Money Talk with a Business School Professor about Divorce, Luck, and Growing Up in the 50s!1/15/2017  Screenshot from "The War of the Roses" with Michael Douglas and Kathleen Turner 1. Tell me about your background.
I am a male tenured business school professor at a top-ranked school in the Midwest. I am in my early 70’s. I grew up in a relatively middle class household in the 1950s with a very financially conservative family. As a child, my dad worked as an artist and sold paintings to hotels and offices. There were years when business was good and years when he barely earned anything. In addition to working as an artist, he taught high school art. My mom was a middle school teacher for the mentally disabled. We moved around a lot based on where my dad could find work. In college, I always had a series of odd jobs (library clerk, waited tables, research assistant). My parents actually paid for my college tuition whereas I was just responsible for paying my living expenses so I didn’t have any student debt. Keep in mind that I went to college in the 1960s so obviously tuition back then wasn’t what it is now. When my parents passed away in their late 80s, they left some money behind but not much. My brother and I got around $10K in cash and $20K in stock. They would have left more but much of it was used up for my mother’s assisted living expenses. 2. What does your financial situation look like? I am financially okay, but certainly not wealthy. I went through a divorce a few years ago and my assets got cut by half. My ex-wife gets half of everything I make, as long as I keep working. I really like my job and plan to work for as long as I can but that’s how the settlement went. I have always been a “dreamy academic” and never gave much thought to money. I always assumed that I would make enough. My wife handled all the finances and for a long time, we earned almost equal amounts of money and lived a very comfortable life. But she quit her job (she was also a tenured university professor) unexpectedly about 20 years ago and that really messed up our finances. We had to sell several properties we owned and I had to move across the country to a new school where my salary tripled. Our financial problems pretty much went away when my salary tripled and I again, never gave much thought to money. My wife continued to manage all the finances and I chose to leave money management in her hands. Now that I think about it, my ex-wife could have taken advantage of my ignorance, but I am sure she was always honest and never lied to me about anything. I believe the 50-50 split of my current income is close to the legal norm for divorce after a long marriage, and I am comfortable with that arrangement. We’re both in our early 70’s and I’m sure most of the money I give her will just end up going to our two children, the way I intended. At the moment, I have about $1 M in retirement savings, a house in the West that is likely to be worth more than $2 M in 5-10 years (the housing market where that house is located is fluid), and an apartment currently worth about $300 K. 3. How long do you want to live? Probably for another 15-20 years, until I’m in my late 80’s. It really depends on physical status and whether I can still mentally and physically function at the level I want to. I really think this becomes a lottery after age 70. If I ever need assisted living help, I will sell my properties to pay for that. 4. How do you define rich? It depends on the context. When I was growing up, I thought it was $10 M. Being rich is being able to do whatever I want, and if I had to say a number today, I’d say $30 M. My ‘wish list’ is mostly based on being able to live in several locations, as I like variety in my “living environment.” At the limit, I’d like to have a studio apt in Manhattan, a studio apt in San Diego, an apt where I live and work now, and my house in the West. I would like the ability to fly in whenever I want at the drop of the hat. I plan on spending all my money on myself. I’m sure there will be some money left left for my two children but I don’t plan on it. I’m also not interested in philanthropy and giving money away. 5. What does your family situation look like? Do you financially support them in any way? As I mentioned, my ex-wife hasn’t worked in 20 years and I pay her alimony. We have two children - one is a consultant at a Big 4 accounting firm, and one is working in a scientific research lab. My ex-wife and I paid for their college / grad school education and still help them out occasionally, especially the one working at the academic lab who isn’t making too much right now. My policy is to contribute or pay for any educational costs as they continue to develop their careers. 