A Quiet Fortune column: A banker, a businessman, and a teacher part III — the teacher
If by chance you’ve read my two previous columns you’ll know that I am asking three people whom I admire some “money questions.”
I didn’t pick these three just because they are successful financially, although they are certainly that. I picked them because they have an understanding of others’ needs, an intelligence that blends knowledge with good sense, and a personal sense of honor. These are people I look up to.
The final person I spoke to has inspired me for years. I met him when I was a brand new teacher and he a seasoned educator. Every time I took his suggestions my teaching got better. Years later my son was lucky enough to be in his class, and I was lucky enough to realize how much he learned that year.
This educator and his wife, also a teacher, took some solid steps toward their financial security: (1) they lived within a budget for years, (2) they used plenty of sweat equity to buy and improve real estate, and (3) they invested in Individual Retirement Plans (IRAs).
There’s a number 4: they listened. Emphasizing the importance of seeking guidance, he mentioned to me that K-12 schools really had not taught personal finance. So while he and his wife were young they spent time talking to “people much smarter than we were.” They asked the advice of experts, of people who knew what works. I guess that’s what I’m trying to do in these three columns.
Another step they took reflects the couple’s deep belief in God and strong commitment to helping others. Some advice he had received as a young man was: Give 10 percent to your church, save 10 percent, and live off the rest. They did that, and told me, “All of our decisions weren’t great. In a few cases we’ve had some divine help, I’m sure.”
To “give, save, and live off the rest” may seem tough at first, but it can be a steady goal and eventually an unwavering habit.
When I asked this educator what advice he might give to young people, he had one quick, almost all-encompassing answer: Live within a budget. That thought embraces his other suggestions. One is to develop the ability to actually enjoy delayed gratification. He also urges young people not to use credit cards unless they can be paid off each month. Finally, he says that having long-range goals makes it easier to live without something small today in order to get a bigger reward later on.
Interestingly, the others I visited with made almost exactly the same recommendations. These pieces of advice must be important keys to financial stability if they have been emphasized by each of my experts.
I want to mention a new suggestion this teacher gave me. It is that we start putting “The Rule of 72” to use. This is a math shortcut to estimate the effect of any financial growth rate. Here’s the formula:
Years to Double = 72/Interest Rate
One thing he pointed out (and something I hadn’t thought much about) was that the Rule of 72 is good not only for us to figure out how long it will take for an investment to double, but also to determine how long it will take for something to actually cost twice as much as the original price if we buy on credit. For example, if we buy an item on credit and are charged credit card interest of 18 percent while paying only the minimum monthly amount, the item’s cost will have doubled in 4 years (72 divided by 18 = 4 years).
Go figure … it’s math magic, and it tells us a lot about the true cost of debt. You can easily find it online if you want to read a bit more.
Here’s one last inspirational tidbit from my friend. He and his wife now have grandchildren who are grown. Years ago they started small mutual funds for each grandchild and added to them each month. Those funds have allowed the kids to get through a few years of college without debt or, if they qualified for other financial help, to use their fund for down payments on their first houses.
My friend and mentor comments, “Not every monetary decision you make will make sense, but try to improve your batting average.” He and his wife are examples of doing just that over the years. It has to feel good.
Terrie Drake is the author of the book “A Quiet Fortune” and a retired teacher and librarian. She and her husband have lived in Glenwood Springs since 1974. She is not a financial adviser; consult a competent professional for your personal financial solutions. She can be reached at email@example.com.