Before Mr. McPherson died, he wrote an article called Falling, that was published in 2014, regarding his descent into poverty. It was published in The Hedgehog Review.
He went from book critic, novelist, and an editor at The Washington Post to destitute. That is a far fall from grace indeed. Here is his story.
HOW TO GO FROM PULITZER PRIZE WINNER TO PENNILESS
William Alexander McPherson was born on March 16, 1933. His father worked as a plant manager and his mother was a homemaker.
He attended public schools and eventually went on to college. Between the period of 1951 to 1966, he attempted to get a college degree. He attended several universities during this time. Alas, the coveted sheepskin (college diploma), remained ever elusive as he did not earn a degree.
He married in 1958, but it ended in divorce.
By 1969, he started working at The Post.
As an editor, he was in charge of Book World for The Post and under his leadership, he turned that into one of the leading literary publication in the United States, which is no small feat. That is a tremendous undertaking, job, and responsibility. However, here in the real world versus in college, he thrived.
WINNING THE PULITZER
In 1977, he was awarded the Pulitzer Prize for distinguished criticism and the judged noted his large breath of literary and historic knowledge.
A Pulitzer Prize is a coveted award in literature. It first began in 1917. This prize is given out for achievements in magazine, newspaper, literature, journalism, and music composition.
The Pulitzer is named after Joseph Pulitzer, a famed newspaper publisher, that made his fortune in publishing. The award is administered by Columbia University in New York City. Either a gold medal or cash prize of $15,000 (increased from $10,000 in 2017) and certificate is awarded to the winners.
He wrote two published works. One in 1984 and the other, a sequel to the first novel, in 1987. A third was in the works, but was never completed.
At the age of 53, he decided to leave his job, and head to Romania, after the fall of the Berlin Wall. He stayed there for seven years. Mr. McPherson opted for early retirement at the ripe old age of fifty-three. He would not be eligible to receive his pension for 12 years; at which time he would be sixty-five. This is where things began to spiral downward.
Why not retire at 65, when you can receive your money? That just makes more sense. In my opinion, unless you have between $2.5 to $5 million in assets it will be tough for most folks to retire or even justify retiring early before you have access to 401(k)’s, IRA’s, Social Security and pensions.
THE FALL FROM MIDDLE TO LOWER CLASS
Don’t follow any advice, no matter how good, until you feel as deeply in your spirit as you think in your mind that the counsel is wise. – Joan Rivers
After choosing early retirement, having no real plan and giving little thought for his future income, he set out for an adventure overseas.
Although, he is a writer by profession, with age and the decline in his health, he is unable to sustain this way of earning a living. It is far different to be a man of twenty-two, eking out a living by writing than it is at seventy-two. He can long longer grind out the words as he could when he was a young man. He states this is one reason that he is poor.
Inflation would also erode the purchasing power of his money. From 1986 to 2014, inflation has gone up 109.7 percent. Meaning things have doubled in price.
His pension becomes worth half of what it once was and it not adjusted for inflation.
He receives Social Security, but having not worked formally for the last few decades means that this amount would not be very high.
Medical insurance has skyrocketed. It is a much higher cost to insure anyone, let alone a man in his golden years. It now costs him more monthly than he used to pay in a year.
He did not pay attention to his investments and bought stocks on margin.
In addition, he allowed advisors to manage his money and give him advice against his own gut instincts.
Eventually, his investments and brokerage accounts were empty.
FINANCIAL MISHAPS AND MISSTEPS
These are the things that caused Mr. McPherson to lose his financial shirt:
No clear vision of a career
No path to wealth creation ever established
He did not complete his degree; after numerous attempts which is time and money wasted
His only income consists of a Social Security check and a miserable pension
He retired early without a financial plan
Gave no thought to the future or inflation
High cost of medical care never even considered
Higher cost of housing not considered either (as news flash, things become more expensive not cheaper)
Did not plan for health issues
Divorced without having a financial net
He invested on margin
He spent his investment capital
Took bad advice from advisors that told him not to buy shares in AOL and Apple
Due to this he has to depend on the kindness of family and friends
He couldn’t pay for $10,000 of dental work
Did not have the money to attend a funeral
He subsists on a HUD subsidy for housing and medical benefits
Things got so bad, at one point, he only had a quarter to his name in his pocket and no bank account
POVERTY IN OLD AGE
He states by all standards of living that he is poor. Living in poverty is awful and humiliating he writes. Being poor is exhausting and time consuming. Waiting for buses and in lines at assistance offices takes all day.
His income is above $11,670 annually, putting him above the poverty line, as he receives more than that in Social Security. Even though, he has not ever had to apply for food stamps, welfare, or Medicaid he still has had to ask for government assistance.
He feels his younger self was delusional and naïve.
Although, he does not live in a homeless shelter, but living in subsidized housing isn’t exactly palace living. Many living there are poor as well.
The ailments that come with age are hard. Without good medical insurance, medical bills can be catastrophic to say the least. Medical debt has caused some to declare bankruptcy.
