While I rarely advise buying a certain stock or making a money move just because an expert did, that doesn't mean there's nothing you can learn from the best minds in finance. Quite the contrary.
With that in mind, here are seven of my favorite personal finance quotes of all time, how you can apply them to your own financial lifestyle, and the principles contained in them that all Americans should live by.
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1. "Don't look for the needle in the haystack. Just buy the haystack."
-- Jack Bogle
Bogle, the founder of Vanguard, is considered the pioneer of the index fund. An index fund is similar to a mutual fund, except instead of employing investment managers to make decisions, it simply buys all of the stocks in a certain index. For example, an S&P 500 index fund would own all 500 stocks in that index, and in proportional weights.
The idea is that by investing in an index fund, you're guaranteed to match the index's performance over time, which in most cases has been pretty good. Historically, the S&P 500 has returned nearly 10% per year on average, just to name one example. In contrast, most actively managed mutual funds don't perform as well as their benchmark index.
To be clear, if you have the time, knowledge, and desire to invest in individual stocks, I say go for it. However, I agree with Bogle (and with Warren Buffett, for that matter) that in most cases where those three components are not present, passive index fund investing is the best choice most people can make.
2. "Too many people spend money they haven't earned, to buy things they don't want, to impress people that they don't like."
-- Will Rogers
This is one of my favorite money quotes, simply because it sounds like common sense, but most people (myself included) have been guilty of doing this. Whether it's running up a lot of credit card debt to keep up with the latest fashion trends or borrowing way too much money to buy a house or a car that you really shouldn't burden yourself with, it's important to keep these words in mind before you stretch your budget to accommodate a big impulsive purchase.
3. "The four most expensive words in the English language are 'This time it's different.'"
-- Sir John Templeton
When a certain asset class is doing particularly well, these four words always make me very cautious. When people questioned the dot-com boom in the late 1990s, a lot of "experts" said "this time it's different." When skeptics compared the housing bubble in the mid-2000s to the dot-com bubble, experts once again said "this time it's different." When bitcoin neared $20,000 in late 2017 and began to show signs of a bubble... well, you get the idea.
4. "It's not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for."
-- Robert Kiyosaki
One of the best lessons I ever learned from one of my college professors is that if you make $50,000 per year and spend $45,000, you're rich. On the other hand, if you make $250,000 per year and spend $300,000, you're poor.
The point is that it doesn't really matter how much money you make if your spending is out of control.
Going a step further, it doesn't matter as much how much you save as what you do with the money you save. Consider that $1,000 saved in 1965 and kept in cash would have lost more than 87% of its purchasing power by the start of 2018, thanks to inflation. Meanwhile, the same amount invested in the S&P 500 would have grown to more than $155,000 since that time.
5. "I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful."
-- Warren Buffett
I've written entire articles about Warren Buffett's investing wisdom, as the Oracle of Omaha has shared an abundance of valuable lessons. However, this is perhaps the nugget of Buffett wisdom that I use the most in my own investing strategy.
Simply put, Buffett is saying that when everyone is making money in stocks and it seems prices keep going up and up, that's the time to be cautious. Conversely, when the experts on TV are panicking and everyone can't wait to sell their stocks to avoid further losses, that's the time to buy.
And to be clear, this quote doesn't just apply when the entire market is greedy or fearful. As a personal example, one data center real estate investment trust posted some troubling results, so investors became fearful of all data center REITs, driving down prices. In the midst of the selling, I decided to pick up some more shares of Digital Realty Trust (NYSE: DLR), one of my favorite stocks. Since I bought them earlier this year, the market seems to have acknowledged the fears were overblown, and shares are up by more than 20% since then.
6. "Wealth consists not in having great possessions, but in having few wants."
This goes hand in hand with the Kiyosaki quote I mentioned earlier. It's not about how much you make -- rather, it's about living comfortably within your means. If you're content with what you have, you're wealthy. On the other hand, if you want a bunch of "stuff" you can't afford, you're poor. Regardless of income.
Ben Franklin was notoriously debt-averse. While most Americans don't have to worry about eating dinner, the point of this quote is that it's better to sacrifice some of our wants as opposed to taking on massive amounts of debt to finance them.
There are a few common themes among these quotes. Live within your means and invest simply and with common sense are two of the major themes here and are perhaps the most valuable money lessons you can learn.
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