FQ: Financial Intelligence

FQ: Financial Intelligence

2018 © daasKnowledge LLC. All Rights Reserved.

ISBN: 978-1-7332878-1-4

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. From a Declaration of Principles jointly adopted by a committee of the American Bar Association and a committee of publishers and associations.

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Contents

Acknowledgments, vii

Preface, ix

Act I—You, Yourself, and You

Introduction 3

Module 1

The Psychology of Money 9

Module 2

The Thick Green Line 27

Module 3

A Question of Balance 47

Module 4

The Spendthrift Robs His Heirs… 65

Module 5

Money Changes Everything 79

Module 6

A Fresh Tomorrow 97

Act II—Invest with Your Eyes and Other Pearls

Module 7

Holy Macroeconomics! 111

Module 8

Lions & Tigers & Bulls & Bears, Oh My! 141

Module 9

Charting a Course 167

Module 10

Bond, James Bond 193

Module 11

Looking for Love… 213

Module 12

Portfolios and Ratios 237

Act III—Money Stuff You Simply Must Know

Module 13

(Can’t Get No) Protection 265

Module 14

Buying Sh*t 283

Module 15

Gypsies, Tramps, and Thieves 307

Module 16

Entrepreneurship 333

Module 17

Deader ‘an Disco 351

Module 18

The Island of Misfit Toys 369

Module 19

The 19th Hole 389

References, 397

Images, 401

Acknowledgments

The genesis of this tome dates back a few years. I detected a lack of financial savvy amongst younger folk. Yes, I know it sounds like I’m profiling. Because I am! Granted, I didn’t perform exhaustive research. I studied and asked probative questions of any youngin’ who would tolerate me. The results were eye-opening and confirmed my suspicions. Turns out I wasn’t the only one who recognized this yawning knowledge gap. A few state legislatures witnessed the same trend. The results have been mixed.

So, I came up with an idea for a treatise on financial literacy. The first thing I do when planning a new project is to perform a search of what already exists. I uncovered numerous videos and long-form courses. I also found websites dedicated to teaching finance and a large selection of books. Everything I found fit one of these four categories: too technical, too specific, too superficial, or too self-serving.

Alas, life intruded. I put the project aside whilst I turned my attention to other more pressing matters. My primary focus is my entrepreneurial coaching business. I have amassed an international clientele that keeps me busy. In addition, I trade the equity markets which, while not a full-time endeavor, requires more than a few hours per week to stay in sync. Add to this my right brain exercise—screenwriting—and you can understand how my bandwidth would be tight. And that’s not even mentioning I am a husband and father of three boys. Thus, the great financial literacy project would have to wait.

Over the last 18 months I, by chance, discovered a new niche in my practice—location independent businesses. They’re sometimes called digital nomads. They are super smart, motivated and a joy to coach. I work with quite a few of them and recently traveled to southeast Asia for one of their conferences. There, I discovered I was focusing on the wrong market. So, I rededicated myself, and the result is this work.

In it, you will travel through every stage from birth to death, exploring the myriad touch points affecting your financial life. My goals are multifold—to create not so much an instruction manual but a compendium of best practices for managing your personal finances. I share my own experiences from almost six decades on planet Earth hoping my trials and tribulations provide a deeper understanding. And maybe a good laugh. Sort of like a money memoir if such a creature exists. My number one goal, though, is to make it all fun, enlightening and most of all useful.

This entire project began as an online course and should be available by the time you read this at www.daasFQ.com. As such, I tested the material with numerous volunteers. I wish to thank Anne, Helen, Jase, Michael, Markus, Rich, A.J., Olivia, Pomy, Ryan and Moe for taking time out of their busy lives to be my guinea pigs. You gave me valuable insight and made the entire enterprise that much better.

I also want to thank my Mastermind group for supporting me and holding me accountable. Special thanks to Jason C. who convinced me that publishing this work as a book would not be eating my seed corn and that folks would sign up for the course even after reading the book. In fact, they might because of it. Here’s hoping he’s right. Finally, a big thank you to Judith, my copyeditor, who taught me the difference between a hyphen and an em-dash and that Chicago Style is not just a pizza. Still not sure how I made it this late into life without those tidbits.

