars, and the poor fortune my father experienced in the dating jungle after he and my mother split – as there was lots of despair, and little hope or encouragement in his words.

“When you have to make child support payments, it forces you to be very careful with your money.”  I have to be very careful here as this is a sensitive topic, and my mother generally proof-reads my articles.  Throughout my childhood, Dad sometimes lamented about making child support payments – not because he didn’t want to support his children, but because I think he had a hard time making ends meet on his own end.  During my childhood, he eventually took a second job in the military to pay the bills.  It’s a sensitive topic because while he felt maxed out, my mother felt as though he wasn’t doing enough.  And I’ll stop there, but suffice it to say that in many instances men and women see money (and life) differently.  In some instances, as the ones being asked to provide, it can seem like your best is never enough – a hard pill to swallow.  He and I talked about this a lot as I got older and I started experiencing my own scrapes and bruises with the opposite sex.

“The bank is going to want to look at all of your bank statements when you apply for a mortgage, and $2,000 isn’t any money,” Dad scoffed at me, making me feel five feet tall.  I was still living with the big guy during my Postdoctoral fellowship.  I had started reading Robert Kiyosaki’s Rich Dad Poor Dad series and had joined my local Real Estate Investment Club.  I wanted to make an ambitious move and get my first investment property – a duplex which I would live in and eventually rent out for “Passive” income.  I needed some help with the closing costs and associated expenses, so I asked him for a loan.  It was one of the worst experiences of my life.

Instead of a nice teachable discussion about the ups, the downs, and the ins, and outs of trying such a thing – it turned into him putting me in a proverbial headlock.  It dragged on for days and days as he mulled over it, and asked me random pointed questions about it – his analysis and communication styles.  After a while I just wanted to drop the whole thing, and I concluded that I never wanted to be in a position to ask his help for anything money-related, though I did once more, and returned to the same conclusion.

In hindsight while it was smart to want to create a passive income stream, it wasn’t a good idea in that particular instance.  I wasn’t going to stay in that area long-term, and I wasn’t experienced enough, and didn’t have enough money to manage a property from a long-distance.  What was funny was that many people don’t even have $2,000 in the bank they can access quickly.  That said, he was right in that it wasn’t a substantial amount of money.  He was also right in that prior to qualifying you for a mortgage, the banks do want to know everything about your financial history.

Dad was also jaded in terms of being a landlord from a prior experience, as he once had a tenant in his lower unit – an older woman.  According to him, he went downstairs to collect the rent one day, and the woman transformed into a malevolent, ominous, and demon-possessed state.  It scared him at the time and forever soured him on being a landlord.

“I wouldn’t invest in the Stock Market if I were you.”  This bit of advice was given to me in my 30s when I expressed that I wanted to buy some stock by the end of that particular year.  Because of his own life experiences, Dad was averse to losing money.  Coincidentally, one of our closest cousins recommended I get in the game and buy stock, and even today experts like Dr. Boyce Watkins, strongly advocate blacks getting into the Stock Market.  So who was right in this case?  Who was to be believed and trusted?

This gets back to one of the points I made in my 2017 Mother’s Day post.  As we grow into adulthood, I think we all get to a point where everything our parents tell us can’t be taken as the gospel and in some instances must be questioned and or pondered critically.  In this particular instance, yes investing in stocks does involve potential loss.  An important consideration going in though is whether or not you understand that there is a potential for the loss, and whether or not you can absorb the loss.  In other words, do you have emergency money in the bank, and is the amount to be invested allocated for that reason?  Can it be easily replaced for another round?  This is a much different thought process than simply stating, “You’re going to lose your money if you do that.”

*  *  *

If the tone of this blog post was in part melancholy and mixed, then it reflects our father-son relationship which has been full of contradictions and mystery.  When I look back at my youth many of my childhood experiences were marked by concerns over money.  I’m not saying that I grew up in poverty because I didn’t by any means.  I don’t really remember my mother, whom I spent the majority of my childhood with, talking about money a lot, but I think she shielded my brother and me from some things – sheltering us, as one of my aunts often said.  I did look around at peers, such as my best friend and realized that I didn’t have Air Jordans, Starter Jackets, Karl Kani, or any of the trendiest apparel of our cohort.

