Part One
SPEND LESS, SAVE WELL, INVEST OFTEN
Me in San Francisco in 1984 in the early days of SoftKey Software Products. We were losing money every day. I was scared out of my mind. I know a thing or two about feeling financial loss.
(Property of Kevin O’Leary)
CHAPTER 1
Money Lessons I Learned from My Mother
In the same way that our relationship to food is shaped by lessons learned during childhood, so, too, is our relationship with money. It is often our parents, for better or for worse, who teach us our first money lessons. My mother, Georgette, was a master with money. She was born in Montreal to parents of Lebanese descent. And while she didn’t have a fancy business degree, she was thrust into the family clothing business at a very young age, after the sudden death of her father. In the Lebanese culture, businesses are usually passed down to the boys, but her brother, Norman, was too young to take over. So in the beginning, it was up to my mother and her sister to keep the business running until Norman was old enough to take over. Turns out, my mom was a natural at balancing the books. She met my father, Terry, through the family business. He was a charismatic guy and one of the company’s most talented salesmen—until his personal problems meant he lost every penny he earned.
Many marriages crash against the unforgiving shores of bad money management, and too often children bear the brunt of their parents’ financial decisions. My parents shielded my brother, Shane, and me from the worst of their marital woes, but my mother’s marriage to my father broke down largely over money matters. He was good to Shane and me, but he was a fun-loving Irishman who liked to buy rounds at the bar and gamble with his friends.
I was six years old when my mother was granted sole custody of Shane and me. She got remarried, to a man named George Kanawaty, who became a father figure to Shane and me—something my own father couldn’t be because of his addictions. After the wedding, we all moved to Illinois so that my new stepfather could pursue a Ph.D. in business. One day, fed up with the custody arrangement, my birth father threatened to come to Champaign-Urbana and bring Shane and me back with him. My mother had heard he’d fallen in with a rough crowd, so she didn’t want us going there. The plan was for my mom and both of us kids to fly to Europe for as long as it took George to reason with my dad in Illinois. But the trip required cashing in a big part of George and my mother’s emergency savings, which weren’t significant to begin with. When my mother married George, he was a student with $36 to his name.
Where there’s a will, there’s a way—and I have never met a woman with more will than my mother. The three of us flew to Lausanne, Switzerland, where my brother and I would be safe. After waiting it out for weeks in a foreign hotel room with two little children, and despite her determination and cool resolve, my mother finally burst into tears. She was at the end of her rope, in terms of both stress and finances. The money that was keeping her children safe from a man she didn’t trust to take care of them was running out. And both George and my mother had used up almost all of their resources. There was nowhere else to turn. Kids pick up every nuance of parental strife and store it in a place so deep in their subconscious that it affects them for the rest of their lives. I knew George and my mother didn’t have the money to hire expensive lawyers to fight this in court, and they certainly couldn’t afford to keep us hidden in Europe forever. I will never forget my mother’s fear, the look on her face when she realized that eventually the money would run out and she might lose her children.
Less than eight weeks into our exile, sadly, tragically, my father died of a heart attack at the age of thirty-seven. The custody struggle was over. Still, our precarious financial situation, and my mother’s panic about it, moved through my bloodstream in that one moment, and I think it changed my very DNA. I remember thinking, I never want to feel this frightened and powerless again. I never want my own children to experience economic terror. Early-childhood trauma is an awful thing, but in this case, it might have been an odd blessing for me. Looking back, I think that’s when the seeds of my own need to achieve financial security were sown.
Maybe you’re wondering why I’m telling you this story. The truth is that when I deliver tough-minded financial advice, I want you to know where it comes from. I’m a wealthy man now, but at various points in my life, I’ve experienced the terror of economic insecurity firsthand. I’ve shared this personal story with you to show that sometimes in life, people may be able to help you out of difficult situations. But there are other times when the only thing that can help you is money. But for money to save you, first, you have to save it.
