money-snowball

I don’t want to drop names or anything but last weekend Warren Buffett sent me a long letter.

He’s very thoughtful. Warren does this every year at this time. Has for 50 years now. It feels like a grandfather’s warm, reassuring hug.

OK, it’s not only me that Warren loves.

The letter is actually his annual missive to Berkshire Hathaway shareholders, freely available to anyone, even non-shareholders like myself.

In its entirety, it’s an encyclopedic message of knowledge and hope to anyone who wants to invest, live, and retire comfortably, spoken in a folksy, left-wing, socialistic kind of way.

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Buffett… Graham… Fisher… Lynch… Cramer… Green????

A world of great 20th (and 21st) century investors. You might want to remember and study the ideas and words of those names (except the last one!) if you crave a life of lessened financial worries.

I was loitering in my former lab workplace this past week while dropping by to pick up a lab buddy to go for a sweat session at the gym.

While waiting and listening to haematology analysers counting red and white blood cells happily in the background, another young former co-worker Trina, shook her head and smiled and said incredulously to me:

Larry, how did you manage to work part-time for 25 years, raise 3 kids, help them out with university costs, retire at 57, and go travelling around the world?”. 

A rush of warm blood flooded my face and I felt the sensation of my head swelling. Doesn’t everyone love a compliment, well deserved or not?

Thoughts rushed through my mind. This was the perfect smartass moment. I latched on for one pleasing drag off the cigarette.

Looking down and thumbing the rough calluses on my fingertips, I mentioned our most recent trip to India. Tongue in cheek, I spoke of how we journeyed to the jungle of humanity that is Mumbai, to try out life in a location where we would actually be raising our standard of living.

Lots of other thoughts flashed through my head. I wanted to smile and gloat about a huge inheritance from my Grandma who owned Bloomingdales, or a monster lottery win, or maybe a clever Bonnie and Clyde-style bank heist… bang bang, but unfortunately (or you might say fortunately) I had none of those stories to offer Trina.

No fake news today!

Bonnie and clyde.jpg

I soberly reflected back on the years of preparation and planning that had brought me to this point in time.

I admitted to Trina that, for sure, I’d had some lucky tailwinds that blew warm fortune my way, but the brutal reality is far more boring. Boring, but I think instructive as well.

Remarkably, she still looked interested so I pushed forward and… blah blah blahed.

First of all, while I’m wealthy in all sorts of non-financial ways, I’m truly not a financially rich man by current North American standards.

I worked in a part-time lab tech job that would have paid a full-time worker somewhere in the $65- 70,000 area with medical and retirement benefits layered on top. My wife did much the same so we finished with a combined income in the $70,000 neighbourhood.

We own a modest home in tiny Summerland, British Columbia’s Okanagan Valley where typical homes sell in the $400,000- $600,000 range, not Vancouver or Toronto’s $1 million plus real estate market.

I reflected that long before The Wealthy Barber made his millions by peddling the notion of saving 10% of each paycheque, we were on board.

The early years… before kids… were the golden opportunity to lay a foundation of savings, a sturdy structure to build the rest of the rise-to-the-heavens skyscraper of hoped-for financial fortune.

money-skyscraper

And this is that time I already mentioned where the “luck” tailwinds were gusting firmly at our backs.

As Jim Cramer says on his wacky CNBC TV show…. “there is always a bull market somewhere“. This is true yesterday, today, and tomorrow.

Opportunity will exist forever, or as it was said to Virginia about Santa: “… A thousand years from now, Virginia, nay, ten times ten thousand years from now, he will continue to make glad the heart of childhood”

Our “tailwind”? Ridiculously high mortgage rates of 20+% were terrible for those buying real estate in the early 1980’s. Monthly mortgage payments were absurd based solely on the almost usurious interest rate charged by banks.

But conversely, ridiculously high interest rates of 19.5% paid on Canada Savings Bonds were a crazy incentive to save and invest in bonds. Now there’s a low risk tailwind!

We avoided real estate and plowed our dollars into savings bonds. Cha-ching!

Time passed along and kids mysteriously insinuated their way into our world (I’m better at numbers than I am the birds and the bees). Changing the locks to the house that we finally purchased never seemed to keep them out. The little Olivers and Artful Dodgers always managed to pickpocket us and leave us bordering penniless… foolishly with our seal of approval.

It was a perpetual challenge to squirrel away 10% of our earnings, but it was a priority and when it was taken out automatically, the pain was fairly mild. Thank god I love Kraft Dinner and Friskies cat food…

And, sure as shootin’, the foundation of savings mixed together with decent returns on investing began the SNOWBALL effect.

Perhaps learning as much as I could about investing in quality stocks à la the investors I named at the top of this post helped. I’ve never scored huge gains, but a consistent annual return in the 12% range has made the snowball grow bit-by-bit.

Every snowball by necessity begins as a few grains of sticky white flakes.

But give the tiny snowball some time, and fresh snow to roll it in, and it begins growing larger and larger so that every turn of the snowball collects an ever-increasing amount of momentum-snow…. growing and growing and growing…

I’m not telling you anything you don’t already know. I’m never the smartest guy in the room, or on the web.

I’m not telling you to give up all the moments of enjoyment or pleasure you can garner, by squirrelling away every penny. This isn’t intended as a tribute to Scrooge.

Every era has its financial challenges and opportunities.

I’ve spoken with Trina about money matters before. She knows the path to her Money Valhalla. She’s doing the right things that will one day give her flexibility and financial freedom.

In the meantime, hopefully she’ll be receptive and spend a few minutes reading Warren’s wise and cozy letters each year.

Her $$ snowball merely needs some more time and patience.

BOOYAH!!

bull

 

 

 

 

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