What money advice would you have followed?

Published May 22, 2017   Posted in How to Think

Last week, I wrote about bullshit money advice. I recalled some of the nastiest money advice I have ever heard, and it was one of the easiest articles I’ve ever written. Bad money advice is everywhere. It permeates our culture. Permeates is a big word, so it must be true.

Then, I asked the good folks over on the Rockstar Finance forums to weigh in on this topic, but the question was framed differently. Instead of bad money advice, I asked what advice they wish they heard as a young person – think teenager or drunk college student.

I also added a small caveat to the question. Your answer can only include advice that you honestly believe that you would have followed. Meaning, the “save more money!” advice is tried and true, but let’s face it – the majority of us probably got that advice, but not many of us followed it. I wanted something a little more “real” than that stuff.

What money advice would you have followed?

The responses I got were fascinating, and also very personal.Β One of my favorites was from Felicity:

Put your money where your mouth is. Is travel important to you? Great! Why are you spending $400/mo on Chipotle when that money could go towards an awesome vacation?

Boom! Pointed, yet something that I think most of us can probably relate to. Put up or shut up, you exceptionally smart college kid who probably isn’t majoring in something like finance or accounting. Frame life’s important questions better. Start with: “What’s important to you?”

Check out this gem from Vicki, who runs MakeSmarterDecisions.com:

Those financial advisers you meet after you fill out the paperwork at HR in your first real job are really nice! But who do you think pays their salaries? YOU DO…

Damn. And, this advice goes for life in general: Be extra careful who you’re taking your advice from. Pay attention to how that advice benefits you…and them. “Learn about fees and how to avoid them or they will be taking awesome vacations on your money,” she added.

Michelle from MakingSenseOfCents.com added this nugget:

You don’t need all of those clothes.

I never had that problem, but I can imagine. Now, it’s a badge of honor to see how many days I can go wearing the same stuff. “I bought a clothing item nearly every single day when I was younger, and sometimes bags of it every single day.” Moral of the story? Definitely, wear clothes. But, not necessarily something new every day.

Oh, and here’s a solid point from HighIncomeParents.com:

I wish someone would have set me down and showed my 90%+ of professional fund managers don’t beat the market over an investing career and that low cost index funds put you way ahead of almost everyone else.Β 

What money advice would I have followed?

“Stop spending so much damn money” – my dad uttered those words (for the possible exception of the “damn” part) to me as a kid. The problem? I had a budget, and it lulled me into a false sense of security. I studiously filled all of my budget categories with my Safeway paychecks, but I then proceeded to spend the entire remainder of my paycheck. After all, I was saving. I did put money into my other budget categories like a good little budgeter. I thought I was good. So, why not spend the rest? My dad’s advice hit home.

I wish I heard “Building equity isn’t automatic”. After nearly a decade of renting apartments, I was ready to branch out and buy my own place. I did – in February of 2007, the exact month that real estate prices peaked. I had no business buying a home, but I did. I liked the idea of “building equity”, even though I didn’t really know what that meant. A decade or so later, I sold the house and lost around $100k altogether. Real estate isn’t for me. I hate the stuff.

“How many cars do you really need?” Working a full-time job, I had three different vehicles at one point…a Cadillac STS that had been in the family for years, a Corvette convertible I bought immediately after college graduation and a Yamaha R1 sportbike. Won’t lie, I had fun. Stupid fun. But, I funded that fun with years of retirement-killing wealth.

Tell me: What money advice do you wish I heard as a youngster…that you honestly believe that you would have followed?

We track our net worth using Personal Capital



Comments

40 responses to “What money advice would you have followed?”

  1. I really wish I learned about passive index funds.

    I wasted too much time and money trying to find the perfect stocks to build my portfolio. Between the amount of time researching, fees in buying and then watching picking stinky stocks (here’s looking at you Chipotle), I definitely wish someone had sat me down and said buy passive index funds and be done with it.

    • Steve says:

      Amen to that. I live on passive index investing. I just throw our money into a targeted retirement fund and call it good.

    • Grace says:

      Yes! I didn’t even know index funds were a thing until I read MMM, well out of college and well into my 20’s. Not sure why there was this shroud of secrecy around non-insane investing options (or, I guess I do, because expensive managed funds would rather people keep paying them), but I’m glad there are lots more voices adding to the chorus now!

  2. I wish I would never have sold my first house too. I bought when I was 23 and if I would have been smart and kept it as a rental (I did for a few years), I could have retired a few years ago! And yep – wow, was I clueless about investing. JL Collins “Simple Path to Wealth” would have saved me more than I could imagine in fees. We set my daughter up at Vanguard this week!