In summary, I believe you will find the reading thought-provoking, informative but not dry, amusing, colorful and best of all invaluable. It will help you make sense of one of the most vital and ubiquitous aspects of your life—money.

Preface

Larry-O (I Need You So)

The film Clash of the Titans was released in 1981 starring a young Harry Hamlin as the mythical protagonist Perseus, the son of Zeus. The film was a box office success grossing over $41 million. It’s worth a watch if for no other reason than the special effects are laughable (by today’s standards). And Maggie Smith. It also stars Sir Laurence Olivier who many consider the greatest English language thespian of the 20th century. He plays Zeus and like Marlon Brando in the 1977 edition of Superman, has limited screen time. And also, like Brando, he received an outsized paycheck. During the press junket, a reporter asked how he felt about being paid a small fortune for such a tiny role. His response was, as the Brits might say, brilliant. I’m paraphrasing. Don’t be silly, dear boy. I wasn’t paid for five minutes on the screen. I was paid for fifty years in the theatre.

Who Am I?

The year 1981 is also when I graduated college. I was born in Brooklyn in 1959 and have lived my entire life in and around New York City. My sister Helen is three years older. That’s us at the Roman Colosseum in 1971.

My first encounter with money was when I was about five. My mom gave me a nickel to buy candy. Yes, you could buy candy with a nickel in the 1960’s. I haven’t stopped handling money (or candy) since. I was raised in suburban New Jersey. I had a very normal childhood and have the therapy bills to prove it. That’s a bad joke. Get used to them.

After college, I worked for Honeywell, a large multinational company. I was hired as an engineer—I have a BS in Electrical Engineering from Bucknell University—and I hated it. Not Bucknell. The job. But it paid well. Not bad for a 22-year-old living at home with almost no overhead. Almost immediately, I got into financial trouble. Nothing awful, just tapped out a credit card… or two. Soon, I recognized I had become my own worst enemy and made a course correction. At 25, I talked my way into a job at a company with the unfortunate name of Securities Industry Automation Company (SIAC) not to be confused with SAIC (Science Applications International Corporation) another tech company with a regrettable moniker.

SIAC began in 1972 as a jointly-owned subsidiary of the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX). SIAC had one purpose, but it was a huge one—build and maintain the computer systems used on the trading floors of both exchanges. All at once, I was thrown into the frying pan. Within two months of being hired, I became solely responsible for a system called QuickQuote. QuickQuote ran on a series of Intel 80286-based microcomputers running the iRMX86 operating system. I know, gobbledygook.

The only important part to know is it was the system used by the floor specialists at the AMEX to trade XMI (index of the Standard & Poor’s 500) options. And, rumor had it, those options were the biggest money makers on the exchange. Some said the only money maker. The entire system entrusted to a 25-year-old with modest (almost non-existent) experience. Sounds like today, don’t you think?

By 1991, I founded my first business, Abacus Solutions. We sold Apple Macintosh computers. In February 1993, I quit SIAC to make Abacus my full-time gig. And I never looked back, founding and running a series of entrepreneurial businesses; some great successes, some just okay, and one ignominious failure. Today, I use the wisdom I have accumulated as an entrepreneur to coach and advise business owners in a variety of vertical markets. I love it and believe with every fiber of my being it is what I was put on Earth to do.

Okay, So What?

I am not an MBA. Nor am I a CPA. I did not go to Wharton (although three of my uncles did) nor did I ever work at Goldman Sachs. I am not a CFP (Certified Financial Planner) nor have I toiled for an enterprise that manages people’s money. Other than Honeywell and SIAC (and ten horrifying weeks at Bear, Stearns), I have spent my entire adult life as an entrepreneur. In other words, working without a net.