6. Tell me about an experience you had with money that was notable to you. When my ex-wife unexpectedly quit her job. This was the first time I had to face the prospect of really downsizing my life. At the time, we were living in the West and we had to sell the property lot next to our home (we sold for $500K, it is worth at least $1.5 M now) in addition to a ski condo. I had to change jobs and moved across the country to do so. My new job paid three times as much as my old one and the raises I’ve had every year are great. But my ex-wife and children never actually moved with me, they just stayed put in the West. 7. How do you think that has influenced your behavior with money since? My behavior actually didn’t change at all since I started to make more money and our money problems went away. Looking back, I really should have taken a more active interest in our finances and regret this now. 8. Can I ask why your ex-wife quit her job? She’s always been an incredibly high achiever and liked being at the top of whatever she was doing. She went to top schools for college degree and her PhD, she was a nationally ranked athlete, and she was promoted at a very high rate in her first jobs. However, her academic career moved more slowly and she felt a strong pull to spend more time with our young children. So, she decided to quit to stay at home with our children. Practically speaking, there was no compelling reason to quit to spend time with the kids. A tenured university professor job is one of the most flexible jobs in the world, and she got paid reasonably well. I urged her to stay in the university job, but once she made up her mind, I couldn’t talk her out of quitting. 9. What was your most impulsive purchase? I bought a BMW SUV once and then realized I didn’t need something that extravagant. I traded it in for a used Honda and have driven economical used cars ever since! 10. What was your best purchase? Financially speaking, my wife and I bought a house once and tripled our investment in less than five years when we sold it. This was completely by accident. The housing market was on fire and we were the lucky recipients. And, with reference to personal consumption I really like investing in experiences (scuba diving, cycling, hiking, skiing). 11. Do you worry about money? No, not really. My job pays me really well and like I said, I’ll sell my properties to pay for assisted living care if / when I need it. 12. Do you splurge on anything? If so, what was the last splurge and how much was it? No, not really. I like fancy hotels but my definition of a “fancy hotel” means that it has a good gym because I really like to work out! 13. What has happened in your life financially that you attribute to luck? You must have worked hard to achieve what you did but luck was obviously involved in many cases. When I think about luck, I think about it as being something you can’t control. My ex-wife and I made a huge profit off one house we bought but that was purely by accident as we stumbled upon a major housing boom in that area. However, we also lost a tremendous amount of money after she quit her job. So I guess it all evened out. 14. You mentioned earlier that your two children will probably not receive much from you after you pass away. Do they know this? If so, how do they feel about it? They’re both okay about it. We paid for their education, both for college and grad school, so they had a huge advantage right there. My older child is in his late 20’s and has been working as a consultant for one of the Big 4 firms so he makes a good living. He has excellent saving and investing habits. My younger child is in his mid 20s and just began working at an academic lab which he hopes will get him into grad school in a few years. I help him more financially, but overall, they both have seem to have good self-control over things. 15. Is there any advice you would give to our readers? Start paying attention to your finances sooner. I really wish I had done so. Even though I’m not worried about my personal financial situation, I could have avoided a lot of unpleasant situations if I had paid more attention earlier.
