Knowledge brings about wealth and power. If this wasn't the case, you wouldn't have families spending $20,000+ a year for their children to attend kindergarten through the 12th grade. If knowledge wasn't so important, there wouldn't be any private tutoring or a test prep industry. If education was no big thing, there wouldn't be a tremendous amount of pressure for kids to go to the best universities that cost even more.
The very fact that people spend so much time and money learning is the main reason why I love to write about personal finance. Achieving financial freedom while doing something purposeful along the way is often the end game for those who focus on education. Yet, not everybody has the money, time, or connections to get the best education possible. Therefore, to be able to democratize access to knowledge is quite fulfilling.
If you learn nothing else from Financial Samurai about the stock market, real estate investing, asset allocation, early retirement, entrepreneurship, tax minimization, behavioral economics, or debt management, at least come away motivated to improve your finances based on the target income and net worth charts I've created.
Given Financial Samurai gets roughly 1 million organic pageviews a month, I'm able to test new hypotheses that may help different types of people in various situations. The latest problem I want to tackle is figuring out an inexpensive, easy way to fix the financial crisis in America. I'm thinking simple policy changes that will strengthen our country for generations to come.
Hypothesis: Those who read more about personal finance topics tend to earn more, be wealthier, and lead happier lives than those who do not.
To test this hypothesis we will first compare overall American income and wealth numbers by race with the income and wealth numbers of American personal finance readers.
We will then see if the racial makeup of American personal finance readers reflects the racial makeup of the overall population. Finally, we'll then assess whether an overrepresentation by one race correlates with higher income and wealth and vice versa.
Key Assumptions:
* More education is better than less eduction.
* More reading is better than less reading.
* Access to the internet is available, low cost or free.
* Intelligence across races/ethnicities is more or less equal if you control for environment
* The larger the sample set, the more significant the data.
The Racial Makeup Of America
Median Household Wealth And Income By Race
Let's look at the Urban Institute's calculation for average family liquid retirement savings by race. There's a massive difference between White, African American, and Hispanic retirement savings.
For those wondering why Urban Institute refuses to include research on Asian Americans, I've asked why and they've said they don't have enough data. Same response from Pew Research. When I dug further, they said Asian American income and retirement savings is equal or greater than Whites, so they don't want to talk about it. Hmm, makes you wonder what their agenda is.
Now let's take a look at the racial makeup of America based on 2010 census data.
Now let's look at the income by race data provided by the Census Bureau. Asian median household income leads the way at roughly 30% higher than White median household income. African American and Hispanic incomes are lower, which correlates with the retirement savings by race chart by the Urban Institute. A 100% difference between the highest income ($78,000) and the lowest income ($38,000) is significant.
Racial Makeup Of Personal Finance Readers
If we believe financial education leads to more income and wealth, then we can hypothesize there should be an underrepresentation of Black and Hispanic personal finance readers, an overrepresentation of Asian personal finance readers, and a steady to slight underrepresentation of White personal finance readers, depending how much over/underrepresentation there is.
Based on my survey of roughly 3,000 votes, there is roughly a 30% overrepresentation of Asian readers (35% FS readers vs. 5% of US population), a 5.3% underrepresentation of African American readers (7% FS readers vs. 12.3% of US population), a 11.3% underrepresentation of Hispanic readers (5% FS readers vs. 16.3% of US population), and a 15.7% underepresentation of White readers (48% FS readers vs. 63.7% of US population).
How can we explain the 15.7% underrepresentation of White readers? Because the total must equal 100%, we can do so by observing the underrepresentation and overrepresentation of the other races. Further, the data from the Census Bureau is lagging by several years.
A 30% overrepresentation of Asian readers on Financial Samurai is startling. Perhaps some of this can be explained by my site's name and the fact that I'm Taiwanese/Polynesian American. Everybody tends to gravitate towards people most similar to themselves. Just look around at all your friends, everybody in senior management at your firm, the people Presidents choose as their cabinet members and so forth. Homogeneity reigns supreme because we're all biased for those who look and talk like us.
But since 70%+ of Financial Samurai's traffic is from search engines like Google with traffic coming from all over the country and the world, and only 5 out of 1,397 of my article's have titles with “Asia,” “Asian,” or “Chinese,” one can assume a smaller percentage of the 30% overrepresentation is due to the site's name and my race. If my site had less than 10,000 pageviews a month, my site's name and my background will have a bigger impact. But my site generates over 100X that and is therefore, statistically significant.
Feel free to peruse my most popular articles and see for yourself. The most popular articles relate to retirement savings, investing, and earning more money. These topics are relevant to all races.
As Black and Hispanic Financial Samurai personal finance readers appear underrepresented and correspond with Census Bureau-provided lower income and wealth figures, and as Asian readers appear overrepresented and correspond with higher income and wealth figures, it seems clear there's a correlation between higher income/wealth and reading personal finance articles.
The Solution To Improving The Financial Health Of Our Country
Read more personal finance sites. It's that simple.
