A Book for My College-Age Son and His Friends

I recently purchased 6 copies of The Psychology of Money, by Morgan Housel for my son and his college friends. I told them to consider this their first graduation gift – a year early – and I decided to provide it in advance in hopes they would all start thinking about their financial futures now. Why now? As Housel puts it, “The premise of this book is that doing well with money has a little to do with how smart you are and a lot to do with how you behave. And behavior is hard to teach, even to really smart people.” I want to encourage them to start imagining their financial habits before they actually start earning money.

Here are two stories from the book that help illustrate what I want them to start thinking about:

1. Ronald James Read – janitor and gas station attendant (look it up) – was born in rural Vermont (redundant if you ask me) and was the first in his family to graduate high school. He fixed cars for 25 years and swept floors at JCPenney (look it up) for 17 years. He died in 2014 at age 92 with a net worth of over $8 Million! How? There was no lottery win and no inheritance. He accumulated wealth the old-fashioned way – by saving what little he could, investing it in the stock market and…. waiting. His small but regular savings grew and then the earnings on the earnings grew, eventually becoming $2 Million for his step-kids and $6 Million to the local hospital and library.

2. In contrast, Richard Fuscone was a Harvard-educated Merrill Lynch executive with an MBA. He was so successful in his finance career that he retired in his 40s, seemingly set for life and ready to become a philanthropist. The Merrill CEO praised his business savvy and sound judgment. In the mid-2000s, Fuscone borrowed heavily to expand his 18,000-square foot home in Connecticut that had 11 bathrooms, two elevators, two pools, seven garages and cost more than $90,000 a month to maintain. Sound business judgment? My ascot.

When the 2008 financial crisis hit, Fuscone’s fortunes turned to dust and he declared bankruptcy. He lost his Connecticut mansion as well as a house in Palm Beach about five months before Ronald Read left his fortune to charity.

Was Ronald Read smarter than Richard Fuscone? He certainly wasn’t as educated. He was definitely more patient and, possibly, wiser. Maybe most important, he wasn’t interested in impressing anyone with his wealth.

There are dozens of lessons in this book that illustrate how our financial behavior has as much impact on our future wealth as our income does. My sincere wish is for these wonderful young men to mature to be not only smart and educated but also wise.

Steve Byars, CFP®