“The key to financial success isn’t saving, but investing in your own future production.” Cullen Roche
This quote from the book Pragmatic Capitalism has enormous ramifications to investors at every stage. What Mr. Roche is trying to say is: Investing in yourself is the wisest choice a person can make and will provide the highest return over time. He goes on to explain that savings is not investing because it is not designed to produce things like a factory does, or a degree in engineering would. This limits the possibility of enormous returns because you are essentially purchasing someone else’s savings when you purchase a stock on the secondary market. Investing would be defined as learning new skills to increase future earnings or purchasing shares in a private company before it went public, in a primary market. Since the risks of the latter are way too much for the average person to bear, let’s focus on the former.
I can look at my own life and see the logic of all of this. I went to college and earned a degree in economics with a minor in history. I went on to become a currency trader, where I acquired more unique skills like how to produce under pressure. I became disillusioned with the whole idea of short-term trading, along with some other stuff, and left this profession. I went back to school and earned a graduate degree in secondary education. I got a job teaching history and worked in a middle school for many years learning invaluable communication skills along the way. I still had a great interest in finance so I took the series 65 exam and started my own RIA firm with my wife. I then enrolled in the College of Financial Planning in order to take the required courses to sit for the CFP, which I passed. I left teaching to run my RIA firm. Why am I going on about the boring details of my life?
Going through this litany was enlightening. Though much of this time, I had great concern over my “investments” and what the market was doing. I now realize what folly that was. While markets will do their thing, my investments in myself were really what mattered. By working two jobs, I was able to save substantially in my retirement accounts. I put in enough time teaching to make me eligible for a lifetime pension. Getting my CFP immediately increased my hourly rate and my technical skills. My teaching experience will enable me to apply for part-time employment in the educational field if I so desire. None of these options would have been available to me if I did not decide to invest in myself. The income resulting from having acquired these skills will help finance my savings which will pay for needs at a future date. The words of James Altucher could not ring more true. “You’re not going to get rich buying stocks. Put the money into reading, writing, learning, starting your own business. Investing in yourself is by far the best investment you can make.”
This seems like contradictory advice coming from a person who manages money for a living. When I look at my wealthiest clients, I realized the reason they have so much savings is because they invested in themselves and the savings became the by product. They created businesses which manufactured useful products. Many worked in jobs that required great skill that enabled them to earn high incomes, which generated enormous savings rates. I would not have a business if these people did not invest in themselves first and come to me later!
Young people have the most to benefit from making this strategy, since they have the greatest number of income-producing years ahead of them. This is not to say that middle-aged workers cannot also find rewards. Acquiring unique skills is one of the best protections against outsourcing or automation of job tasks. “Encore Careers” can revitalize people who may feel their best years are behind them. Older people can also improve their quality of life by investing in themselves. Diseases like dementia are less common in people who are constantly learning. The motivation for this is not just monetary, but increasingly health related. Without investing in yourself, the chances of acquiring great savings are markedly diminished.
Focus on acquiring as many diverse skills as possible. This will provide the main ingredient for a happy, healthy, and secure life. Going down this path will increase the odds you will enjoy what you do while generating enough savings to fund future expenditures. Most importantly, a life of creativity, balance, and fulfillment is much more fun than watching the ticker running on CNBC or incessantly checking stock quotes on your i-phone.>