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Saving $300,000 By Age Eighteen

This article was written by in Saving. 34 comments.

CNN Money is featuring stories from six young Americans, all of whom have managed to save substantial amounts of money as kids. When I was a teenager, saving money was never a priority for me. I understood the concepts, but I was more concerned with other things in my life: my hobbies, activities, school, and friends. I found jobs during my breaks from school, but I didn’t save much of what I earned. I certainly didn’t think of saving up for a large purchase, much less saving for retirement.

The kids featured in the CNN Money article are off to a great start. There’s a 23-year old who has been saving since he was eighteen, and he’s accumulated $25,000 for retirement. A fourteen-year-old has accumulated $10,000 by saving from age eleven. I didn’t have $25,000 in my retirement account until I was 28 or 29.

EighteenOh — there’s also an eighteen-year-old who has been saving since age eleven, Grace Goldoni from Princeton, New Jersey (down the street from me), who through babysitting and “lots of retail work” has saved $300,000. I’m still trying to wrap my head around this one. Perhaps it’s a typo, and she saved $30,000, or perhaps she’s just found lucrative clients and high-paying retail. Assuming eight complete years of saving, she’s managed to put away $37,500 per year, after taxes.

Grace admits that her parents “sometimes… match the amount” she saves, but I still find it difficult to fathom how babysitting and retail — working part-time while attending middle school and high school — can contribute to $300,000 in the bank. Even compound interest wouldn’t have made that much of a difference due to low interest rates the last few years. Perhaps Grace invested some money and got lucky with a stock or two.

CNN added a disclaimer to the article, which I don’t believe was there the first time I read it:

In addition to saving the money she earns or is given as a gift, Grace does side jobs, like tutoring, and sells textbooks and clothing so that she is able to put even more money into her savings.

It seems others may have recognized that Grace’s results are a little out of place when compared to the other featured young adults in the article. I wonder what percentage of the $300,000 is a result of gifts. I’ve sold textbooks, sold clothing, and tutored as well, and I can’t imagine those activities contributed significantly to her savings.

Regardless of how she came up with $300,000 as a teenager, it’s a great start for a life of financial freedom. If she can convince or inspire other teens to save, particularly those who live in an area not nearly as wealthy as Princeton, the details don’t matter.

What could you have done to have saved $300,000 by the age of eighteen? Or, if you had saved $300,000 before becoming an adult, how did you do it?

CNN Money

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From a retail perspective, this holiday weekend was successful. The National Retail Federation — an organization that represents retailers and is always happy to report good news in the industry — says that total spending over the four-day weekend from Thanksgiving to Sunday increased 16 percent over the same time period in 2010 when measured by total dollars spent. The total number of shoppers increased 6.6 percent and the average spent by each shopper increased from $365.34 to $398.62, or 9.1 percent.

Even “Small Business Saturday,” which I still see as a self-serving marketing campaign on behalf of American Express, has produced anecdotal evidence of success from mom-and-pop small business owners, while some customers have expressed frustration that some of American Express’s advertising did not clearly mention that registration in advance was necessary to receive the $25 credit.

I can’t overlook the unseasonably mild weather, at least in the New York metropolitan area, as a contribution to people’s willingness to leave the house and shop this year.

On Friday, I spent most of the day on an airplane, traveling from Los Angeles to Newark. I did not have the desire to wait outside a store in a line Thanksgiving night, the eve of Black Friday. Over the weekend, once home, I did not completely refrain from shopping. I purchased a gift for my girlfriend as we passed an item of clothing she liked, as well as a few discounted items of clothing for myself. For myself, I spent about $50 for items that normally would have cost about $100 without the “one-day-only” discount.

This past week leading up to Thanksgiving, while I was spending time with family in California, I gave into pressure and purchased myself a few toys. I grew up playing the original Nintendo Entertainment System, and Legend of Zelda was my favorite game. After the great reviews of the latest iteration in this series, a few in my family decided to take a look at the game. After getting a chance to play it, I decided I wanted to have a copy of my own. I find that I don’t have the time to spend playing video games, but I splurged on the game for myself, anyway — without paying full price.

