DISCLAIMER: I am not a financial advisor and this should not be taken to be financial advice. You should consult a financial professional for advice. I am a financial amateur. These are my thoughts and opinions on money that I have recorded here for my children, with the hope that my thoughts might help them. They are responsible for the results of the advice they choose to follow. Always worth keeping in mind: Past performance is no guarantee of future results. Your mileage may vary. The map is not the territory. Keep your eyes open. Smell it before you take a bite.
To my children:
Money is a deep subject. You can make money by making and selling things, like lemonade or kites. You can make money by buying and selling things, like stocks. You can make money by renting things, like cars. You can make money by selling parts of things, like percentages of companies. You can make money by performing a service, like washing a car or mowing someone’s lawn. You can make money by loaning someone else money and charging them interest on the loan. You can make money by renting out a room in your house. You can make money while you’re asleep or while you’re awake.
There are a million different ways to make money. It’s enough to make your head spin. Find the way that’s best for you. And try to stop your head from spinning, because while the details may seem boring or uninteresting at times, at other times, you are buying lunch, or a house, or helping a friend because you paid attention to the details and made good financial decisions.
There are also a lot of ways to save money. For example, there is a US tax rule about selling stocks which distinguishes between short-term and long-term capital gains you made on the stock. If you hold onto the stock for a year or longer, then it is considered a long-term capital gain and is taxed at a flat 15%. Not bad compared to lots of tax income brackets. If you hold onto the stock for less than a year before selling it, then any gains are considered short-term capital gains and are taxed at your normal income rate, which could be 30% or more depending on your income level. That’s a big difference and it’s one that I learned the hard way, at tax time, when it was time to pay for a stock that I held for 10 or 11 months and I would have held onto it longer if I had known about this rule. So learning the details matters.
There are lots of people out there who know more about money than you do. Go learn from them. They are in books, in online videos, and maybe even in your circle of family and friends. They might be making and saving money in ways that you currently are not, so it’s worth exploring the tools and knowledge that’s out there to help you improve your financial situation.
You can learn a lot about business by watching Shark Tank and you can learn a lot about taxes by reading articles by accountants. I know reading about taxes doesn’t sound very exciting but if saving money on taxes allows you to buy a surfboard or take an extra vacation, then reading about taxes is worth it.
Bottom Line: Money is a deep subject and you should keep learning about it until you have optimized your financial situation or reached your financial goals.