According to Elizabeth Warren, Americans are filing bankruptcy in record numbers. The main causes are job loss, illness, and medical bills. Women with children are also most vulnerable to file for bankruptcy.
The things he did that harmed his financial future were unable to be undone.
I share this story because the author had the fortitude to do so. I urge you to not just eliminate, but crush all of your debt and save at least 20 percent of your income because one day you may need it.
Don’t save what is left after spending; spend what is left after saving. – Warren Buffet
If you take a look at your bank accounts, you will notice that the rates on your savings accounts are minuscule.
On average, savings rates are a paltry 0.01% APY.
That means you are not even earning 1% on the money you have stashed away in most big banks.
This meager 0.01% APY is not doing anything for you.
If I put my hard earned money into a bank, I want something for it. These rates are almost no better than sticking your money under a mattress!
However, don’t do that. If the house ever catches fire, your money also goes up in smoke and is not FDIC insured.
I once heard a real estate mogul say that many years ago there was a time when interest rates were paying 10%. He was able to double his money every 7 years!
Now, that is fantastic.
However, this is not the case anymore.
Although, there are some banks that are willing to pay a fairly decent rate for the opportunity to house your money.
I found a few from doing an online search.
So, here is how you can earn money from placing your money in a high yield savings account.
WHAT IS A HIGH YIELD SAVINGS ACCOUNT
A High Yield Savings Account is a savings account with a variable rate typically higher than retail brick-and-mortar banks.
These banks are usually online and offer no physical bank that you can visit.
However, you can deposit your money online via electronic funds transfer.
Access to you funds may include a combination of wire transfers, checks, or ATM withdrawals. But this is not always the case.
For example, American Express® Personal Savings accounts are not meant for everyday spending. Therefore, debit cards, ATM cards, or checks are not provided. Transfers have to be done online. And transferring funds online can take anywhere from 1 to 3 days to complete.
Therefore, you should only deposit money in these types of accounts that do not require you to need access to these funds immediately or for daily spending purposes.
THE RULE OF 72
This rule allows you to estimate how long it will take for an investment to double at any given interest rate with the “Rule of 72”.
Knowing this will allow you to make a more informed decision before placing your money in any investment or savings vehicle.
You must also pay attention to the type of account you put your money into. For instance, a money market account or Certificate of Deposit (CD) will pay you more than a savings account.
Stocks pay you he highest rates of returns and give you the biggest bang for your buck!
The average annualized total return for the S&P 500 index over the past 90 years is 9.8 percent.
With the Rule of 72, If you use the formula, that equates to 72/9.8 = 7.34 years to double your money.
However, many banks are paying 1% or less!
Therefore, if your savings are earning only 1%, this means you money will double in value in 72 years.
That is 10x longer than if you had invested your money in stocks.
BANKS WITH HIGH YIELD SAVINGS
After doing a short search online, I found the following banks with high yield savings:
American Express National Bank – 1.90% APY
Ally Bank – 1.90% APY
Barclays Bank – 1.90% APY
HSBC Direct – 2.01% APY
Synchrony Bank – 1.90% APY
HOW MUCH YOU CAN EARN
This amount can vary based on how much is deposited.
Of course, the higher the deposit amount the higher earned in interest.
You can use this money for anything you want or simply keep it invested and let the interest keep compounding on the amount you earn.
Please be advised that you still have to report this as income on your taxes. The bank will supply you with a form for tax purposes.
Now let’s show you the money.
We will use the 2.01% APY as our rate.
If you deposit $15,000, into an accounting paying 2.01% APY, you will get the following:
If you deposit $25,000, into an accounting paying 2.01% APY, you will get the following:
If you deposit $50,000, into an accounting paying 2.01% APY, you will get the following:
SKY’S THE LIMIT
All yeah! Let’s stack that paper!
Unless banks start putting a cap on the amount you can deposit, you can pretty much do this until you feel you have deposited enough in savings.
The point of using a High Yield Savings is to grow your money while you sleep.
That’s right. You can earn money just for breathing.
Merely allowing it to sit in an account paying less than 1% will not beat inflation; being its customary 2-3% rate per year.
At the very least, your money can keep up with inflation and not fall so far behind.
The goal is to always beat inflation.
Your money will have less purchasing power as inflation does its thing.
Therefore, it is your job to finds ways to keep the money train going by figuring out how to earn more, invest more, save more, and ultimately beat the inflation monster that is coming out every year to a theater near your wallet.
Financial independence is the ability to live from the income of your own personal resources. – Jim Rohn
Reading headlines in the news about how boomerang kids are returning home in droves is quite alarming.
When I was growing up, I saw lots of young adults leave home and never return. They got jobs and worked their way up to where they were trying to go.
However, a couple decades have changed all that.
One of the biggest culprits: student loans.
The cost of college has outpaced inflation. Therefore, it is now up to families to find affordable ways to get a college degree.
Otherwise, your kids may just end up back in your basement, or worse, in their childhood rooms that they could hardly keep clean when they were debt-free teenagers. Gulp!
The reason that so many millennial’s need parental assistance in paying their rent is because they shoulder the bulk of the $1.4 trillion in student loan debt.