Anybody who started reading Financial Samurai since its 2009 beginning has probably crushed the average American in terms of wealth creation because we've been talking about investing in the stock market, bond market, and real estate market all this time.
Even as the stock market marched to new record highs, you could read articles talking about investment ideas at the top of the market to let you make even more money. You would have likely also started building your passive income portfolio to give yourself more options versus others who just rely on a day job income.
If you bought property in SF, NYC, Denver, Vancouver, Toronto or most big cities in 2012 with a 20% downpayment, your equity is up over 300%. Meanwhile, the S&P 500 is up over 70% during the same time period. You could have also learned to save a lot on mortgage interest expense by not taking out a 30-year fixed mortgage as we enjoy a permanently low interest rate environment.
The same cannot be said for everyone who disagreed with my 1/10th rule for car buying. You can literally read hundreds of comments from people who missed out on investing in this massive bull run because they had to drive a $50,000 truck that equaled 100% of their annual gross income.
Yes, we can hypothesize that those who are already financially savvy care more about financial information than those who aren't. But we should also conclude that over time, those who read personal finance websites tend to get richer than those who do not. How can this not be the case with all the motivation and knowledge gained?
To teachers and school administrators: Choose a handful of personal finance sites or main stream financial sites for your students to follow. Hopefully the sites you choose tell stories that make personal finance more interesting and applicable to real life.
To government officials: Make it mandatory for every student to attend and pass a basic personal finance course before they graduate from high school or college. You can't count on parents to teach all the fundamentals of personal finance when they haven't been taught themselves. There is no downside to empowering our youth to learn about the pitfalls of credit card debt, how to write a check, and the importance of compound interest. Why should learning chemistry be more important than learning how to be responsible financially? Finance is a part of our everyday lives.
To personal finance writers: Don't compromise on quality. Money is too important to be left up to pontification. Find an expert in his/her field to guest post if you don't know the ins and outs. Be open and honest about your wins and losses. Tell stories that are applicable to real life situations.
To those who want to help others: Spread the word about your favorite sites, especially to those who you think need the most help. There are personal finance sites written by every single race, age, and gender if you feel more comfortable reading articles by someone who looks and talks more like you. There are over 100 reasonably high quality sites that will entertain, educate, and motivate you to improve your finances. Here's a directory of over 1,000 personal finance sites that are free to consume.
Education Will Improve Financial Health
You don't have to be rich to get a great education because access to information is now free. I wish I was reading personal finance sites back in 2007. If I did, I wouldn't have over-leveraged myself into a vacation property that ended up losing half its value a couple years later. I wish I read even more about entrepreneurship. If I did, I would have started this site years earlier and left the salt mines of Corporate America sooner.
Soak up as much information as you can and share your favorite articles with as many people as possible. Personal finance sites aren't going to eradicate poverty. But imagine if every single person in the country read a personal finance article at least once a week. I'm absolutely positive we'll see a tremendous improvement in our finances over the next generation. Once you have your finances sorted out, you can focus your attention on more important things such as family, health, and happiness. And when your finances are really good, you can even spend your time and money helping other people!
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For those who have the joy of going back to school, share this no-brainer idea. I'd love to hear what your school administrators or teachers think. My mind is hardwired to come up with solutions. And this one is a no-brainer.
Readers, why do you think the government and schools don't do more to highlight free personal finance sites to help our country get financially healthier? A good personal financial site makes financial education more entertaining and applicable to real life situations. If you don't believe in my hypothesis and solution, please share why.
I often wonder how large a role education and particularly, financial education helps citizens make better choices. I guess my curiosity is more related to socio-economic factors and cultural norms in lower classes outweighing large benefits provided by financial education. Those in lower classes who also have cultural upbringings downplaying the importance of financial security and/or education have so much more working against them then say an low income immigrant family who has the cultural background of valuing work, financial planning, and education. So even for those in lower income brackets, is it easier for some groups to move out of that class due to family values? Or do you believe every one has equal opportunities to put their money to work and education is the main missing factor?
I’m so interested by what you discovered about asian americans being excluded in those reports! Wow, I’ll have to go dig into this myself some time :)
Yeah, there is consistent exclusion of Asian Americans in any studies dealing with income, wealth, and education comparing minorities. It’s because the data for Asian Americans don’t fit the writer’s/research’s agenda.
Related: Why Are Asian Americans Ignored By The Media, Research Institutes, And Politicians?
After getting inspired by your blog and countless others like MMM, ERE, Mad Fientist and Jim Collins, I decided to document my own personal finance journey as well. My case is a little different as I am on a work visa which gets over in 3 years and then I’d have to return to my home country. I am in wealth building phase and hope to be FI (in my home country) by the age of 35 so I can focus on endeavors I truly care about!
