What I’ve Learned About Money

I was just commenting to a friend the other day about money and what I’ve learned about it over the last decade or so. He was lamenting about “not doing anything about his dreams” and not understanding why he isn’t doing the things he’s dreamed of. My comment was that his problem is MONEY. Not too little (in his case), but the attitude that it is zero sum and if you lose it, you’ll NEVER make more. That belief will KILL YOU, homes. Being insecure about money when you have stacks of it is DEFINITELY an American societal issue. And it makes me sad that people with plenty are still unhappy because they are afraid to spend it. That is one seriously fucked up way to live.

This is an attitude that is all too common in our society: zero sum. It’s what makes billionaires hoard money like it will help them in the afterlife or something. It’s the core value of rich people who make it their business to keep poor people in their place and to pay out as little as they possibly can for any reason. Poor people are taught that there’s never enough and they had best just get used to it. It’s ALL LIES.

Money is not a zero sum. You can make it, lose it, and make it again.

I know this FOR A FACT, since we’ve done this twice in the last decade or so. We made money, bought a house, lost our ass on the house, bankrupted out, made money again, lost our ass in the pub debacle, bankrupted out and have made the money back again. All in the space of about 10 years.

SO I know of what I speak.

We’ve come to understand that there are tools in plain sight, that anyone can use to gain and manage wealth. You don’t have to be rich to have your money work for you! Investing, using IRAs properly and yes, bankrupting out of untenable situations are all tools that rich people use with impunity, yet are LOATHE to educate poor people how to use and actually work to keep basic knowledge out of the hands of the very people it could benefit the most.

Let’s first look at bankruptcy. My family would DIE before they’d bankrupt. They’d lose everything to pay a silly bill rather than use the tool of bankruptcy to stop the losses and get back on their feet. It is preached to the [poor] masses that bankruptcy is The Last Resort™ and should NEVER be used. THAT IS A LIE. Bankruptcy is a legal tool put in place to allow people (and corporations, of course) to stop losses and get out of an untenable, unrecoverable situation. Be it a deal gone bad, or medical debt, or just bad money management. Whatever, it’s there to give everyone – not just the rich – relief of debts and a chance to start over. The poor are taught that you must ALWAYS pay your debtors, even if the debts outstrip your ability to pay. The poor hear things like, “But what about your creditors? HUH? What about THEM?” To that I say: FUCK ‘EM. 9 times out of 10 these poor, innocent creditors are huge megacorporations with trillions under their control and a flock of millionaire executives who could not possibly care less about your $5000 credit card. Same for medical debt. This should not exist in the first place! People are paying $1000s per month for shitty insurance with a $10k deductible that they cannot afford to pay out! Where is the sense in that? Medical debt is NEVER a reason to lose your whole worth. Just bankrupt out.

What happens with bankruptcy? Well, it’s not instant death, poverty, destruction, starvation and ostracization from society, as you’ve been taught. It is a simple and painless bunch of paperwork. You have a choice of which to do: Chapter 7 or Chapter 13. Chapter 7 is the clean slate. Zero debts left to pay, you can keep certain items, it depends on their financial status. Chapter 13 is a repayment plan that works for the creditors, NOT YOU. Chapter 13 is for suckers. You get all the credit knocks AND still have debts to pay. I do not recommend it.

You go to a bankruptcy lawyer, which will cost you around $2k (as of 2020). Some will finance even that for you. You provide all your debts, your bank accounts, etc. They do an audit of your accounts then they issue the request for bankruptcy to the Federal Court of your area. You have to then go to court and affirm that all your shit is true to the judge. Then they issue the decree and finalize the bankruptcy. (Side note: thanks to the 2020 pandemic, NOW is a great time to do a bankruptcy. You don’t even have to go to court. They call you on the phone! SO EASY.) That is it. Your debts are erased and you are free to start building your credit again. You’ll have credit card offers (and car buying offers) all over the place. Yes it will be “on your credit” for 7-10 years (credit scores are a whole ‘nother RANT I have, suffice it to say they are BULLSHIT), but other than purchasing real estate, there is little issue with it.

After getting out from under Maplehurst, which was 60% under water, our credit was back and better than before in TWO YEARS. Believe it. That’s how we had about $60k empty credit cards ready for the pub. Those cards are what we had to get out from under AFTER the pub failed. And we did. The $100k or so from the 401k was liquid, so while it is gone, it didn’t affect our credit, just our net worth.

Now, let’s move on to investments. Poor people are taught that investing in the market(s) is for rich people only. In the past, it has been difficult to do any investing without a broker and a fat nest egg. BUT since the advent of the internet and the ability to get information easily, that no longer applies. Investment companies such as e*Trade are geared for the small investor who just wants to make his small nest egg work for him.

The rules for investing still apply: don’t buy on margin, don’t dally with penny stocks, don’t “day trade” and fuck around with your stocks constantly. For the small investor, buying and holding is the way to grow your wealth. Nick is VERY good at this! This is why our [relatively] small $20k account has bloomed into about $50k in less than a year [after the Apple split, they got up to over $60k!!]. By being very strategic with the stocks we buy and even more strategic about our ratios of which stocks get more $$, we’ve made about 40-50% on our investments this year. Our IRA is in an index fund which has done well, but we don’t mess with the IRA that much. It was the $24k we had left after the pub, and it’s not liquid, so we tend to leave it alone. More on IRAs in a second.