However, borrowing or taking out deposits from the bank of Mom and Dad is not a good idea and can have lingering consequences for the parents as well as the kids and future generations.
Here are the reasons why young adults should stop relying on their parents and become independent as fast as they can.
FINANCIAL INDEPENDENCE WILL TAKE LONGER TO REACH
We are living in a time when more people discuss this phenomenon called FIRE (financial independence retire early).
Although, this should be taken with a grain of salt, as many people will need to save 50% or more of their income for a decade or two to make this dream a reality. And that is not always possible or feasible to do, to say the least.
That being said, the decision is always yours whether or not you retire at 42 or 62. The point is to be able to one day have the option to retire.
When you lean on your parents (the Rents) to pay your bills, it can delay the transition into adulthood.
I have noticed when people have no safety net, they are a lot more resilient and cautious about what they do and spend.
For example, to rely less on Mom and Dad later in life as an adult, you could do the following:
Live with a couple roommates
Pick a smaller apartment to live in (say 700 square ft.)
Go without a car or at least buy a smaller, more affordable one
Commute to college and save by not paying room and board; therefore, requiring less or no student loans
It seems to be the people that get off their parent’s payroll ASAP are the ones that are able to become financially independent the fastest because they have no other choice.
When the only option is self-reliance, then you learn to live lean really quick. And low fixed expenses are how you will be able to start saving money.
A SUBSIDY SHOULD HAVE LIMITS
For those that may not know, right now the Direct Stafford Loans offer a three-year subsidy (you may have to ask your loan servicer if your loan has this feature) for students entering repayment.
Those funds give graduates time to find suitable employment and create a budget for their lifestyles in order to repay what they owe.
This cushion is a great way to help young people get on more solid financial footing.
What you may or may not have noticed is that there is a three-year window and then it closes shut.
And do you know why? It is because when you offer people a crutch, then unless they have the drive, perseverance, determination and the will to be self-sufficient, they are likely to use the crutch forever.
You have to limit aid, otherwise, people come to rely on it for all their days.
This includes the funds from your parents.
Get off their bankroll as fast as you can, or you may come to depend on it for the rest of your life.
Let’s be honest. Nothing lasts forever. Even milk, has an expiration date.
You would rather have the option of saying no than hearing the words: We’re cutting you off.
RELYING ON SELF GETS BETTER RESULTS
I know that having help is at times necessary to keep a roof over your head. I would not tell parents not to help their children. I am asking children to tell their parents, that they no longer would like their financial assistance.
Therefore, you become the adult or hero in your own life and story.
If you read any number of stories about the rich and successful, you will notice that many did not pull themselves up by their bootstraps, but had just enough help to get things running and then go it alone.
When you allow someone to write you a check, you are also giving them some form of say so in your life. This de facto control you are giving up every time you cash that check, has far reaching and lasting consequences.
You may want to live in SoHo, but the parents say they are only willing to pay for something closer work or at a specific dollar amount. Thereby, giving them more control over your life.
When you write the check, you have all control. You say when, where, and how much.
No need to wait on anyone to give you the green-light or hand you the money. You can make decisions for yourself and might I add, faster than if you had to wait for help or other form of assistance.
Thereby, causing you to not miss opportunities because you can say yes without having to check in with anyone else.
You can say yes to that job, internship, business opportunity, apartment lease, car purchase, or vacation.
Just something to think about.
INDEPENDENCE IS ATTRACTIVE
Independence, especially financial independence, is attractive.
When you are an adult, you do not have to tell anyone you are one.
They can see it in your actions.
Are you out at the bar every night? Or are you at home, working on that new app your developing to earn enough money for a down payment on a house?
Do you spend with reckless abandon? Or are you cognizant of what you are spending, and where your money is going?
People are drawn to confident people. It is an attractive quality. They say like attracts like.
Nothing exudes confidence like someone who is in control of their money and time.
Are you looking for a partner? If so, ask yourself what qualities are you looking for in one.
For instance, do you want someone who buys everything in three’s, likes to lease cars, and maxes out their credit cards every month?
If the answer is no, then you may want to make sure you are not doing any of those things as well.
Everyone wants to date up, but they forget that they too need to get themselves together in order to attract someone worthy of their time and vice versa.
When you are independent, people want to be around you. You attract jobs, opportunities, people, and money when you have your own.
GENERATIONAL WEALTH INTERFERENCE
The New York Times has reported that 40% f people in their early 20s receive financial assistance from their parents.
Parents are paying for everything from rent to car insurance.
The problem with this is that every dollar that parents give their children, is money that is not working for them in building their financial house and keeping it secure.
If parents have the money to give their children for a down payment or college education, then I am all for it. By all means, help the kids out.
However, what many kids may or may not know is that Mom and Dad cannot afford some of these expenses.
It is one thing to help someone with a one-time expense, like a down payment on a home.
It is another thing entirely to help pay someone’s rent or mortgage every month with no end or deadline in sight.
Many baby boomers are going into retirement unprepared. Therefore, they usually do not have the funds to give the kids or grand-kids because they need that money themselves.
