Colin Walsh/ Class 9: Financial Literacy
by Colin Walsh
223. How would you gauge your level of financial literacy today?
If first grade was the lowest level, and twelfth grade was the highest, I would have to say that, as for financial literacy, I would be in about 7th or 8th grade.
Finance is a deep involved field. It must be if there is a doctorate degree for it. Not only is there personal finance, but there is also corporate finance, and other types. A person can study finance every day for the rest of their lives, and they would still not know everything there is to know about finance. Therefore it is impossible to gauge one’s progress.
For me, I have my own personal gauge. This is how I gauge my progress; I used the analogy of grades. First grade is where I was, and twelfth is where I want to be.
As of right now, I would consider myself to be in seventh or eighth grade. Through personal studying, I have learned the basics, the alphabet of finance. This was first through third grade. Then through studying with an established professional, I moved through some more intermediate financial concepts. This moved me to fifth grade. Then through the studying in college in business courses, I advanced myself further, through fifth to seventh. Now I am not quite where I want to be, but I am moving there. I only have five grades left to go.
224. To what extent would you suppose that financial literacy relates to your probability for success upon release?
Personal finance is essential to success. If a person cannot budget and manage their money, they will fail. Even the richest people in the world need to budget to avoid this. The ability to manage one’s finances is essential to success.
It is a fact that 75% of lottery winners file for bankruptcy protection within the first three years following their win. I believe that this is because they lack the skills to manage their new found riches.
This shows that a person must have financial capabilities to be successful. Having money isn’t enough, a person must know what to do with it.
For a prisoner it is also important. Many prisoners lose the ability to budget because it atrophies over time of non use. Many prisoners do not use financial skills. A prisoner is limited to $290.00 per month at the commissary, and they don’t have any other bills. $290 is nothing in the outside world. Over the years of only dealing with this small amount, I feel that many prisoners lose the ability to budget. I think this also reflects recidivism rates. I believe that without the ability to manage money, a prisoner will fail. And many prisoners do.
The probability of success for someone without some financial know how is very low.
225. What opportunities exist for prisoners to improve their financial literacy?
The advantage that prisoners over the rest of the world, is that they have spare time. A prisoner can essentially devote every second pursuing whatever they want. If a person wants to improve their knowledge of finance, they have enough time to do it. Along with time, a prisoner also has the invaluable resource of each other.
A prisoner can spend their entire day playing cards if they want. But a prisoner can also spend that same time studying. If prisoners want to improve their financial knowledge they have to devote some of their time to that. This can be a great opportunity for prisoners.
Along with time, prisoners also have the resources necessary to learn finance. Mostly all prisoners have access to television. They can spend time every day watching financial programs. Also prisoners have access to a library. Even though the library is limited in books, they will have some books, magazines, and newspapers that would be helpful in teaching finance.
Also the prisoner is a very diverse population. The prison is full of people who earned their doctoral, masters, bachelors, degrees and it is full of other professionals. I currently live in a unit with 300 other people, and their are 5 other units just like this one. There is 2000 people on this prison compound. There is a great chance that there is at least one person here that has some financial knowledge, and there are many. Personally I found a person who has his PHD in finance. He helps me learn a lot about finance. He is like my personal 24/7 tutor. Also with such a dense population, there is always many books, newspapers, and magazines everywhere. This great mass of people is a terrific resource and offers a great opportunity. There isn’t a question that cannot be answered by someone here.
If a person wants to increase their financial literacy they can do that in prison. There are many great opportunities that exist. All that one has to do is take advantage of them.
226. How would you summarize the total costs of your imprisonment?
To the best of my knowledge, it costs the government $30,000 per year to keep me in prison. This covers the cost of housing, clothing, food, and supervision. this totals $2,500 per month, so to maintain my imprisonment for 55 months it will cost the government $137,500.