Most of the money-related talks as I grew up actually came from my father and as you might have gathered from this post, many of them had some sort of pain associated with them.  As I’ve gotten older, I understand things much better now.  As we get older we start to see that our parents are people who make mistakes themselves, and are not perfect though at one point we may have thought they were.  In some instances we start to understand their pains and struggles.

Over the years our father-son relationship has gone through a lot of changes – some good and some bad with multiple ups and downs.  Overall I’m grateful for everything my father has done for me, and I tell him that every time I see him now (my mother too).  That said, as I think President Obama said years ago, for children whose biological fathers are missing, there can be other fathers too.  And even if a child’s father isn’t a good one, or can’t supply everything needed, there can again be other fathers to fill in those gaps.  I certainly have many.

There are a lot of podcasts and men’s stations on places like YouTube these days – many talking about the importance of fathers.  My favorite in this current station of my life is Paul Elam’sA Voice for Men” – content I would recommend for any man still figuring things out in our society – personal values, dating and marriage, and finally gender/societal roles.  Fathers are very important if for no other reason than to lend a balanced perspective on the world.  This is true for both boys and girls who themselves will eventually both grow into men and women.

Thank you for taking the time to read this post. If you’ve found value here and think it would benefit others, please share it and or leave a comment.  To receive all of the most up to date content from the Big Words Blog Site, subscribe using the subscription box in the right hand column in this post and throughout the site.  Lastly follow me on Twitter at @BWArePowerful, and at the Big Words Blog Site Facebook page.  While my main areas of focus are Education, STEM and Financial Literacy, there are other blogs/sites I endorse which can be found on that particular page of my site.

Your net worth, your gross salary, and what they mean

Note.  The subject matter of this blog post is not new.  It has been known for years by those who learned about it in their families, or who have discovered it on their own.  It’s simply a discussion from my personal perspective which I think is worth visiting.  The pictures displayed throughout this post are from the eastside of my hometown of Buffalo, NY.  My first money lessons started there – a lot of what not to do, and they capture the essence of some of the money challenges facing my brothers and sisters in my hometown and across the country.

Life is literally a lottery and regardless of your color or nationality, one of its immutable truths is that you can’t control the family you were born into.  You can’t control the parents you are born to, which likewise dictate the privileges and advantages you have access to.  We often think of privilege in terms of black and white (White Privilege), but there are also black families that have privileges over other black families.  The family you are born into in large part guides your start in life, the information, and the values that will dictate your early life choices – good or bad, though they don’t necessarily shape all that comes afterwards – a good thing for some.

Neither of my parents talked about what a Net Worth was when I was growing up.  As described in the Big Words Blog Site Story, my mother and her siblings were first generation college students – descendants of parents who were a part of the Great Migration.  My father’s situation was similar.  They were children of the Civil Rights Era, and thus the big goal for them was earning college degrees and then securing stable jobs on equal footing with their white peers.  That for them was winning and it was also a surpassing of their elders.  For those of us born from their generation (Generation X), going to college was also expected, but what would be the next level for us?  What was winning for our generation?

These days I have a lot of discussions with via text messaging with my brother Amahl, and three close friends from Hutch-Tech High School in Buffalo, NY: the twins Alim and Raheem Gaines and our other buddy, Hestin Brown.  All week long we discuss topics including sports, politics, and some of the silly stuff we see in the media, on Black Twitter and on Facebook.  We discuss social issues as well, particularly as they relate to the black community.  We’re a “Black Male’s Support Group”, or even our own little “Think Tank”.  Recently in a group dialogue that started out with a controversy regarding Tyrese Gibson’s spouse and whether she was actually black, something else much more important came up; the concept of one’s net worth.

