Some lessons I would tell my younger self about money.
I sometimes think about what it would be like if my 40-something self could talk to my 18-year-old self. I think I'd tell my younger self, "Congratulations, you didn't totally mess up!"
This is what I say because I've always been afraid of failing. Some people are afraid of heights or speaking in public. I've always been driven by the fear that I'd fail at something important. I've been pretty lucky in life, and I'm thankful for that. I'm married to a wonderful person, have three healthy kids, a job I love, and a nice place to live. We eat well, save well, and go on trips every year. Soon, we won't have any debt.
Does that mean I've done the right things? Hardly. On the contrary, I've made more mistakes than I care to accept in this thing we call life, including a lot of financial ones.
But such is life. We all make mistakes, from which we (hopefully) learn.
Still, that doesn't mean you should do what I did wrong. I won't say I know everything about money, but here are some things I'd tell my younger self about money.
1. Take Out Smaller Student Loans
If you didn't already know, the whole business of student loans is a mess. Like most people, I had to learn the hard way that it's fun to take out a lot of student loans while in college, but it's not nearly as fun to pay them back. I did need the money, though. College isn't cheap. But I usually got more than I needed.
"You got a good interest rate," a friend said. "You can just invest what you don't spend, and the interest will earn you more than you'll pay on your loan."
This suggestion might have been good or it might not have. We'll never know because I didn't put any of the money into investments (more on that later). But I did go on Spring Break every year, even though I probably spent a lot more than I would have if I hadn't.
2. Always Have a Job in College
I worked a lot while I was in college, with the exception of my first year as a student. I think it helped that I liked my job and worked with people I knew. When I went to graduate school, things changed. I've never had a job other than being a teaching aid, which didn't take much work. I didn't think I needed one because a lot of my school was paid for, and this would let me study even more.
I made a bad choice when I did this.
I would tell my younger self to take any chance to make a steady income, no matter how small. There are many jobs that will let you work and learn at the same time. No matter what job you choose, it will likely give you good training and keep you busy, in addition to giving you money.
3. Invest Every Year
It is important to invest. Yes, the goal is to make money, but that isn't a sure thing. But money isn't the only issue. It is also about getting more disciplined and learning more. Investing will teach you how markets work and make you think about your long-term future.
So, if I could go back in time, I would tell my younger self to start saving right away, even if it's just a small amount of money.
Maybe you'll make money, maybe not. But you'll definitely learn a lot, like how to be patient, how to avoid making hasty choices, and how to trade options on the spot. You'll see both down markets and up markets before you have a lot of money spent. This will get you ready for booms and busts in the economy, which might make you want to sell your investments in a bear market or jump into an overvalued market out of fear of missing out (FOMO).
4. Don’t ‘Buy the Dip’ in a Bear Market
When people talk about trading, you might hear the phrase "buy the dip." This is a popular and simple way to invest. The thought is that you should buy stocks when they are low instead of when they are high.
It looks easy, like the saying "buy low, sell high."
If you know what you're doing, buying the dip can be a great plan in a bull market. However, buying the dip in a bear market is a terrible idea. Don't think that getting a stock for $50 is a good deal just because you like the company and it was selling for $100 or $150 last week or two weeks ago. Even if the company's fundamentals are good—and you should know the company's fundamentals if you want to buy shares—if you're in a bear market, that stock could just as easily go to $10 before it goes to $150, as many traders have seen in the last few years.
When Zoom shares dropped to $295, $255, and $183 in 2021, you might have thought you were getting a great deal. After all, the stock was worth $560 in October 2020, and the company has a bright future. The problem was that the stock market was entering a bear cycle, and once it became clear that the Federal Reserve was going to start raising interest rates, Zoom and hundreds of other growth stocks just kept falling. Today, each share of Zoom is worth about $61.
After doing your research, a better approach than "buying the dip" with big bets is to average into companies over time.
5. Attack High-Interest Debt
When I got my first real job, one of the first things I did was get a credit card. I used it for almost everything I bought, but I always paid off the amount at the end of the month. That meant I didn't have to pay interest on my amount, which was good because the interest rates on credit cards are very high. Wallet Hub says that the average interest rate on a credit card in 2023 will be 22%. (That's a lot.)
But that doesn't mean I haven't gotten into debt in other ways. There were car payments and school loans, as was already said. I would tell myself not to be afraid to get rid of debt, especially if the interest rate is high. In fact, you should go after it hard and start with the loan that has the highest interest rate.
I did this wrong when I was in my 20s. When I was done with school, the amount I had to pay on my student loans seemed too high. Instead of tightening my belt, I changed my payment plan and went from paying $450 per month to paying $250 per month. This was a bad idea, and it ended up costing me a lot of money. (I could have just played less golf and spent less time in bars.)
Later in life I made a similar mistake. While we took advantage of those low interest rates in 2020 and refinanced the mortgage (2.62 percent, baby!), I should have attacked other debts harder. So when you have an opportunity to pay off debt with marginally high interest rates, do it.
6. Drink Less, especially in Bars
This may sound like a lesson, but it isn't. I used to like going to bars. I still like a good beer, wine, or whiskey every once in a while.
When I say you should drink less in bars, I'm talking about money, though there are other good reasons to stay away from bars. If you like to drink, you could spend a lot of money in a bar.
I won't tell you to stop drinking because I don't want to look like a hypocrite, but Iman Gadzhi, a wealthy YouTube star whose video "7 Money Tips for Teenagers to Make $1 Million" has already been watched more than two million times, says that you should stop drinking.
"If you want to be a millionaire, the first thing you have to do is stop drinking," says Gadzhi.
You can see for yourself why Gadzhi tells you to do this. I don't agree with his view that people should not drink, but if I were younger, I would tell myself to drink less and spend less time in bars if I was serious about building a good financial future.