I have always wondered how I ended up understanding basic money concepts because my parents never discussed any of it. This article reminded me that in middle school (early 80’s) I would stay up late to listen to the Sally Jesse Raphael show on the radio. It didn’t come on until 10, so I just listened to the radio playing Bruce Williams!!! OMG I learned so much, even when I didn’t understand it all. I haven’t thought about that in years, just wow. Thank you Bruce!
Reading a personal finance site doesn’t help those that earn so little that they have no excess after paying bills. If one works at Walmart a personal finance site won’t help that person. It does help those with excess, or unknown excess. Uber and Lyft is one of the best things that have entered into the economy. Unfortunately as easy as the jobs that both have created have entered the economy those same jobs will also one day go away. Anyway, the creation of jobs and the improvement of unskilled labor and wages is a key element to improving financial health. Strengthening of unions would also be a positive. Forcing those that have been hoarding cash for decades to pay more taxes would also be a positive.
As for your poll numbers, you have written a couple articles about your vacation to Asia with several Asian countries sprinkled through out the articles. Those articles alone will increase your Asia readership. Write an article about Alonzo Ball’s 500 dollar sneakers and the same thing would occur with your other lower readership poll numbers lol
Got it. So you don’t believe there is a correlation with financial education and wealth. Like no way out. What is your background and what are some of your suggestion to help folks directly?
I may take you up on your offer to see if writing about Lonzo ball’s shoes increases my readership for a certain race. Which race would that be and by how much?
Will be cool to 6X one race and build more diversity and readership on FS! Thanks for your suggestion.
The way to help folks directly is through the creation of jobs. Personally have an idea that been thinking of for a while but haven’t started working on it yet. It has large scale potential and would be economically helpful.
Anyway, the Alonzo Ball article would target NBA fans and financial readers but blacks, hispanics might stumble across it via SEO.
Wonderful. What is stopping you from starting a company and hiring people? It’s a rewarding experience that is mutually beneficial. I’ve come across too many people who have ideas but don’t take action and then end up wondering “what if.”
With my current number of visitors, do you think my Black and Hispanic readers will double (forget about 6X with the Asian demographic) if I write an article about Lonzo Ball and the NBA?
Before I get started, can you let me know if you have a digital marketing background or something related with some case studies before I get started? I’m always happy to try new things and take advice from experts in their field.
Btw, wouldn’t writing an article about taking a trip to Asia attract non-Asian readers since Asians already live in Asia or have been to Asia more than other races?
Thx
Don’t think it’ll be “what if”. There hasn’t been a black tech billionaire yet need to be careful about when and how it’s done. Haha Always felt that the first black tech billionaire will be older in age than zuckerberg for multiple reasons (not saying that it will be me). I’ve already told you my background the last time you asked.
If I was planning a vacation to Bangkok, I might run across your article. All I’m saying is that if you wrote one targeted article every few months towards those ethnicities that the numbers are low on they would come up over time and they might like it and stay.
I would consider myself a “silent reader” who frequented this site for many years. I still compare my financial progress against the “Above Average Net Worth” figures, along with other great advice.
Sam, your knowledge of PF is vast and authentic, however every FS article that brings race into the picture seems disingenuous and quickly reveals the biased, troubling opinions of some of your readership.
If we look at the key assumptions of this article as well as your recommendations, are they not all universal? Is there some recommendation you’d provide to one group over others? If so, it calls into question the choice of focusing on race, other than click bait.
Sorry you feel this way. A click bait article would have a controversial title and really thin content. This article is 1800 words long. The goal of the article is to indeed provide a simple solution to help people get to head. All this data is useful to come up with a conclusion.
Do you feel very uncomfortable about your race and education hence your comment? Tell me more about yourself and why you decided not to add value to the discussion and offer suggestions to help others in this topic.
Everybody has a story to tell and I’m interested in yours. There’s always something behind a comment that is a reflection of the reader. Thank you.
“I believe that every race has similar cognitive abilities”
“There is a mean difference in black and white scores on mental tests, historically about one standard deviation in magnitude on IQ tests (IQ tests are normed so that the mean is 100 points and the standard deviation is 15). This difference is not the result of test bias, but reflects differences in cognitive functioning.”
– Charles Murray (author of The Bell Curve)
I personally like to believe that unicorns exist but sadly they don’t.
Thoughts about controlling for environment? As well as having white people take a test that was created by non white people in a different country?
I think you’ll be surprised to learn that people of similar origin of the creators of a test tend to score better. Look at the studies done for the simple SAT test. Good luck trying to score as well on an IQ test in China.
I think you will be surprised to see a correlation with test scores and children who have parents who are wealthier than average or who have two parents in the household.
And at the end of the day, even more reason to help others if you believe what you say is true.
Charles Murray’s research on IQ is sound. I suggest you familiarize yourself with his work. Especially the tests. There is no bias.
As for the SAT you are 100% correct. Many research papers have been published showing it is biased.
IQ is genetic and sets the baseline. Studies have shown that the diet of young children has an effect IQ. Maybe being wealthy affords the food that provides the advantage? Maybe attaining wealth means the parents are above average intelligence and therefore passed those genes to their children?
