In terms of personal finance, there is no magic wand to wave to make money appear. What we are fortunate to have, however, is sound financial advice from brilliant men who have come before us. I have found five quotes about personal finance that can benefit anyone who is willing to put their advice into practice. I have put these quotes in order from the simplest to the most complex, which is to say, from a subject as (seemingly) simple as budgeting to one as (seemingly) complicated as investing. By ordering these quotes in such a way, I realized that I had put them in chronological order as well, from the oldest to the most recent. This coincidence reveals that even though things may get more complex over time, good financial advice never really loses its “value.”
1. “Beware of little expenses; a small leak will sink a great ship.”
~ Benjamin Franklin
We will begin our financial quote discussion with some insightful advice from one of America’s founding fathers. Benjamin Franklin said, “Beware of little expenses; a small leak will sink a great ship.” This quote is representative of the most foundational part of getting one's finances in order: budgeting. That is to say, you need to know what money you have coming in and what money you have going out, in order to know if you are “well off,” or well, off. The goal of budgeting is to live below one's means. Or another way to put it: you need to spend less than you make. Once you begin to understand that by not spending money on small irrelevant items and/or services, it will be as if your income has risen dramatically, and (in keeping with Franklin’s “ship” metaphor) you can finally keep your head above water, so to speak. Thus, Franklin’s sound advice forms the foundation of one’s path to prosperity. It is emblematic of budgeting, and about understanding where your money is going. It seems simple enough: plug the holes in your finances you will stay “afloat.”
2. “What is a cynic? A man who knows the price of everything and the value of nothing.” ~ Oscar Wilde
Moving on from Franklin’s simple wisdom about budgeting, we come to the Irish poet and playwright, Oscar Wilde, who has given us the next step in our sound financial journey. It is easy to say, do not spend your money frivolously and you will have more of it, but how do you really put that advice into practice. Well, simply put, it is all about having a certain mindset. That is, it is about being frugal. Frugality is about being very economical or sparing in how one spends his or her money. Frugality, however, should not be confused with being cheap. The latter is a despicable, selfish quality, where one refuses to actually participate in the economy. Money must be spent for the economy to work effectively, and those who simply refuse to understand this fact and hoard their money are cheap, not frugal. And cheapness is synonymous with greed, which is another disgusting financial habit (despite what Gordon Gecko famously proclaims in the movie Wall Street).
Frugality, on the other hand, is an admirable trait. It is the understanding that some things are just not worth the price. In other words, frugality is conscientious spending. It is not wasting money on things that you know serve no real value for you, while allowing you to put more of your hard earned money towards the things that really give you fulfillment and joy. For example, “frugal” could be seen as not going out to dinner every week for a year, in order to have that money saved up to go on a trip instead. Dinner is certainly pleasurable, but traveling is an experience that can really build your character and give you lifelong memories.
So, looking at Wilde’s quote, one can see the clear distinction being made between price and value. As such, Wilde’s words are a perfect encapsulation of what it means to be frugal; it is all about understanding “cost.” Not only how much the item costs, but what it costs you to get it. To determine cost, you need to ask yourself the multilayered question: is this really “worth” it? Is it worth my money? Is it worth my labor? Is it worth my time? Approaching expenditures in such a way, with a frugal discerning eye, one can see that this is how budgeting is put into practice.
3.“Money is, in some respects, like fire. It is a very excellent servant, but a terrible master.” ~ P.T. Barnum
The famous “Showman,” P.T. Barnum gives us an excellent finance quote to put things in perspective -- here in the middle of our discussion -- to bridge the gap from budgeting to investing. Barnum says, money is a terrible master but an excellent servant. This quote shows us the dual nature of money. It can be a great tool for those who are good with it; but for those who are not, it can make them the tool, and subsequently control every aspect of their life. In other words, if one has poor financial habits, then he or she will be poor as a result, and will always be trapped, exchanging time and labor for money. If you are good with money, however, then the entire world opens up for you, and you are given a freedom that is simply not afforded to those who lack. The question then remains: what side of this economic tug-of-war do you want to be on: the side with financial strongmen, or the side that continues to be dragged through life?
4. “We simply attempt to be fearful when others are greedy and to be greedy when others are fearful.”