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 Photo Credit: Professor Plum from the movie "Clue" Interviewee Bio: University professor, male, mid-50s, highly visible and very successful in his field
Key takeaways: -Set financial goals for yourself and figure out to achieve them (by setting a budget, investing, etc). Try your best to stick to your goals. -Try to date someone who is financially compatible with you. Question: Tell me about an experience you had with money that was notable to you. What did you learn from it? Answer: There are five short stories that come to mind. 1. I grew up in a lower-to-middle class household (veering much more toward lower class) and my dad worked at the local bakery. This was in the 1960s, we lived in the midwest, and he was part of a union. At one point, the union went on strike and everyone was out for work, including my dad. He didn't work for nearly a year and this was very hard financially on our family. My dad is a quiet, shy man, and his self-esteem really took a massive nosedive. My mom worked as a secretary and her meager salary helped to keep us afloat. We also went to the local food bank often, and my dad and I would sell corn by the side of the road. My dad would also walk door to door asking people if he could mow their lawns. I don't think he ever got hired to mow anyone's lawns but he did it anyway, mostly because he felt so bad about our situation and needed to feel productive. I was under age 10 when this happened so I don't remember being scared or worried. I just remember being excited about all the free bread we were getting from the food bank. It wasn't until I was older that I mentally processed what really happened. Our insecurities with food ultimately influenced the career path I went into. 2. My first tenure track professor job was at an Ivy League school in the early 1990s. I joined a group called the Assistant Faculty Support Group (or something along those lines, I don't remember the exact name now). I taught in the business school and the other people in the group taught in other departments. I had just bought a house and everyone began talking about how GREAT teaching in the business school must be, and how they all struggled with money. Well, that made me mad. I made $50K / yr and even though the school offered loan assistance with the 20% down payment, it was still a struggle for me to pay the monthly mortgage bills. But I did it by giving up other perks. I barely traveled (and if I did, it was a car roadtrip!), I didn't go to expensive restaurants, I cooked a lot, I essentially worked hard at keeping my costs low. I took the old-fashioned route and stuck to a budget. I just wanted to tell everyone else in the group, "I doubt I get paid that much substantially more than you do. But you need to learn how to budget, save money, and stop spending money you don't actaully have." A simple lesson, but you'd be surprised at how many people don't listen to it. 3. I once dated a female PhD student in the late 1990s. She began talking once about how much credit card debt she had (around $25K at the time). I asked her how she planned to pay it off. She said that once she got married, her husband would just take care of it. I asked her how that was going to work. She said she just assumed that was what was going to happen. The lesson I learned from that was - When you date someone, make sure that you are on the same page about money. Needless to say, I did not marry her. 4. In the early 1980s before I started my PhD program, I spent a year working in the Small Business Administration. I had a friend there around my age and we spent time together outside of work. We both liked to run and had similar interests. He was just a very normal, nice guy. One time, he invited to have dinner at his parents' house. When I arrived, I was surprised to discover that his parents lived in pretty much a mansion and that they were very wealthy. Turns out, his dad was the then CEO of Bell & Howell. My friend said that he never told people about his wealth because he didn't want people treating him differently. They had done so before and it made him wary. 5. When I was in college, I worried about money. I worked part-time as an Amway door to door salesman. One time, I was talking to my mentor about money. He looked me in the eye and said, "Trust me, you will never worry about money. You will always be okay." Very simple words, but it brought a feeling of peace that I had never experienced before. And he was right - I have always been okay.  Photo Credit: Screenshot from the movie "October Sky" Who are you and how old are you?
