by Dave Barry
DAVE BARRY’S
MONEY $ECRETS
LIKE:
Why Is There a Giant Eyeball on the Dollar?
Crown Publishers / New York
Contents
Title Page
Dedication
Acknowledgments
Introduction: Why You Need This Book
1.
How Money Works
2.
How the U.S. Economy Works
3.
Managing Your Personal Finances
4.
How the Corporate World Works
5.
How to Get a Job
6.
Ethical Guidelines for Corporate CEOs
7.
Providing for Medical Care
8.
How to Argue with Your Spouse About Money
9.
Teaching Your Children About Money
10.
Providing for Your Children’s College Educations
11.
Starting Your Own Business
12.
How to Get Rich in the Stock Market
13.
How to Read a Corporate Annual Report
14.
How to Manage a Hedge Fund
15.
How to Get Rich in Real Estate
16.
How to Negotiate a “Win-Win” Outcome
17.
Income Taxes: Building Blocks of Our Great Nation and Lifeblood of Our Sacred Democratic Way of Life
18.
Get Rich the Donald Trump Way!
19.
A Guide to Tipping
20.
Saving Money on Travel
21.
Planning for Your Retirement
22.
Planning Your Estate
Conclusion: You Can Do It!
Endnotes
Photo Credits
Other Books by Dave Berry
Copyright
This book is dedicated to all the people of the world, on the theory that they will respond by thinking: “Wow! A book dedicated to me. I should buy a copy.”
ACKNOWLEDGMENTS
I want to thank Alan Greenspan, Milton Friedman, and the entire faculty of Harvard Business School for not attempting in any way to interfere with the writing of this book. I also want to thank Donald Trump and Suze Orman just for being who they are.
INTRODUCTION
WHY YOU NEED THIS BOOK
PERHAPS YOU’RE A YOUNG PERSON just getting started in life. Or perhaps you’re an older person thinking about retiring. Or perhaps you’re a hostile space alien planning to wipe out humanity by putting tiny radioactive scorpions in the latte machines at Starbucks.
Well, no matter who you are, you need this book.
“Why?” you ask.
Because chances are that when it comes to your personal finances, you are, with all due respect, a complete moron. I do not mean that in a derogatory way. I mean it simply in the sense that, when it comes to handling money, you are a stupid idiot.
“But,” you say, “what if I follow the accepted principles of sound money management?”
Great. Except that your so-called “accepted principles of sound money management” are worthless.
“But,” you say, “what if OUCH!”
I apologize for slapping your face, but if you keep interrupting with your stupid questions, we’re never going to get through this introduction.
As I was saying, your so-called “accepted principles of sound money management” are worthless. To help you understand why, let’s consider the financial situations of two best friends, named “Bob” and “John.”
In some ways, “Bob” and “John” are very much alike: They’re the same age, make the same salary, and have the same number of dependents. They live in identical houses next door to each other. They both have quotation marks around their names.
But that is where the similarities end. “Bob” is very involved in managing his money: He reads every money-related article he can get his hands on, follows all the money-advice experts on radio and TV, and regularly attends investment seminars.
“John” does none of these things. He has never read a word about money management. He has no investment plan. “John” can’t even balance his checking account!
And yet, oddly enough, “Bob” is the one in financial trouble. He lives paycheck to paycheck. He can’t afford to send his kids to college. He drives an old clunker car and is forced to use cheap, generic toilet tissue that makes him feel as though he is performing intimate hygiene with roofing materials.
“John,” meanwhile, drives a new Mercedes, sends his kids to Ivy League universities, and dines at fine restaurants serving shrimp the size of Mike Tyson’s forearm.
How is this possible? What is “John”’s secret? Simple: He is stealing from “Bob.” He dug a tunnel under “Bob”’s house and uses it to swipe “Bob”’s cash, food, electricity, cable TV, and small appliances. Sometimes, when “Bob” is at an investment seminar, “John” has sex with “Bob”’s wife, “Alice.”
What is the moral of this story? Simple: When it comes to money, you can’t even trust your best friend. You can’t trust anybody. Everywhere you turn, people are trying to take advantage of you.
I’ll give you an embarrassing example from my own personal experience. Like many computer users, I receive a tremendous amount of “spam” e-mail. Most of it is highly questionable, consisting of offers to sell me discount Viagra, enlarge my penis, refinance my mortgage, eliminate my debts, get me a “great deal” on life insurance, set me up in some “home business” that will allegedly give me a huge income for just a few hours’ work, enroll me in a pyramid scheme or some other “foolproof” system to “get rich quick” with almost no effort, and on and on and on. It’s ridiculous! I mean, why would I need to enlarge MY penis? The very idea is absurd! Ask anyone!