Alim cited something he heard about listing what black men in the United States earn in terms of average gross income.  I responded wondering what the breakdown was for black women and Alim on cue cited the 2010 study by Mariko Chang describing Black and Hispanic women having average net worths of only $100 and $120.  I quickly pointed out that there was a difference between one’s gross income and their net worth.  My brother, the eldest in our group, asked what a net worth was.  For perspective, we’re all just above the age of 40.  Alim and I both knew the answer and gave it.  I shared that I was first introduced to the term in my late 20s, but didn’t completely grasp it until my mid-30s – very, very late in the game.  I pondered the fact that my brother still hadn’t grasped it yet – not a knock on him by any means, just our life’s circumstance.  I then wondered how our own life decisions would have been different had we known this important concept in our teens.

Just briefly, your net worth is the numerical difference between what you own and what you owe – your savings and your assets minus your debts and obligations.  Your savings are self-explanatory – the amount of liquid cash you have available and can access quickly.  Assets can be anything from securities such as stocks, gold or silver, real estate investments, equity in your home, or profitable businesses.  If you’re an employee, a major contributor to your net worth is your retirement savings – that’s if you’ve been disciplined enough (and able) to steadily set money aside.  Debts are self-explanatory as well.  Common forms of debt are: credit cards, car notes, mortgages, home equity lines of credit, loans against your retirement savings, etc.

I only started learning about what a net worth was in my late 20s, out of curiosity and chance.  Books like the Rich Dad Poor Dad talked about it, in addition to the Millionaire Next Door.  In Dave Ramsey’s Financial Peace University (FPU), the term is not explicitly addressed, but FPU’s ; ‘Baby Steps’ ultimately lead to a steadily increasing net worth.

Okay, so what’s the big deal about this somewhat abstract and nebulous term that only few understand?  The answer is that your net worth is a metric of your wealth which is very, very different than your gross salary.  This is a critical distinction because a high gross salary doesn’t necessarily translate into a high net worth.  A person or a couple can have high gross salaries and still have a negative net worth(s).

In Black America we’re often enamored and impressed with individuals who make six figures.  Similar to one’s occupation, making six figures by itself can be deceptive.  You would assume that a medical doctor, a lawyer, or a news anchor would be very comfortable, but not necessarily – the same is true for someone who makes six figures.  Imagine if a person has a gross salary of $100,000 and their expenses are $95,000.  They’re still essentially broke right?  Beyond a certain point, your gross income is what Malcolm Gladwell in his book, Outliers, calls an ‘Entrance Criteria’ – an attribute that allows you entry into a club, though it isn’t a predictor of greatness.  ‘Excellence Criteria’ is what separates the great from the average and the underachievers.  These are the things that allow one to become wealthy in this case.

Contrary to the images we’re bombarded with in the media, the excellence criteria for building your net worth don’t necessarily involve a lavish and high consumption lifestyle, but instead being frugal and careful with one’s money.  Dr. Thomas Stanley wrote extensively about this in his Millionaire Next Door series.  This means that many people are chasing after the wrong things in life and not knowing it until it’s too late.

What are some keys to growing your Net Worth?  Some of them include:

  • Budgeting one’s money and controlling costs – learning to run a surplus vs. a deficit;
  • Saving money gradually in an emergency fund, retirement and then potentially for investments and;
  • Carrying the least amount of debt possible.

What are some keys to keeping and maintaining a low/negative net worth?  Some of them include:

  • Spending more than you earn – spending everything you earn;
  • Not saving anything and;
  • Carrying large amounts of debt – particularly on the things that lose value or don’t justify borrowing the money – cars, sneakers, and degrees which don’t lead to well-paying jobs.

In his Rich Dad Poor Dad series, Robert Kiyosaki actually defines wealth as the amount of time one can go without working while still being able to cover expenses.

But what are the greater implications of growing your net worth and wealth?  They can position you to do things like build businesses.  They can be used to donate to charities, and to give other students, for example, the chance to go to school to better themselves – something sorely needed in Black America.  This is the importance of organizations like the United Negro College Fund for example.  They can be used to fund political candidates and campaigns, and have a true seat at the table when national and local policy decisions are made.  At the end of the day, politics is all about money right?