I am a female in my mid 40s working as a university professor. Tell me about your background. I grew up on the East Coast, went to college in the area, and got married right after college to my first husband. He had gotten into a PhD program on the West Coast and we moved there for his schoolwork. I began working at a local hospital initially as an account coordinator and then as an account manager. I enjoyed my work and my husband really enjoyed his PhD program. His goal was to get a tenure track job at a university afterwards. I realized after a while that I wanted to get my PhD as well and so I began applying for different programs. I got into one in the Midwest but my husband didn’t want to move there with me and so we got a divorce. There were other reasons too, but that was the biggest one. After my PhD program, I got a tenure track job at a good university on the East Coast but didn’t get tenure after the requisite seven years. During this time, I remarried and had two children. I then got a lecturer job at a smaller school and taught there for three years before getting another tenure track job at a local university. I am really hoping I get tenure at this school. Getting tenure is quite difficult. You have to constantly publish and be cited in the top research journals and bring in grant money. Your colleagues also have to like you, you should demonstrate good teaching abilities, all that. Only about one out of seven people get tenure but tenure track process weeds people out along the way - three will decide that teaching is not for them and two will be told that they are not performing at the right level and be asked to leave. Thus, the tenure position will come down to one of the remaining two people. It used to be easy to get tenure before the late 80s and it’s gotten much harder over time due to increased competition. But if you get tenure, you pretty much have a job for life. What does your financial situation look like? If you don’t earn money through a “normal job”, how do you support yourself? I make money through my tenure track job and my husband works as a project manager at one of the departments on campus. Our total combined income is in the low six figures. We live in a reasonably priced area so we can live relatively comfortably. How do you define rich? I define rich as being in a situation where my husband and I have paid off all of our student loans, we own a house, and we can afford to pay for both of our kids’ college tuition. Did you grow up with money? How did your childhood conditions about money affect how you behave? I grew up in a middle class family. My dad worked at the local museum and my mom was a homemaker. I have a younger sister who taught elementary school for a while and is now in school getting her nursing degree. I don’t think my parents lived paycheck to paycheck but they didn’t save as much as they would have liked. Did your parents give you money when you were growing up? What about for school? My parents gave my sister and I a weekly allowance but couldn’t afford to contribute to our college tuition. I took out loans and am still paying them off. My PhD program paid for me to go to school but because I made so little, I couldn’t afford to save or pay off my school loans for a long time. Where did you learn about investing? I don’t invest at the moment will would like to in the future. Do you and your spouse/partner have similar financial habits? We have similar financial habits most of the time and are pretty good with sticking to our budget but he tends to spend more money than I would like on electronics and “fun” things that aren’t necessary. How did your financial lifestyle change when you had children? As a family, we had to tighten up our budget quite a bit. I was used to living a modest lifestyle because I had spent six years on a PhD salary but my husband used to live more extravagantly. Do you feel like you are living paycheck to paycheck? If so, do you feel that way due to your lifestyle? At the moment, yes. Our monthly costs really add up - my husband and I are both paying off our student loans, we are renting a house, we’re raising two young children, etc. We unfortunately have not been able to save much but that’s a huge goal on our list. What was your most regrettable purchase? During the first two years of my first tenure track job, I rented a huge house that was much too expensive for my budget. But at the time, I felt like I had “made it.” I had a great job and thought I deserved the best. I really should have been more careful about my budget and was smart enough to downsize starting my third year. What was your best purchase? I hire a housekeeper to come in once every two weeks to help clean the house. She’s really a lifesaver - my husband and I are busy at work and we have two young children so things can get really messy at home sometimes. Do you feel like you have a financial habit that’s out of the norm (or at least something that others have commented on)? I’m not sure if this is exactly out of the norm but when I was younger, I always bought really unnecessarily expensive items. For example, I rented a really expensive house when a cheaper one would have been fine, I bought clothes at Nordstrom when a cheaper store would have done, etc. Do you actively contribute to a retirement account of any sort? I contribute to the 403(b) and 401(k) retirement plan at work. I don’t contribute the maximum amount but I was automatically enrolled when I began my job. Do you feel like your lifestyle reflects your income bracket? It probably does. Even though my husband and I have a combined income in the low six figures which sounds like a lot of money,we’re raising two children and have high monthly costs. Do you talk to your peers and family about money? I talk to my parents and my husband about money. I also talk with my best friend about it. Do you worry about money? I worry about the fact that we’re not saving much money at the moment. I think we’ll be able to do so later on but a lot of that will have to do with whether I get tenure or not. If I get tenure, things will be much more secure but if not, we'll have to move again which will disrupt our lifestyle. In terms of money, what was something you did in the past that you could do differently? I would have saved a lot more money during my first tenure-track job. I was making around $70K at the time, which was a very decent salary and I really should have been more careful about how much I spent. What is your strategy for moving forward now in regards to your big goals in life? I’m working as hard as I can to get tenure!  