A note from our editor, Elizabeth MacBride:
I consider myself very lucky to have worked with some of the world’s smartest people when it comes to money. So, to celebrate January and the beginning of tax season (hey, if you hadn’t made money, you wouldn’t owe any to the government — so it is cause for celebration!), here are five lessons on money, especially for entrepreneurs.
1. Consider time. This is particularly important in an inflationary era. When I was in the middle of my divorce, I had a choice of paying my ex-husband immediately for his share of our house or waiting a decade. I wanted to be done with things, but my friend Charley Ellis, the famous financial advisor, told me that the fixed sum of money would be worth much less in 10 years. He was right, of course. Time is your ally when it comes to compound returns, and can be your ally when it comes to whittling down debt (given low interest rates).
2. Define assets broadly; see yourself as an asset. I learned this from Wealthfront founder Andy Rachleff. When I was working at Wealthfront, we started the list of career-launching companies. One of the biggest assets most people have is their career. Maintain it; invest in it, as you would a house or an investment account. Once I recognized that my talent for writing was one of my biggest assets, it became easier for me to spend money on things like gym memberships and writing retreats. (We’ll talk about how women (and others) can invest in themselves on our panel with Stacey Vanek Smith and Dina Sherif next week.)
3. Give until it hurts, and philanthropy is a personal journey. This I learned from Abby Disney, philanthropist and filmmaker. It’s pretty well known that having a lot of money makes it harder for you to care – to feel empathy. The antidote is to remember what it feels like to hurt. I think giving is also an investment in relationships with people who are different than you are, which are often the most interesting and fun relationships.
4. When it comes to investing, just start. Ric Edelman, the financial advisor for the middle class, rightly recognized that fear is a dominant emotion for the middle class. The fear of making a mistake or trusting someone you oughtn’t keeps people, especially women, on the sidelines. See lesson #1 above. When it comes to money, I most trust regulated companies where I also have a personal relationship with people.
5. You have to get more conscious as you get wealthier, not less. A while ago I was thinking about the future of capitalism, and feeling troubled that it creates so much inequity. (I am starting to research a new book). The great pastor AR Bernard told me money takes on the character of those who possess it. Jeff Bezos’s wealth is power-hungry; Mike Bloomberg’s data-driven mindset is reshaping causes he cares about, like gun control. Money gives you a different set of responsibilities, not lesser ones. Unless you want to be a miser, spoil your family rotten or become a sociopathic spender, you have to figure out how to give your money away responsibly. The comforting, controlling habits and values that enabled you to build wealth may not help you be wise and generous.
Time to change, again.
Excitement is building for Times of E’s first event, Challenges Met, Opportunities Ahead. If you register today or tomorrow, there are still a few FoundersCard free memberships to be given away. You’ll also receive a free copy, while supplies last, of Jim McKelvey’s book The Innovation Stack. Join us to hear Jim, Stacey Vanek Smith, Seth Levine and more than 20 other great speakers next week. And, we’re unveiling the Top List of University Entrepreneurship Competitions!
This story and others on Times of E are made possible by a sponsorship from the Ewing Marion Kauffman Foundation. The Ewing Marion Kauffman Foundation is a private, nonpartisan foundation that provides access to opportunities that help people achieve financial stability, upward mobility, and economic prosperity – regardless of race, gender, or geography. The Kansas City, Mo.-based foundation uses its grantmaking, research, programs, and initiatives to support the start and growth of new businesses, a more prepared workforce, and stronger communities. For more information, visit www.kauffman.org and connect with www.twitter.com/kauffmanfdn and www.facebook.com/kauffmanfdn.