Don't Save Too Much
Steven Levitt
Author, "Freakonomics"
When I was a first-year assistant professor at the University of Chicago, my friend and department chair Jose Scheinkman relayed the advice Milton Friedman had given him 20 years earlier: "Don't save too much."
The logic was simple: An academic's salary rises steadily over time, as do outside opportunities (like writing popular books!). The right reason to save is so you can even out your consumption. When times are good, you should save, and when times are bad, borrow. Most likely I would never be that poor again, which meant I should be borrowing, not saving. I didn't follow the advice as fully as I should have, partly because my wife insisted we save - she is not quite as good an economist as Milton Friedman.
Swear Off Debt
Elizabeth Gilbert
Author, "Eat, Pray, Love"
 Elizabeth Gilbert Photo: Deborah Lopez, Courtesy: Wylie Agency |
My father is the most frugal human being I've ever met. His most adamant instruction was that I should never under any circumstances go into debt. To this end, he passed along the message his own grandfather had taught him: "Borrowing money is like wetting your bed in the middle of the night. At first all you feel is warmth and release. But very, very quickly comes the awful, cold discomfort of reality."
That vivid image has stuck with me forever. Even when I was a diner waitress, I wouldn't let a month go by without paying off my credit card. And this adamancy has kept me warm and dry and free my whole life.
Sell for the Right Reason
Don Phillips
Managing director, Morningstar
Tom Mathers, founder of the Mathers Fund, shared these words of wisdom at an early Morningstar Conference: "If you find a great growth company, don't sell it just because it gets a little pricey - you may never get back in again." He told a charming story about how he and his wife were redecorating their home in the 1960s and wanted to buy a piano.
Tom held some shares in Disney, and while he liked the company, he thought its stock price was a bit rich at the time, so he sold the Disney stock to fund the purchase of the piano. Tom never got back into Disney and instead watched it rise and rise. Years later Tom would walk through his living room, see the piano and mutter to himself, "That's the most expensive damn piano on the face of the planet!"
Don't Follow the Herd
Robert Shiller
Professor of economics, Yale University
My teacher in graduate school at MIT in 1970, Charles Poor Kindleberger, who later wrote "Manias, Panics, and Crashes," first convinced me of the social process that drives much of what goes on in speculative markets. One needs to think antisocially to excel in investing, to resist the patterns of thinking that seem mysteriously to arrive simultaneously in the minds of millions of people around the world.
People do not trust their own judgment but go along with the crowd, even when they can see truth. In a world populated with such people, there are investing opportunities for people who make the effort and do the work see clearly for themselves.
Always Get It in Writing
Dave Barry
Humor columnist
 Dave Barry Photo: Raul Ribiera/Miami Herald, Courtesy: Dave Barry |
I got my best financial advice when I was 16. I met this kid who was only eight, but he seemed smart, and he said, "If you give me $5, I'll invest it in a company I plan to start someday. In return I'll pay you 10% of the profits."
That young man was Bill Gates. I'm sure he'll remember this, now that it has been revealed in a reputable magazine.
Be Frugal but Not Stingy
Meir Statman
Professor of finance, Leavey School of Business, Santa Clara University
My parents told me, "Use money well, but do not waste it." I remember receiving a bicycle when I was a kid. When I asked my dad how much it cost, he wouldn't tell me. So I grew up with the sense that money is there to do good things, to support your family and others.
I like to think I'm frugal. "The Millionaire Next Door" describes millionaires who never buy a new car because its value goes down substantially after two years and so on. I buy new cars. I check with other dealerships to get the best price. But the idea that I have to live like a pauper even if I have the means to live better doesn't make any sense to me.
What I Learned From Horace
John Bogle
Founder, Vanguard
"Whoever cultivates the Golden Mean avoids both the poverty of a hovel and the envy of a palace." I'm not sure when I first read that quotation from the Roman poet Horace, but I used it to introduce my chapter on balanced funds in "Bogle on Mutual Funds." These funds allocate investors' assets between stocks (usually about 65%) and bonds (the remaining 35%).
