How Nancy Dunnan Changed My Life

TB and I were chatting yesterday and somehow we ended up talking about investing. The crux of the conversation was how so many of our family members view the stock market as a massive Ponzi scheme setup to allow institutions to steal money from small investors. Perhaps this is true, microscopically, yet investing in equities, particularly stock, has been a surefire method of sustained asset growth over the long term. Still, the stock market is viewed by many in our families as something to be feared rather than something to be leveraged.

This fear is real and cannot be summarily dismissed. I wish I could chalk it up to conservatism, yet these same people throw caution to the wind whenever the next get-rich-quick opportunity (aka scheme) comes knocking. Another explanation is complexity. The stock market involves millions of numbers, some with lots of decimal places, others with lots of commas. There are also numerous financial & technical terms resulting in a jargon and shorthand that could scare away just about anyone.

I am sure if you asked the average person to walk you through the process of buying a share of McDonald’s or Starbucks stock, they probably could not tell you. However, they can quickly tell you what comes on a #3 and that they prefer Grande-raspberry-soy-extra-hot-no-whip-mocha lattes. For many people, it is easier to buy from most publicly traded corporations than it is to invest in them.

I could have been one of those people. Statistically, from my upbringing, I probably would have as well if it were not for a book I bought and read one college summer.

I started interning at the world’s largest software company the summer following my freshman year at MIT. That summer I earned more in 12 weeks than I had earned from all my previous jobs combined. That blew me away because I began working (in the W-2/W-4 sense) when I was 14 and had a job up until the day I left for college. My new riches were quickly wasted on stereo equipment, computer gadgets and hanging out. Shoot, I was rich and living la vida loca. The next summer I earned even more but put some of it away into a checking account to augment the money I would earn during the school year from my campus job. The savings did not stretch far enough and I knew there had to be a better way.

First, I had to get some discipline by saving more and keeping it saved. I am a fairly disciplined person so that part did not scare me. The next thing I had to do was get a return on those savings that justified ending my current version of la vida loca by investing in a grande version for the future. I did not know the first thing about the stock market but figured if it made Bill Gates the richest man in the world I needed to get schooled, quickly. As a young adult, I did not have a lot of money but I did have both time and discipline.

I bought How to Invest $50 to $5000 by Nancy Dunnan in its first edition (it is now up to its 8th). It is a small, inexpensive paperback with very clear and simple guidance on how anyone including a poor college student can invest small amounts in a low-risk way. I read it a few times cover-to-cover envisioning the yacht and jet I would eventually be able to afford after investing $100 each month in a few DRIPs and several mutual funds. Try to get your average college student to invest $100/month from their campus earnings each and every month. It took a lot of discipline and was painful but it changed my life.

I setup direct withdrawals from my checking account to my investment accounts. Each month that $100 was going to be deducted regardless of my balance and NSF charges would cost me about 2 hours of work at my campus job. The strategy worked. I never overdrew my account and I always paid myself first through that $100 monthly investment before paying other bills and living expenses. Did I mention it was painful?

So, how did Ms. Dunnan’s book change my life? I bought my first house at age 22 (a couple weeks after graduating) using the money I had saved for the down payment. I rented a room to a friend from those previous internships to help with the mortgage. I sold that house 2 1/2 years later for $50k more than I paid getting a decent return. With that money TB and I built our next home which we moved into in 2001 and sold in 2005 for an even bigger return which we rolled into our current home. Those early investments have been one of the primary contributors to our Worth Score. If all goes as planned, the cycle will continue.

While I no longer invest with them, the primary source of my early investment returns, was the Alger family of mutual funds which makes it easy for people just getting started. If you have cash to invest and are unsure which funds to choose or how to get started, open a TD Ameritrade account (we have one) and buy index funds.

3 Replies to “How Nancy Dunnan Changed My Life”

  1. 😀 I think I may purchase a few of those books for my younger cousins and a few undergrads at Rice!!

    After much yapping I finally got my mom into her first house since she was married to my dad and her first house she has ever owned by herself. Next is getting her to invest into some kinda of something so she can have something to augment her retirment besides my salary!!

    Glad I stop by on this lazy Saturday!!

    Hope you and TB are doing ok! I’m sure I will see you soon!!


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