Photo Credit: Screenshot from the movie "Indiana Jones" Who are you and how old are you: I am a 55-year-old tenured professor at a major Ivy League University on the East Coast. I also write books on the side and have a second career as a speaker/consultant in my field of study. Tell me about your background: I grew up in the Midwest, stayed in the Midwest for college and my masters degree, and then got my PhD on the West Coast. I've taught at three major Ivy League schools, and stayed put at the third one. I've very well-known in my field of research and run a relatively well-known lab. Tell me about your money. How much do you make? Between $200,000 - $300,000 a year from my university salary. Add on another $50,000 - $300,000 every year from consulting/royalties/speaking fees. A lot of my annual earning power comes down to hustling. If I hustled more, I would make more but it would probably affect my work performance at school. How do you define rich? Having enough money so that for normal things (meals, tickets, vacation trips), you never have to ask what it costs. You can always travel first class without having to ask about how much it is. It's knowing that you had enough money in enough different places and in varying levels of liquidity so that if disaster strikes in any form, you’ll always be okay and prepared. Did you grow up with money? How did your childhood conditions about money affect how you behave? No, I definitely did not grow up with money. My dad worked in the muffin line of a commercial baking company and my mom was a legal secretary. We were very much lower middle class. During Christmas, my parents used to buy used games or toys at rummage sales and mom would wrap them up in saran wrap and use a hair dryer to tighten up a the saran wrap so that it would look more new. My parents were extreme savers. When I was eight years old, my dad was laid off for 4-8 months and we struggled through that time. We went to the local food pantry, had pancakes a lot for breakfast, ate weird parts of chicken for dinner and had lots and lots of white bread. This really incentivized them to save. They put a lot of money away in banks and invested in bonds. They were very financially conservative. To this day, I don’t order a cheeseburger in a fast food restaurant without asking how much it costs. I will always ask if there are refills on diet coke. Otherwise, I won’t get it unless it’s priced under a dollar. Growing up in such a household made me very frugal and conscious with how I spent or saved my money. Did your parents give you money when you were growing up? What about for school? My parents gave me a weekly allowance (started at $0.25/week and eventually went up to $1.25/week) for doing household chores. From 11 years old and on, I had summer jobs, which included detassling corn, selling vegetables door to door, and mowing lawns. I wasn’t encouraged to go to college because parents didn’t have money saved for college. The only reason I went was because when I was 17 (this was in 1977), I won a $500 junior achievement award for winning a business trivial contest. I then chose the cheapest college I could find so that my $500 winnings would cover the annual tuition. Do you still have school loans? No - I've never had school loans. I sold Amway to make money on the side which paid for my entire college tuition. When I attended my masters program, I had a 20 hour/week job where I reviewed resumes and worked as a fraternity adviser. This (along with my Amway sales) paid for my masters program. During my PhD program, my tuition was paid for and I got a $1000/month stipend which paid for room and board. I lived in a mobile trailer for a few years to save on rent costs. It's not as bad as it sounds. Where did you learn about investing? In college, I would go to the library and read books on investing. That's where I first learned about investing. Two book that come to mind includes Think and Grow Rich by Napoleon Hill and More Wealth Without Risk by Charles Givens. What does your family situation look like? I have three children, aged 10, 8, and 6. They are lots of fun. I also had a cat for ten years but she sadly passed away a few years ago. My parents are in their mid-80s and still living in the Midwest. How much do you spend on your children every month? How does that break down? I'm not too sure about this and my numbers are probably going to be incorrect but I'd say that $500 is spent on each child per month. There's $200 for lessons (ballet, piano), $150 for food, and $150 on other miscellaneous expenses. But again, I'm really not sure about this. Have you started to put money away for their college tuition? If so, how much is it? I started two 529 plans titled “Child 1” and “Child 2” when I was 31 years old and deposited $1000/year for each account. I stopped contributing to both funds when I didn't get tenure at my first teaching job and only began contributing again to both accounts in the recent years. Each