In Black America right now discussions, like the ones my buddies and I have, are actually taking place about the differences between having a high net worth and having a high salary – again two things which don’t necessarily correlate.  One gentleman on Twitter, a Nigerian I think, who regularly beats the net worth drum often rebutting people who think they’ve made it because they’ve attained a high gross salary and have luxury items like Mercedes Benzes and BMWs.  While these are prestigious toys, they gradually lose value and deceptively don’t translate into wealth.

The interesting thing about one’s net worth is that it can’t be negotiated with one’s employer – it’s something that must be decided and acted upon by the individual once they understand it – like choosing to eat healthy or choosing to continue to eat an unhealthy diet.  It can’t be legislated or forced upon groups of people, nor should it be.  It’s a personal choice just like practicing a religion or choosing a spouse.  Speaking of which, I’ve read that judges actually consider a couple’s net worth during divorces and usually just split everything down the middle – a source of tension particularly when one of the spouses hasn’t earned the assets being split.

“Tasha and Ron are living large.  She’s a School Administrator and he’s a Fireman,” my mother said about couple in their 40s who are friends of the family.  She was looking at their professions and what she thought their salaries were and concluded that they were winning financially.

“Actually you don’t know that, Mom,” I said in reply.  “People can look like they’re making it on the outside, but without knowing their savings, their bills and their debts are, you don’t really know how they’re doing.”  My response echoed Robert Kiyosaki’s books where he stated that an individual’s financial success is actually dictated by their income statement and balance sheet – two things you can’t see by looking at someone – but things banks weight highly when qualifying individuals for mortgages or business loans.

What prevents individuals from growing their net worths?  Several things actually.  One is ignorance.  If no one ever tells you about it and you don’t stumble upon the information, you’ll never know.  Secondly, personal choices prevent one from doing it.  It takes discipline and drive, and many individuals lack those.  As a man, if you’ve recklessly had a bunch of kids and are bogged down with child support payments, you’ll probably never get there.  If you’re a single mother also with many kids, you’ll also have a hard time getting there as well.  It’s not impossible, just exponentially more difficult.  In one of his videos, Dr. Boyce Watkins stated that the average cost of a child is $250,000 up until it turns 18 years of age.  The other piece is that in some instances, particularly in Black America, only a handful of people in a given family get educated and earn a decent salary.  Those individuals are often looked upon to take care of everyone else – a potential, “Siphoning off of the wealth,” as Dr. Michael Eric Dyson said, partially joking, at the 2015 Congressional Black Caucus Annual Legislative Conference.  That day he was leading a Wealth-Building panel.

Growing a high net worth doesn’t necessarily involve going to get a Ph.D., an M.D., a Pharm D., or a J.D.  You actually don’t necessarily need a college degree to do it.  It simply requires a steady stream of income, understanding debt, and priorities.  This is what Dave Ramsey meant when he said, “Money is 20% knowledge and 80% behavior.”  This is also one of the key principles in Robert Kiyosaki’s Cashflow game where players must choose their profession before playing.  One would think in the game that it would be easier to get out of the “Rat Race” by being one of the higher income professionals like the doctor, lawyer, or the airline pilot, but it’s actually easier as the web designer or the janitor.  While they generate less gross income, they also carry less debt and have fewer bills.  Their cost per child is also less than the higher income professionals.

Understanding what a net worth is and then making the decisions to grow it is a paradigm shift and a powerful one.  As with most things, we all have lives and everyone’s situations are unique.  We all have relatives and friends who may not necessarily understand the decisions and temporary sacrifices being made, and thus it’s important to know your own motivations – you have to know your ‘why’.

Again, a net worth is not a salary that you make every year.  It’s a result of spending habits and specific money choices.  How often should it be calculated?  One of my mentors told me that it should be calculated quarterly.  If you haven’t been paying attention to it, your initial assessment may not look pretty, but it gives you a place to start from – kind of like a doctor’s checkup.

So what’s your net worth?  Don’t answer that.  From experience, just like your gross income, it’s best if you keep it to yourself and only share it with a trusted few if anyone at all.  Money does different things to different people, and when people think you have it, it can do strange things to your relationships – your relatives and friends.