Also the excessive cost to investigate, charge, arrest, and prosecute me had to have exceeded $1 million. This would be included to the cost of my imprisonment. This cost would have included two senior prosecutors’ full time salary, plus two FBI agents’ salaries, for two and a half years, plus their entire legal and investigative team. This would also include judges and all of the court room staff, and anyone else involved in the matter.
Finally my cost should include the fact that I am unable to contribute to society through taxes. I won’t pay taxes for the four years that I am here. This is included in the cost because it is a loss of revenue to the government.
If I had to estimate a total number, I would say that the cost that it took to imprison me exceeds $2 million, in a matter of 7 years.
227. Describe ways in which in an understanding of the stock market may help you value investment opportunities.
When investing in the stock market, an investor buys a piece of something, and bets that the price goes in the direction that they bet. Eventually, the person sells the piece back to the market for a profit or a loss. A successful investor doesn’t just randomly pick securities. It takes analysis and research. I believe that the skills required to be an investor are great life skills also. Learning these skills would be very helpful in life.
Understanding the stock market forces a person to weigh risk verse reward. If a person risks $100, to make $1. That is not a good investment, because the risk is greater than the reward. If a person risks $100 to make $50, that is an excellent investment, because that return would be a 50% Return on investment.
In life, risk verse reward is equally essential. A person needs to be able to consider this in every activity. For example, anyone could sell drugs. They basically sell themselves, and the business is very lucrative. It is easy money. A person can easily make $1 million. But for me, the risk of going to prison or being killed far outweighs the reward. In a business sense, it is not a good choice to invest time nor money into a business that is going to fail. In a personal sense, it isn’t worth investing time into a relationship that is going to fail. Every choice that is made in life uses the same rules of investment.
Learning and applying these skills is very helpful, not only in investing, but in life.
228. How would improving skills to analyze the fundamentals of a particular stock lead to becoming a better small businessman?
Investing in stocks is essentially buying a portion of a business. The ability to analyze, and research other business, gives a person insight into how businesses operate. Owning a piece of a business, through the stock market, also analyzing, and researching these businesses, will help a potential business owner learn the necessary skills.
In order to be a good investor, a person must research a company in depth. Throughout this process, a person will learn a lot about the companies that they are researching. Also they will learn about business in general. Over time a person will acquire the skills necessary to operate their own business.
Buying stock gives a person ownership of a small piece of a business. Being part owner of a business is a great way to learn the essentials of running a business.
229. Describe the level of thought you are giving to your financial future.
I continually think about my financial future. Being so young, my future is always on my mind.
I think constantly about how much money I will need throughout my life. I always ask myself, how much do I need upon release. How much do I need for a car, housing, clothing, food, college, recreation, and everything else required for life? I think about how much will I need in five years. How much do I need in ten years? I even think further into the future, how much do I need in 20 or 30 years?
Not only do I simply ponder about these questions. I also think about how I am going to reach the goals that I set.
These thoughts constantly rest on my mind. I think about it all of the time and look for opportunities to make these thoughts reality.
230. Describe the level of preparations you are making to prepare for retirement.
Personally, retirement is a long time away. It is about 40-45 years. Even though it is so far off, I still give it some amount of thought an preparation.
As of now, the only preparations that I make are researching and learning everything that there is to learn about retirement. I learn all of my options. I learned about various investment options such as, IRA, 401(A-Z) And other options. Knowing about these options will prepare me for future retirement.
Personally, I believe that retirement is too far away for me to begin investing. Too much could happen between now and then. I can’t afford to lock up my money for almost a half of a century. I would rather use the money that I do have, to make more money, then invest in retirement. So as of right now, the only preparations that I am making is through learning.
231. In what ways would an understanding of the U.S. tax code contribute to your preparations for release?
Over the past year I have met many people, people who have violated the tax code. Out of all of those people I would assume that half of them were ignorant of the code. Many of these people could have avoided coming to prison if they only knew the code. Personally, I too, could avoid returning to prison if I was familiar with the tax code.
