Master your Money: When I was 25, I wish I had known these Financial lessons!
Mastering your money takes patience, diligence, sacrifice, and discipline. In addition, best practices/Financial lessons to live by would also help expedite the process. There I said it, now that all of the microwave-millionaires have closed this window because they can’t stomach the work that is needed to win, we can talk about the lessons I wish I had known in my mid 20’s. Unlike many, I did not finish high school and ended up wasting a lot of time living a lifestyle that I believed was the only way out of my surroundings. I simply followed the lead of the impoverished people around me and ended up a statistic for several years of my life. Thanks to a supportive family, the justice system, and a desire to do better… I went back to secondary school and finished when I was 22. Shortly after I found a job and enrolled in community college. I had a very late start to the whole “getting out on your own” thing that everyone was talking about. But because I didn’t’ have any examples of financial fitness, I ended up like most do after a few years of “figuring it out”. I was a 25-year-old broke college student with all the answers that I never researched. I had been living paycheck to paycheck for years, had no savings, and was living in an apartment that I couldn’t afford. Oh yea… and my credit was destroyed. Those circumstances lead me to predatory lending, limited options, and an inability to get ahead with conventional processes. My first car payment was $525 and had an interest rate of 24.9%. Yup, that is not a typo. I didn’t care either; when I purchased that car I remember being thrilled. I felt like I had stolen something and gotten away with it! Foolish me, the idiot who got robbed and thought he was lucky. I simply was ignorant, I didn’t know that it was a bad deal. Since my credit was so bad and everyone turned me down, I was just happy that someone gave me a car. Now that I think about it, it had a GPS shutoff device on it to make it easier to repossess. I am literally laughing as I type this, I was such an idiot.
Writing this post makes me fully aware of how far I have come, since those days. Many people are motivated by something they want and something they are afraid of. Well for me, I am motivated by leaving a legacy for my family and guiding my children well. So, that they have all the knowledge needed to make sound decisions in life. The thing I am afraid of is losing the foundation of success that I have built. If I could travel back in time, I would make sure that the 25-year-old me had already mastered the following financial lessons:
#1 Money is freedom: Money provides us with options and is needed to obtain the desired lifestyle that one chooses. I have learned that educating yourself on money is key to understanding how to win financially. You don’t have to take a college course or be a financial planner, you simply have to ask the question and find a credible answer (not your broke Uncle Bob). When you have control of your money, life is better. Money is lead cause of divorce in the U.S. and 64% of American’s choose money as the biggest stress in their lives. Financial peace is something I wish I had when I was in my 20’s. I know now that it was as simple as following a well-known set of financial lessons like those in another post I have written on the subject. You can read that post here (The Richest Man in Babylon)
#2 Relationship building is key to financial success: If you ask any married successful person, what has contributed the most to their success? I bet the answer will be the support and backing of their loving spouse. Married couples have a huge advantage over all the singles out there. They have a united assault against life’s obstacles, and a united defense against its hardships. This is why it is key to nurture that relationship with passion. We must set goals and actively invest in the financial space to build on our foundation and our relationships are no different. Wealth in a marriage is not just monetary, when you make it monetary the marriage dissolves and wealth does as well. You can’t get rich without enriching others. Did you know that when couples divorce the average individual lost is a 77% reduction of the net-worth. Invest in your relationship, it is far more important than money.
#3 Insurance isn’t for the wealthy: I would say I probably spent 3 years in my 20’s without any health insurance. We have already determined that “Twenty-something Ron” was an idiot, so this one is simple… don’t be an idiot like me. Because I failed to actively problem-solve what the true problem was, I opted out of insurance with my employer. I figured “Hey I never get sick” and hell I needed every dollar of my paycheck because I was broke. The truth was, I could afford healthcare if I address the real problem of spending every dollar I earned while not managing any of my money.
#4 Credit is a dangerous tool: Yes, I believe credit is a very useful but dangerous tool. I would compare credit to a chainsaw. You can use it to accomplish tasks quickly, that would take you great amounts of time and energy on your own. In finance, this is called leverage. However, if you are not careful in the use of the tool, you can severely cause yourself harm. In this analogy, both the tree you cut down and the chainsaw itself can cause you harm; just like the financed item and the credit card’s interest will eat into your future. I wish I was taught the in’s-and-outs of credit early on in my adult life. It would have saved me thousands of dollars, prevented subprime financing, and would have opened up several opportunities that would have my financial walk more enjoyable.
#5 Put your stunna shades on: You can’t win with money if you are looking at what others are doing. In order win now and in the future, you need to not only not care what others are doing; you also have to not care what others think. The Joneses want you to see the new car, hell they want you to copy them. Don’t follow the habits of broke people, copy the habits of those of millionaires. Being flamboyant is not a character trait of millionaires, actually the reverse is true.
#6 You have to have a plan and a backup plan: You must write down your goals and how you plan to achieve them. If you don’t write it down it is simply a wish. We all wish were in a more desirable situation. Successful people make plans to actually get there. Additionally, there needs to be a backup plan as well. Life is unpredictable, it helps to have alternatives.
#7 Saving is a choice: It seems like saving is the lost arc of the covenant or something. Why is America’s saving’s rate so low? I believe it has something to do with the debt problems of student loans, credit card debt, and car payments. If we follow the first rule of finance we would hold saving as a priority above those three debts. Instead, it ends up as a wish that never gets fulfilled. Savings should come off the top before you pay anything. Ultimately saving money is a choice that many people place in the “if I get around it to” box. There is a direct correlation between being broke and not saving. Please don’t say I can’t save because I’m broke… you aren’t broke, plan is broken.
#8 Avoid advice: Yes number 8 is to avoid advice. You should literally hide from those who aren’t financially fit. Opinions are worth what you pay for them, so that makes them worthless. It shouldn’t surprise you that broke people have opinions, and they will often suggest what they have done in the past. Avoid this advice at all costs. You should seek counsel from a wise person, the payout is priceless. Continue to find advice from the successful and act on it. Successful people love helping others and often will share past experiences and knowledge if asked.
#9 Start Reading: Many meaningful changes in your life can come from what you read. It is a requirement of financial success because self-improvement is needed for growth. The cure for ignorance is education, we cannot simply rely on the formal world of academia. We need to learn that which we do not know. Most people have a very limited exposure to financial schooling. In addition, most of the word of mouth financial advice you have received is probably wrong; so throw out those opinions and replace them with facts. To quote Yoda, “you must unlearn… that which you have learned.”
Okay, so now that you see how messy my journey started. This should be a cakewalk for you! Just kidding, everyone has different variables and circumstances that either aid or hinder their financial walk. The key is to continue to grow by improving your knowledge and to stay on a preplanned path. We all should know where we are going and how to get there. It helps to steal a few best practices, on what makes the journey easier.