There are also many studies showing that the largest impact from schooling occurs until about the third grade. After that the “mold” has been cast. Tell your great state of California to stop wasting money giving away free college and focus those funds on the first few grades. Sadly people like handouts and children can’t vote.
All the knowledge you need to be a millionaire is on the internet. Free, accessible and easy to find. It’s not the lack of knowledge holding people back.
Thanks. Luckily I have $22K less property taxes to pay a year.
Are you encouraging your kids to skip college? Or what route did they take? How old are they?
This is simply untrue. Please do research on culture fair IQ test results which consistently show the patterns that have been discussed. On tests more culture fair and with higher g factor loading, the gap between Europeans and African-Americans actually widens. One is fine to think wishfully if one so chooses, but one is not entitled to make up facts to align to such wishful thinking.
And before launching the typical tired ad hominem attack, I am not some Eurotrash or toothless redneck; I have been educated at the top undergrad and graduate schools in STEM, have an IQ > 150 as measured by Stanford Binet psychological assessment, and have a net worth approaching 8 figures…I am just tired of this pc nonsense. When James Watson and James Damore are fired simply for hypothesizing politically incorrect postulates, someone has really gone wrong with society and people need to push back.
Thanks. Please feel free to provide the research that you are commonly referring to. Let’s get research conducted by all races and cultures to keep things balanced.
Do you have any inexpensive and easy suggestions to help other people with their finances instead of just saying one race is more intelligent than another? It’s good to always focus on solutions, so if you have better solutions please share given your educational background.
Do you feel you could’ve done better with your finances and life given your education and age? Is there something that is bothering you that you would like to share? I’d love to know more about you. Thank you.
I have a strong suspicion the reason the Asian income is higher is because most are recent immigrants (last 50 years) and they are arriving in higher income regions in the United states with high skills.
I think the Asian income bonus will fade out over time.
It’s definitely a reasonable conclusion, especially if the numbers are smaller.
This can be said about anything really. People that read health and fitness blogs tend to be healthier and fitter. People that read about golf tend to be better golfers than those who don’t. I know I found you because I was trying to figure out if should focus savings towards 401K or IRA. People that aren’t already interested in fiances don’t find you because they aren’t searching.
I agree that much more needs to be done to educate kids about personal finances but I’m not sure if I want the government doing that. I tend to find them incompetent at best so it seems unlikely they would teach anything about finances that I would agree with. Anything would probably be better than nothing though.
The government is smarter than you think. The reason why they withhold taxes from each paycheck is because they know that individuals will not pay their taxes at the end of the year or whenever taxes are due. It’s a casual safety net for them to collect money from us.
It’s the same thing with implementing mandatory personal finance education in high school or college. It might not be super affective, but with millions of people that ever you’re having at least basic personal finance knowledge, you better believe that more people will be well off in the future.
Your fourth assumption is most likely incorrect, based on centuries of empirical evidence. If you really want to explore the reality of racial differences in averages, which anyone who professes a belief in Darwinian evolution should expect given the separation of human populations for thousands of years in environments with distinct selection pressures, I suggest reading A Troublesome Inheritance (former science writer for the NYTimes Nicholas Wade), The 10,000 Year Explosion: How Civilization Accelerated Human Evolution (a 2009 book by anthropologists Gregory Cochran and Henry Harpending), or the latest white papers from the science community or work at the Beijing Genomics institute. According to Scientific American, the human brain uses more energy than any other human organ, accounting for up to 20 percent of the body’s total. To deny the possibility that evolutionary selection processes acting upon separated human groups over tens of thousands of years would be limited to trivial traits like eye and hair color but would somehow spare the most energy intensive organ, i.e. the brain, seems as foolish as those on the right who believe in creationism.
To be clear, North Asians score highest on cognitive tests, have lowest level of incarceration and lack of impulse control and time preference, all behaviors that would point to them earning the highest incomes. This in turn is followed by Europeans, then South Asians, Hispanics and finally African Americans and lastly Africans. If one applies Occam’s Razor, what is easier to believe, an ether of Asian and White privilege is depressing the achievements of others or that there are different averages.
Note that all groups have their own strengths – Europeans are by far the most innovative as even a cursory glance at the scientific advances and innovations that have created the modern world would clearly demonstrate and there are likely alleles that will be discovered that correlate to such innovation capabilities. Note this is despite their lower level of intelligence vs. North Asians as their overrepresentation. African Americans are clearly the most athletic group, as their dramatic overrepresentation in the NBA and all sports for which speed and leaping ability facilitated by a higher mix of dense, fast twitch muscle will attest.
Note these are averages, and any person of any group can be anywhere along the distributions which are highly overlapping across groups. However, as anyone who knows basic statistics, small differences in averages result in big differences in the extremes assuming similar std. deviations. Examples would be every day observances we can see all around us, like despite only a 3-5 IQ point difference between European-Americans and North Asians, Caltech is ~42% Asian or the ~74%+ African American in the NBA despite the desire of so many European-American kid’s dream to play NBA basketball someday (it is definitely not cultural)!