But some of the “get rich quick” proposals look pretty good. I got one in particular from a businessman in Nigeria, who wrote me a very businesslike e-mail stating that, in a nutshell, he wanted to send me $47 million.
I didn’t totally follow his explanation—there were a lot of details—but the gist was that there was some kind of business screwup over there in Nigeria (you know how it is in business) and a bunch of businesspeople decided that, for business reasons, they needed to send somebody $47 million, and somehow my name came up.
It seemed almost “too good to be true.” But as I say, the e-mail was very businesslike, so I replied that, sure, I would be willing to take the $47 million.
You probably know what happened next. After a few e-mail exchanges, the businessman informed me that some “minor technical problems” had cropped up—something about “Nigerian government red tape”—and that in order to “smooth things out” and send the money to me, he needed me to send him an “advance fee” of $5,000.
I was a little suspicious, and my friends warned me to be cautious, but $5,000 seemed like a small enough investment for a return of $47 million. So I sent a check.
No sooner had it cleared than my businessman “friend” sent me another e-mail, apologizing and saying that there were more problems, and he needed another $5,000.
At this point my friends were all telling me that I had become the victim of a classic “scam,” and that I was crazy to send any more money. But I was so blinded by greed, so hooked on the idea of getting my hands on this huge fortune, that I went ahead and wrote a second $5,000 check.
Two days later, I received $47 million in cash. It came via UPS in 578 large cardboard boxes. I have cash all over my house. If I want a helicopter, I just grab a box and go buy one. My money worries are over forever
! And why? Because I did not trust my friends. They’re not even my friends anymore, now that I’m extremely rich. I hang out with new friends that I met at the helicopter store.
Of course I cannot guarantee that you will achieve the same level of financial success as I did. But I can promise you that, if you carefully follow the proven, time-tested money-management principles* 1 detailed in this book, you will be the first person ever to do so. And surely that is worth something.
So let’s get started! The first order of business is for you to take the following:
Quiz to Determine Your Current Financial Health
What kind of financial shape are you in right now? This scientific quiz will show you. Be honest in your answers: If you lie, you’ll only be lying to yourself! The place to lie is on your federal tax return.
What is your annual income?
1.
More than $50,000.
2.
Less than $50,000.
3.
However much I get when I return these empties.
Not counting your mortgage, how much money do you currently owe?
1.
Less than $10,000.
2.
More than $10,000.
3.
Men are threatening to cut off my thumbs.
How would you describe your portfolio?
1.
Conservative, mainly bonds and blue-chip equities.
2.
Aggressive, mainly options and speculative stocks.
3.
My what?
When analyzing an investment, what do you consider to be the most important factor?
1.
The amount of return.
2.
The degree of risk.
3.
The name of the jockey.
How do you plan to finance your retirement?
1.
Savings.
2.
Social Security.
3.
Sale of kidneys.
Calculating Your Score
• If your answers are mostly ones and twos, you’re in pretty good financial health.
• If your answers are mostly twos and threes, you definitely need to improve your money-management skills.
• If your answers are all threes, be advised that we’re having a minor technical problem calculating your score because of Nigerian red tape. To smooth things out, we need you to send us an “advance fee” of $5,000, which you will get back many times over.
1
HOW MONEY WORKS
Or: Everybody Clap for Tinker Bell!
WHY IS MONEY VALUABLE? Why are people willing to work so hard for it, lie for it, cheat for it, go to prison for it, fight for it, kill for it, give up their children for it . . . even marry Donald Trump for it?
I mean, look at the dollar bill. What is it, really? It’s a piece of paper! What’s more, it’s a piece of paper that appears to have been designed by a disturbed individual. On one side, you have a portrait of George Washington, who, granted, was the Father of Our Country and a great leader and everything, but who looks, in this particular picture . . .
. . . like a man having his prostate examined by Roto-Rooter. And then on the other side of the dollar you have:
What is that about? Why is there a picture of a pyramid, instead of a structure traditionally associated with the fundamental values of the United States of America, such as a Wal-Mart? And why is the pyramid being hovered over by an eyeball the size of a UPS truck?
