What You Weren’t Taught About Making Money: Sarah Potter (Transcript)

Sarah Potter – Trading & Market Expert

My daughter just started kindergarten. So this is a really exciting time. It marks a time when me, as a parent, is going to hand my child over to this education system and hope that she learns the skills she needs to be successful in life.

I’ve only dropped her off at kindergarten, and I’m already thinking about high school. But really, when we drop off our kids at school, it kind of evokes a lot of deep philosophical reflections about what we need in order to be happy or to be successful in life and what our children will need.

Now, one of these topics is something that I know that she’s really not going to learn in school, as much as I wish she would. And oftentimes, this conversation doesn’t actually happen at home.

The topic that I want to talk to you about today is this, and specifically: “How do you make more of this?”

Now, my experience with money started very differently than most.

I was in education; I was an educational consultant, worked there for about ten years. And at the time, I was doing my Masters of Education, and I had this hobby called trading in the market.

As you can imagine, when I first started, I didn’t make a lot of this stuff. And what I decided to do when I did my Masters of Ed was apply the things I was learning about how we learn best with the skills of making money. It ended up working out really well.

I left that full-time job, and now I do this for a living, and it’s pretty fantastic. But it’s with this perspective of both education and investing that I want to talk to you about today.

When we think about money, many of us are very familiar with the skills: “save more,” “spend less,” “budget.” Those are terms we use all of the time; we throw them around, we know they’re things that we should do, and they’re really focused on preserving what we have.

Then on the other side of the coin, we have this idea of what it would be like to make a ton of money. We have these ideas and notions in our head when it comes to the market — that we think we need to risk it all to make millions of dollars.

This is Gordon Gekko, a very familiar character when it comes to making money. We’ve probably all seen the movie Wall Street, we might watch shows called Billions.

This is the typical depiction of what we normally think about when it comes to trading. This is me.

Trading in a coffee shop while my baby is sleeping on me. What we see and hear when it comes to money-making is so far removed from what it’s really like.

So, if you have a bit of money saved, and we’ve done what we’re supposed to do, and we want to actually grow some wealth, many of us are trying to hit that other very traditional notion of what it’s like to be in the market, the notion that’s actually more appropriate for institutional investing or people who already have millions of dollars trying to make more.

Depictions of average people are few and far between. If we actually want to do something with our money, we are somewhere here in the middle, and there’s a big knowledge gap.

And so, no wonder it’s pretty confusing for all of us. I mean, 76% of millennial women find investing confusing. 71% of Americans find talking to their financial planner scary.

And get this: 44% of Americans find the most challenging conversation you can have is about money. Even the topic of death comes in second at 38%. So this is a real problem. We all work really hard for our money. We are all told to save our money.

But what do we do if we want to make a little bit more? What do we do if we’re somewhere here in the middle? Most of us are probably handing our money over to financial institutions because this is often what we’re told to do. And when we do that, that’s fine for some.

But unfortunately, we don’t really get to see what they do, we definitely don’t get to learn how to do it. And many of us don’t even know the questions we should be asking about why are they making the decisions that they are.

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And I don’t think that this is really right. Many of us don’t even realize that we actually have the technology to be able to log in to your cellphone or your laptop, and to be able to trade at any point in time during the day.

Unfortunately though, the skillset that’s gone along with this hasn’t really kept up, so many of us don’t really know.

So what if we turned, then, to the formal education system? This is where we would think about: “We need to learn to make money.”

So, the latest term that we have here is called financial literacy. This is supposed to help all of our money woes.

But if you look at the narrative about what is still being discussed when it comes to financial literacy, we still are talking about the same old, same old: “save more,” “spend less,” “budget your money.”

And I want you to think about it for a second. If we actually took this idea and started helping people to know how to make money, and then they started spending money based on the profits that they actually made from money they earned, how would that change the conversation about money?

We need to help our students realize that when it comes to the markets or the ability to make more money, this can be actually very achievable for most of us. But we need to stop trying to make millions of dollars and risk it all and start realizing that this is a skill that any of us can do at any point in time.

We need to take some of the skillsets that kids already learn. So think about something like: “compare and contrast” or “sorting” for that matter.

In kindergarten, they’re starting to learn how to sort things and build patterns. Those are skills that actually I use in the market every single day.

And, in fact, when I learned how to trade — and I trade for a living — a lot of the skills that I use aren’t actually financial skills; they’re skills that I actually learned in other areas. So we need to help students bridge the gap between information they’re already learning and tying that to conversations about money.