The tax code is an 800 page tome. It isn’t something that a person just picks up and reads cover to cover. A person must take a significant amount of time to learn it.
Understanding the tax code isn’t only for accountants, but for everyone who pays taxes. Every person needs to know what they do and do not owe the government. Not knowing the tax code is like playing a sport not knowing the rules. A person who is ignorant is going to make mistakes. Dealing with taxes, these mistakes could carry great penalties.
232. What is your understanding of entrepreneurship?
The definition of entrepreneurship is risking time and other resources for a business venture. An entrepreneur is someone who does just that.
I recently took a college course specifically teaching entrepreneurship. The first chapter covered risk assessment. I believe that this is the most important aspect of being an entrepreneur. If one is unable to assess risk effectively, then they are going to fail.
The remainder of the course covered other business disciplines including: Marketing, management, planning, Finance, sales, human resources, strategy, and many other ancillary topics. I agree with the book in stating that all of these topics are essential to entrepreneurship.
Entrepreneurship is taking risk for financial gain. Anyone can be an entrepreneur, but a successful entrepreneur takes much skill. Likewise, for a person to be successful in life, they too must have some of the same skills as an entrepreneur.
233. What would you attribute as a primary reason for business failures in the United States, and why?
It is a proven fact that the primary reason that 75% of all businesses fail, is due to an lack of capital. Looking deeper into the problem, I realized that although the proven statistical reason for business failures is lack of money, I believe that that the problem starts far before that.
Nobody wants to go into business to fail. Everyone expects to succeed. Everyone thinks they will succeed. Otherwise why would they even try. Therefore, everyone thinks that they have enough capital to succeed. This proves that the main reason for business failures cannot simply be lack of capital, but in truth it must be lack of planning. If a person would have planned to anticipated more effectively, they wouldn’t have ran out of money, or they wouldn’t have even tried. This clearly shows why I believe that lack of planning is the primary reason for business failures. This lack of planning, is like the first domino, it causes all of the other problems.
Even though the government stats show that they lack of capital is the main reason why businesses fail, I believe lack of capital is only an effect, an effect caused by lack of planning.
234. If you were going to run your life as a business, how would you describe your preparation to succeed?
99.9% of successful businesses have a well thought out business plan. This is why I know that the guide to a successful business, is a great plan. If I was planning to start a business soon, I would begin by making a plan. Therefore in running my life like a business, I plan also.
Planning is the current stage of life that I am in now. Like running a business, planning is essential in life also.
A business plan has various topics that covers a broad base of subjects. There is marketing, finance, policies and procedures, operations, management, and this just scratches the surface. A business plan goes into great depth. It tries to anticipate every possible scenario, and plans how to overcome ever difficulty. The business plan looks years into the future, and shows, step by step, how a company is going to succeed. It begins from the inception, and continues far into the future. Basically, a business plan lays out goals, then systematically and methodically, shows how the business is going to get to that goal. For life it is the same.
I operate my life like a business, and now I am writing my plan. I break my life into categories on different subjects. Personal finance, education, discipline, relationships, et cetera. Within each of these categories, I plan every possible scenario, and plan how to overcome every possible problem. I look years into the future. I have goals, and show, step by step, how I am going to achieve each goal. My life plan is essentially identical to a business plan.
The key to an successful business is a well throughout business plan. Likewise, the key to a successful life, is also a well throughout plan.
235. What resources do you have available to you now?
As of right now, my resources are scarce. Two resources that I do have are time and educational material. These two resources far exceed any monetary figure.
Currently, I don’t earn much of an income.. I only make a few dollar per month. The maximum that I could make is about $200 per month. In order to earn that amount, I would have to sacrifice another priceless resource, time. In order to make that much I would have to work over 40 hours per week. I believe that my time is worth more than that meager wage. Especially when the work is meaningless, monotonous, and robot work. I consider time to be the number one resource. It should be used wisely… Working a prison job would cost me this valuable resource with little reward.
