Financial well-being October 10, 2017 By
Have you ever tried to mentor a teenager or young adult in regards to good financial habits? You know - something really profound where if they would listen and take action, it could really help them throughout their life. Did you feel like you were talking to a brick wall, or more like a sponge trying to soak it all in?
Looking back to when I was a teen, I wonder about the financial advice that various family members and mentors shared with me. Did I choose to ignore them or take heed? I must have ignored it since the advice doesn’t seem to stand out.
As I’ve matured, it’s hard to remember all the sound money advice I’ve been given. But one thing I know for sure - experience is a great teacher. While I’m a fan of experience and life lessons, I do like to speculate about the wealth I could have accumulated if I had avoided some bad money mishaps and wrong turns.
One of my favorite sayings is “You don’t know what you don’t know.” There is so much truth in this statement! Wouldn’t it be great if we were all given the opportunity to go back in time to give our younger selves some financial advice to make life run a little smoother as we are growing up?
I reached out to some mentors and experts that I trust at First United and asked this question: “What is one piece of financial advice that you would give your younger self?”
Student Loans. The truth is it took me five years to accumulate the debt, but 19 years to pay it off, so listen child! Yep, I referred to the student loan as a child because 19 years of making payments to Sallie Mae took more time than raising a child to the legal age of consent which is 18!
Keep student loan debt to a minimum!! Don’t borrow more than you absolutely need. You can send it back to the loan servicing company, and then you will not have the extra debt hanging over your head.
Apply for scholarships and lots of them. Research all the scholarship opportunities you may qualify for, and apply for every scholarship you possibly can. Make applying for scholarships your job during your junior and senior years of high school. This will be the best paying part-time job you will ever land. Don’t know your major yet? That’s okay just keep applying for scholarships and discuss the possible paths you may wish to take in your essays.
Furthermore, pick your major and stick to it by the end of your sophomore year of college. It can be costly to change your major which is why it took me five years to get my degree. I paid for classes I did not need which means more debt I had to pay back!
Stay consistent in both giving and saving, and they will become routine. Nothing will make you happier in life than to have money saved for the unexpected, and also to give money to those in need.
Spend less by driving an older (preferably paid off) automobile. The average auto loan payment according to Experian is $503, and that payment is being stretched out over a period of 68 months. That’s $34,204 that could be invested in your younger years to help you grow wealth!
Drive an older vehicle for 68 months and invest the cash. Sure, the older auto will need repairs from time-to-time, but if you do the required maintenance and keep it clean, you will save yourself a lot of money. Besides, if you were to buy a brand new car, two years from now you will be making a vehicle payment plus paying for repairs. That will be a real drain on the bank account.
Rent instead of own a home in your early years, avoid eating out, and most of all don’t try to impress your peers. If you really want to impress your peers, let it be later in life when they see how you have accumulated wealth, and are able to retire early because of the smart decisions you made. Debt will rob you of joy, cause stress, and make you have trouble sleeping at night - so keep debt to a minimum.
Save more while your financial responsibilities are at a minimum. You could save $100,000 by the time you’re 30 by driving an older car, renting a modest place or living rent free with parents, and not eating out. Save some diversified retirement funds via your company’s 401k, and the remainder in other investment opportunities.
$50,000 invested in a 401k with modest additional monthly investments after the age of 30 could be worth several million dollars by the age of 60-65. Invest the other $50,000 in rental properties and continue to accumulate more properties with the equity generated. You will likely be able to retire early unless you choose to work because you love your job. Either way, by sacrificing the first 5 to 10 years, you provided yourself options which will translate to financial freedom.
Contribute to your retirement account such as a 401K, and then increase your contribution every year or every time you receive a pay raise.
Auto transfer to a savings account every paycheck. This makes savings a habit and priority.
Only have one credit card, and pay it off in full every month. If you do not have the money to pay it back in full that month, then do not make the purchase. Save up the money for a few months (learn the concept of delayed gratification), and then when you have the money in hand to pay for the purchase, go ahead and buy the item.
A credit card is not your back-up plan as you need to stop spending and start saving. Step away from the stores and put your income in check. The amount you will end up paying in fees and interest could be a great college fund for your children someday.
The best way to live life is by planning for the future, saving for the unexpected, and by having the freedom to pay for the things that are important to you.