Things I wish I had learned earlier in my life. But better late than never.
You are the boss. Decide whether you want life to happen to you or whether you want to make it happen for you.
Recognize that your choices of spouse, friends, and neighborhood will influence your attitudes and behaviors about money.
Give up the idea that you must make “perfect” financial decisions; learn to embrace failure and learn from it. Wildly successful people inside and outside of the financial industry all have spectacular failures in their pasts.
Spend less than you earn. Simple, but remarkably effective if you make it a way of life. The road to financial success and independence is not based on math, it’s based on mindset, attitudes, and behaviors.
Do not be influenced by the nonsense printed or spoken in the media that presents itself as financial wisdom. None of these people cares about your money more than you do. In fact, many of them wish to separate you from your money.
If you don’t have any idea as to your monthly expenditures, prepare a budget, and update it annually. You’re likely to be surprised at what you learn since your priorities in your life are typically revealed by what you spend money on.
Don’t underestimate the value of setting financial goals. If you don’t have any idea where you’re going, you’ll end up somewhere you don’t want to be. And you’ll make worse decisions along the way because you have little or no context in which to make them.
Allocate your time and effort to get the best return. Don’t spend hours fussing over how to save a few dollars on an item that costs $100, while spending 10 minutes choosing a new car that costs $50,000.
Never run up credit card debt unless you pay it off every month. Keep a few cards for establishing good credit scores and for emergencies. If you don’t have a credit score of at least 700 then work towards getting one.
Never buy an expensive car unless you have the cash to pay for it.
Never let a debt go to debt collectors, no matter how angry you are with a creditor. Find a way to fix the problem or you will have to deal with the downside consequences for years.
Never forget “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”
Keep some reserves (cash, savings, money market accounts, short term CDs) on hand in an emergency fund for meeting unanticipated emergencies.
Be prepared to face the possibility of losing your job along with the resulting financial ramifications at some point in your working life. Having backup plans for significant exposures in your life is always helpful.
Cover your insurable needs up to a rational point. If the death of a spouse with surviving children would be financially catastrophic, consider term life insurance. On the other hand, don’t pay auto or homeowner’s insurance with low deductibles if you can afford to take the financial hit with higher deductibles. Never purchase more insurance than you need, and be very wary of insurance sales people working on commission with the “more is better” philosophy.
Maximize your retirement-related investment opportunities: 401k(s), 403b(s), SEPs, traditional IRAs, Roth IRAs.
Don’t withdraw retirement funds early. Don’t be seduced into thinking of this money as “your” money, think of it as belonging to the person you’re going to look like in 30 years.
Accept that there will be significant economic downturns in the future like there have been in the past, and that you will likely not escape the effects.
Add to investment assets whenever possible. Homes do not count as investment assets; they are not liquid, you will always need a place to live in, and contrary to the usual thinking they sometimes decrease in value. And don’t assume that it’s always smarter to buy than rent Rent or Buy?.
Never act on a “hot” tip from anyone. Including your broker, if you have one.
Never let a real estate agent talk you into buying a house you can’t afford.
Do not be in a rush to pay down a mortgage. There are alternatives to consider.
There is good debt and bad debt. Learn how to use debt to your advantage, and always be aware of your level of debt and how well you are managing it.
Get over your aversion to taxes – prepare your own returns. It’s the only way to develop an understanding of how to keep your money while the government strives to take it from you. The IRS is not your friend. And the elected representatives who spend your tax dollars are not your friends either.
Financial institutions are not your friends; they exist to make money, frequently at your expense.
Financial independence is incredibly liberating. Think about whether you want to get there. The earlier you start the easier it is.