Sushi Money

It’s often been said that experience is the best teacher, and that’s a very appropriate axiom when it comes to managing money. Jonathan Hoenig from SmartMoney.com might agree in his article Trading, Not TV, Offers Best Investing Lessons. He makes an excellent point in terms of investing in the market and how learning to trade stocks can provide an understanding that we won’t get anywhere else. It’s a good read with some valuable insight, but it’s not for everybody. There are plenty of investors out there who have never set foot in the world of brokerage accounts, and don’t intend to. Many investors have a 401(k), Roth IRA, and a host of taxable mutual funds. Do they need a brokerage account? Not unless they want to trade stocks on their own.

Sometimes I think many of the Wall Street gurus think that trading in the stock market is a necessary practice for achieving wealth. Perhaps surprisingly it’s not- many people enjoy building a business and working at a career that provides long-term growth and opportunity. Many other people invest patiently without trading. Some folks think the market is just too complicated, and don’t want to risk any money trading. I can empathize with that, but at one point in my life I felt a strong desire to learn what trading is all about. My story is pretty much like Mr. Hoenig’s, except perhaps that I didn’t make as much money and don’t trade for a living now.

The conclusions I came to were born on the winding road of countless gains and losses, and the realization that, for me, trading stocks is no way to make a living! Naturally, if you are a professional or have a passion for trading, then more power to you. But to be quite honest, I realized that unless I was going to focus on trading full-time, or become a professional in the investment and trading world, I really had no business being there. It takes a lot of time and focus to get it right, and you can’t be very successful on a part-time schedule. Maybe there are exceptions- I’d love to hear about them. Trading just doesn’t get me there… but saving and investing does!

I would offer that most of us need to be a little more patient and disciplined over time, and instead of trading- focus on investing. Once I accepted that I wasn’t going to spend a lot of time trading stocks, I became a long-term investor, and focused on companies, stocks and mutual funds that would help grow my portfolio. Much of that means dividend paying stocks that return something for the risk I take when holding them over time. I also became someone who looked for opportunities to save money in every facet of life. Little costs add up to big dollars over the years. Something that David Bach calls “The Latte Factor” or how People Magazine says “A Latte spurned is a fortune earned!” Don’t see it? Let’s say you give up three latte’s per week at $3.50 each. That’s $10.50 per week, or $42 per month. Or if you cut back somewhere else and save $20 per week, or $80 per month? Take a look at a comparison:

That’s just from some extra savings each week, with monthly compounded interest. Maybe it looks like a paltry sum of money to some people, but it’s just a minor example. Imagine what we can achieve by saving more! It also shows how a little more interest can go a long way. And it presents an opportunity for us to look for saving money in everything we do over time. At home, at the grocery store, at the bank, when using credit cards, etc, etc. There are countless ways to become more frugal, efficient, thrifty… whatever you want to call it. Just doing it is the hard part, but once you get started- it becomes kind of fun.

Overall I think we can achieve a balance between needs and wants… taking care of ourselves and our families, treating ourself to good things now and then, and being proud of our savings and investing habits over the years. We can end up with a lot more than we ever dreamed of, if we just do our part each week. And by the way, that axiom about getting experience? Well, experience is pretty darn important, no question about it. But it’s not the only place we can learn. Learning from the mistakes and wisdom of others is often more important. There’s a quote I like from Benjamin Franklin, someone who long recognized the value of money throughout his life:

“Experience keeps a dear school, but fools will learn in no other.”

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