Isn’t this human diversity something to celebrate vs. to shun and deny? Nobody should be a supremacist, white, Asian (and I would note the Asian supremacist are by far the most common variety please travel to China, Korea and Japan if you don’t believe me), or African American. Every group and individual is good at different things. And if we don’t like these differences, then we have to acknowledge reality and quite talking about white privilege and start doing what the Chinese are doing and start using CRISPR technology to uplift the human race so all people are Caltech level geniuses, have Mother Theresa level of empathy and kindness, have that Protestant work ethic, and have LeBron’s athleticism….this is not hate this is an attempt to deal with reality and let the data lead us where it must. Otherwise, other countries will not be foolish enough to live in this false reality and will leap ahead of us. Whether the west wants it or not, designer humans are coming and my bet is the future will belong to China, who will certainly not be concerned about western morals and ethics about evil nazi eugenics and will create a race of 120 IQ+ people who will dominate the planet while the west worries about safe spaces and hurting certain groups’ feelings.
Do you think it is incorrect even if you control for environment?
I believe that every race has similar cognitive abilities if they have an environment that allows them to learn and explore. But if you compare one kid who lives in a nice neighborhood with private tutors and stable parents do another kid who lives in a foster home with a lot of violence, I think it is obvious the kid with more stability has a better chance of getting ahead.
But if you compare one kid who lives in a nice neighborhood with private tutors and stable parents do another kid who lives in a foster home with a lot of violence, I think it is obvious the kid with more stability has a better chance of getting ahead.
Therefore, I think it is our duty for those who have the ability to share our knowledge and the time to make effort to help those who do not have the same opportunities. I often wonder why I continue to write so much and spend so many hours, and it always comes back to giving someone a chance and hearing back from that someone years later telling me that they’ve improved their life for the better.
Oh, I wish it were so, as the world would be much better off. There have been numerous twin studies demonstrating that environment cannot explain these differences away, and the latest and greatest scientific research is showing that genes and non-shared environment play a vastly bigger role in socioeconomic outcomes than shared environment. Intelligence and industriousness finds a way to succeed, as illustrated by the success of North Asian immigrants in the face of adversity in multiple western countries and the relative failure of Africans regardless of where they are in the world, whether in the west, self ruled countries like Haiti or Africa itself and over vast periods of time, including the majority of African history which predates European colonialism.
Heretic, I have to disagree with you on the capabilities of races. Admittedly I haven’t looked up the sources (but I will because genes fascinate me!) you have quoted but I know of plenty of smart people from all races. It seems to me that opportunity and exposure to the bigger picture plays a large part in what a person does.
Africans created the first great ancient civilisation, Ancient Egypt. This was followed by the Asians (Middle East, India, China) and then Europe and South America.
I think the lack of invention by races and indeed progression of the human race as a whole, is because we are too busy behaving like a$$hole$. Instead of mimicking our bodies and working together like a giant multi-celled organism, we act like individual viruses.
So instead of having a better way of life for everyone, we have incidents such as racism or road rage where people fight over a careless slight and some tar, etc.
You are of course correct when you argue that there are smart people of all races, but you are not addressing my points by claiming so. I of course agree with you on that point as I noted the high level of overlap between groups. What you have not disproven is my point about the differences in average. Of course there are many africans who are smarter than Chinese or Koreans. However, the average IQ of Chinese is much higher than that of Africans, and that results in the unequal outcomes at the extreme end of the distributions. An example is Caltech undergraduates, who are probably on average IQ 140+ type people. Note that 42% of Caltech undergraduates being Asian even though they are only 5% of the US population vs. African Americans are only ~1-2% of Caltech despite being 12% of the US population. Note too the 500 point SAT handicap vs. Asians African Americans are given.
You are incorrect as far as ancient Egyptians are concerned. Recent DNA analysis of Egyptian mummies has recently been conducted and found that they are closely related to ancient Middle Easterners, i.e. Caucasians similar to Greeks, Syrians, etc., who inhabited the ancient Mediterranean, and not ‘black’ Africans. Proof below: https://www.mpg.de/11317890/genome-ancient-egyptian-mummies
I agree people can be jerks, but arguing should be devoid of emotion and let the chips fall where they may. I am European and nowhere am I saying Europeans are the most intelligent so no skin in the game on my part. Instead, I am just arguing that nobody rationale can really believe that Japanese are interchangeable with Nigerians….there is absolutely no evidence to support this. Reality is not unicorns and rainbows, sorry mate!
Thanks for the link Heretic! That was fascinating to read. I do have to point out that the mummies tested were from 1400 BCE to 400 CE.
The pyramids and the sphinx were built circa 2500 BCE. And if you look at some of the statues from that era, Nerfetiti’s bust, etc., you will notice skin colour as well as typical African features. Black Africans built Ancient Egypt and the newer Great Zimbabwean ruins.
