4 Financial Lessons Learned From How to Pass in Middle School

4 Financial Lessons Learned From How to Pass in Middle School

Many years ago, I attended my daughter’s open house for eighth grade. At the open house they move you from class to class quickly. This idea is to briefly replicate your child’s typical day and meet the teachers.

The problem I encountered that evening was “Mrs. Smith.” She had to run up and ask every teacher how her “Johnny” was doing. Naturally, “Johnny” was in all my daughter’s classes. This takes up all the class time, you cannot even go up to the teacher and introduce yourself.

However, the more I thought about it, at least for one teacher, that was not such a bad thing. But I eventually got the chance to meet this teacher later in the school year under, shall we say, different circumstances.

English Class

To illustrate, the one class that stood out at open house was English. In this class there were two signs posted on opposite sides of the blackboard. One sign read:

How to Pass
• Show Up
• Pay Attention
• Do Your Work
• Behave

That is, it, just four requirements to pass English Class.

The other sign at the opposite end of the blackboard reads:

How to Fail

______________________________________________________________

______________________________________________________________

______________________________________________________________

The lines above are blank. However, the actual blackboard listed about forty requirements that were needed to fail.

Reflecting on these signs, a couple of things struck me about those two signs. First, how easy it was to pass. After all, you only had to complete those four requirements.

On the other hand, failing seemed like a lot of work.

I was going to bring this to the teacher’s attention, but I thought better of it.

Second, I recall doing a lot more than four things to (barely) pass back in the day when I went to school. How come these signs were not posted then? It could have saved me, all the Average Joe’s, my teachers, and my parents a whole lot of aggravation.

What was the takeaway from this? Simply, we tend to overcomplicate things. It only takes four basic requirements to be successful in eighth grade English Class. This got me thinking, what if we applied the same simplicity to personal finance?

1)Take Ownership of Your Financial Future

Long gone are the days when employees could expect their employer and the government to take care of them in retirement.

Defined Benefit Retirement Plans (Pension Plans) are gone except for governmental agency employees. Unlike your parents or grandparents, you probably will not have a pension in retirement.

Additionally, as time has marched on, the age to collect full social security benefits has only gone up. Also, the social security system is projected to be insolvent around 2033. 1) The media likes to say the social security system will go bankrupt. This is fake news. Going forward, absent any changes, insolvent means folks receiving social security benefits will be taking a 20% haircut on their benefits. Yikes.

All of this means that you are on your own.

There are tools available to help you reach your destination. However, you must use them. These tools included 401(k) plan, IRA’s, Roth IRA’s, HSA’s, 529 College Saving Plans and others.

2)Maintain a Diversified Portfolio

I know, this sounds a little too obvious. It is like saying, “Do not talk on your cell phone while you are driving.”

However, it is true that a diversified portfolio will provide less volatility and will smooth out the ride for investors. However, diversification does not assure a profit or protect against loss in a declining market.

The other hard truth is that diversification may not work in the short term. Most recently this was apparent with the market decline because of the Covid-19 pandemic. This was the sharpest and most profound recession since the end of World War II.

The Standard and Poor’s 500 Index lost 34%. NASDAQ lost 12.3% in one day, March 16, 2020. The index’s largest one-day percentage drop ever. 2) 3)

The stock market crashed and recovered faster than ever before in U.S. history. It only lasted a long weekend under five months. 4)

The problem is that there is no one who rings a bell and says, “We are at the bottom now. It is OK to start investing again.” People refer to this as market timing.

Market timing involves having a system whereby you will buy when the market is low and sell when the market is high. The system is based on the idea of “buy low and sell high.”
If only it were that easy. If it were, well, frankly, everyone would be doing it. There are three issues with this.

First, you must know when to buy “low.”

Second, you must know when to sell “high.”

Third, if this is in a taxable account you will have to pay income taxes on any gains you have.

Do not attempt to use a market timing system. It will not work.

3)Invest for When You Will Need the Money

This is especially true now. We have witnessed and continue to witness unprecedented historical events. This causes stress and anxiety to say the least. It becomes more difficult for investors to keep their eye on the target when the market declines.

It is easier to “stay the course” when the markets are up 10% per year. This is a lot more difficult when the market is down 20% per year.

For younger folks saving for retirement, you have an exceptionally long runway. Invest accordingly. Folks that are closer to retirement may want to consider dialing down their equity exposure a bit.

The daily drumbeat of ‘news’ can easily take investors’ attention off what they are planning for their future. During good times, the media focuses on negative things. What do you think they do during tough times?

While there will always be negative events, investors tend to shift their focus to the present. There is nothing wrong with living in the present. If you do not, you can miss a lot of good stuff. However, you need to plan for the future, not the present. Even though the future is unknown, we still need to plan for it as best we can.

4)Behave

Sorry for borrowing one of the four requirements needed to pass eighth grade English Class. It just could not be more appropriate.

I am not talking about hanging out with Flounder down at the Delta House. He was one of the stars in the all-time classic, Animal House, and he really knew how to have a fun time. Dean Wormer had plans for riding Faber College of the Delta House, but Flounder and his fraternity brothers had other ideas.

Investor Behavior

However, the behavior that I am talking about is investor behavior. This behavior periodically becomes quite erratic.

Why is this? Part of this is natural conduct, I believe. Too many folks just follow the herd.

The two primary emotions of greed and fear show themselves in spades during market extremes. Unfortunately, it is easy to get sucked in.

On the ride up, nobody wants to miss out. This is what is known as the fear of missing out (FOMO).

On the ride down, everybody wants to get out. This is what is known as capitulation. No acronym here. Just hit the sell button and get to the exit doors as soon as possible.

To underscore this point, Warren Buffett, CEO of Berkshire Hathaway said, “We simply attempt to be fearful when others are greedy and to be greedy when others are fearful.”

With Berkshire Hathaway holding $347 billion in cash, cash equivalents and U.S. Treasury Bills in mid-2025, we would conclude that Mr. Buffet believes that: 5)

Others are greedy.

Conclusion

It only takes four things to be successful in eighth grade English Class. Similarly, use these four things to get a passing grade with your finances.

If you need help with 4 Financial Lessons Learned From How to Pass Middle School, give us a call at (860) 645-1515 or E-Mail Thomas.scanlon@raymondjames.com.

This is original content written by Manchester, Connecticut Financial Advisor Thomas F. Scanlon, CFP®, CPA.

1)ssa.gov - June 18, 2025

2)thestreet.com – November 10, 2022

3)cnbc.com – March 16, 2021

4)yahoofiance.com – April 12, 2025

5)Investmentvector.com – June 19, 2025

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