Thank you for taking the time to read this blog post.  If you’ve found value here and think it would benefit others, please share it and or leave comments.  To receive all of the most up to date content from the Big Words Blog Site, subscribe using the box in the right hand column in this post and throughout the site.  Lastly follow me on Twitter at @BWArePowerful, and on my Big Words Blog Site Facebook page.  While my main areas of focus are Education, STEM, and Financial Literacy, there other blogs/sites I endorse which found on that particular page of my site.

Chris Brown discusses true stewardship and financial peace

sports-jacket-standing-hands-together-close-up2_backdropAround 2012, two friends introduced me to Dave Ramsey’s Financial Peace University – a faith based curriculum for managing one’s finances and achieving financial security and stability.  I had heard of Dave Ramsey before and knew that he had a radio show, and maybe had written some books.  I admittedly was suspicious that it was potentially another Multi-Level Network Marketing business proposal.  It turned out to be something very different, and four years later it has changed my own finances and life, and I also help out with the Financial Peace Ministry at the Alfred Street Baptist Church.  The following interview was published on the Examiner shortly after Dave Ramsey’s Washington, DC Smart Money Tour stop in the spring of 2016.  There I met Chris Brown who took the stage along with Dave that night, and was subsequently granted an interview.

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On April 21, 2016, talk show host Dave Ramsey and his team visited Washington DC for one of his many Smart Money Tour stops.  That evening, Ramsey shared the stage with a member of his team, Chris Brown.  This Chris Brown, however, is not the controversial recording artist who shares the same name as they joked that night, but instead he is the host of the True Stewardship talk show.  Shortly after the tour stop Chris granted an interview to talk about his background, his True Stewardship talk show, and Financial Peace.

Anwar Dunbar:  Hello Chris.  We met briefly just after the Washington DC tour stop when you took the time out to talk to all of the current and prospective Financial Peace University (FPU) coordinators in the audience.  I really appreciate the opportunity to follow up with you and talk a little bit more.

Just a little bit about me for some context here. I’m a coordinator in the Financial Peace Ministry at the Alfred Street Baptist Church in Alexandria, VA.  When I start with a group these days, as part of my personal story, I tell them first and foremost that I have a Ph.D. in Pharmacology from the University of Michigan.  I share that at one point in my life I thought being a “Dr.” would be the key to having a good comfortable life.  In the sciences, a Ph.D. typically commands a significant income.  It wasn’t until after I completed my doctorate, got my first job and made some money mistakes that I realized the degree by itself, while definitely an accomplishment, didn’t put me where I wanted to be in life.   There were a lot of aspects to the financial world and money that I just didn’t understand, and several lessons that I hadn’t been taught.

At the end of the DC Tour Stop, you took some time to acknowledge the FPU coordinators in the audience.  Did you start off as a coordinator yourself?  How did you get to your current position where you’re working with Dave Ramsey and hosting your own talk show?

Chris Brown:  Yes, I remember meeting you.  Well, I think it was important that I had a background in Financial Peace University, and whether or not I was a coordinator or had been to a class, I think that it’s important that whenever you’re going to be representing a philosophy and a way of life – you’ve got to know that you’re behind it and living out what you say.  So I think that’s important.  Whether or not I was a coordinator, I don’t think that would’ve mattered. I’ve never personally coordinated a class.  I’ve been in several of them.  I’ve actually led at a church and my role was to make sure that we had several coordinators and that they felt equipped.  So for me, I went from attending a couple of Financial Peace classes to making sure that several of them happened at my church.  I kind of skipped over the coordinator piece.

AD:  So you must of have distinguished yourself in such a way that you got to meet and work with Dave Ramsey.  How did that all come about?