How do I know? Well, I ask people. And many have said that their are finances precarious and funds are limited. Many give until it hurts. However, it not just hurts them, but also their heirs.
The Sandwich Generation is a generation of people who care for their aging parents while supporting their own children.
By not taking or limiting financial help from parents, it limits the help you may need to give your own parents when you are raising your kids.
Let me share with you this story for some perspective.
I read an article about a man who decided to become writer. While he did pretty well for himself, the family still struggled financially.
This is what happened during the course of their lives:
His wife quit working and became a stay at home mom
Their daughters were given the option to go to the private colleges of their choice, even though the family could not truly afford it
His father helped them pay for college for the kids; thereby, making him forfeit any future inheritance for him or his children for the sake of present conveniences
They also paid for their two daughters weddings out-of-pocket, with empty pockets
His wife has been out of the workforce so long she is unable to find reasonably paid work
He works 7 days a week
They have no savings and NO RETIREMENT
From the example above, you can see how paying for present pleasure or not planning for expenses can harm you and your family down the line.
This is scary stuff. Their inability to say no and set firm limits on what they were willing to spend has caused long-term consequences. They may have to rely on their children for financial assistance in their old age as opposed to passing on wealth.
I urge you to reconsider.
Let this post be your wake up call. A call to arms, if you will. A call to financial arms. To arm yourself with financial knowledge, so that nothing can stop you from working toward your goals and building a solid financial future; independently.
Unless you have not been reading headline making news lately, then you have heard of the man who ran up a tab of over a million dollars to become an orthodontist. It was featured in the Wall Street Journal and has attracted a lot of attention. His name is Dr. Mike Meru. He owes approximately $1,060,945.42 as of the reporting of the article in May 2018. There are only 101 people with $1 million in student loan debt. He is one of those people. Here is how this went down.
HOW TO GO FROM DEBT FREE TO OWING $1M IN 13 YEARS
Mr. Meru grew up in California. He has two brothers and is the eldest of the three. His parents said they would help pay for college. He got through undergrad with the help of his parents and by working through school. He graduated in 2005 from Brigham Young debt-free.
From there he decided to go to dental school.
Before we go any further in this story, I want you readers to know that becoming a doctor is incredibly expensive. It is not uncommon to have medical students be in debt for hundreds of thousands of dollars. Anywhere from $200,000-300,000 in medical school debt is their reality. Dental school is also one of the most expensive programs and can cost upwards of $70,000 or more per year.
Getting back to Mr. Meru, he was informed that going to dental school would cost anywhere from a price tag of $400,000-$450,000 in student loans plus interest.
For me, this is a red flag. Even if you can earn a six-figure salary as a doctor, I am risk-averse and would be turned away by this eye-popping amount. However, if your goal is to be a doctor and be of help and in service to others, then this is what the cost will be.
FROM $0 IN STUDENT LOANS TO $340,000 IN FOUR YEARS
He then chooses one of the most prestigious institutions for dentistry: University of Southern California. This is what he paid for four years of school from 2005-2009:
Year one at end he owed: $43,000
Year two at end he owed: $115,000
Year three at end he owed: $230,000
Year four at end he owed: $340,000
Dr. Meru has now finished dental school. He owes over a quarter of a million dollars in debt within four years of graduating from college debt-free.
Keep in mind that college tuition goes up every year around the country. USC is no exception. In addition, interest rates have gone up on student loans as well. In the WSJ article, his loans were at various interest rates throughout his time at school. Also, tuition increases at USC would go for about 6%. This is a huge amount of money. For instance, a 6% increase over 3 years would be the equivalent of an 18% increase in tuition by overall from start to finish.
The cost of college is going up faster than the cost of inflation. Generally, inflation goes up by about 3% annually increasing the costs of goods and services. Therefore, if it cost a dollar ($1.00) last year it will now cost $1.03 this year. Imagine paying 6% on $50,000 and then 6% on 53,000 and so on, all the while you are also accruing interest on this borrowed amount.
You are getting hit with a two combo even worse than Mike Tyson could ever do.
First, you get hit with tuition increases of 6% in this case. Second, you pay interest on the loans you take out of approximately $50,000 per year. The compound interest is brutal.
In the article, it states that Dr. Meru found his calling as orthodontics changed his life as a teenager. However, the one caveat he did not take into consideration: inflation. If you want to learn more about inflation, read my article Money Lessons I learned from Scrooge McDuck. The cost of becoming a doctor 20-25 years ago was cheaper then as it is way more expensive now.
This is not the first time I have seen people take bets like this on their education.
If you were to do some research, you will find that 50 plus years ago education was pretty reasonable and in many cases more affordable. I will provide one such case below.
In the book, Generation Debt by Anya Kamenetz, a Yallie that was born toward the end of the 1970’s, stated in her book that her parents old college professors were in shock at the sticker price of Yale over a seven year time period which had risen- from $30,000 to almost $39,000. Her own father, who attended Yale on a scholarship, had appropriately asked the justification of the tuition increases. This considering when he went there the price was…wait for it…$3,000. That means within one generation tuition has increased $1,000% or to roughly 10 times the cost.