account has around $20,000 now. I just started a 529 plan for my youngest child this past summer. How did your financial lifestyle change when you had children? Life became boring. I couldn't really spend money going out or going on vacations. When I was single and making decent money, I bought a lot of weird stuff. I really like WWII collectibles and bought a ton on ebay. I've probably spent over $20,000 on this stuff over the course of ten years. Are you still living paycheck to paycheck? If not, do you feel that way due to your lifestyle? No, I've never lived paycheck to paycheck because I saved money all the time. I always had a six-month cushion. What was your best purchase? The first house I ever bought when I turned 30. It was in the town where I got my first tenure-track teaching job and buying the house made me feel like I had finally "made it" and was a real adult. When I didn't get tenure, I had to leave town relatively fast and so I sold my house. I didn't make any money on it because I had to leave in a hurry but it holds a great deal of sentimental memories for me. What was your most regrettable purchase? A home I bought on the East Coast when I moved there for a teaching job. I overpaid for it because at the time, I was very busy with other things (recovering from knee surgery, moving to a new school, didn't want to rent a place, etc) and hurriedly chose the house. Even though I've since moved to a new house, I haven't been able to sell the first house and am still stuck with it. Do you feel like your success now has anything to do with luck or being in the right place at the right time? I attribute most of my success to God. I have a very deterministic view - a lot of the things that people would chalk up to luck, I attribute to a divine force. How much investing do you do, if any? I bought some Apple stock in the early 2000s, when the iMac G3 came out. I really admire Steve Jobs and wanted to invest in his company. I also invest in mutual funds and real estate buildings. How much do you have in your retirement account and do you actively contribute to it? I probably have around $1 million in my retirement account and max out my 403(b). Do you talk to your peers and family about money? I talk to my parents, brother and accountant. But other than that, I don't really talk to anyone about money. Academics talk very little about money - they are not into conspicuous consumption. My business friends talk about money all the time though. They're two very different crowds. Do you worry about money? I don't worry about my personal funds but I worry about having enough money for my school lab. The lab employs around 20 people and our budget is in the millions. I am always concerned about whether we will have enough to create the impact that I want. Do you feel like your lifestyle reflects your income bracket? No, I’m not into conspicuous consumption. Being raised frugally had a huge effect on my lifestyle. I feel that people who make half or even 1/3rd of what I do live a much more extravagant lifestyle. How are you teaching your kids about money? By often telling them there’s a lot they can’t have (iTunes apps, buying stuff at stores) or can’t do. They’re not spoiled at all. Do you splurge on anything? If so, what was the last splurge and how much was it? When I achieve something great at work (I get a major paper publication in one of the top two academic journals), I would reward myself by buying something new. This happens maybe once a year. The last example was buying myself a nice piece of leather luggage that cost $2000 although I did wait for it to go on sale for $1300 before I bought it. Do you pay attention to money or personal finance at all? I'm more conscious of day to day stuff (how much does adding extra cheese on my burger cost) but lose sight of the bigger picture sometimes (how are my retirement accounts looking). Do you have a plan to make more money? Yes, I'm in the process of starting a business around a book I recently wrote and am currently looking to hire a CEO to grow the business. What would it take for you to feel like you are completely rich? $25 - $30 million. My reasoning for this is strange. I like checking out websites like celebritynetworth.com and finding actors that are around my age and look like me. I see how much they're worth and think that I should be worth that much. In terms of money, if you could go back in the past, what is something you would have done differently? I would have always maxed out my accounts like the ROTH IRA, 403(b), tax deferred accounts, etc. I travel a lot for business and even though my costs are reimbursed, I often lose receipts or don't turn in my expenses on time. I would have made sure that I got every dollar reimbursed as quickly as possible. I also would have hired financial consultants that weren’t in the business of selling something or the other. And lastly, I wouldn't have given away IP related to my work. I've lost money that way in the past and it was a tough lesson to learn. What is your strategy for moving forward now in regards to your big financial goals in life? Max out as much money as possible for retirement, get all my business receipts reimbursed as quickly as possible, and focus much more on generating money through my business. |
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November 2024
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