CB:  Yes.  I view my role at Dave Ramsey Solutions not as a platform thing.  It’s more of a calling.  We lead out, Dave and myself in particular, with our mistakes, not necessarily as experts.  It’s more of a vulnerability of saying we have been successful, but more than that what people are actually relating to is that we have failed, and that’s what people are resonating with the most.  We’ve applied biblical principles and they’ve worked, and we’ve applied non-biblical principles and they haven’t worked.  And so we’ve seen both worlds, so we lead out with our vulnerabilities and our huge mistakes.

AD:  How long have you been doing your True Stewardship talk show?  When did that start?

CB:  It’s been about a year.  Dave has always had a passion for stewardship which is managing God’s blessing, God’s way for God’s glory.  It’s deeper than just financial principals, the Xs and Os, and the mathematics.  It’s more of we’ve been entrusted with resources, our time and our talents.  And how do we manage those things for those who have lived by faith as believers?  And we wanted to make sure that we ministered to that particular demographic.

Dave is obviously serving everybody whether you’re a person of faith for not.  But he wanted to make sure that we had a branch of our organization that just ministered to those people of faith, and broke down what the Bible says about money.  There are 2,350 verses in the Bible all about how to handle wealth and possessions.  We want listeners to not only be educated, but empowered, and that they feel a little bit of encouragement and hope wherever they find themselves in their stewardship financial journey – when they apply themselves they can find themselves being successful on the other side.

It’s a twenty-five minute show, and just like Dave’s it’s a call-in show.  Dave Ramsey has a call-in show Monday thru Friday.  It’s a three-hour call in show in 550 plus markets around the country.  Mine is a twenty-five minute show.  It’s also call-in.  I occasionally have a guest, or I occasionally do a full teaching myself, but it’s on Monday thru Friday, as well in 20 different markets and both of us have podcasts that are associated with the show, and also we stream on our websites.

AD:  With so many financial gurus out there with their own systems for wealth building, do you find that some people perceive Financial Peace University to be a hustle or is it perceived the way you guys intend it to be?

CB:  I’ve never really thought about it that way because we’re really focused in on what we’re trying to do.  We like to say that we’re on a crusade.  We’re really trying to enhance a movement that’s already started so we’re more focused in on what we’re doing.  I don’t know about what all of the other gurus are doing.  I don’t know if there are any, if they’re twisted or if they’re shady.  I’m actually not familiar with any of that, but I do know that we have a very loyal tribe, and I also know that there are a lot of results, and people will follow where there are a lot of results.

Over the last twenty years there have been over four million people who have gone through this class and have experienced an average $8,000 swing in their finances in just the first 90 days. And so for around $100 for you to enroll in Financial Peace University and have a kit and some resources, and a book and all of that kind of stuff – after 90 days to have an $8,000 swing in your finances, for me the value of that is so big.  There’s never been a question about the value added to society.  So I really feel that way.  We give away a bunch of stuff for free on our websites and podcasts and radio shows.  It’s our way to serve the community.

dsc03840AD:  From your testimony at the tour stop, it sounds as you were pretty deep into the real estate investing world and experienced a lot of success, which is a lot of further than I ever got.  I did some learning, but never got any deals done.  Based upon your experience, once someone’s life becomes “Financially Peaceful”, would you recommend that arena for someone else?  Once you get out to Baby Steps Five and Six and you’ve got money in the bank and no debt; you’ve got your 15% retirement savings going, and you’re saving for your kid’s college funds, would you recommend someone going into the real estate investing arena to acquire properties, flipping homes, and similar things?

CB:  Let me just say that investing in real estate is great.  So there are a couple of factors.  First you have to make sure that you’re already diversified.  What we teach in Baby Step Four, which starts getting into investing, is to start with 15% of your household income going towards long-term investments – things with tax advantages.  You want to think long-term so you want to make sure you’re diversified: mutual funds, 401-Ks, Roth IRAs, 403-Bs, 457s, those kinds of things first.  Then you’re going to go to Baby Steps Five and Six; pay off your primary mortgage first – that primary has to be paid off first, and then you can get into rental homes, flipping homes, but only with cash so you’re not borrowing anything for that to happen.  So let’s say you go out and buy a $100,000 house with cash and two and a half years later you sell it for $175,000 – that’s really good.  You get cash, you use that $175,000 and then you go buy two properties for $70,000 each, and then clean them all up, and then two years later you sell them both for $200,000 each, or $150,000, whatever it is, but it’s always with cash.  You also want to buy investment properties where you have a local intelligence where you are, and where you can feel it.  You don’t ever want be a landlord if you’re living out of town.  You want to do it in your town.