Maybe once I get round to reading the sources in your first comment I might become convinced of your opinion.
Reading blogs and books about personal finance have absolutely changed my own habits. That’s why I’m writing my own. I’m starting from a deep hole, but I think I’ll get out of it. I hope that if folks see that I can do it, that they’ll believe they can as well.
I recently engineered my layoff into early retirement. I have tried to share saving and investing knowledge with friends and coworkers. I have given free investing seminars on implementing modern portfolio theory to investment clubs. I have failed to break through, to motivate action. Why?
Information was not the missing ingredient. Interest, self control, planning and patience seemed lacking.
The recipes for good health and wealth are straightforward, yet people choose not to execute. I suspect the underlying issue may be mental health related (cognitive dissonance). Have you considered exploring that topic?
I really hope you spread the word about engineering your layoff to get a severance package. Five years after publishing my book, I STILL see so many people announce they quit their job after 3, 5, 10, 15, 20, years! It pains me that they have walked away with 10s of thousands of dollars.
Mental health….. now that is a topic I’m realize affects a lot of people, especially as I get older.
Sam,
I like your ideas of more financial education. It will help some people. Unfortunately, more education early in life does not mean a lot more people will listen or take any action. It comes down to the individual. The people that read PF blogs are different. We want to be educated in different forms passive incomes and investments. I don’t know of any co-workers or family members that read PF blogs.
My family, aunts and uncles are emigrants and they all have there own businesses and many of them have rentals. My father and uncle alway lost money in the stock market. I knew from an early age that it was too much work to run my own business or to manage tenants. I got burnt during the dot com days and avoided the stock market since.
Early financial education would have help me to learn about passive income and financial independence. I wished I knew about muni bonds in 1987 when I started working after college. My wife and I alway knew about 401K and we were depending on our pensions. Earliest retirement age for us was 55-59.5. I did not know and read about FI until 2010 when I heard rumours of laidoffs and a re-org that would have affected me in a negative way. In 2010, I had to scramble to find a way to generate income since CD rates were SO LOW. I told my wife that I would have to quit if I was re-orged to that bad manager.
My mentor told us about muni bonds around 2008 but we did not take any action until I was forced to in 2010. I was moviated by fear.
In 2010, I told 14 co-workers about the re-orgs and shared our plans to buy municipal bonds to generate passive income BUT NO ONE listened to me! One co-worker said being FI is fine but what do your want to achieve in the company? Huh like being a Senior Director? The point of being FI is that I don’t have to work anymore. He did not get it. Whenever I see him at work he would mock me for buying muni bonds and my pursuit of FI. Two years ago, he completed his MBA and my wife and I have a muni bond portfolio that generates 87K tax free every year. Screw him!
I told 17 family members about muni bonds and NOT ONE of them bought any!
In 2012, we had 350 people laid off and NONE of my co-workers took any action. They continued to buy new cars and a larger condo or homes.
In 2016, 500 people were laid off and now my co-workers were in panic mode. For many, it was too late to invest. Then 6 of my co-workers expressed interest in munis and I showed them how to create an account and to pick individual municipal bonds. Only one person had enough savings to buy enough muni bonds to generate over 10K to supplement his small pension. I worked with this co-worker for over 2 years to reduce expenses, buy munis, purge his stuff, sell his house, relocate to Florida. Now he is FI and retired.
I noticed that the majority of people (34 co-workers and family members) that I spoke with did not take any action. Only 6 take some action when they were forced to. Only one was extremely fearful and was committed to being FI. I too was motivated by fear and was forced to take action.
I will try to teach my niece and nephew, who are in their early teens, the concepts of passive income, FI and municipal bonds.
Adam
If only I invested a million billion into municipal bonds in 2010! Ah.. .that would have been so nice. And at least, if I had been more knowledgable and aware of a site that introduced me to muni bonds, I’m sure I would have invested at least 5% of my net worth in munis because I was looking for safe havens that I understood. A 7-year, 4.1% CD was my alternative. Better than a poke in the eye.
Most people don’t take action… actually 97% of people don’t when I analyze the millions of datapoints from my website. But math is fun, and all you have to do to get the 100 people you care about to take action is to show / tell / do 33.3X more.
Keep on pushing.
Sam,
That is why I share what little that I know on munis on your site and on retireby40. I think munis are a great alternative to CDs especially when CD rates are so low. IMO, It is good for conservative investors. I was not aware of municipal bonds until my mentor introduced them to us in 2008. Even my accountant that my dad used for over 30 years did not tell my dad or me about it. My accountant told me recently that he had some munis that pays 7% tax free! WTFReak! Why did he keep it a secret until we bought munis?
I believe your 97% stats of people that don’ take any action. Only one out of 34 people that I shared my info with, actually took REAL action to buy a significant amount of munis to make a financial difference in their life. 1/34 is 3% so 97% of people that I tried to help also took NO action.