You can start up an investment account with just a few grand. Generally, $5k is the entry level. I STRONGLY encourage EVERYONE to save up that $5k and get started with investing no matter your age. E*Trade is who we use and they have really strong support for n00bs. Like all things, investing does require some learning and some research to decide which companies you’d like to invest with, but for the beginner, a good index fund should get you going and e*Trade is very helpful with all that.

Now about those IRAs/401ks. Everyone is told continuously that having an 401k or IRA is paramount for retirement. Well, we disagree. 401ks/IRAs are only as good as the company that manages them. And, sure, a company match is nice, but again, if the 401k is only making 3%, you’d be better off with your own IRA that YOU manage, so you can make more returns. Nick’s company 401k never made more than 3% the whole 20 years he had it and when the crash happened, their management company lost over 50% of their value. We called it our 201k. After 20 years, when the company closed, Nick’s 401k was only worth about $116k with a full company match. That is pathetic. So after the pub wiped out the funding except about $24k, we had to roll it into another retirement account because of the ROBS program we used to finance the pub. We set up a simple IRA that we manage. We have it invested into the USAA index fund, which is a good one and we pretty much leave it alone. Why put money into a black hole when we can instead put spare money into investments or high yield savings and we can pull it any time we want to?

The issue with 401k and IRAs is that you can’t get to that money. There are steep penalties for taking it out. So basically, it’s a trap for poor people. The only people who really benefit from 401ks and IRAs are the companies that run them – which is why 401ks are notoriously low earners. Why would the 401k company want to make YOUR sorry ass money, when they can use your money to work for THEM? It’s FAR more beneficial for the average joe to put money into an investment account for the long term. Stocks will make money. Not every day, of course and there are “corrections” (read: crashes), but OVERALL, your money will do more for you with investing than an IRA if you buy and hold some good, solid earning stocks. You can get your money OUT of investments if you need it and if you manage them correctly, you might be able to eat the high end cat food when you’re old! The way the economy is set up currently, if you are not in the upper echelons of earners ($1M and up), you’ll never retire anyway. We know this, so we are trying to make our money work for us as much as we possibly can while we’re making it.

We heavily invest in Apple (which just had a 4 to 1 split and we are VERY HAPPY) and other tech stocks. Our IRA is in the USAA Nasdaq index fund, which is a consistent earner. We’ve brought the remnants of the pub mess, that lost 80% of our net worth, back to about 80% of what it was in a year. We did this by using the tools that the rich use every day. We bankrupted out of all that credit card debt from the pub (you can keep your investments and IRAs with Chapter 7 BTW) and used our investment fund wisely. That is precisely what rich people do and it works.

We are also looking into a high yield savings account. We’ve got about $5k that could be making us more than shitty credit union savings rates. We were looking at money markets, but found that Smarty Pig has a high yield savings account that will make us more so I think we’re going to use that. High yield funds usually require a certain balance to get the best rates, so it’s not something we’d recommend instead of investing, but rather in addition to.

Those of us on the lower end of the earnings grid have the same tools as the rich, we’re just not taught how to use them. This is done 100% on purpose. It serves the rich to keep the poor where they are and to keep upward mobility as tamped down as possible. If more people start to move up, that leaves less for the rich to divvy up amongst themselves.

A great example of lack of knowledge keeping people down is my father. He was brought up dirt poor. He was proud to tell people that he was a millionaire in the 80s. He was a subdivision developer in the 70s and 80s in addition to owning a bunch of chain restaurants. But due to lack of knowledge, he never invested his money. He put it in low yield CDs. Long story short: my parents were broke LONG before he died. They ran through the money that had been sitting, making maybe 1-2% for decades and were broke by their mid-60s. If my father had been educated in investing, those millions he made could have been working for him for decades! He’d have had plenty of money for retirement and my brother wouldn’t have had to give up his whole life to support the parents. My brother got a shitty county schools job (after the construction industry collapse) and he has paid the bills for years. He has zero savings and nothing to fall back on. All they have is their 15 acres of land, a huge house in disrepair and a stack of bills. My brother will never retire unless he comes to his senses and sells that fucking albatross of a house and land. And he’ll never do that.

So next time you look at your bills and feel that you’ll never get them paid off, perhaps think about using these tools to help yourself. What if you can get out from under all those bills and start over? Would that give you new hope? Could you start over and do better?

Think about it. And never be afraid to use the tools that everyone else uses to benefit yourself. Life’s too short to be a slave to creditors. Make a clean start. Despite the frowns that you’ll get from rich people, starting fresh is a game changer. Do it if you need to.

Ignore the societal pressure to remain exactly where you are.

Money is not finite. You can always make more. The trick is managing it to your benefit. Never let fear of losing it keep you from your dreams.

We are proof that you can reach for your dreams! If you fail, well, so what? Just make more money and try for the next dream. Life’s short. LIVE IT.

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