Two of my companies, however, were in tangential financial fields—leasing and factoring. Like the refrain from the Talking Heads song Burning Down the House, I’m-an-or-din-a-ry-guy. A guy, as it turns out, who knows a sh*t-ton about money. I do not want to paint a picture of infallibility or give off the vibe I have all the answers. I do not. No secret sauce other than a lifetime of managing the finances for myself (and a few others) and my companies.

Just like Larry-O-livier, I possess decades of experience; tracking, learning and most of all, experiencing money. As a business owner. As a husband. As a son and sibling. And as a human being. Just like you. I am both honored and humbled you would entrust something as important as finance to someone like me. I promise not to let you down.

One More Thing

More than one person who has read this material has stated that the vocabulary is, shall we say, advanced. I might beg to disagree. At least one even suggested I bring it down a notch or two. I have not and I most unapologetically will not. You may also detect some grammatical quirks. Again, guilty as charged (with apologies to Judith).

My wife will say I’m being recalcitrant—a pompous, pedantic reprobate of the lowest order. And she may be right since she knows me better than anyone else on Mother Earth. But to dumb it down would simply not be me. Utterly disingenuous and that I cannot abide. So, I suggest you have a dictionary close by. I may be a persnickety one but at least I give fair warning.

Introduction

The Big Why

As a child of the sixties and seventies growing up in suburban USA, I played a lot of sports. As a result, I had a lot of coaches. Some good, some bad, some downright pathetic. As the father of three boys, I have coached many a team—40 by my estimation in soccer, basketball, baseball, football, and lacrosse. Sometimes two in the same season.

Back in the day, if a coach asked you to run through a brick wall, you ran through a brick wall. Somewhere along the line that changed. Or perhaps nothing changed, except for me. Regardless, today you could never get away with such a request. First, you would be brought up on charges of child endangerment. I learned this firsthand when I insisted my fourth-grade recreational basketball team run suicides* because they were misbehaving.

It seemed reasonable and was what my coaches had done. Even the best of them. The kids, however, complained to their parents, and I received a flood of emails calling me everything from a bad parent to the second coming of Pol Pot. So, I authored a mea culpa, finished out the season with my tail between my legs, and wrote it all off to experience.

Next, they would ask, Why should I run through a brick wall, Coach Daas? Because I said so simply isn’t a good answer. It’s as if an entire generation spent a long weekend at Stella Adler Studio. If that reference is cryptic, think Method acting. No help?

Then think about it this way. What is my motivation for running through said wall? What can I expect to gain by this experience? Coach Daas’s assurance that this exercise will benefit me is not enough to cause me to act. Besides, it might be painful, and I don’t like pain. Sigh.

One of my beta readers asked me a different question: Why are we doing this? What’s the end game? I’ll admit, she caught me off guard. Why indeed. At first blush, I thought it a bit lunatic to be asked such an obvious question. Seemed a truth to be self-evident as Jefferson might have writ. I mean, it ain’t a brick wall. Is it? Seems it isn’t so self-evident or so she led me to believe. Therefore, I’ll spell it out. In the screenwriting trade, we call this spot-on dialogue. No subtext. No nuance. Plain speak. So, why must we learn about money? Because I said so.

So happy I could clear that up. Kidding aside, we need to learn about money because money affects every moment of our lives from the day we are born until the day we die. Imagine being born and not knowing you had to breathe to survive. As if your body was not pre-programmed. In other words, imagine you needed to use your brain to figure that out. You would figure it out fast or you wouldn’t be on this earth for more than a few moments. Which is why every human’s first (involuntary) act when they exit the womb is to fill those tiny lungs with air. If not, Earth’s human population about now would hover right around zero.

Learning about money, however, is not an involuntary act. You must want to learn and for many, it is a brick wall; an impediment they have no intention of running through, around, or over under any circumstances. And I get that, I do. But what if we deconstruct the wall? Instead of using brute force, we break it down one brick at a time. Well, this is what I have tried to do. Even if we raze this figurative barrier, the task ahead may still seem overwhelming for some; running suicides might be a welcome alternative. Money is like that for many.

