Please share the practices that you did to manage your finances, the ones that worked and also those which didn't and what you learnt from it.
What was it that you learnt later in life and wish to have known a little sooner?
Feel free to share any of your thoughts
- Think about liabilities vs investments. Early on, I would invest in yourself. Gain new skills, education. Keep your teeth pristine. Spend money on well-fitting clothes and other things that will help your confidence. Things like cars, toys, etc are liabilities. They cost money, and don't generate any.
- Develop frugal taste. Don't spend on name brands and luxury unless it's really important. Sometimes it is, though.
- Buy nice stuff: when you buy stuff you think you will own a long time, buy nice stuff. Tools are a good example. I have a socket set I bought 25 years ago. (Related: take care of your stuff!)
- If they suit you, find hobbies that can earn you money. The big winner in this category for me was poker, but I've also made some money at photography, programming, and pool, all of which were hobbies originally.
- Just make a plan. If you don't make a plan, you don't know where the money goes. Your plan will be fine. Don't listen to any one of these comments too closely. Decide for yourself. You are the only expert on your own life.
Early in your career, aim to change jobs every 3-5 years. Your income and career will rise much faster and you will gain more experience.
Take on debt when it is cheap, so long as it goes towards durable goods or personal investment. Loans where the interest rate is lower than inflation is free money.
Talk to a loan officer before you start saving up for a house. You may not have the right savings goals in mind.
Nothing will eat away at your finances worse and more quietly than a car payment. For the monthly cost of a new Camry, you could buy an old running Camry every 5 months.
Nothing will save you money more than roommates.
Know yourself. If you chase side-projects and have ambition, don't stick all your money into retirement - set aside money for direct investments. If you just want to work the bare minimum and play video games, then squirrel away at a steady rate.
Having cash or savings when entering a recession is how people get wealthy.
The best investments are in private businesses, followed by real estate, followed by stocks, followed by bonds. But it is also directly proportional with risk and effort.
You may come to a point in your life when your time is worth more to you than your money. Don't become accustomed to wasting either.
Appricate the power you have in your youth.
"Compound interest is the eighth wonder of the world."
There are few secrets, just common sense really:
- Live within your means (spend less than you earn), avoid debt.
- Corollary: Have a good paying job (tech is handy for this)
- Save early put 10% (at least) of your gross salary into investments such as low MER ETFs, re-balance every 6 months - or use a Robo Advisor that does it for you.
- A partner/spouse helps immensely (and you both need to be aligned wrt goals and spending habits!)
- Balance savings and the future with enjoying life
- When you are in school, money is more valuable than time.
- After graduating and starting your career, time is more valuable than money.
- Don't scrimp on your mental health and physical health. Sometimes, you just need to re-energize and do absolutely nothing.
- Keep only one credit card. You can have backup card, but don't use it. Pay the credit card off every month and don't carry a balance.
- For the average person, cars and automobiles are an endless financial headache. Buy a reliable car that doesn't break down. People who buy expensive cars to show off are throwing their money in the dust bin.
- Take advantage of your employer's 401K match. It is literally free money. Put it all in an index fund that mirrors the S&P500 for example.
- Buying a house is the American dream, however beware of some of the gotchas. Be careful of HOA dues which can be expensive. Also beware of expensive repairs to HVAC, foundations, and roofs. Also watch out for issues your realtor will never tell you, like potential flooding and (lack of) cellular/internet providers in your area. Also most Home Warranties are worthless.
- Once you have children, you should buy term-life insurance policy in case you die. I bought a 50 year term-life policy that is independent of my employer and the monthly payment amount is locked in.
1)start investing the federal maximum pre-tax into your 401K. if you can't do the max, invest at least a minimum of your company's match. if there is no match, try to do at least 5-10K. 1a) put it all into an SP500 fund, or at least never put it into the age 20## type funds. 1b) if your work offers anything else that can be purchased through them such as vacation, insurance, etc., do it all through them as that's typically all pre-tax.
2)if you need a car, never buy a car that's more than 3x your yearly salary. if you can make it 4x even better.
3)don't rush to buy a property, expecially at today's rates. if it does come to a point that you're buying a property don't buy a property, don't go above 4x your yearly salary. i suspect that won't be much at 21 and i suspect the bank advisor will tell you the good news that you're pre-approved for much more, but until you (and your eventual spouse) can meet the 4x level, don't buy a property. 3a) this advise is worth exactly what you've paid for it. there are a gazzilion nuances such as do you need a car if you have a house/condo in a place where you can walk/take bus to work and everywhere else, what are the property taxes? it's one thing to have 2000$ mortgage and it's another to realize that you're paying another 1000$ in taxes before utilities, etc.
4)work-life-balance: it's extremely important to use all your vacation and have overall balance when you can get away from work and recharge.
Can you get from say, $50k to $55k income? Invest in that first. Buy books, pay for expensive courses, even some of the shadier ones. The average ROI for shady classes is often better than investing in a blue chip stock.
Until you're probably at some point where you can't go from $400k to $440k or so. And in some cases the cost isn't financial - the path forward becomes several steps backwards spiritually and morally. Then you stop and start investing in passive income.
Active income isn't just salaries though. I make more per year from hackathons than bonuses. Running a business is a form of active income, and at some point it's easier to transition to that.
Remember that anything that sounds too good to be true very likely is. There are a lot of people out there trying to scam you out of your money. Be smart and don't try to get involved with get-rich schemes. Definitely don't pay for courses that claim they'll teach you how to become rich.
Don't get into dropshipping or MLMs (pyramid schemes). Don't take advice from anyone who recommends "Rich Dad, Poor Dad" or related books.
Be exceptionally cautious with crypto. If you must participate, keep it at a small percentage of your overall assets. Don't get involved with "meme stocks."
Only lend money you're ok with losing.
- don't buy a new car. there's plenty of reliable vehicles between 5-10k that will serve you well for many years
- most banks will let you set up as many checking accounts as you want. figure out your monthly budget for bills, and automatically deposit that amount + a little extra to a separate "bills" checking account. autodraft all your bills from that account
- be careful with credit cards!
First up; spend less than you earn. Which means being cautious with debt. I've bought houses with debt. I've bought cars with cash.
Second; build up a primary fall-back, liquid, fund. About 6 months of salary. This gets you through "life happens" events. Returns on this will be lowish, that's OK. (My mortgage allowed for extra cash yo be stored there, reducing my interest each month).
A smaller general savings account for big-ticket items I need from time to time. Like the car. Or fridge or whatever.
Once all that's settled to can talk to a financial advisor about long-term investment options. That's usually a mix of things that balance your appetite for risk, age, circumstances etc.
Always remember. Money exists to serve us. If you develop the habit of living within your means it will. Conversely if you develop the habit of spending tomorrow's income today (aka monthly payments on xxx) then you start existing to serve the money. And that's not a fun place to be.
Some of this advice is personal. Some is universal. You figure out which is which. Good luck.
2. Save more for retirement than you think you need. Leverage 401K matching and be critical about the performance.
3. Minimize your debt.
4. Always negotiate.
5. Have an emergency fund.
Every Answer is in that book.