The absolute saddest and funniest part of the book, in my opinion, was at the high school graduation brunch of her younger sister. Her parents also wanted her sister to go to Yale, but cited cost concerns and rightly so. The speaker said of the 180 graduates they would divide $18 million in scholarships- that’ll just about get them to Thanksgiving. That was putting it mildly.
The problem is that education is not an equalizer. Although, there is nothing wrong with getting a good education. And going to a great school with high-quality education is awesome; some people may have to simply understand that it may not be the best option for them individually.
The jury is still out on the value of an education. Sure, they let you know on college brochures and in the media that a college degree can net you more than $1 million more in lifetime income, but in Dr. Meru’s case did it also say that if you flip a coin, it could be the opposite and you could owe $1 million dollars? I don’t think so.
Many employers are paying in wages nowhere near the cost of college.
I have read that some places cannot put a dollar amount on how much to pay their employees for their degree, but colleges have put a price on it as USC cost Dr. Meru over $400k.
FROM $340,000 IN STUDENT LOANS TO $601,506 IN THREE YEARS
You would think by finishing dental school that his education was done and over with. Alas, then there is residency, which is training for doctors. However, for dental specialists this costs too. Many doctors are paid while in residency, but Dr. Meru must continue to pay for training for an additional three years FROM 2009-2012. This would increase his debt to over $600,000.
FROM $601,506 IN STUDENT LOANS TO $1,060,945.42 IN SIX YEARS
Pay close attention here because things move really quickly.
He consolidates after finishing all his education and training. He then owes $724,817 by 2012-2013. This includes in interest and principal as a consolidation not only changes your repayment terms, interest rate, and payment amount but interest can capitalize. Capitalization is what makes student loans such a slippery slope. It makes you owe interest on top of interest making it harder to get it paid off.
From there he continues to accrue interest and owes $882,300 by 2015.
Within 3 years, interest continues and grows the debt to $1,060,945.42 by 2018.
How is this even possible? In 2005, Congress created Grad PLUS loans that removed loan limits and allows student to borrow for every expense from tuition to rent and living expenses. Dangerous.
He is now making monthly payments of $1,589.97. He has two daughters, a wife, a $400,000 mortgage, a $225,000 salary and is accruing $130 per day in interest on his loans, which is $3,900 per month and $47,000 per year.
If not for Income-based repayment, he would have to pay $10,541.91 per month. Instead, he pays about $1,600. This does not pay all the interest that is accruing and does not even touch his principal. Within 20 years he will owe $2 million. If forgiven, he will owe $700,000 in income taxes. Currently, his take-home pay after income taxes is $13,333 per month. That means if he pays the $10k monthly payment, he would have his debt paid off in about 13 years, but bring home less than $3,000 per month.
are in income-driven repayment plans and will have a portion of their balances forgiven. As my story on the orthodontist with $1 million in student debt shows, students at prestigious private schools like NYU, USC are taking out bigger loans to cover high tuition … 2/
Keep in mind that it is mostly graduate students that end up in the most debt. With the cost of graduate school (2-4 years) easily topping $20,000 or more per year, it can dwarf undergraduate costs. Over 20 years ago no undergrad or graduate students owed six-figures of student loan debt. Today, over 2.5 million of graduate students do.
Per @PrestonCooper93 "Between 2008 and 2016, the share of professional students leaving school with six figures in debt rose from 32% to 50%," and that's after inflation. The issue is less whether grad students are defaulting … 4/
After reading about Dr. Meru’s story, I feel that there is a serious problem with the funding of higher education. I want people to be doing the opposite of owing interest on a $1 million and instead be earning interest on this amount of money.
I want people to have the trifecta of retirement funds- pension or 401(k), savings, social security. Over a 30 year career you want to have a paid for home, 25 times your annual income in a retirement account, and be able to get social security or have at least two forms of income to supplement your savings.
In the article, his wife said there are a few things that are OK to go into debt for: a home, an automobile, an education. I have to disagree. I say if you can avoid all debt, then do it. Pay cash for all your purchases. For a car you need one loan. Same goes for a home. However, her husband needed 50 loans to fund his education.
If you are unsure why or how you will pay cash for all purchases, let the advice of these millionaires be your guide.
Mark Cuban, billionaire owner of the Mavericks, says if you use a credit card, then you do not want to be rich.
Kevin O’Leary, shark tank entrepreneur, says all debt is evil.
David Bach, financial advisor and author of the Automatic Millionaire, says all debt is bad debt.
“No man is poor who can do what he likes to do once in a while.” -“Uncle” Scrooge McDuck
I am a huge Disney fan and one of my favorite characters is Scrooge McDuck. He was a Scottish Pekin duck that lived in a huge mansion in a city named Duckburg and had a money bin the size of a skyscraper. For those of you not familiar with this cartoon character I will give some background information.