All I’ll ask of you is for a modicum of faith. Faith that what I propose will speak to you, that it will make sense and that you will feel empowered to put forth the effort to embrace and use the tenets. Let me state for the record that in no way is reading what I’ve written a guarantee you will suddenly become a money maven. Nor is any other book, course, or video by any other carbon-based life form since man emerged from the primordial soup. Anyone who states otherwise is selling something—the Brooklyn Bridge comes to mind.

This book represents one man’s journey. It’s methodical. It’s analytical. It’s anecdotal. And it is, as I was reminded by some of my female readers, decidedly male-centric. Baseball cards? Really? In addition, and this note came via my international readers, while the concepts discussed are universal, the specifics are decidedly American. One reader even went so far to say, Henry, we don’t have student debt in Germany. Or costly health care. What we have are astronomical taxes! He also complained that he never again wants to hear about US retirement plans as long as he lives. Sorry, Markus. My tale might resonate, it might not. You should discover which right quick. If it doesn’t, stop reading and move on until you find someone or something that does. Just don’t give up—it’s too important.

Turkey on Rye, All-the-Way

So, who is my target audience? Apparently, a writer must have one. Who knew! My original idea was to write something for Millennials until that lightbulb moment in Bangkok. Eventually, I came up with this title: Financial Intelligence for The Sandwich Generation. Seemed to make sense, having been one for much of my adult life. Right? Funny, when I pitched it to my wife, she replied I like it. What’s the Sandwich Generation? Moving on.

As the chart below shows, nearly half of US adults between ages 40 and 59 have both an aging parent and young children. They are sandwiched between generations. When you consider the graying of the population, I expect this number to increase. This age group represents a sweet spot for this treatise, albeit we must not forget folks in their 20s and 30s who may be just a bit ahead of the curve. And just because you’ve turned 60 or may still be in high school, doesn’t mean you get a pass either.

I realize trying to be all things to all people is not a prescription for success; you end up being nothing to nobody. This is not that. Even a nonagenarian will attest you can never have enough knowledge. It’s power. I have no reservations that readers of all ages and stations in life will find value in this work. For young people, it’s never too early to learn all you can about finance, even though some elements will seem far, far away. Same goes for singles of any age. Man, woman, married, divorced, gay, straight, black, white, green with antennae, not a single segment of society gets a pass. No one is exempt except perhaps the occasional trust fund baby.

Why Again?

The unvarnished truth is I cannot provide you with the answer to why you should learn about money—only you can. I can help you but much like breathing, you do it, not me. Well, I do, too. Oh, never mind. Failure to breathe can lead to some dire consequences. The same holds for failure to understand money. So, congratulations on taking charge of your financial future. You’re in for a thrilling ride.

The Course

As stated, I wrote this work as a course and tested the material as such. The online course material includes videos, exercise, and more, as well as one-to-one coaching. You will notice throughout I use the terms book and course, as well as module and chapter, interchangeably. To set expectations, I will share a primer on the various modules so you can get a sense for the journey you are about to undertake. I have divided the 18 modules into three acts (once a screenwriter…):

Act I—You, Yourself, and You

Module 1 The Psychology of Money—What Does Money Mean to You

Module 2 The Thick Green Line – This is Your Life (maybe)