If I worked 60 hours per week, for every week that I was here, I would be working 54% of the time that I was awake here. At the end of 4 years I wouldn’t have even earned $50,000 which is the average salary in America. After figuring this out, I realized that the risk was not worth the reward. I chose not to waste the valuable asset for that diminutive reward. Even though I am able to earn $200 per month, I chose to not, and I chose spend the time more effectively.
Instead of wasting my time making less that a dollar an hour, I utilize my time and use it effectively. The resource that I value the most is time. I only have 16 hours every day. Being in prison allows me to focus this time on bettering myself. I have already invested 7360 hours into myself, and I only have 15440 hours left. Time is the greatest resource available to me. I have every second of every day to devote to bettering myself.
Along with time, I have educational material as a resource. Even though I am in prison, I still have access to books, magazines, and newspapers. This material serves as a great resource. With this resource I am more able to make better use of me time.
Although prison lacks many resources, many still do exist. I try not to focus on what is not available, but what is. I use what does exist to the best of my ability.
236. What potential markets exist for you?
There is one advantage that I have gained over the time that I have spent here. I have first handedly experienced prison and learned in dept about prisons. Also, I have encountered a great adversity in my life, through this experience. Not only have I encountered adversity, but I am working to overcome it. These advantages have opened a giant market for me.
The prison market is growing daily. More people are going to prison and less are getting out. Also the number of people that come out of prison and are returning to prison is proliferating. This trend defines the market. I expect to use my knowledge in the field to influence this market. I can reach this market in numerous ways.
Along with the prison market, others do exist. I am now able to better relate to people who have faced adversity. With this insight, I can help show and teach anyone who is facing adversity, how to overcome it.
I know that other markets do exist, I just haven’t defined them yet. I believe that over time they will reveal and develop, but as of right now, they are not clear.
There are millions of various markets that exist in America. For me, there are a few that I have an advantage. I intend to use this advantage, and operate within these markets.
237. What level of resources do you anticipate having on the day of your release?
When I am released from prison, the seeds that I have planted will begin to grow.
Even before I was sentenced, I started preparing for release. I have collected and saved resources. I anticipate to employ these resources upon release.
Everyday, I glean resources in anticipation for release. These resources are not only financial, but mental and human as well. I intend to have enough resources saved to begin on the road to an successful life.
238. What level of earnings do you project during your first three years after your release?
I don’t expect to make much money in the first three years of release. This is because I will be attending college full time. I do still intend to work on the side, and work full-time during the summers.
If I had to guess, I would estimate that, in the first three years following release, I will make a salary of about $20,000. I will earn this working somewhere part time. I know that I can also make another $10,000 per year doing freelance work on the side. Along with that, I assume that I can make another $10,000 working full-time during the time that I am off from school. So in total, I expect that I will make $40,000 per year gross income. For three years, that would be $120,000.
239. What level of earnings do you project during your first decade after your release?
After the third year following my release, I will be graduated from college. After college I intend to land a professional full-time position. I also expect to work on the side doing other freelance work.
Following college, I expect that I could land a decent full-time job. I think that it isn’t unreasonable to expect that I could make a $40,000 per year salary.
Along with this steady income I intend to do professional freelance work. For the first few years of doing this, I expect to have a gross income of $30,000.
Between these two incomes I intend to make an average of $70,000 per year for the first ten years. This will total, $700,000 over the period of ten years.
This is a very rough estimate, the success of hitting these marks depends on many external factors. Even though it is an estimate, it is my goal. This is what I want to earn. It is the target that I am going to aim for. Whether I earn it in the ways that I stated, or not, the goal doesn’t change. I will try to reach this goal by whatever legal means necessary, not only meet the goals, but far exceed them.
240. What action steps can you begin taking to increase your financial literacy?
If a person wants to build a strong financial literacy, he must build a strong foundation in rudimentary subjects. A good start to building knowledge is having a good basic foundation.