AD:  As a literacy Examiner, from time to time I’ve written about money, not telling people what to do or trying to sound judgmental myself, because I’m not rich and have made my share of money mistakes.  However, I think the principles of Financial Peace University and money lessons in general are important to talk about.  With the exception of one or two pieces I’ve written, many of my financial articles have gotten little to moderate reaction.  Have you found money to be a sensitive topic in your experience, and if so, why do you think that is?

CB:  I’ve personally seen more traction on articles, and videos and teachings when they have a personal, emotional or a relational component in them.  So it’s not really just about the facts because we live in Google society where you can look up the information.  You need the inspiration with the information – some kind of personal or vulnerable moment whenever you’re explaining anything financially or some kind of personal anecdote.  Those pieces tend to be shared and liked a little more often because, yes you’re right, it’s a sensitive topic.  Its taboo to talk about money and there are lots of opinions out there and nobody can argue with your experience.  For me, I deal with the faith-based side and on the faith-based side you can’t argue with the scriptures.  So I lead out with the scriptures and my experience and that’s a lot better than if I do a cold article that says, “Here are the three steps to budgeting”.  You can find that stuff on a lot of different websites, but what you can’t find is your story.

AD:  You’re right, I wrote a piece called, The Difference Between Being Cheap and Frugal, and it got a lot reaction I think first because I told a story with it in a humorous way, and also because it’s something a lot of people have been personally faced with.

When you were coming up, did your folks talk to you about a lot of this stuff or did you have to find it all out on your own?

dsc03836CB:  I have an interesting story.  This is pretty cool.  I did not have a dad growing up.  I actually had four fathers who were all violent and we were always running away from them, from abuse shelter to abuse shelter.  So I didn’t have a dad and my Mom, because she was a single, Mom was always working three jobs and was never home.  So I really raised myself, but I say that liberally because I’d be sitting in an apartment with no food and no furniture for days at a time completely bored stiff, but the one thing I did have was my Yellow Sony Walkman; if you remember from all the way back in the day before the Sony Discman.

I was listening to the radio and I was never a really big music guy at the ages of 11, 12 and 13 years old.  I was always more intrigued by learning because to that point, I had just been sitting around the house by myself and bored, and we didn’t really have TV and cable or anything like that, so I was just intrigued by things that would get me to think.  So I would listen to guys like: Charles Stanley, James Dobson and Larry Burkett, and then later on Dave Ramsey.  Pretty much the radio raised me.  I mixed that in with some pastors, some teachers and coaches – there ended up being some bosses later on that really walked me through life and taught me these principles. Then I found out about Financial Peace University which made it more formalized.  But for me, I was never taught this stuff other than listening to the radio, and no one ever sat me down in a formal setting and taught me these things.  For me it just clicked and as soon as I knew that it was God’s way of handling money, it made sense to me.

I actually didn’t make a lot of money mistakes in middle school, high school or college.  I did great financially starting off as an adult.  I was the man.  I was rocking and thinking that what I was doing at the time really worked.  And then one day I decided I was going to get cocky.  I was flipping homes and I said, ‘Why am I flipping homes one at a time?  This is great.  This is fun.  This is awesome.  I’ll flip eight at a time.  I’ll go borrow a million dollars and I’m going to expedite this thing.  I’m going to get rich quick.’  The year was 2007 (the start of the bursting of the housing bubble) and for the next 36 months I couldn’t put a renter in any of my properties and I couldn’t sell any of them, so I was paying out $10,000 a month on vacant homes all of the way to January 2011 when I had to walk into a filled courtroom, look a Trustee in the eye and I had to file bankruptcy.  So it was a major fall because of one month of getting greedy and getting cocky.  So I was never taught, but I learned more from that big mistake than I learned all of the rest of the time.  I will never go borrow again, not even for a house.  I will never borrow money again period.