Module 3 A Question of Balance—Create Your Personal Balance Sheet

Module 4 The Spendthrift Robs His Heirs—Identify Fixed Expenses

Module 5 Money Changes Everything—Confront Discretionary Expenses

Module 6 A Fresh Tomorrow—Make a Plan for the Future

Act II—Invest with Your Eyes and Other Pearls

Module 7 Holy-MacroEconomics!—Econ 201

Module 8 Lions & Tigers & Bulls & Bears, Oh My!—Understanding Markets

Module 9 Charting a Course—Technical Investing

Module 10 Bond, James Bond—Other Investment Vehicles

Module 11 Looking for Love…—Funds, Sectors, and Other Fun Stuff

Module 12 Portfolios and Ratios—Building a Portfolio

Act III—Money Stuff You Simply Must Know

Module 13 (Can’t Get No) Protection—Other Account Types

Module 14 Buying Sh*t—What it Says

Module 15 Gypsies, Tramps and Thieves—Keeping the Wolves at Bay

Module 16 Entrepreneurship—Starting a Business

Module 17 Deader ‘an Disco—Planning for the End of Days

Module 18 The Island of Misfit Toys—Everything Else

By the end of Act I, you should have a firm grasp on the steps involved in determining your risk tolerance, how to build a balance sheet and income statement, how to analyze discretionary expenses, and otherwise take stock of your current financial situation. Then you create a plan.

Act II is all about economics, financial instruments, markets, trading and places where you can put your hard-earned capital. I also discuss various headwinds and bear traps that will help you prepare for inevitable economic and market upheaval.

Act III explores subjects like retirement accounts, insurance, buying large tickets items, avoiding financial pitfalls, potentially starting a business, death and dying, and everything else that didn’t fit neatly into the first two acts. If I did my job, you should be much more conversant in a variety of financial elements, than you were when you started. Heck, you should even have a plan for a new, brighter financial future. If not, well, then I apologize for wasting your time.

Finally, if you’re one of those folks who prefers just the crib notes, skip to module 19, where I describe the 12 crucial takeaways. I did just that in high school — wrote a paper on Hemingway’s For Whom the Bell Tolls without reading the book. Never liked Papa.

The teacher handed my work back to me with a curt message written in big bold letters: I have the Cliff notes, too. I cheated, but hey, time is money. Or money is time. Or both. You decide. And yes, I got an F. For whom does the bell toll? I guess that would be me…

Act I

You, Yourself, and You

Module 1

The Psychology of Money

For the love of money is the root of all evil

Timothy 6:10

A (mercifully) Brief History of Money

If you have ever seen a TV commercial for Aflac, the insurance company, featuring that annoying duck (I suspect the reason the DVR exists), you’ll notice they never use the word money. It’s always cash. Yogi Berra even says in one, they pay you cash, which is better than money. Same holds for most institutions at least when it comes to marketing. I’ve never seen an ad for Money for Gold. Who would send gold in an envelope to a total stranger? Someone who needs cash, that’s who.

Moola, Cabbage, Clams, Scratch, Dead Presidents, Bucks, Bones, Greenbacks, Loot, Dough, Cheddar, Simoleans. The list of slang terms goes on and on and those are just a few—in English. My favorite is Baksheesh from the Persian word for charity. The first money appeared around 5000 BC in the form of metal objects. Coins arrived 4000 years later. They were struck from precious metals such as gold and silver; the value was proportional to their weight. Paper money first appeared 2000 years later in China. Bills first appeared in the US during the Civil War, March 10, 1862 to be precise.

For decades, money in many locales including the US, followed the gold standard. The gold standard guaranteed paper money could be redeemed for the equivalent weight in gold, acting as a proxy for the metal. People thus accepted bills as legal tender. Gold also inspired trust between nations and facilitated international trade but the bullion itself was cumbersome due to its extreme weight. Gold presented other problems above and beyond its mere bulk. For instance, when new gold reserves were discovered, the value of paper money sank.

During war times, adhering to the gold standard limited the money supply making it harder to fund the effort (a good reason not to fight). Many nations suspended the practice, often returned to a metallic basis once hostilities ceased. Printing large sums of money led to hyperinflation. The inflation often remained long after the armistice, memorialized by people pushing wheelbarrows filled with bills to buy something as simple as a loaf of rye—or bank notes in ludicrous denominations.

The quantity of physical gold became an insurmountable problem—there were not enough reserves to continue to peg it to paper. The US abandoned the gold standard in 1933 and the US dollar became the world’s reserve currency. Once the value of gold was uncoupled, it could float like other commodities. In 2011, gold hit an all-time high of $1,900 per ounce.

