Charlie Munger’s Life as a Financial Independence Blueprint

blueprintCharles Munger is probably best known as the Vice Chairman of Berkshire Hathaway and partner of Warren Buffett. The University of Michigan Ross School of Business recently shared a hour-long talk with Munger on YouTube (embedded below). Munger has plenty of mentions on this site already, but my main takeaway from this talk was a more nuanced overview of his early years and how he personally achieved financial independence before really getting involved with Warren Buffett.

Here is a summary of my notes from the talk:

  • He was not born poor, but he was also not born into exceptional wealth. Munger wanted to go to Stanford for undergrad, but his father encouraged him to go to the University of Michigan as it was still an excellent school but more affordable. He ended up dropping out after only one year in 1943 to serve in the US Army Air Corps.
  • Military service, then law school. After World War II, he took college courses with the GI Bill and eventually went to Harvard Law School (getting accepted even though he never earned an undergraduate degree).
  • Successful law career. He practiced as a successful real estate lawyer until he achieved about $300,000 in assets. This was 10 years of living expenses for his family at the time (he now had a wife and multiple kids). At this point, he started doing real estate development at the same time. When this took off, he stopped practicing law.
  • Successful real estate development. When he achieved about $3 to $4 million in assets, he also wound down his real estate development firm. He was now “financially independent” but still mostly anonymous.
  • At this point, he decided to become a “full-time capitalist”. This last stage is what led him to his current status as a billionaire philanthropist. Along with his work with Warren Buffett and Berkshire Hathaway, he was also the chairman of Wesco Financial, which also grew to be a conglomerate of different wholly-owned businesses along with a carefully-run stock portfolio. Wesco Financial eventually became a wholly-owned subsidiary of Berkshire Hathaway.

Using Charlie Munger’s life as a blueprint, here’s a pathway towards financial independence.

  • Work hard, get an education, develop a valuable skill. Munger didn’t start Facebook from his dorm room or trade penny stocks in high school. He served in the military, earned a law degree, and went to work everyday for years. At this point, work means exchanging your time for money, but hopefully at a good hourly rate.
  • Use that work career and save up 10x living expenses. Munger called himself a “cautious little squirrel” saving up a pile of nuts. He dutifully saved his salary while supporting a family and kids (and some other personal family drama that a luckier person wouldn’t have to deal with). I don’t think you’ll need 10x if you don’t have a family to support.
  • To accelerate wealth accumulation, you can now take some more risk and start some sort of business. You need something that scales, something that’s not paid per hour. Munger did real estate development. If you look at people who got wealthy quickly, nearly all of them are business owners of some type.
  • At some point, your investments will enough money to support your living expenses. This is financial independence. It doesn’t matter what you do during the day, as you earn enough money while you’re sleeping. However, many people choose to continue doing one of the paths above: (1) employee-based career, (2) active business management, or (3) actively managing their investments.

Bottom line. Charlie Munger offers up great words of wisdom in this talk. He reminds us that our choice in marriage is much more important than our choice in career. He reminds us that just showing up every day and plugging away will yield great dividends over time. He reminds us that easy wealth without work is not a good thing for society. (He also says to give Bitcoin a wide berth.)

However, you can also learn a lot by noting and observing his actions. Munger was not a huge risk-taker. He grew his wealth in steps and never exposed his family to possible ruin. He worked hard for a long time and only became extraordinarily rich and famous later in his life. He primarily wanted to be independent “and just overshot”.

Connexus Credit Union 5-Year CD at 3.00% APY: Early Withdrawal Penalty Comparison

percentage2Connexus Credit Union has raised the rates on their 5-year Share Certificate to 3.00% APY with a 365-day early withdrawal penalty. They also have 1-year Share Certificate at 2.01% APY (90-day early withdrawal penalty). Both have a $5,000 minimum deposit. Anyone can join this credit union via partner organization Connexus Association for a one-time $5 fee.

It’s nice to see a 5-year CD hit 3% APY again, but the main drawbacks are that (2) rates may continue rising and (2) a year of lost interest is a significant early withdrawal penalty. To help illustrate this, I ran a comparison with the Ally Bank 5-year CD with a shorter 150-day early withdrawal penalty. The Ally CD is currently paying 2.30% APY with a $5,000 minimum deposit, so I will use that as the comparison rate. (You can also get 2.35% APY with $25,000+.)


As you can see, the penalty makes a big difference. Even if you make an early withdrawal at the last possible moment (59 months), you will never get anything higher than 2.39% APY.

If you do end up having to make an early withdrawal, the Ally CD with a smaller penalty will actually net you more money up until about 36 months. After 36 months, the Connexus 5-year wins out. For periods shorter than about a year, the likely best option is to just keep your money in a liquid online savings account. If you think rates will stay higher, you could also buy a 1-year CD and hope to roll it over.

Bottom line. If you’ve been waiting for 3% and/or you’re building a ladder of 5-year CDs where you are confident you won’t have to break it early, this Connexus certificate is currently a top rate and should be considered. Just be aware of the sizable early withdrawal penalty.

The Fall of Landlines and Rise of Cell Phone-Only Households


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Berkshire Hathaway vs. S&P 500: Shrinking Edge?


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50% of American Households Don’t Own Any Stocks At All


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Best Interest Rates on Cash – January 2018

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