  3. Matt @ Optimize Your Life says:

    I’m with Felicity. Think about your priorities. Look at your spending. Do they match? Then wtf are you doing?! Go make them match and live a happier life! It’s so simple, but so life-changing.

  4. I just honestly wish someone had told me that a 40-year career isn’t inevitable if you start saving right away. I think that would have been a strong enough incentive to get younger me to act very differently toward money!

  5. The Tepid Tamale says:

    I am with Mustard Seed: passive index funds. I thought spending a lot of time trying to learn about stocks, and funds, beta values etc. meant that I was working hard towards retirement. Hand in hand with this, I always heard: save 10%. I wish someone had shown me that there are people that save 20%, 40%, 60% and more! It’s obvious that I didn’t need anyone to tell me that this was physically possible. Unfortunately, I was just shuffling along with the masses, and I needed a wake up call. I didn’t even dream that this was being done. I mean how could anyone get over 10% and still keep up with everyone else!

    • Steve says:

      Ha! Thanks Tepid Tamale. No doubt, the more passive your investments, the better. Don’t meddle. Just let your investments do what they do best…grow!

  6. Slow Dad says:

    That when you borrow money, you are actually borrowing from your future self.

    The cost of the fees and interest you commit to pay today is coming out of their pocket.

  7. DadsDollarsDebts says:

    Don’t listen to others and spend money on stupid things that don’t add to long term happiness- i.e. marriage, buying rounds of drinks for friends, treating others for dinner (I did that a lot when I became an attending and my wife and her friends were all students- big mistakes).

  8. That’s tough. I don’t know if I actually would have followed the good advice. I guess it depends who it came from. I wish I knew more about the Roth IRA at that point while I was making less money. Such a great vehicle I didn’t use until I was about 26.

  9. Oh, lawd so many regrets here. Knowing how I was just a few years ago, I’d say the advice I would have followed was “Spend less than you earn.” It’s simple and true all at once.

  10. Jwheeland says:

    Hmm… I like the question and I thinking back on my life as now as 33 year-old working as an attorney, I’m trying to think of advice that I would actually have followed. I had (am having?) a hard choosing a career. I think that if I knew I “only” had to work for 10 years instead of 40 I might have been more focused on getting a good paying job out of college (instead maybe not majoring in Philosophy :). Then using ER to explore, go to grad school, teach/ live overseas. Right now, ER will probably be at age 40, but it’s all good. Life is a process.

    BTW, I fucking love Bryce! SW Utah for the win!! Enjoy.

    • Steve says:

      ER at age 40 is a great achievement…far sooner than most! Life is a process, indeed. And yup, Southwest Utah is just amazing. Loved it!

  11. I wish someone had told me to avoid lifestyle inflation like the plague. If we hadn’t upgraded houses, cars, etc. as we got older and earned more, we would have retired 10 years earlier!

  12. Not really money advice, but I wish I heard “Rome wasn’t built in one day, but it burned in one”.

    This quote taught me to slow down and spend less, because just like our finances, we have to build it up. And it can all go away, if we spend/burn it all away.

    • Steve says:

      Life is a marathon, not a sprint. It’s very true. I was told that as a youngster, but of course, I didn’t listen. πŸ™‚

  13. Mr. Tako says:

    There’s a couple that would have made a big difference in my life — “Never buy a new car. Used cars take more work, but you’ll be smarter and richer because of it.”

    “Learn to be happy with imperfection in your life.” — Which is so true. I could have saved myself a bundle not trying to find false perfection in life.

    • Steve says:

      Amen to that! Perfection is unattainable, so I don’t even try to get there. And I did buy a brand new car once, but that is a mistake that I definitely won’t make again. Man, the depreciation is killer!

  14. Amber says:

    Oh my gosh, those are some good ones up there. Especially about not buying so many clothes! That would’ve been a good one for me.
    There’s so much advice I wish I’d taken, but one I wish I’d heard was “pay yourself first”. I thought I’d be happy buying everything I wanted on credit and putting whatever I could afford into savings afterwards. Now I’m investing & putting money directly into paychecks and I feel 1000x more comfortable financially!

    • Steve says:

      Ah, pay yourself first. Definitely a wise move that’ll set you up for some serious financial success. And it’s so damn easy, too!