Today, more than 150 countries mint bills and coins as fiat** currency and virtual currencies such as Bitcoin and Ethereum have disposed of a physical manifestation altogether, replacing it with an algorithm. Meanwhile, too much printing led not only to inflation but also to other assorted unintended consequences like currency wars and arbitrage. However, the convenience of paper money was and is undeniable.

Today physical paper money transactions represent less than 15% of all activity in the US and have become increasingly regulated by banks to dissuade money laundering, tax evasion, and criminal enterprise. The lion’s share of payments transpire via credit and debit cards and it’s growing. It is possible to envision a (not-too-distant) future where paper money itself is no longer used and all transactions take place by some electronic means.

The Madness of Crowds

Extraordinary Popular Delusions and the Madness of Crowds, by Charles Mackay was first published in 1841. It is a masterpiece. Three chapters deal with economic bubbles: The South Sea Company, the Mississippi Bubble, and the infamous Dutch Tulip Mania of 1637.

As a rule, I believe people are motivated by but one of two things—self-advancement or self-preservation. Markets follow the herd. Much like automobiles on a highway, people cluster together. As social creatures, human beings take comfort in being surrounded by other human beings. There is no question this tendency provides enormous benefit if for no other reason than it helps ensure the survival of the species. It also has a downside, one of which is mob mentality.

At the height of Tulip-mania, some bulbs sold for over ten times the annual salary of a skilled craftsman. The mob had spoken, however, unlike gold or other precious metals, a tulip bulb exists solely to produce a tulip. No matter how unusual and striking the flowers they yielded were—and they were striking—they served no practical purpose beyond the decorative.

One of mob mentality’s first cousins is groupthink. Once groupthink takes hold, no one wishes to point out the emperor is in fact naked. Then, suddenly, some brave soul makes a break from the pack. Preservation replaces the innate need for advancement and the mob goes into a selling frenzy. And when markets fall, they fall hard.

The psychology behind popular delusions can be, well, rather maddening. One might think rational people living in a rational world with access to rational data would not be susceptible to such lunacy. Yet, having lived through the dot-bomb meltdown of 2001, I can attest first hand that such speculative escapades are alive and well, even in an era of boundless access to information.

To further the point, hot on the heels of this fleeting period of overvalued startups (with dubious earnings) failing, we witnessed a speculative real estate mania that brought the world’s largest economy to its knees. Michael Lewis’s wonderful tome The Big Short details the tribulations of a few souls who saw the housing madness unfolding and cashed in. It’s also worth a read.

Humans are emotional creatures who oscillate between the two states. So why is it that a few folks can spot a bubble from miles away while others get swept up in the euphoria and reach their comeuppance? One of the contributing factors is without a doubt also one of the Seven Deadly Sins: Greed. Greed fits squarely in the advancement camp. But what about greed? How is it something that’s bad enough to be called out by name in the Good Book is also so insidious?

Bubble Bath

Unlike money that’s backed by a commodity (gold) or the full faith and credit of a government (US dollar), Bitcoin (BTC) and its brethren are just algorithms. They are not backed for any practical purposes by anything other than people’s willingness to accept them as legal tender. Cryptocurrencies allow greed to prosper in that, not only are activities unaffiliated, they are opaque; many transactions occur away from the prying eyes of governments and regulators. This platform creates perfect cover for shady operators and criminal enterprise. And the greedy.

I don’t mean to imply that cryptos exist merely to circumvent the shortcomings of fiat currency. And being greedy is not criminal regardless of what the Bible says. Greed may manifest from events that the individual may not even remember. Perhaps it derived from poverty at an early age. Or from a parent or a loved one’s desire to control the individual by granting or withholding money as a means of manipulation. Whatever the psychological underpinnings, greed is omnipresent in our society and in no danger of being rooted out any time soon.

BTC

Bitcoin is the new tulip in my estimation.

Bitcoin’s value versus the US dollar has increase eightfold in less than a year. If that’s not a bubble, I don’t know what one is.