AD:  So at the DC Smart Money Tour stop you told us the funny story about your sons and the garage door.  As an education writer and a science tutor, I’m always fascinated by what resources some kids have access to early in their lives versus others, because what you learn at a young age can greatly impact your life as an adult.  Are these lessons you’re going to teach them gradually?  Or are you going to sit them down one day and say, “Okay guys, we’re going to sit down and watch Financial Peace University today and then we’re going to debrief afterwards”?  How are you planning to do that?

CB:  The best thing I can do is teach them the world view and the heart behind good financial management.  I don’t want to manage their behavior, I want to manage their heart and so every day from the time they’ve been able to retain a thought – so four, five, and maybe six years old – anytime anything happens with relationships or anything else, there’s a great teaching opportunity to say, “That relationship, that brother of yours, God has put that relationship in your life trusting you to make sure you handle that relationship well and for His glory.”  And they’re not going to get it right away, but I’m planting seeds all of the way throughout their childhood.

Now as far as formal guidance, they’re already getting that.  They actually love it because kids are sponges.  We have what we call Financial Peace Junior.  It’s a great curriculum and age appropriate for my kids and they actually love it.  They’ve got this savings jar and it’s got three different compartments where you: give, save, and spend.  They have a chore chart where they get commissions for their chores.  Two of my three have bank accounts where they save and we go out to the mall and they save their saving part, give their giving part, and spend their spending part.  So it’s been great and when its time they’ll go to the next curriculum for middle-schoolers and high schoolers; Generation Change and then Financial Peace University.  I don’t ever want to make them do anything.  I want them to want to, and I’m never going to force them.

I think the only thing I would do if they were rebellious and looking to get married at 23 years old, I think about six months before they got married, if they hadn’t done it yet, I would probably bribe them to make sure they’ve got it in their brain first.  I’d say, “I’ll give you $200 to watch this class just so that I know that you did,” and just so that I know that I equipped them on my side as a parent.  I would say, “You’ve got to listen to this.  This is going to save you thousands and thousands of dollars, maybe even millions if you sit down and watch this.”  So I would make sure that before they got married they did it, but I don’t think I’m going to have that problem so far.

AD:  And once again Chris, when does your show come on?  You have a livestream broadcast right?

CB:  In DC we’re on at 3:30 pm on 780 AM-WAVA.  And, of course, we’re on in 20 different markets at all different times from noon to 8 pm depending on the market all of the way from Seattle, Portland, San Diego, Washington DC, Detroit, all over the place.  We also have iTunes podcasts and we’re on Google Play and we’re also at Stewardship.com. So there are lots of different places people can connect with us.

AD:  Well Chris, those are all of the questions that I have.

CB:  Thank you, Anwar, we appreciate all of your work.

A special thanks for this interview goes out to: Chris Brown, Dave Ramsey Solutions, to the Alfred Street Baptist Church, and finally to Tommy and Erica Walker, founders of the Financial Peace University Ministry at the Alfred Street Baptist Church.  If you enjoyed this post, you might also enjoy:

The difference between being cheap and frugal
We should’ve bought Facebook and Bitcoin stock: An investing story
Your net worth, your gross salary and what they mean
Simone Griffin discusses homeownership and the African American community part one (also parts two and three)
Mother’s Day 2017: one of my mother’s greatest gifts, getting engaged and avoiding my own personal fiscal cliff
Father’s Day 2017: reflections on some of Dad’s money and life lessons

Thank you for taking the time out to read this post.  If you’ve found value here and think it would benefit others, please share it and or leave a comment.  To receive all of the most up to date content from the Big Words Blog Site, subscribe using the subscription box in the right hand column in this post and throughout the site.  Lastly follow me on Twitter at @BWArePowerful, and at the Big Words Blog Site Facebook page.  While my main areas of focus are Education, STEM and Financial Literacy, there are other blog/sites I endorse which can be found on that particular page of my site.