A person cannot run before they can crawl, and they can’t understand anything in finance until they learn the basics in Math and Reading. Mastering skills in Math, reading, and writing, would put a person on the level where they are more able to understand more complicated topics, such as finance. Learning the basics will open many doors, and advance a person toward mastering finance. That is where a person should begin to learn anything, especially finance.
Trying to learn financial concepts before learning the basics, is like trying to build a house on sand. You might be able to get by, but eventually it is all going to come crumbling down. Not only learning the basics, but mastering them, is required.
241. What relationship do academic credentials have to enhancing financial literacy?
Some may believe that academic credentials are a direct correlation to overall knowledge. Although this may sometime be the case, many times a person who masters one skill, will be lacking in another. Academic credentials only show that a person has passed the minimum requirements is a particular field. It doesn’t mean that they are knowledgeable in everything.
When it comes to financial literacy, many people with advanced degrees, are completely oblivious to that subject. The perfect example is my college English professor. He had his Doctoral degree, and could write 100 page dissertations on his subject, but when it came to math, he probably couldn’t do a math problem to save his life. Unless a person focus is on learning financial literacy, they will not learn it.
Even though academic credentials prove that a person has made it to a certain level of education, it doesn’t mean that they have reached that level in every topic.
242. In what ways would fluency with mathematical concepts and equations enhance your potential earning power or opportunities upon release?
Building the basics in all subjects, establishes a strong base to build any career. Math skills are especially important. I believe that everything in life is one big math problem. Math can be applied to all fields. Having proficiency in this field would enhance one’s chances of being successful.
Math can be applied to everything. The world that surrounds us is all math and all numbers. A value can be placed on just about anything. The ability to use and manipulate these numbers, and use them to one’s advantage, is a great asset.
A person that lacks this basic knowledge is are a severe disadvantage. They will be taken advantage of. For example: Pricing techniques are all designs to trick the prospective buyer. Gas savings is a great example. There are people who spend dollars to save pennies. Gas stations manipulate their prices a few cents to drive in buyers. Some people will drive miles out of the way to save a few cents off of a gallon. So, if a person saves 2 cents on 15 gallons they only saved a total of 30 cents. If they drove 7.5 miles out of the way, that is actually 15 miles out of the way, to and from. If a car gets 30 miles to the gallon, they just used a half of a gallon to drive 15 miles. If gas costs $3.00 per gallon, this person just spent $1.50, to save 30 cents. That is a loss of $1.20. Using math, this proves to be ridiculous, but there are people that do it everyday.
Not only is math useful in everyday life, every career could also uses math. Whether it is an artist, or an engineer, every career could use math. Therefore, being well versed in these skills will open up career opportunities. The higher the level of this skill the higher level of opportunities.
Overall math is essential to life, the more that a person is skilled in math, the more fulfilling their life will be.
243. In what ways would developing your skill with regard to reading, writing, and speaking enhance your potential earning power or opportunities upon release?
As with math, improving skills in all basic fields would enhance one’s chances of success.
Reading, writing, and speaking, are all skills that can be used in all fields. Having these skills can elevate anyone in any profession. Even a construction worker that can read, write, and speak, will have a better chance of advancing his career, than the guy who doesn’t. These skills serve as a spring board to launch a person into a higher position. Those who do not have these skills will remain at the bottom.
The ability to read write and speak well, can open many possibilities. The ability to do these well, shows intelligence, and the perception of intelligence is what will create the opportunities. Each level that a person reaches in these skills, the more doors that will open.
244. Describe the types of books that might broaden your financial literacy and thus help you prepare for success upon release?
There are thousands, maybe even millions of books, that are written about finance and business. I believe that reading any of these books, would enhance one’s ability to comprehend finance. Along with books, there are also many other publications, magazines and newspapers that cover many subjects of finance. Reading these will also help one to learn about finance.