I have more shopping to accomplish over the next few weeks before the holidays approach. I think giving into the retail frenzy during the days after Thanksgiving is generally a mistake. I’ve seen this happen in past years; the hottest items, even those deeply discounted during Black Friday, can often be found at even better prices later.

Before you consider me overly frugal, take note that I plan to spend quite a bit of money on myself in the near future as I continue exploring my hobbies and interests with full force as I find the time.

How much money did you spend this weekend?

CNN Money

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I’m an accidental entrepreneur.

I never quite fit in with big hierarchical systems, like public education (as a teacher) and corporations. Getting things done, particularly accomplishing various things the way I wanted to accomplish them, has always been a struggle for me in these structures. I knew from the day I started working at a corporation after leaving a small non-profit arts agency that I would never quite find my bliss or even thrive in that type of environment. I remember thinking that my first job, an administrative type of position, didn’t add any value to the world. The position only existed from a pure corporate need, not a societal need. If the corporation weren’t as big as it was, my job function would be unnecessary.

There were other options for me to consider such as owning an independent school of some type or creating an arts foundation, but those goals required two things I did not have at the time: money and experience. So I stuck it out in the corporation for more years than I would have liked, and I put energy into hobbies like writing and blogging.

My hobby became a business over time, and you can see this in its incarnation as Consumerism Commentary. While all I was doing initially was learning how to become the chief financial officer of my own life, I became the CEO of a company that was helping me attain that first goal. Being a CEO has been outside of my comfort zone, and I’ve made a number of mistakes over the last few years. The experience has been one of growth for me, and I believe I’ll eventually get the hang of running a business and accepting the fact that I am an entrepreneur.

In the past, the word “entrepreneur” has always been associated with a negative connotation for me. I viewed people who called themselves entrepreneurs as people who knew exactly what to say to manipulate others into relationships. They’re savvy, smooth, and disingenuous; they see all communication and relationship-building with a purpose in mind — building their own business and growing wealth for themselves.

Now that I’ve become what other people often call an entrepreneur, I’m dealing with this cognitive dissonance. What other choice did I have, though, to work for myself? I was out-of-place in formally-structured work environments, particularly where I wasn’t free to take whatever approach to my work I wanted, when I wanted. I may have misjudged entrepreneurship, but I still see this type of posturing in my daily experiences operating Consumerism Commentary.

To add another layer to the idea of entrepreneurship, with the employment market still very much in favor of employers, the trend in financial advisory media towards working for oneself has increased in volume — in both senses, quantity and amplitude. I do agree that by finding a way to work for yourself removes employers from the picture, giving you much more control over your financial destiny. (A portion of that control just moves from an employer to potential clients or customers, however.) A typical advice-based article attempts to convince all corporate drones to leave their unfulfilling job and start their own businesses.

Meeting RoomTaken to the extreme, a nation of business owners wouldn’t work. This advice, however, might inspire a small portion of readers to crash through their psychological barriers and find a way to add value directly. Not everyone will be a successful entrepreneur.

I think there are certain personality traits that lend themselves to being a great business owner, first from a Myers-Briggs perspective, where the best business owners likely have a profile of “ENTJ.” (After some quick research, I’m right on the money with this assessment; the ENTJ type is often called The Executive type.) For contrast, I am an “INFP.”

