It’s absolutely amazing at how fast time flies by. Last night I was out with a buddy of mine, the first time I had really been “out” at the bars in quite a long time. And as I watched all these 20-something millenials living it up and having a great time, I started to think about what I was doing when I was in my early 20’s, just after graduating from college.
And then I started thinking about what I wasn’t doing… at least as far as my finances were concerned.
Bottom line – I made a lot of financial mistakes 20 years ago, and I often wish that I could go back in time and tell myself to start thinking about the long-term implications of those financial mistakes.
So, if I could go back and talk to my 20-year-old self, here are some of the general pieces of financial advice I would have given myself back then.
1. Buy Your First Car With Cash
Honestly, I didn’t need a brand new, $15,000 car when I was 23. I had a car that my Mom had bought for a couple thousand bucks that I used in college. It was good enough. I don’t remember why I gave it back to my Mom and bought a new car. Perhaps she needed it for my younger brother, or maybe I was just sick of driving it. But for whatever reason, I decided to purchase and finance my own, brand new car – along with the $300+ monthly payment that came with it. In hindsight, this was an incredibly dumb thing to do financially, especially considering that I could barely afford my first apartment and had to work weekends delivering pizzas to pay all my bills.
2. Keep Your Expenses as Low as Possible
The second mistake I made was getting my own apartment – one that I couldn’t afford. I could have saved a LOT of money by finding some roommates or renting a room. I didn’t do either of those things and instead paid hundreds more per month in rent payments as a result.
3. Wait to Get a Dog
I got my first dog when I was a senior in college. He was a black lab named Dexter, and I loved that dog. But, if I had to do it all over, I probably should not have adopted him. He cost me a lot of money in both vet bills, food, and kennel fees anytime I wanted to go anywhere overnight. In addition, he limited the number of places that I could live, and who I could live with.
4. Save Consistently Every Month
There was a time when I put away $25 or $50 per month into a mutual fund. I don’t remember when I stopped doing this, but at some point I did – and certainly lost a lot of money as a result. The thing is, when you are young, time is on your side. When I was working weekends to deliver pizzas back then, and I probably earned an extra $500-$700 per month, mostly in cash. If I had simply invested that money instead of using it to pay for an expensive new car or pay for an apartment that I couldn’t actually afford, I’d have much more to show financially for all that hard work and long weekend hours than I actually do today.
5. Think Long and Hard Before Investing in Graduate School
I’m not going to say that going to law school was the worst decision of my life because I did meet my Wife in law school and now I have three beautiful kids as a result. However, knowing what I know now, I would strongly caution my younger self to think long and hard before leaving a good job to spend three years of my life incurring a substantial amount of debt for a degree that hasn’t necessarily provided the return on investment, either financially or personally, that I had anticipated. Don’t get me wrong, I had a lot of fun in law school, but I’m not sure that it was really worth the $130,000 price tag that I paid and continue to pay for it (I still have approximately $97,000 of student loans in my name) almost 14 years later.
6. Pay Attention to Your Credit
It is so much easier today to watch your credit than it was 20 years ago. There are a ton of free tools available online, such as Credit Sesame, that will allow you to monitor your credit score on a regular basis. Having good credit can save you a lot of money in fees, interest rates, and even when you are ready to buy a house. Back then, I never checked my score or made any effort to improve it other than pay my bills on time. Shame on me.
7. Invest in Real Estate When You Are Young
After college, I had considered investing in a small condo that was selling for about $70,000. Ultimately, I decided not to invest, but instead I chose to go to law school. I just checked online and the condos where I had wanted to buy are now selling for approximately $160,000. If I had purchased that condo, lived in it for a few years, and then rented it out, I would probably have a rental property now that is most surely paid off (or close to it), and maybe I would have purchased even more real estate along the way.
8. Don’t Use Your Credit Cards for Discretionary Spending
I was terrible with credit cards when I was younger. I didn’t understand how to use them the right way and ran up balances that got me into financial trouble at a very early age. Credit cards should only be used if you are confident that you can use them responsibly, or for an emergency situation. But even then, I would caution you against using them if you can help it at all.
Right now, I have 4 credit cards. One is used for law firm related recurring expenses that is paid off each month. A second is the Costco card that I need to shop there, also paid off each month. And the last two are my CareCredit card that is used for medical emergencies and which I am in the process of paying off and a separate credit card used for personal emergencies that I also pay off each month.
Bottom line – don’t hold a balance on your credit cards. If you can’t afford to pay your credit cards off at the end of the month, then you shouldn’t be using them.
9. Turn Saving Money Into a Game
When you “gamify” something, you are more likely to succeed at it. I wish that I had realized this 20 years ago. I should have kept track of how much money I spent or didn’t spend each month, and strived to constantly increase my savings from month to month. Back then we didn’t have Craigslist or Amazon or Uber or Ebay, but there were still ways to save more money every month and make more money on the side. I should have saved more of my pizza delivery money for a rainy day or to invest in stocks or real estate. But now that I’m telling you this, you won’t make the same mistakes I did… will you?
10. Buy Assets that Will Appreciate and Earn You Passive Income
I’m going to cut myself a little slack at this point. Twenty years ago, most people didn’t know what a blog was, and there was no Facebook or “social media”. The internet was a fraction of what it is today. We had no way of knowing what the internet would become. I wish I had started a blog back then, but hindsight is 20-20.
What’s the saying? The best time to plant a tree is 20 years ago, the second best time is today.
So if I were you, you should know that now is the time to invest in a website or blog and start contributing to it. Start writing about your passions and find a way to turn those passions into an online presence so that people can pay you for your expertise.
What Financial Advice do you wish that you could go back and tell yourself?
What about you? What did I miss?
If you have a nugget of financial wisdom that you wish you could go back in time and tell yourself, what would it be? Leave a comment below and let us know!