I am actually shocked at your 97% stats of ppl taking no action but it matches my stats too! I don’t feel so bad. I am just happy I was able to help one person reach FI. My mentor helped us so now I pay it forward to help others..only if ppl would listen.
Adam.
Fascinating your statistics it up to my statistics. Thanks for sharing.
At the end of the day, everything is rational. People won’t want to change until something is hurting them enough to make them want to change. So in that sense, 97% of people are doing just fine.
Education on financial literacy is important, but also education o. the grind you have to do to actually earn money. the post about the janitor was a wakeup for me in that either i had to earn extra income through overtime at my job or put in overtime as an uber lyft driver or one of those type positions. you are not gonna get rich working only 40 hrs a week. about 60 pct wage earners earn less than 40,000 a year so we have to teach about multiple income streams for everybody. i had a coworker at my old job. he was single, lived with his parents, didnt have any bills or kids. I always asked him as to why he wouldnt want to do uber a couple of hrs everday just to make a few extra bucks in cause his parents put him out or if he wanted his own place. He always had some excuse as to why he didnt want to earn any extra $$ after his job. Some people dont really want it sometimes but if you show them the benefits of do extra when youre young it can really help them learn about how to become financially independent/
Sam, I’m a reader of your site for a long time and since my financial knowledge has progressed (also thanks to you), my life quality has also significantly improved. So from this perspective I agree: better financial education = better life.
But let me be the devil’s advocate:
– better financial education means less spending on useless things, less debt etc.
– less spending and less debt means less profit for companies, banks etc.
– less profit means cost cutting at companies
– cost cutting means more unemployed pple
– more unemployed means even less purchase power, further decreasing profits, fall in rental and property prices
– the above means less profits or even losses on investments
So my question: Do you think there’s a thing like too much financial education to too many people…?
I don’t think there’s any such thing as too much financial education or education in general.
Education is what will empower the individual to live the life they want. I see this very clearly now at age 40, compared to when I was in college and couldn’t understand what the point of education was.
This is one of the reasons why I created my blog, to share my experiences and bring awareness that personal finance should be a crucial for everyone. Even if you do not like dealing with numbers, at least have some basic knowledge of saving for retirement, investing, and ways to save in your everyday life.
I find it weird that the Urban Institute does not think their’s not enough Asian representation in the US. Doesn’t Asians represent at most 10% of the racial makeup in the country.
With lack of education in high schools of personal finance, I believe they do not want to provide any teachings of PF because they do not want to provide potential young investors to get ahead of the market and have the knowledge to understand investing. Probably believe that you should go to college and build up student loans so we can be like the rest of recent college grads and catch up on paying it off. The US is so consumer conscious that they believe debt is the way to go instead of getting ahead in the race to save and invest.
Even though my professorial duties have nothing to do with finance I became a certified financial education instructor to offer more programs in personal finance. I would make a financial literacy course mandatory if I could. And it would be at the end of their time in college.
I wish there were more studies to parse out the underlying reasons for the seeming over-achievement of Asian Americans when it comes to education/income.
I like the simple solution you posit – I think it’d be funny to see grade school kids coming home with the assignment: “Read and summarize 10 articles from financialsamurai.com, etc.” LOL.
Maybe one day?
I’m gonna use Occam’s Razor for your question, and assume the simplest answer for why schools and governments don’t put an emphasis on personal finance (in general) is that they simply don’t care.
They all have “bigger fish to fry” in their eyes. Govts more worried about N.Korea, Russia, and China. Could probably care less about education…
To see what people really care about – see where they spend their money. Spending on education is paltry… sad but true.
That would be funny, and frankly, A no-brainer to try to understand what are the derivative meanings of my posts. I often try to embed three different lessons in each post, but they aren’t obvious unless you start really analyzing the writing.
And then I think it be fun for the students to try to dissect the comments, which are always a reflection of what someone else is or is thinking eg angry comment is from an angry person, arrogant comment is from an arrogant person, lovely comment is from my lovely person etc. I’ve witnessed this phenomena 1000+ times. Whenever there is a nasty or critical comment, there’s always something bothering the reader if you can dig deep enough. I always try, but they often don’t reveal understandably.
I’ve been investing in the Stock market since high school and only started reading PF books and sites within the last 8 years. Wish I had done so from the very beginning and not have to learn the hard way.
And now I am constantly nagging my boys to read your site or other PF sites, but, I think I’m falling on deaf ears. Hopefully some day they will see the light.
Thanks for nagging Dick. Maybe they’ll come around when they’ll have to survive on their own with no help from you.
Generally, people don’t start reading about personal finance until they have a financial dilemma or difficulty. The best way to learn is by experiencing trauma.
Actually when I first started reading Financial Samurai I had no idea that you were Asian American. So I’m not sure that Asian readers read your blog because of that. It was the content which attracted me (I’m Chinese American).