The other piece that I want to talk to you about is realistic expectations. Again, this is something that can be very appropriate for students when we talk about this with them.

When it comes to the market, it’s not all or nothing. So, just for example here, about a week ago, I got an email from someone. And he had $5,000, and he wanted to know how long I thought it would take to go from $5,000 to $10,000. And that’s the problem.

$5,000 to $10,000, that’s a 100% return; that is doubling your money! Gosh, if everybody could do that, wouldn’t we all? It’s all about our expectations. It would be far more realistic for him to take his $5,000, trade with it, enjoy that, and take his family out for dinner once a month as opposed to trying to double his money.

There is nothing wrong with taking a small amount of money that you have and only just focusing on making some profits, and then spending those profits on all the fun things that you love rather than trying to double your money. It doesn’t have to be all or nothing.

And let me tell you, I am not an ex-institutional trader. And by the way, just because you are an ex-institutional trader doesn’t mean that you actually know how to make money, or that it’s appropriate for us as average people.

I also want you to know that I am not a certified financial planner. I do not have an MBA, nor do I have a business degree. I am an average person.

And when it comes to making money, I am no more capable of this than you are. Home Depot brought “do-it-yourself” construction projects to the masses with the tagline: “We can show you how.”

We need something like this for money-making skills, too, for average people. We need to start seeing depictions in media and entertainment that are actually more realistic and focused on what most of us can do with all of this.

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We need to stop idealizing these very fantasized versions of trading in the market and start realizing that this can be appropriate for all of us.

So, there are three things that I really hope you’ll walk away with today. And now that I do know how to make money, this is what I hope you will write down and you will continue to tell other people.

The first thing is that when it comes to making money, there’s this language to it. And there’s lots of complicated terms. And one term is often used to define another term.

So no wonder it’s confusing for all of us because none of us are using plain English when we start talking about making-money skills, but particularly in the market.

So let’s start asking our financial planners, all of the media outlets to start talking about all this in plain language so that we can actually understand. If you want to continue to invest with someone else, that’s fine, but maybe we’ll have better questions to ask about the decisions being made.

And if you want to do that yourself, it’s even better. I also want you to know that the language shouldn’t be the barrier for you to do this; you don’t need to know all of the words to know how to make money. And vice versa: you can make money without knowing all of the words in this industry.

The second piece is that when it comes to investing or trading or making money, it doesn’t have to be a full-time job.

Now, I love this, and I have to say I’ve done this part time, full time, and I started trading four days after my second baby was born. You can do this as a hobby too.

The best part about trading and making money that’s more realistic is when you go to Starbucks and you order a latte and it’s free. And you know why it’s free?

Because I’m spending the profits that I made on a trade in Starbucks, the stock, about a week earlier. That feeling is something everybody can feel.

If you have a little bit of money saved and you focus on spending it on your indulgences, how does that change your perception about money?

The third thing that I want you to know when it comes to making money is that it’s a skill. Unfortunately, there are a lot of people that come to the market and think that they are Olympic mountain bikers before they’re really ready to take the training wheels off.

So I want you to remember that when you first started to learn to ride a bike, you probably started with training wheels. And you may have even fallen a couple of times when you took them off, but you got up, and now some of you might be Olympic mountain bikers, but others might just enjoy a Sunday afternoon ride.

And the same experience can be true in the market. Just make sure that if you do fall down, you can still get back up again, because it does get to a place where it’s actually really fun to do.

I’d like everybody to think about Gordon Gekko. What Gordon Gekko did is risky, but it doesn’t have to be that way. And honestly, not knowing about money-making skills is risky too.

If we all ask more, see more and hear more, we can learn to make more. And so this brings me back to the beginning of our conversation when I dropped my child off at school this morning, as many of you have as well.

Are they really learning the skills they need to be successful in life? And have the skills that you learned about money helped you to get you where you want to go?

Thank you.

 

Resources for Further Reading:

10 Things I Learned After Losing a Lot of Money: Dorothée Loorbach (Transcript)

Chamath Palihapitiya on Money as an Instrument of Change (Full Transcript)

Martin Ford: How We’ll Earn Money in a Future Without Jobs (Transcript)

When Money Isn’t Real: The $10,000 Experiment by Adam Carroll at TEDxLondonBusinessSchool (Transcript)

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