Beyond saving money in case of catastrophe, my mother was also a savvy spender. Here’s the distinction: She was careful with her money, but she wasn’t cheap. I remember admiring a Chanel jacket she once wore to Christmas dinner at our place in Boston.
“Great jacket, Mom. Must have cost you a fortune.”
“Not this year,” she said.
“What do you mean?” I asked.
“Kevin, dear. This jacket is old. I’ve had it forever.”
This surprised me because the jacket was so stylish and beautiful, a black classic box cut. It looked like she’d just picked it up off the rack from that season’s new line, but she then told me she’d bought it in the late sixties, twenty years earlier! She spent, at the time, a small fortune—about $500—for that jacket. We didn’t discuss this further, but knowing my mother, she would have saved and thought about this purchase for a long time before actually following through. She would have tried it on a few times, with George there to give her feedback. But the thing is, she wore that jacket for decades. She didn’t dry-clean her clothes every time she wore them. She steamed them now and again, to maintain their shape and color. She never flung her clothes on the back of chairs. She always hung them up on hangers. Not everyone can afford Chanel, that must be said, but this example begs some serious math.
Let’s say you buy a bargain black blazer at the Gap for $100. It’ll probably stay in style for a season and pill and fade after dry cleaning it five to ten times. So in the course of twenty years of professional use, you’ll purchase a new black blazer every two years, say, for a total of $1,000—assuming the price never goes higher than $100. Using the math above, you could say my mother’s jacket, purchased for $500 more than twenty years earlier, saved her $500. But here’s the real value: The perpetually fashionable Chanel blazer would fetch about $1,000 today, according to vintage clothing collectors I’ve consulted.
So who saved more money? You, with your $100 blazer purchased every two years for twenty years, at the cost of $1,000? Or my mother, who bought one jacket, once, at a price of $500, wore it for twenty years, then sold it for $1,000? I want you to know this is coming from a man who balks at a designer price tag. I can’t believe how much good-quality clothes cost. And I also want to be very clear that I’m not advocating that you go out and buy Chanel if you can’t afford it. But I am asking you, with everything you buy, to consider value over impulse. I am asking you to examine all your purchases and begin to treat everything you buy as an investment. Everything. Even a blazer. I want you to start thinking about quality and the potential resale value of every single purchase you make. It’s a good discipline that will cut down on a lot of impulse and redundant spending.
That’s what Georgette did. Incidentally, that’s what my wife, Linda, does, too. We went to a black-tie function recently, and she pulled out a dress she’s had for more than ten years. It’s a classic cut, beautifully made, the kind of silhouette that never goes out of style. She’s gotten a lot of use out of it. And while my mother bought some of the most beautiful and expensive clothes I’ve ever seen, almost none of what she bought lost much of its value or stylishness over time. Her closet was well curated. She never bought too much or overspent. She was a smart shopper. Incidentally, my daughter, Savannah, has become a vintage clothing hound. She buys a lot of great pieces secondhand. I like to think she inherited her unique style from her mother and her frugality from her grandmother.
In 2008, my beloved mother passed away. It was devastating and unexpected: a heart attack followed by a stroke on the operating table. Days later, I was told that she had made me the executor of her estate. After years working for the United Nations, she and George had enjoyed a textured life, rich in experiences, travel, friends, and fine food, but their lifestyle was by no means overly lavish. They mostly lived on George’s solid UN income, so my mother’s money was hers to invest and spend. She never merged it with her husband’s. That money was all her own, and George didn’t even know how much she had. Keeping some money separate for you and only you is one of the best financial lessons I can impart to you. (I’ll talk more about that and what I call your “Secret 10” in Chapter 6.) But at the time of my mother’s death, I hadn’t given this idea much thought. Mostly, I never imagined that Georgette’s savings amounted to much. But when I opened the books and studied her long-term investment portfolio, I got a big surprise. She’d amassed the kind of nest egg with which most people could enjoy a worry-free, exciting re...