Update: The below chart is from November 21st, 2017. Two weeks later, Bitcoin hit $19,000 intra-day before retracing. That same day, my plumber rang the doorbell unannounced. If you own a home, you must have a reliable plumber on speed dial. I do. Last year, my boiler died, and he replaced it in the dead of winter. At a very reasonable price. He’s a great guy and lives in my town. He also trades. And he knows I’m a trader.

He said he wanted to check on it as the cold weather is here. Oh, by the way, one other thing. What do you think of Crypto? Turns out he holds a fractional position in Ethereum. I don’t give advice on people’s trades. I share my experiences. I asked him how much profit he stood to make. He said a couple hundred. I broke my rule and told him to sell. Then, take his wife out for a nice steak dinner. Moral of the story: When your plumber rings your doorbell and asks for investment advice on a particular market, you’ll know it’s over. Dump it, fade it, get the _____ out!

Update part deux: On December 22, 2017, Bitcoin fell to $12,000. Give it some time and it will be right back where it was before the run up. Oh, joy.

Abraham Maslow

In his 1943 paper, A Theory of Human Motivation, Abraham Maslow created the hierarchy on the next page. The bottom of the pyramid holds the most basic needs, the non-negotiable elements of survival such as air, water, food, and sleep. These are essential to every ambulatory carbon-based life form on Earth. Air costs nothing. Neither does sleep. Perhaps we can add (clean) water to the list, although I’m not so sure. Everything else requires dough. The next layer up is Safety, which is where financial security lives. If economic security is not essential, then it’s the closest thing to it.

The poverty bar in the US in 2017 was $24,600 for a family of four. That’s less than $500 per week. The overall poverty level has remained steady despite what this graph indicates.

Poverty affects everyone. It raises our health care costs. It feeds criminality and homelessness. It increases stress for those in it and those who are trying to fight it. It is an intractable problem that generations have been trying to overcome with scant success.

In fact, the odds of an individual or family moving up from the bottom socio-economic quartile to even the next highest quartile are minuscule; Children of the poor often remain poor.

Pennywise

My mother was classified as a Depression-era baby. She was born two years before the stock market crash of 1929. Her mother was from the old country, brought as a child to America at the turn of the 20th century. The family settled in Brooklyn like much of the wave of European immigrants who came to our shores through Ellis Island. As a family, they were working class. My mom recalled being carried out of their tenement in Flatbush at age five by a New York City fireman. The landlord had set the building on fire to collect the insurance money. He was rather unconcerned that families were living there. Such acts were not uncommon during the Great Depression.

She was the only girl of five children. Her mother had contracted rheumatic fever as a child and had a damaged heart, so my mom took care of her mom. She used to quip that if anything happened to her mother, she and her brothers would end up in an orphanage. I found that odd since it seemed all of Bay Ridge was somehow related to us. Someone would have taken them in. Right? Her father was a notorious ne’re-do-well. He was not a good provider and I cannot recall anyone in the family ever saying a kind word about him. He passed away when I was a baby, so I have no personal experience to draw on. I do know when my grandmother died in 1957, he wasn’t by her side but rather in Florida. Doing what, is unclear.

Because of this and other hardships, my mother developed what can only be described as a scarcity mindset. This condition differs from greed. While greed manifests itself from an irrational desire for material possessions and wealth, scarcity mindset is the opposite—the equally aberrant notion we have too little despite a preponderance of evidence to the contrary. For much of my childhood, I was unsure about our socioeconomic status as a family. While I always had a roof over my head, my parents seemed too frugal. When our neighbor bought a fancy convertible, I wondered why we drove an old Buick. Because it’s paid for, my mother would say.

My parents shared nothing about money. The only bona fide data point I ever uncovered was in my late twenties. In an unguarded moment, my mother shared that the only time we ever took in less than we spent in any year was the one where my sister and I were both attending college. It wasn’t until my father passed away in 2000 that I, then in my forties, sat down and performed an accounting of the family net worth, an exercise driven by the need to address a necessary evil—the dreaded estate tax.

When I asked my mom what she thought the number was, her guess was one-third the actual amount.