Scrooge McDuck was created in the 1940’s by Carl Barks for the Walt Disney Company. He was modeled after Ebenezer Scrooge, the main character in Charles Dickens’ 1843 classic, “A Christmas Carol.” Like Ebenezer, McDuck is a tightwad and whose miserly behavior made him a fortune through frugality and hard work. In addition, he has strong similarities to the wealthy American industrialist Andrew Carnegie, who was also a Scottish immigrant, that made his fortune through work and ingenuity. Scrooge also shows similar traits of John D. Rockefeller.
Rockefeller was at one point the world’s richest man and first ever American billionaire. Considering he was a billionaire in the early 1900’s he is still considered as the richest person in modern history. When a reporter asked him, “How much money is enough?” He responded, “Just a little bit more.”
Scrooge’s penny-pinching ways are a constant theme throughout his life, but his belief in thrift, square business dealings through honesty and ingenuity are the reasons for his success. He is often criticized for being tight-fisted and cheap, but admired for his values and work ethic. Even though he is immensely wealthy, he does not shy away from an opportunity, no matter how arduous, to earn more. He often laments that the young want to start in at the top instead of working up from the bottom like he did. The lessons Scrooge teaches his nephews Huey, Dewey, and Louie in the series are always to be smart, have morals, values, good work ethic and to play totally aboveboard meaning fair and square. A short biography is provided below.
Bio
Name: Scrooge McDuck
Birth year: 1867
Nationality: Scottish
Gender: Male
Nickname: Uncle Scrooge
Occupation: Entrepreneur and Business Magnate “Adventure Capitalist”
Education: Informal (school of hard knocks)
Known for: Swimming in his money bin
Amount of wealth: unknown but estimated in the billions
Hobbies: Treasure hunter and adventurer
Relatives: Donald Duck (nephew) Huey, Dewey, and Louie (grandnephews)
Life Lessons from Uncle Scrooge
Humble beginnings. Scrooge truly started from the bottom. He was not born into wealth and started without a dime. He was born to poor farmers and started working as a young boy to earn money. A true Dickensian existence he lived, as he and his family were poor. Regardless, no matter how poor you are, you still have worth. Therefore, know your worth and do not accept anything less. Remember this: “I believe that virtue shows quite as well in rags and patches as she does in purple and fine linen. – Charles Dickens. His first job was as a shoeshine boy in Scotland. This is where he earned his first dime, which he never spent, but would save as a reminder of the importance of hard work. This is the start of his thriftiness and the secret of his wealth.
Scrooge also worked as a cabin boy on a ship to America. He left Glasgow, Scotland as he decided he would be able to make his fortune in America and was inspired to do so after earning his first dime, which was an American coin. He learned from a young age that life is full of tough jobs, but he wasn’t afraid to get his hands dirty. He prospected for gold in the Klondike and that is how he made his first million. His past is not so rosy as not all of his business dealings are done legally, but he learns from these experiences and changes his ways to only doing business fairly.
Education. School of hard knocks. McDuck had no formal education because he went to work at an early age, but became a self-taught and lifelong learner by reading. His extensive travels and business dealings to seek out opportunities allowed him to learn numerous languages where he is able to cut out the middleman as he states he has outsmarted the smarties. There is no one job or niche that secured his wealth. He would go on to diversify his mining money into as many opportunities and investments that he could use to grow his money.
He teaches his nephews the principles of economics, including the history of money, and inflation. Scrooge always does his due diligence and researches any investment before investing because knowledge, discipline, and understanding are the foundation to building a profitable wealth portfolio. Note this witty adage: Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway. – Warren Buffett
Invest in yourself. Scrooge knew that investing in a good education pays the best dividends. He became an avid reader and linguist. This allowed him to do business with people all over the world. Thus, increasing his fortune as there is plenty of money to be made internationally. Scrooge would often say that “knowledge is power.” Due to his research in looking for investment opportunities he built a huge personal library. The secret of wealth is not complicated, but it does require you learn how money works by becoming financially literate. Therefore, your home should look like a Barnes & Noble if you want to build and keep a fortune.
Work ethic. Scrooge believes in hard work and not being a spendthrift are the first steps toward success, he understands that real success comes in working smarter and not harder. Generating multiple streams of passive income, such as ownership of a business or other enterprises are the keys to building lasting wealth. Staying away from get rich quick schemes and knowing that time is your ally not your enemy.
Investments. Scrooge McDuck was shrewd and close-fisted when it came to spending money, but was big on saving. He preferred to have his money work as hard for him as he worked for it through investing in a diversified portfolio of holdings such as art, gold, diamonds, farms, newspapers, rubber, real estate, and other assets. Buy assets that go up in value. Cars and clothes do not. However, rare coins, stamps, books, and art do. He believes in “trickle back economics” in where he gets a piece of the profit from every investment he makes such as from customers buying products from a company he invests in or owns. He limits and cut costs to the bone and only spent when ready or necessary and always would seek to gain a profit.
Inflation. Scrooge teaches his nephews about inflation in the animated short entitled Scrooge McDuck and Money (1967). Basically, as the price of good and services rise the value of currency falls. Meaning that the money in the bank today will be worth less tomorrow. He wanted to teach his nephews that without something solid and secure behind the money, then you get inflation where money becomes worth less and less. A dollar would not be worth the paper it’s printed on. He says “it’s what you can buy with what you have got that counts.”