Business is a very broad topic. The range of books that do exist is endless. There are an innumerable amount of textbooks that cover all of the disciplines of business. There are also books written for the general public on finance, including books covering business, the stock market, and others on investment strategies. There are also expose books about companies that have failed. Also there are biographies about successful businessmen, and financiers. Reading any of these books would definitely improve a person’s comprehension of finance, thus enhancing one’s chances for success.
245. What resources will you rely upon to make financial decisions in your future?
In the future I intend to make financial decisions the same way that I intend to make all decisions. I plan to make them based on my values, and goals. My decision making process will not change with financial matters.
When faced with a financial decision, I will first assess the risk verse the reward. Then I will assess the decision and decide whether or not this decision will get me toward my goal.
For example: If I had $100,000, I could easily go and buy a brand new Lamborghini. What would stop me from making that decision? First, It is not part of my values. I wouldn’t waste that amount of money on something such as a car. Second, having a Lamborghini is not one of my goals. Therefore, I would spend the money more usefully.
I will make financial decisions just as I make any other decision.
246. To what extent do you anticipate investment decisions having a role in your future?
I expect that investing will be an important factor in my life. In order for the money that I make to generate more money, I know that I must invest.
I expect to be an avid investor in the future. With the knowledge that I have acquired, I can use investing as a secondary income. That is what I plan to do.
The decisions I make while investing are critical. A person can lose everything and their shirt while investing. It is very important that an investor makes intelligent decisions to avoid losing.
My investment decisions can make or break my future. If an investor doesn’t make good decisions, they won’t be an investor for long. Knowing this, I know that the decisions I make are crucial.
247. Describe the resources you anticipate relying upon as you advance in age.
The more that I age, the more resources that I am going to need. I need to position myself, so that the money that I make in the earlier years can grow, and then be used in the later years. I intend to make this happen through investing.
I intend to make a primary steady income through means other than by investing. With this money that I make, I intend to invest a percentage of it. As I age, this money will gain interest and grow. Also, this money will provide a secondary income stream through dividends and other payouts.
As I age further, I will begin investing into my retirement. Eventually, this money will aggregate into an amount I can live off of through the final years of my life. As I age, the more I will rely on the money I have invested in the earlier years.
248. What role will these resources play in sustaining your life?
The resources that I aggregate over time will provide a secondary income. This money should also reach a reasonable amount, that I will be able to utilize in the final 20-30 years of my life.
These resources should help provide a comfortable living while I am young. And as I age they should provide me the ability to sustain myself without working.
249. How will you adjust your tolerance for risk as you age?
As I age, the amount of risk that I will be able to take will inevitably lessen. The less years of life that I have remaining, is the less years that I would have to recover from a bad investment. This means that I must make more conservative investment decisions as I age.
While in my twenties and even well into my thirties, I expect to take a greater amount of risk while investing. With a higher risk there is usually a higher reward. Because I will be so young, I want to take advantage of this higher reward.
But with any investment, there is a risk for loss. As I age into my forties and fifties, I need to avoid taking this risk. Therefore I need to shift the majority of my investments into more conservative investment options. As I get older, I won’t be able to afford the risk that accompanies less conservative options. This will be because I won’t have time to recover from a loss. A loss in the later years of my life would be much more detrimental than in my younger years.
As everyone ages, their risk for everything should lessen. It is the same for investing.
250. What influence would another problem with the criminal justice system have upon your financial stability?
Another collision with the criminal justice system would completely crush all stability, especially my financial stability.
I have met numerous people who have lost everything through their arrest. They have lost their house, cars, furniture, clothes, jewelry, cats, dogs, everything. Anything that they once owned is gone. As a result they also ruin their credit, which weakens their financial position in the future. Through lawyers fees, court costs, restitution, fines, and the inability to work, many people destroy their whole financial stability not only for the time being but for the future also.
I know that I am not special. I know that another arrest would ruin everything in my life, and whatever financial stability that I have gained. Therefore I must completely avoid taking this risk.