~ Warren Buffett
Known as one of the greatest investors of all time, Warren Buffett, has given us so many pearls of financial wisdom, it is hard to pick just one quote for our discussion. It was my intention to pick one that would explain investing in the simplest terms possible. Buffett’s famous quote about being fearful when others are greedy and greedy when others are fearful was first said in a 1986 shareholder letter, and it perfectly encapsulates what it is about Buffett’s psychology that has made him such a great investor. By not following the crowd, he has been able to differentiate himself in the investing world, and in so doing he has provided us with an excellent example of the mindset that is needed to be a good investor. Similar to Oscar Wilde’s quote (above), Buffett has also been quoted discussing the difference between price and value, saying, “Price is what you pay. Value is what you get.” By combining Buffett’s two quotes together and applying them to one’s investment strategy, one will remember not to get caught up in what other investors are doing, and instead be confident in his or her own conclusions regarding the value of a company and act accordingly. In other words, just because the market is moving up does not mean that you should buy in, and just because the market is going down does not mean that you should sell out. In fact, oftentimes, it is quite the opposite. When the market is going up (i.e. when others are greedy) it is most likely not a good time to buy in, because companies become overpriced fast. Thus, their value and price are out of whack. And likewise, when the market is going down (i.e. when others are getting fearful), it is likely a great time to buy some stocks, as their price and value are more likely aligned, or better yet, the latter exceeds the former. Buffett’s advice here is great, because it is so simple. The goal of investing is to buy low and sell high, and oftentimes the psychology of the market flies in the face of that. People will overpay for companies when they get caught up in the market euphoria, and panic sell when things start crashing. These are obviously quick ways to lose your money. In other words, learn to separate your emotions from your understanding, and in so doing, investing will become much easier and more economically viable.
5. “Don’t look for the needle in the haystack. Just buy the haystack!” ~ Jack Bogle
Upon his death in January 2019, Warren Buffett said that, “Jack [Bogle] did more for American investors as a whole than any other individual I’ve known.” This is quite a statement of praise. What is it about Jack Bogle that made him so influential to Buffett and others? Bogle made investing something that anyone could do. Thanks to Bogle, one need not be a financial advisor to make money consistently in the market. Bogle created a stock market tool, that is ubiquitous today: the index fund. An index fund is a group of stocks that are put together in order to mirror the movements of the market as a whole. In other words, if the S&P 500 goes up five percent, and you own an S&P 500 index fund, then your index fund should also go up five percent over the same period of time. In this way, one needs not be an expert stock picker in order to make money in the market; one needs only to buy shares of an index fund.
Anyone who understands how the market works, knows that despite short term moves to the upside or downside, over a longer period of time the market tends to only move upward. One could think of this like bouncing a tennis ball up and down as you are walking up a flight of stairs. The ball’s movement represents the market’s moves over short periods of time like days, weeks, or months, but you moving up the flight of stairs, shows how the market (as a whole) moves over longer periods of time like years and decades. In other words, over longer periods of time the market will go up, and if you are invested in an index fund that mirrors the total market, then over time your investment will go up as well. Thus, don’t look for the needle in the haystack (i.e. don’t pick an individual stock and hope it goes up), instead just buy the whole haystack (i.e. buy an index fund) that mirrors the total market, and like the total market your value will increase exponentially thanks to the power of compound interest.
From budgeting to investing, one can see how the brilliant advice laid out before us has given us a very clear blueprint to follow if we want to take control of our finances. Whether it is something as (seemingly) simple as budgeting, or something as (seemingly) complicated as investing, one can see that how we think about money is as much a part of the outcome as anything else. That is to say, in order to be successful with money, one needs to have a mindset that understands the difference between price and value. In other words, what is that you truly value? And what price are you willing to pay in order to get it?
NOTES “Benjamin Franklin Quotes About Money.” AZ Quotes. www.azquotes.com Amanda Green. “25 of Oscar Wilde’s Wittiest Quotes.” (Oct 16, 2018) Mental Floss. www.mentalfloss.com. “P.T. Barnum Quotes.” Goodreads.com. Theron Mohamed. “Warren Buffett Compared Fear and Greed to ‘Super-Contagious Diseases’ and ‘Epidemics.’ Markets Insider (Feb 28, 2020) markets.businessinsider.com Ibid. John Bogle. John Bogle on Investing: The First 50 years. (2015). Wiley Investment Classics. p. 41. John Melloy. “Warren Buffett Says of Jack Bogle Did More for the Individual Investor Than Anyone He’s Ever Known.” (Jan 16, 2019).