Whatever the explanation, the design of the dollar would not seem to inspire confidence in its value. And yet if you drop a few dollars from an overpass onto a busy freeway at rush hour, people will run into traffic and literally risk their lives in an effort to grab them. Try it!
What does this tell us? It tells us that people are stupid. But it also tells us that money is more than just pieces of paper. But what makes it valuable? To answer that question, we need to consider:
The History of Money
In prehistoric times, there was no such thing as money. When people needed to buy something, they had to charge it. And then when the bills came, nobody could understand them, because there was also no such thing as reading. This led to a lot of misunderstandings and hitting with rocks.
The first form of money that we are aware of by looking it up on the Internet was animals. From the start there were problems with this type of money, particularly the smaller denominations, such as squirrels, which were always biting the payee and scampering away.
By 9000 B.C., the most commonly accepted form of animal money was cattle. When you bought something, you would give the other person a cow, and the other person would give your change in calves. This was better than squirrels, but still not an efficient system. The cash registers were disgusting.
By 3000 B.C., the Mesopotamians* 2 had invented two concepts that revolutionized economic activity: (1) writing and (2) banking. This meant that, for the first time, it was possible for a Mesopotamian to walk into a bank and hand the teller a stone tablet stating:
GIVE ME ALL YOUR COWS AND NOBODY GETS HURT
These robbers were captured quickly, because they had to make their getaways at very slow speeds. Still, it was clear that a better medium of exchange was needed.
The ancient Chinese tried to solve the problem by using seashells as money. The advantage of this system was that seashells were small, durable, clean, and easy to carry. The drawback was that they were, in a word, seashells. This meant that anybody with access to the sea could get them. By the time the ancient Chinese had figured this out, much of their country was the legal property of gulls.
And so the quest continued for a better form of money. Various cultures experimented with a number of commodities, including tea, grains, leather, tobacco, and Pokémon cards. Then, finally, humanity hit upon a medium of exchange that had no disadvantages—a medium that was durable, portable, beautiful, and universally recognized to have lasting value. That medium, of course, was beer.
No, seriously, it was precious metals, especially gold and silver, which—in addition to being rare and beautiful—could be easily shaped into little disks that fit into vending machines.
Before long, many cultures were using some form of gold for money. It came in a wide variety of shapes and designs, as we see in these photographs of ancient coins unearthed by archeologists:
SOURCE: The British Museum of Really Old Things
Photography Credits
The problem was that gold is too heavy to be constantly lugged around. So, to make it easier for everybody, governments began to issue pieces of paper to represent gold. The deal was, whenever you wanted, you could redeem the paper for gold. The government was just holding your gold for you. But it was YOUR gold! You could get it anytime! That was the sacred promise that the government made to the people. That’s why the people trusted paper money. And that’s why, to this very day, if you—an ordinary citizen—go to Fort Knox and ask to exchange your U.S. dollars for gold, you will be used as a human chew toy by large federal dogs.
Because the government changed the deal. We don’t have the gold standard anymore. Nobody does. Over the years, all the governments in the world, having discovered that gold is, like, rare, decided that it would be more convenient to back their money with something that is easier to come by, namely: nothing. So even though the U.S. government still allegedly holds tons of gold in “reserve,” you can no longer exchange your dollars for it. You can’t even see it, because visitors are not allowed. For all you know, Fort Knox is filled with Cheez Whiz.
Which brings us back to the original question: If our money really is just pieces of paper, backed by nothing, why is it valuable? The answer is: Because we all believe it’s valuable.
Really, that’s pretty much it. Remember the part in Peter Pan where we clap to prove that we believe in fairies, and we save Tinker Bell? That’s our monetary system! It’s the Tinker Bell System! We see everybody
else running around after these pieces of paper, and we figure, Hey, these pieces of paper must be valuable. That’s why if you exchanged your house for, say, a pile of acorns, everybody would think you’re insane; whereas if you exchange your house for a pile of dollars, everybody thinks you’re rational, because you get . . . pieces of paper! The special kind, with the big hovering eyeball!
And you laughed at the ancient Chinese, with the seashells.
So what does all this mean? Does it mean that our monetary system is a giant house of cards that would collapse like, well, a giant house of cards if the public stopped believing in the pieces of paper? Could all of our “wealth”—our savings, our investments, our pension plans, etc.—suddenly become worthless, meaning that the only truly “wealthy” people would be the survivalist wing nuts who trade all their money for guns and beef jerky?