  • Extraversion. Dealing with business issues is much easier for someone on the Extraversion side of the first dimension. This would be someone who feels energized after dealing with people. I find certain aspects of dealing with people on a business level very draining, though I am comfortable being among large groups of people. I am slightly on the Introversion side of this dimension, but a Myers-Briggs Step II assessment reveals that this is slightly different from my core personality, which would call for a stronger Introversion score.
  • Judging. While my personality traits register on the Feeling side of this dimension, a Judging tendency helps people lend themselves towards the same working structures I’ve never been comfortable with. The same trait that encourages the hierarchical approach to business, helpful when working in school systems and large corporations, is also beneficial to running a business. I’ve also been uncomfortable judging the sincerity of people I’ve worked with in the past. Many of my mistakes I alluded to above are related to my impressions of people.
  • Self-motivation. Without a boss providing guidance and deadlines, the responsibility for performing rests only with the business owner. I find that motivation is much easier when you own the process. Like students who perform better in college when they pay their own tuition, an entrepreneur’s business is all about that one person. The ability to design a business based around something you’re passionate about or particularly skilled at will infuse motivation into many people who’ve struggled with this in other employment settings.
  • Forward-looking and big picture. Anyone who is content with repetitive tasks or would prefer to perform a job by following a step-by-step guide may not be best suited for a life of entrepreneurialism. Running your own business requires looking beyond the next step. It involves always considering the big picture and the ability to define goals. Not everyone is suited for this level of thinking.
  • Determination. From the outside, determination can look like stupidity. Being determined in the face of critics, refusing to give up regardless of what someone else might think of your abilities or your business’s potential is essential to becoming successful. Not only that, but considering businesses often fail, being serious about working for yourself requires the ability to brush off the failures and use them as an opportunity to learn about the business and about yourself.
  • A careless attitude towards money. Many entrepreneurs have succeeded because they have had the financial means to go after their dreams. If you’re already wealthy, you can stand to take some risks with your business. Someone less established financially would find it much more difficult to justify the risks. For a business like mine, there was not much financial risk at the beginning. I did, however, spend almost all of my waking and some of my sleeping hours to finding a path to success, to the dismay of those who sought to spend more time with me.

    The concentration on my own business most likely affected, though probably in a small way, my ability to focus on and care about my day job. I may have missed out on promotions because I wasn’t going beyond my job scope, I was using my own time to build a business. In the end, it was the right decision for me, but it could have easily gone another way. I would have ended up with a continued low salary and no income on the side. From a truly financial perspective, starting a business can be a careless risk. Good entrepreneurs accept this or ignore this, or are just unaware of this.

  • Obsessive-compulsive. With the biography of Steven Jobs due out soon, a lot of media attention has surrounded his attitude, particularly his obsessiveness. In the book, Jobs is described as not settling for anything less than perfection all the time, and perfection in his opinion could rarely be defined before him. He would know it when he were to see it.

    From a design perspective, this has shown to be immensely perspective. As Malcolm Gladwell said in his coverage of the biography, “The great accomplishment of Jobs’s life is how effectively he put his idiosyncrasies—his petulance, his narcissism, and his rudeness—in the service of perfection.”

  • Generalist. Today’s economy seems to appreciate specialists over generalists, but I see the opposite as being the better approach to a fulfilling life — and generalism is an approach particularly suited for entrepreneurship. Large companies have the need for specialists, people who are very good, excellent, or best in the world at doing one particular thing. This can be a very narrow skill. An entrepreneur who starts a company from the ground up, particularly with limited resources at the beginning, needs to be able to handle many different types of tasks and goals, at the same time, while holding herself to a very high standard.

    As the business grows, there can be adjustments. When struggling and to build their business, the founders of Yahoo brought in a CEO from the outside because running the company at a certain level required skills the founders couldn’t quite meet on their own. During the start-up phase, however, the entrepreneurs needed to find a way to tackle all the hard tasks. In this respect, being a jack of all trades, master of none is the best approach for an entrepreneur, provided that this particular jack is a very skilled jack in all trades.

Leaving traditional employment structures behind is not for everyone, and the advice we often see telling everyone to quit their job and start a business can be largely ignored. If you aren’t predisposed towards at least a few of these personality traits, success will be very difficult. If, however, you don’t have these traits in your system, you can train yourself to be comfortable with the actions you would be taking if these traits were embedded in your personality. Acting against your personal profile can be very stressful, though, and might lead to an unsatisfying conclusion.

What do you think about being an entrepreneur? Is it something anybody can do with a little practice or are there certain personality traits necessary for success? Would you consider starting your own business if you felt it was a better path to greater financial well-being over time?

