Tuesday, December 3, 2013

What Would You Tell Your Younger Self?

Over at Get Rich Slowly April Dykman posed the question of what would you tell your younger self regarding personal finance.  Below is my post.

This is fun! 
To College Sam – walk away from the credit card offer, you don’t need that free t-shirt.
To post college Sam – good job on taking that personal finance course through the local extension system. You learned a lot and it will help you in the future. Good job on paying off that college credit card, now you really ought to cut it up. Also, congrats on opening your first IRA even though you are earning poverty wages in social services. And tell your parents thanks for paying your way through college, you probably didn’t even appreciate the fact that they saved each month your entire life to give you a great education. 
To post professional school Sam – good job on paying off that student loan debt and good job on keeping your student loan debt lowish during school. You rushed into your first house purchase, but it will turn out great. Now that you are making a good living you are making a lot of good choices, paying off the student loan debt, creating your first budget (2001), investing in your work 401k and paying off all credit cards in full each month. I sure wish I could tell you that even when you are paying off your credit cards in full each month you are still spending too much money. You should have listened to me when I told you to cut up those cards post college. 
A few years later Sam, just because everyone is investing in Florida real estate doesn’t make it a good investment, maybe you should do some more research before you buy that investment property in 2005, 8 years later it will be worth half of what you and soon to be Mr. Sam paid for it. Good thing its rented. 
To engaged Sam, good job on picking a spouse that is hard working, frugal and recognizes that even though he has the MBA he is terrible at budgeting and bill paying so he turns it over to you upon marriage. 
To married Sam, whoo-hoo, good job to you and Mr. Sam in paying off $55,000+ in just over a year during your first year of marriage. That first year of marriage in which you created your first annual spending plan (an update on the 2001 individual budget), finally cutting up the credit cards, creating an allowance system, prioritizing savings and making sure that you and Mr. Sam are on the same page when it comes to money, that will pay off big time. Seven years later and you guys have increased your net worth by $550,000. 
Now, stop eating out so much.  :)
Looking back at my own journey, I certainly have made some mistakes along the way.  It is hard not to, and many of those mistakes or detours have helped to make me a better person.

I think the most important ingredients to my financial success are as follows.  First, I invested in a good education which lead to a well paying, good, professional job.  I was able, both due to my parents and due to smart choices (savings/grants/working) in professional school, to avoid student loan debt until the very end of my education. Second, early on in my career I started utilizing a spending plan/budget and focused on paying off debt and having a plan for my money.  Third, I met and married a frugal man who, while horrible at paying bills and tracking spending, is fully on board with living a debt free life and prioritizing savings/investing rather than consuming.

How about you, what personal finance guidance would you give your younger self?


Anonymous said...

10 years ago I would have told myself to invest 10% instead of 5% into 401k, open Roth IRA at age of 20 and not 27, create your spending budget, challenge yourself and go to better school, talk to your future wife about finances before marriage,and lastly DO NOT invest in Oppenheimer load funds!!!

Anonymous said...

This is a good post, has caused me to reflect on a number of things. However I may not have listened to my future self, sometimes you have to learn from your own mistakes.

My conversation would be:
Smart move on picking a career with a future and starting right away on retirement savings and max'ing it out each year. However, all growth even in your 20's is not a balanced portfolio, you needed to include fixed income in the mix from the start, you would have been further ahead and with a less bumpy ride now. Learn to make minor adjustments in your portfolio not major strategy changes on a regular basis when you learn new things.

Should have listen to your gut on your first marriage, divorce halved your net-worth that you spent so many years building. Your second wife is proof that there is someone perfect for you out there. Having kids is extremely costly, but it has been the best investment I have or will ever make.

Dan said...

I'd tell my high school self to do his homework and study a little more! would've been worth more than all his part-time jobs combined in scholarships! Instead post-college me is paying for it the hard way, with interest and his own money!

Just about my only financial regret thus far. Oh and stay away from penny stocks.