From worker to owner. Scrooge was bright and not afraid of hard work. He listened to the sound advice of his father and decided he would work smarter not harder. It took him mere months to save enough money to go to overseas to America instead of years through his ingenuity. Businessman was his goal through ownership of numerous commodities. Put money to work for you. Money does not sleep. He even owed the very banks that housed his money! The money is in ownership. He had a simple business motto: Keep it simple so he could run the business himself.
Find your passion. Scrooge always did what he enjoyed which was earning a living and gaining vast sums of money through investing and treasure seeking. Passion means you go the extra mile and continue working even after the clock strikes five. You don’t need vacations or breaks when you’re having fun and doing what you love. When it starts being more work than fun, it’s time do something else.
Treasure hunter. Scrooge likes a challenge. When he learned about the value of artifacts he started to seek out treasures from all over the globe. He works well under pressure and in tight situations that arise from these excursions as he knows pressure makes diamonds; not only in jewelry, but in character.
The infamous Money Bin. Scrooge used to keep his money under his mattress, but when it got too high he decided to build a money bin to keep it more safe and secure, which is why we use banks. It was a three-cubic-acre building and the vault housed the very first coin he ever made called his Number One Dime. He placed it placed on a velvet pillow in glass enclosed case. The Dime’s origins are described in the story called Getting That Heathy, Wealthy Feeling (1964). The bin housed only some of his money that he earned by himself from his personal dealings as he is once heard telling his nephews that the money stored here is “petty cash.” He would often swim in it. It was constantly under attack from his enemies, but he always thwarted them in the end.
Emergency Fund. Scrooge knew that, if something can go wrong it will. He believed in keeping savings and liquid assets just in case. At one point, he hid assets as startup capital should he ever need to start over.
Morality. Scrooge is aggressive when it comes to life and his pursuits, but exhibits strong amounts of self-control. He also has a temper just like his maternal nephew Donald Duck. He does not however use lethal force as he does not want to deal with feelings of guilt, anger, or despair. When helping others, he does not wait or request a thank you. He simply does what he is going to do. He does not believe in burning bridges, but understands that an enemy can be made and is not to be underestimated. He has said that only in fairy tales do bad people turn good, and that he is too old for them and old enough to not believe in fairy tales. “You have enemies? Good. That means you’ve stood up for something, sometime in your life.” – Winston Churchill
He does not believe in cheating and dishonesty as those traits are not prosperous. He also believes in keeping his promises once his word is given. He has once said “Scrooge McDuck’s word is as good as gold.” He practiced what he preached: thrift and integrity. He constantly preached budgeting and being square. If you live your life like you are being followed around all day by a reporter, and everything is on the record, then you may do things differently. Scrooge also believes in the golden rule: treat others as you would want to be treated.
Attitude. Scrooge is very optimistic. There is always another rainbow. Plenty to go around. More than enough for all. The glass is always half-full. Opportunities are always just around the corner.
Resilience. Scrooge is never one to walk away from a challenge or money making opportunity. Regardless of how difficult the terrain or objective may be, Scrooge McDuck can grind it out with the best of them. He has also shown great physical fitness through beating bigger characters, swimming, running and the like. Meaning he still continues to exercise and maintain a stamina that allows him to be mobile and agile well into older age. He has learned to quickly adapt to his surroundings and thrive in any environment and come out on top. He credits his success, which is due to his determination, grit, and will power, on the fact that he is “tougher than the toughies and smarter than the smarties.” Do not give up so easily. When times get tough, get tougher. Work harder, but also smarter.
Persistence. Scrooge is generous and kind in his older years to his nephews, but in his younger days the slaps of life hardened his character. Failure is not an option. He has learned to endure the difficulties of life with a tough exterior and personality to match. Do not be too soft or you will be taken advantage of by others. A great quote by Churchill: “If you’re going through hell, keep going.”
Charity. When Scrooge left for America his mother asked him to write to them and he promised his mother that he would send money home. There are times when he has donated to the poor or given money to the Salvation Army as well as gifting those who have helped him and have less than him. One of the best lessons in life is that you can help others including family. In life, you can’t get something for nothing. You have to give to get.
Family. Although Scrooge has no family of his own, he does have his nephew Donald and his great-nephews Huey, Dewey, and Louie. These are his greatest and most prized possessions: his kin. In one episode of the animated television show Ducktales (1987), episode twenty-two entitled Down and Out in Duckburg which aired on October 13, 1987, the family ends up in the poorhouse. They decide to stick together in the tough times even as people mock and mistreat them. They all even end up washing dishes together to eke out a living. In the end, they stick together as a family, tough it out and regain his fortune. The lesson here is to not ever take for granted or underestimate the importance of family.
Value of money. Scrooge always knew the value of a dollar. He would teach his nephews this through his actions and his words. He was a skinflint who only parted with money when absolutely necessary.
