Tip 10 | Invest in Yourself

One benefit of marrying young is having no pre-martial assets. When you are both asset poor, there should be no arguments about who brought what into the relationship. In my marriage Jennifer, age 18, brought in $1200 and I, age 22, brought in about $700 – and unknown to me a $1500 IRS bill.

The best investment you will ever make is in your own education, your own company, your own ideas, your own family. Don’t be afraid to invest in yourself by joining a small company, starting your own, pursuing an idea, educating yourself, spouse and children.

It’s dumb to generally invest in individual stocks in the stock market because you “did your homework.” You may as well invest on “red” in Las Vegas. You invest in sectors: for example 5 to 10 stocks in the tech sector. Never ever invest all your money in one small stock for the following reason: I’ve sat in cars and planes with some top executives and listened as they answer questions from analysts, investors, and top mutual funds. There is no way you, as a small time investor, can be more informed and therefore have an edge – so fugetaboutit.

If you have additional money and want to invest it then consider the MCD method.  Good investors aren’t really trying to find the great stock, what they are really trying to do is avoid losing. It took me a long time to learn that. So whenever there is a market “risk” flee to the safety of McDonald’s “MCD” – Roger that should be easy to remember.  McDonald’s is an international company so they are exposed to less currency problems, they have massive land holding in prime real estate, and their products are cheap so no competitor will undercut them on price and the public will still be able to afford the product during hard times. It is hard to get more diversified than MCD. When the Fed is printing money, invest in the stock market especially tech and commodities but keep diversified. Then listen for the Fed to stop printing, international problems, high price of oil, and other reasons and flee to MCD. You can choose your own MCD, but make sure it meets the international, profitable, and low price leader criteria.

If your company offers a good deal (i.e. 15% off) on their stock via employee purchase plans, then participate Those are generally good deals. If they offer 401K matching plans, then these are generally good deals as well. Never rely on any government tax free or tax deferred scheme. It is common for Governments to promise tax free or deferred this or that and then to change the rules when too many people take advantage of the tax haven.

One company I worked for actually allowed employees to loan tens of thousands of dollars to purchase company stock. I took advantage of this deal. After thinking about it for another week, I decided it was sort of crazy and sold for a minor profit. I was glad I did.  I also instructed all my direct reports to not take the deal. Our company stock continued to tank and hundreds of employees were trapped with massive debt hanging over their head as virtual debt slaves to the company.

Avoid all fancy financial schemes

In my life I’ve been approached by at least four goofy financial schemes.

The first example, one dear Christian colleague of mine wanted me to invest in a Mexican crabbing operation. I told him to send me some of the crab and only after that would I think about it. The Ponzi scheme collapsed and he lost huge money.

The second example, when selling our first home in Washington we were offered a seller-carry back loan. The buyer offers a higher price to the seller than the home is worth and the buyer pays the closing cost.  However, they only get a bank loan for 80% of the home’s value and expect you to carry the note for the other 20 or even 25%. The Christian real estate agent assured me I could sell this note on the secondary market and even gave me a 1-800 number for a person that buys these types of notes.  The number rang and rang and no one ever picked up.

Here is how the scam works: The buyers are innocent financially illiterate saps who can’t believe that despite their bad credit they can “afford a home” for no money down. The bank doesn’t care about the scam because their loan is backed by the value of the home.  The real estate agent is happy because he gets paid a higher commission due to the inflated price of the home. The inspectors, appraisers, title insurance folks are all happy because they get paid for a deal. You think you are happy because you get a higher price – EXCEPT you will never get paid on the note you carry and no one will buy it from you.

The third example, you will be approached with all kinds of schemes to sell a product out of your home. The most common example is Amway. The way these schemes work is by getting you to “sell” their products.  By selling their products you are working for the company and naturally, as a company worker, you will be very loyal to the company and buy their products. In my opinion, the real goal of Amway is for you to buy their products by convincing you that you work for them. Avoid all these types of deals. If the effort was so valuable they would pay you for it. Now if you really like selling soap, pans, plastic microwavable wear and lingerie from your living room, then by all means go for it. Just don’t expect to get rich.

The fourth example took place around 1978 or so. There was a rush to build windmills for tax deduction purposes. Many people in the church that I grew up in invested in this scheme. The windmills had to be built by the end of the year. I remember distinctly how many church members were pressed into service to build windmills right during the Buena Park Bible Conference which was held for three days around Christmas. The windmills often broke down and in the end, the church members lost hundreds of thousands of dollars to save tens of thousands on taxes.

It is the husband’s responsibility to avoid stupid financial deals. Don’t make her have to question your judgment. 

And to wife, I say, be careful and gentle when questioning his financial judgment … he did after all choose you.

If you must question his financial judgment, then pretend you are on “Jeopardy” where you phrase all statements in the form of a question.