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If there’s anything to take away from an extended period of unemployment, it’s that human capital can mean the difference between receiving a good job offer and remaining unemployed. There are many facets of human capital, and as your human capital increases, so does your marketability. There are many ways you can gain an edge, including seeking more education and gaining experience. One way to grow your human capital is to broaden your focus.

I came across a joke yesterday that described becoming an expert as learning more and more about less and less until one knows everything about nothing. There’s only room at the top in any field for very few, and in some fields, you have to be at the very top to take the most advantage of the effect on human capital. For most people, learning more and more about more and more is a safer approach to boost your human capital.

The specialism vs. generalism debate can be heated, and I often face opposition when I claim that I usually side with generalism. I believe broadening your horizons and being versatile is better in the long run than focusing intently on one skill. Even in the most recent article in this series about becoming an expert, I cited one of my favorite examples, Ron Howard. He broadened his scope beyond acting as soon as possible to gain more skills and allow himself to be open to more opportunities.

The box outside of which you should thinkWhile I am sure this director and producer has other interests, he is not known for anything outside of the film industry.

Moving beyond a narrow focus

Nick Mason is best known as the drummer for Pink Floyd, but he is also a racing car enthusiast. He was able to use his success as a member of the band whose most popular record still has holds the record for most consecutive weeks on the Billboard chart to fund his classic car collection. After his responsibilities with the band slowed down, he had the opportunity to spend time racing. With his wealth, Nick will likely never need to worry about his human capital, but the ability to explore your interests, hobbies, or notable skills can lead to a more fulfilled existence, discovery of other talents, and possible changes in career paths.

My story is a little different. From my time in elementary school, I planned on being a teacher. In high school I decided I would teach music, and I attended college with that goal and the appropriate degree in mind. I earned my degree, but I followed other interests at the same time. I built online communities long before there was a World Wide Web. Even while I was learning to teach, I managed bulletin board systems accessed with modems and eventually taught myself how to program websites once Mosaic was available to the public. This eventually led to more experience writing and the beginning of this website. I’m pretty far away from where I would have been if I had focused solely on learning how to teach and practicing musical instruments as certain professors would have preferred.

And now that writing has been my main focus, I’m looking at other activities to fill any spare time I can grab, which isn’t much. I’ve mentioned that I’ve been learning more about photography. I’ve completed several classes presented by local experts and I try to spend time every month improving my art. It may never lead anywhere professionally — this is a field where anyone can buy a digital SLR, use a wide aperture, and declare themselves an expert and fool a lot of people — but it is something I enjoy. The enjoyment may add to my human capital indirectly; if professional opportunities open up it will have added to my human capital directly.

In my last full-time job, where I worked for a financial company, my job wasn’t technical in nature. However, my experience and skills with information technology, database management, Excel, as well as my capabilities as a good communicator and teacher, opened some opportunities for me in that position that went beyond what others in my position would have been expected to do.

  • The programmer who also has experience running his own business is better suited for management opportunities.
  • The lawyer who has a passion for the arts could be comfortable working for a variety of companies.
  • A mortgage broker who writes professionally can earn income when banks stop offering loans to the public.
  • The baseball player who learns about finance can manage investments when an injury destroys his career.

In high school, extra-curricular activities are generally assets on college applications; in college, experience in your field lead to well-rounded résumés. Being able to include a few sentences or bullet points on these résumés to inform readers of worthwhile but unrelated or tangentially related endeavors could give you an unexpected advantage over other applicants. Having some skills beyond your job description could increase the probability of receiving a promotion or a transfer. If your industry disappears, having alternative skills will make a transition easier.

Looking beyond your field is about more than “having something to fall back on;” it’s increasing your worth to others by having a varied set of skills and interests that make you compelling as an individual.

How have you spent time to focus on skills or activities other than what your job calls for or what your main education track provided?

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Year-End Personal Balance Sheet, December 2010

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I’ve been tracking my personal finances for about ten years now, and I’ve been making the information public but anonymous on Consumerism Commentary since 2003. This, in addition to learning about money, was my primary purpose for creating this website and it still is a major part of what I do. I don’t pay as ... Continue reading this article…

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