So true about people spending beyond their means on quickly depreciating assets like cars. I live near some Title 8 housing and it’s amazing how many people there drive expensive cars. They’re probably paying high interest loans on those cars, and thinking that it’s okay to splurge on a car since they can’t afford a house. I guess there are no spending requirements to qualify for Title 8 housing, only income requirements.
Thanks for the feedback. That’s what I’m hoping to do, make my content colorblind.
At the end of the day, who doesn’t want to achieve financial freedom sooner rather than later?
I agree.. more financial education is better.. but i think you are forgetting an underlying exogenous variable here.. people who come to your site, are probably already more interested in personal finance, and thus are knowledgable, and thus they come to the site, to gather more knowledge. However, the underlying variable is that they are interested, and willing, and capable, and thus they have a higher income. Reading financial sites, only enables this further, buts it’s not the significant factor that changes their wealth, its their original behavior that led them to your site.
I didn’t forget. Most people who come to my site are from search engines, and most people who use search engines have a question they need answered. I’m actually very knowledgeable about online marketing and SEO. Are you in the digital marketing business? What else can explain a 600% over representation of Asian readers on the site and the corresponding higher income and wealth numbers?
Are you not a strong believer that education helps and power someone to make a better financial decisions? If so, why not? What is your background? Thanks!
I strongly feel that financial ed in high school is desperately needed. While STEAM+ is great, we really need basic finance skills – not just balancing a checkbook type stuff but also basic concepts about interest, savings, debt and what a stock market is.
I’ve been catching up on The Wire (HBO series) and in Season 4, Roland “Prez” Pryzbylewski is able to teach a group of highly dysfunctional kids basic skills and teach them in a way they understand: https://youtu.be/elTCEVAAEfo. Maybe that’s the kind of ‘unorthodox’ approach we need – either in the public school system or as a non-profit.
Education starts at home. If parents are not teaching personal finance, then it will not work. And even still, children, just like adults have different personalities when it comes to finance. We talk about money and saving ALL the time at home. We purchased both of our kids piggy banks that have 4 sections: Save, Spend, Invest and Donate. Our 11 year old purchased her first stock when she was 7. Our 8 year old has yet to do so and he SPENDS everything he makes/earns or is given. We thought we were teaching both of them the same things, but unfortunately, I have a feeling that our 8 year old will be a spender and our 11 year old will end up a saver.
I can’t wait to get my son a piggy bank! SO FUN! :) And of course educating him on economics, the stock market, bond market, real estate, risk management, and asset allocation.
Glad your kids are getting some good PF training at home! Yay mama.
Longtime fan here. Teachers themselves are helpless with personal finance. Please read 404bwise.com. What other profession has salesmen hawking two percent fee 403b annuity plans in the lunch room? Not to mention the surrender fees!
I work with a lot of people paying 3-4%! Makes no sense to even use a 403b tax deferred vehicle.
Would love you to make a post on the unfair policies allowed in schools regarding 403b plans.
Love for you to do a guest post about the topic and help teachers!
I like your blog because it’s practical, and our backgrounds are similar enough where what you have achieved seems within reach for me. I will say that for a lot of other people, just getting by is hard enough, so talking about wealth creation and retirement is not even something on the radar. I’m not saying that financial education isn’t critical for everyone, that seems obvious enough and our educational system needs a serious overhaul if kids today are going to stand a chance in this brave new world. But as for race and income/wealth, I applaud you for not shying away from controversy (or maybe that’s the point as a blogger!) but that is a far more complicated issue than you are making it out to be and you can see from the current state of affairs in this country that there are a lot of opinions about it. I think a lot of white and Asian folks just seem really tone deaf when it comes to this. If the solution for income disparity among different groups in this country were as simple as reading a blog or telling people to just pull themselves up from their bootstraps, well then why hasn’t that worked? I think it behooves us all to figure out how to help all Americans succeed financially and to implement real policies that actually work for lower income folks, particularly groups that have experienced discrimination in the past. I’m not at all suggesting that liberal and/or progressive policies are the answer, it’s not clear to me that they’ve actually worked that well, but I do think that structural racial discrimination is a real thing and needs to be targeted specifically.
I’m definitely tone deaf, which is part of the reason why I write these articles to be less tone deaf. Many people like you believe Asians are not a minority in America (Urban Institute, Pew Research), even though Asians are only 5% of the population. But I urge you to look at the data.
What are some SOLUTIONS you are suggesting to improve the financial health of all Americans? The thing with me is, I don’t like to just talk about problems. I want to focus on data and solutions.
“Behooves us all to to figure out how to help all……” – Are you saying you don’t think education about personal finance wouldn’t help people at the margin? How else can you explain the correlation with education and income/wealth?
Dean, tell me about your background. Let’s hear some solutions and what YOU are doing to help. Thx!
It is in ‘their’ interest to keep you a 0% saver, debt-laden consumer. Of course they don’t push it.
Imagine if everyone saved 20% post tax? The economy would tank i’m sure…