In another episode of the show, the boys asked for a raise in their allowance. Their Uncle Scrooge denies their request as he told them if he raised their allowance they would “grow up to have no respect for money, learn to live a wasteful life and end up out in the street begging for a few measly coins.” If the government just creates money, it loses its value. If everybody had lots of money, prices would go up, and then everyone has to have more money which leads to chaos.
This episode entitled “Dough Ray Me” aired on November 3, 1989 and was the 82nd episode of the series. The boys are able to duplicate money and the self-duplicating coins spread through Duckburg. The town is drowned “funny money” and buried in a “cash avalanche” causing sky high inflation. The episode provides a very funny narrative through its series of events that show how inflation works.
The most notable theme is that money’s only value lies in how hard it is to obtain; “easy or funny money” loses value and leads to inflation. In this story, the boys learn a life lesson in everything that glitters is not gold. There is a price to be paid for everything and the bill always comes due. For example, future inflation grows to gargantuan proportions and money becomes worthless in this episode.
During the “cash avalanche” a newspaper is selling for “only” $200.
A lollipop costs a little girl $5,000; she hauls up a wagon full of money, saying in that case, she’ll take two.
A bus fare costs one poor guy an astounding $10,000 in exact change, which he heaves aboard in a huge sack.
At the dentist’s office, one man is told fillings for his two cavities will cost $40,000 per filling for a total of $80,000. He remarks by saying “Well, at least some prices haven’t gone up…”
Even the nephews complain at one point that it will cost them $30 just to use a gumball machine.
Money is so abundant that the Beagle Boys (series villains) try to rob a bank that has now become a money landfill to the cheers and applause of the bank employees.
In a twist of fate, the “funny money” implodes and everything goes back to normal proving that you really cannot make or get something for nothing and the coins are essentially worthless.
Many revelations are shown throughout the episode. For instance, even the show’s villains think the townspeople are acting unusual and overly generous. The triplets realize spending all their money on the first day of summer was unwise. They start to gain a respect for money in understanding that you need to know more than the price of everything or you will know the value of nothing. Like the Marshmallow experiment or test, that it is often called, of 40 years ago done at Stanford, the boys learn patience is a virtue and delayed gratification and self-control are important characteristics to have in life if one is to be successful.
Profit even in bad times. Profit also can come from unexpected events and misfortune. In one of the comics, a classic tale published in 1951 called “A Financial Fable,” where all of Scrooge’s money is lost in a cyclone blasting all the money to citizens in town is a great example. One day his money bin just explodes and all of his wealth ended up in the hands of the townspeople of Duckburg. He lost all his possessions and wealth, but looked for a way to make it all back. Instead of getting angry or wallowing in despair, Scrooge kept his head down and worked by growing crops on a farm he owned outside the town.
The newly minted rich townspeople stopped working to enjoy their new money and the trappings that go along with wealth. They did not believe in saving for the future, spending wisely, investing or delayed gratification. They spent with reckless and wild abandon. Scrooge’s crops just so happened to reach harvest exactly when the town was running out of food and, since the other farmers had quit growing crops, Scrooge had an effective monopoly on a vital good of commodities. He sold eggs for the price of one million dollars! Of course, Scrooge quickly recouped his fortune from selling his crops to the town at the sky-high prices (millions of dollars) that he was able to set due to the lack of competition. He was able to name his price for his goods and he made them high. This is how fortunes are made.
A monopoly. Like the game with the guy in the top hat, monopoly is all about collecting the most properties, cash, utilities and other holdings to win. A monopoly is a business or industry that is dominated by one corporation, firm or entity. Basically, you cannot buy products or services from virtually anywhere else other than this one place. Monopolies are the extreme result of capitalism. Without any restraints, and absent any regulations, the enterprise becomes so big that it owns all or nearly all of the market (assets, commodities, and supplies).
Anti-Trust laws. Laws were put in place to stop this practice of being a monopoly to ensure the marketplace stays open and competitive. This started in 1890 with the Sherman Anti-Trust Act that was used to break up John D. Rockefeller’s Standard Oil company. Monopolies are illegal because businesses can become discriminate and hurt the public because customers will be at the businesses mercy. Although Scrooge is the richest duck in the world, he believes in healthy competition and obeying the law.
Budgets and Bargain hunting. Scrooge finds deals galore, sticks to a strict budget, and likes anything for free or at a discount. He even teaches economics and inflation to his nephews in how you must manage the household finances through budgeting which is financial discipline. He says proper budgeting should leave a profit. Then you invest the profit. Money should not be idle and should be put to work. He allows the boys to invest in his company and become shareholders to grow their own money into wealth. After consulting his nephews, he requests a small fee and tells them that good things are never free. Remember this: When your good at something never do it for free. – The Joker, DC Comics
In life you make mistakes, but the key is to learn from them. The key to building wealth is to stay out of debt and pay cash for large purchases like cars and appliance. Credit is no replacement for cash. Cash is king.
Bottom Line. Fictional characters can teach valuable lessons in life, such as morale character and finances. The only place that success comes before work is in the dictionary. Working, saving, and investing is the true path to wealth and success.