  15. For a long-long time, I mean almost 3 years, I couldn’t understand the meaning of “pay yourself firs”. “What do you mean pay yourself first?”, – I was thinking, “How can I pay yourself first if I have obligatory expenses and they are eating almost every penny I get”. Really, I was so stupid I couldn’t understand this simple concept – PAY YOURSELF FIRST. After almost 3 years it hit me, “MAN!!!!! I have to pay MYSELF FIRST”
    – Traditional 401(k)
    – HSA
    – FSA

    Good, I not only payed myself first really good money, but saved on taxes. After paying myself first I have to take care for my family:
    – Food
    – Utilities
    – Rent/Mortgage
    – Transportation

    Nice job, Russian, you’ve already paid yourself twice. But you can do more.
    – After tax investment – invest as much as you can

    Good, but now you have a little bit of “enjoy it” money. So, please, enjoy it. Have a little bit of fun, but don’t forget to pay yourself first.
    P.S.
    Do you still have your R1? I always wanted to try it but was scared, I can’t control a small Valentino Rossi inside me. So I ended up with adventure motorcycles.

  16. brian503 says:

    I wish I would have learned about the power of compound interest. No sure if my teenage self would have taken the bait, but should would have liked the chance at the opportunity.

  17. The biggest one has to be maximize tax advantages accounts even over debt. I had a 4 percent student loan I paid extra on rather then capture a 4 percent match plus returns. Doh…

  18. luxestrategist says:

    I wish I had a time machine so the Frugalwoods could have written about buying their Cambridge rental property 10 years ago. If I had read that post then, and knew that was a possibility, I think I would have seriously tried to do everything I can to make that happen.

  19. Kate says:

    I wish that I’d known that there were alternatives to a standard 40 year career. If someone had shown me that I could buy my freedom, I would have made it a priority from the start instead of spending my money on who-knows-what. All that money wasted on stuff I don’t even remember…..

  20. Divnomics says:

    I’m on the same page as Financial Coach Brad with lifestyle inflation. When I was younger I had a pretty good student job that paid me a nice sum of money. All of it was spend on more expensive clothing or other nice items…

    I know now that I would have known sooner about investing in trackers of some sort, but I don’t believe my younger self would have followed that advice.

  21. Dave says:

    Best advice I got was “You make your money when you buy.” When i was younger I wish I had focused more on asset prices (investments, house, car) and not paying too much.

  22. TSR –

    Similar to you – You don’t need all of those clothes haha; also – you don’t always need to go out to eat (the story of my life combined from age 14-20). Then… things definitely changed and I’ve been saving well over 60% of my income ever since; but damn – those were some lost years! Cost of lessons, maybe?

    -Lanny

  23. SteveK says:

    I would have benefitted from “put your money in an index fund. don’t try to pick stocks”. Also, “automate your savings to take the emotions out of it”

  24. SteveK says:

    I see lifestyle inflation was mentioned. That is a huge one for I think most everyone. If you can live happily on your $40k salary then keep that same lifestyle when you later earn $80k because you’ll be FI very soon.

  25. Miss Mazuma says:

    As smart as I was with money, I didn’t have a plan. I saved because I was supposed to. I didn’t understand compound interest or the funds I was contributing to in my 401k (target date funds!). Had I paid any attention I would have been retired by now…oh, also provided I hadn’t taken 2 years off from contributing!

    As for real estate – it isn’t the end all and be all…well, until you lose it all! I wish someone had told me to stop at one investment property. Focus on paying it off before buying another. I probably could have survived the whole market had I known what enough was. Eh – at least I learned some valuable lessons!! πŸ˜‰

  26. Ben says:

    Life is all about experience. No doubt, there’s bound to have mistakes. Gain valuable experience from these mistakes and becone a better person.

    Ben

  27. L says:

    So many regrets ehh…just ignorance really…
    1) Someone pointed out something similar earlier – I think my biggest regret is thinking investing in the stock market means buying individual stocks – and so out of fear letting money sit in a 0.01 interest checking account for years. And choosing to put in the bare minimum in the 401(k) – not understanding what the difference between a 401(k) and brokerage account was! Yes, now I max out my 401k with my employer. In my brokerage account I invest in index funds which I can’t necessarily do in my 401k though!
    2) Not having the big picture of finance and your life as a whole! Having the internal script that you have to be in one career forever and retirement happens after 65 (well, I guess this has been drilled into us since we’re babies probably). I’m on fire with the FIRE concept now; definitely targeting financial independence and early retirement. Never thought that you could have multiple sources of income (why???)!
    3) Focusing on how much you earn rather than your net worth!
    4) Not being aware of how I was wasting money; I’ve been able to make significant changes just by becoming aware and without necessarily sacrificing life style

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