Today, sadly, balanced funds seem out of fashion, but the idea of the Golden Mean remains great investment advice. Asset allocation is the most important decision investors must make. It helps keep our counterproductive emotions out of the picture, assuring us of some profits when stocks rise and some protection when they fall. It also enables you to "stay the course" through thick and thin. Come to think of it, that's also a pretty good piece of advice.
Know Where Your Money Goes
Derek Jeter
Shortstop, New York Yankees
 Derek Jeter Photo: Ed Betz/AP |
The best financial advice I've received is that you should always know where your money is. Even if you have someone who handles your finances for you, you should always be involved in the process. I learned this from my parents.
Use Small Bills
Roy Blount Jr.
Author and humorist
A bartender once told me, "Don't ever carry a bill bigger than a 20, because you'll think it's a 20, like you just did, and everybody won't be as honest as me."
What I Learned From Commodore Vanderbilt
John Steele Gordon
Author, "An Empire of Wealth: The Epic History of American Economic Power"
If you take a look at my net worth, obviously I haven't received any good advice. But I've always admired Commodore Vanderbilt's advice to a young, earnest reporter: "Don't buy anything you don't want or sell anything you ain't got."
Vanderbilt was warning against speculation; he followed his own advice and died the richest self-made man in the world. I've never been an active trader - I don't have the personality for it - but Vanderbilt's advice is wonderful.
Create Your Own Opportunities
Bobbi Brown
Founder and CEO, Bobbi Brown Cosmetics
 Bobbi Brown Courtesy: Bobbi Brown |
I started working as a freelance makeup artist in 1980, and I worried that I didn't have enough money. My father told me I'd just have to figure out a way to make more money. So I started looking through the Yellow Pages and calling agencies, magazines, photographers - anyone I could offer my services to. I'd work for free until I proved myself.
Soon enough, I was getting regular calls to do their makeup. My father's advice made me feel that I was in control of my future. I realized that it was my job to find more opportunities.
Don't Get Too Good at the Wrong Stuff
Timothy Ferriss
Author, "The Four-Hour Workweek"
Professor Ed Zschau at Princeton University gave me a short but powerful piece of advice. I had volunteered for the second time to clean erasers and place name placards on desks before class to get to know him.
He said with a smile, "Don't get too good at the little things" and explained that if you excel at the menial tasks, those are the responsibilities people will associate you with and give you. Get noticed for doing things that help the big picture, not for fetching coffee, and your financial picture will grow just as fast as your reputation.
Careful of People You Trust
Scott Adams
Creator of "Dilbert"
When I worked in a bank, I learned that the only people who screw you are the people you trust. The people you don't trust never get the chance. So keep an eye on the people you trust.
Money Doesn't Make You Happy
Craig Newmark
Founder, Craigslist
 Craig Newmark Courtesy: Craigslist |
Material stuff won't make you happy. I'm pretty sure I got the message at the Hebrew school attached to the temple in Morristown, N.J., where I grew up. Maybe I was around eight at the time.
It's very true; I'm pretty happy with a tiny fraction of the wealth I could have. I know a bunch of really rich guys, and they're no happier than anyone else.
What I Learned From Johnny Carson
Bill Nygren
Manager, Oakmark Select Fund
Back when I was in college, I remember watching Johnny Carson interview Andrew Tobias, who was giving personal financial advice. Johnny asked: "What's the best investment for someone who has only $1,000?" Mr. Tobias said, "Nonperishable consumer staples."
Of course, the audience roared. But Mr. Tobias was being serious and said that if you purchase nonperishables when they are on sale, the return on investment is enormous. That answer focused me on the idea that investing wasn't only about stocks and bonds but rather was a mind-set for making sense of all of the transactions a consumer engaged in.
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