The world of personal finance is weird. It is perhaps the only industry, where someone with no formal experience can outperform someone with the best knowledge. Of course, part of it can be attributed to luck. More importantly though, it is not a hard science, but a soft skill. Our behavior is much more important than how much we know.

Here’s a list of 5 fascinating personal finance stories that drive home this point.

Ronald Read

Ronald Read was a simple man. He grew up in a farming household and was the first person to graduate high school from his family. He enlisted in the army and upon discharge in 1945, he worked as a gas station attendant and mechanic for 25 years. For 17 more years, he worked as a janitor at JCPenney until 1997.

In 2014, Read passed away at age 92. And that’s when he made it to international headlines. In his will, Read bequeathed $6 million to charity and $2 million to his family. 

He amassed a net worth of $8 million, mainly by investing in dividend paying blue chip stocks and living well below his means. Oh, he also let his savings compound for decades.

Grace Groner

Grace Groner, like Read, was also born into a farming community. She was orphaned at age 12 and then taken in by one of the members of her community who paid for her education. She graduated in 1931 and never married.

Grace joined Abbott Laboratories as a secretary in 1935 and bought 3 shares of Abbott for $180 in her first year of joining. She worked there for the next 43 years.

Over the next 75 years, her shares split many times and she reinvested all her dividends into the same company.

In 2010, Grace passed away at age 100. Through her will, she donated $7 million to the college she graduated from. She had accumulated around 100000 shares of Abbott by then. She invested at an early age and held on to her stock through almost 13 recessions!!!

Richard Fuscone

Richard Fuscone was a Harvard educated professional. After a successful career in finance, he retired in his 40’s as the Vice Chairman of Merryll Lynch. He was also included in the “40 under 40” list of successful businessmen by a prominent magazine.

Within weeks of Grace Groner passing away, Fuscone filed for personal bankruptcy. In the mid 2000’s he borrowed heavily to expand his 18000 square feet mansion. 

The 2008 financial crisis left him with illiquid assets, huge debt and no income. His home was sold in an auction for 75% less than the insurance company’s initial valuation.

Jesse Livermore

Jesse Livermore, born in 1877, was an American day trader who was considered to be the greatest trader of his day. 

He was famous for going short, just before the Wall street crash of 1929. In October that year, when markets lost a third of their value and many traders were committing suicide, Jesse had the best trading day of his life.

He had made the equivalent of $3 billion in a single day. One of the worst months in stock market history has made him one of the richest in the world.

Since then however, he made larger and larger bets, eventually going into huge losses. On November 28th 1940, Jesse Livermore committed suicide. The suicide note addressed to his wife read 

My dear Nina: Can’t help it. Things have been bad with me. I am tired of fighting. Can’t carry on any longer. This is the only way out. I am unworthy of your love. I am a failure. I am truly sorry, but this is the only way out for me. Love Laurie

Rajat Gupta

Rajat Gupta was born in Kolkata and was orphaned during his teenage years. He and his siblings decided to live by themselves since then. Gupta did his bachelors from IIT Delhi and an MBA from Harvard in 1973.

He then joined McKinsey & Company and by his 40’s, became their first non US born CEO. In 2008, his net worth was around $100 million.

He sat on the board of directors of several public companies, did philanthropic work with Bill Gates and co founded ISB.

In 2012, he was convicted for insider trading and was sentenced to two years in prison. 

Apparently, Gupta wasn’t content at just being a millionaire. He wanted to be in the Billionaire’s club. 

He wanted it so badly that, using his position in the board of directors, he divulged material nonpublic information to a hedge fund manager, resulting in around $17 million of illegal profits, also ruining his reputation and career permanently.

Gupta was released from prison in 2016.

Summary

These stories reiterate the fact that long term wealth requires patience and decades of compounding. At the same time, they also tell us that becoming rich, and staying rich are two different things. 

Staying rich requires you to know how much is enough and not to over extend beyond your means, no matter how big the potential gains are.

Financial success, or failure, therefore, depends predominantly on your own behaviour.

Note : Most of these stories are from the book “ The Psychology of Money “ by Morgan Housel. I recommend you read the book in its entirety. It’s probably the best personal finance book of recent times.

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