The Cold Truth
Nobody prepares us for the real world. In fact, I don’t feel that school prepared me at all for the world of money as an adult.
But, let’s “pull back the curtain of mystery” so to speak.
I’ll use some real world examples from the mistakes I made early on, that I want to help you avoid, then we’ll get into some tips to improve your financial security in a Capitalist society.
Failing Fast Hurts, But You’ll Learn
I didn’t grow up with a silver spoon, or the privilege of a college fund even. Which meant if I wanted to go to college, I had better know what I wanted to do with my life.
Surprise – I didn’t know. So I didn’t go. Some might argue to say that was mistake number 1, but I don’t think so quite yet.
I jumped into the first job that offered me a paycheck. Entry level and minimum wage.
But, hey! When we start out at a job, maybe we’re living at home with our parents still, it’s “fun” to have some extra money to spend.
Which brings me to mistake number one.
DON’T WASTE YOUR MONEY ON DEPRECIATING ASSETS
Some of you might think that means to save it. Which is smart, but you need a goal or a purpose for saving money.
Buying cars from a dealership on minimum wage pay. This is the most foolish thing I did at 18 years old, walking into a dealership with my barely established credit from a secured credit card I got just a few months before.
I picked out a Ram 1500 for $18,000. Not bad right?
I didn’t realize how bad it was until years later (after gaining some financial literacy in my early twenties) I found the original paperwork. I was paying 17% interest on a 5 year loan for that vehicle.
It gets worse…
I drove that truck for only 8 months before I traded it in early! Guess what happens when the value of your vehicle goes down, but the first 2 years of an auto loan are mostly interest, so I owed more on the loan than the truck was worth.
“No problem” said the man at the dealership, “We’ll just roll the overage into the next vehicle, it only adds $43/month to the loan on the new car”.
So a $22,000 car just became a $26,000 loan at 14% interest for 7 years to get the payment under $450/month… Getting paid minimum wage.
That’s a bad place to be if you want financial security.
- Save your money at first, spend only on the bare minimum.
- Don’t buy a car if you can’t buy it for cash. You’ll make mistakes financing early on.
- If you do buy a car – Keep it until the loan is paid off!
I could go on an on about the mistakes I’ve made, but you’ve got other things to do. Right now I’ll just go over the RIGHT things I’ve learned in the past 10 years.
Tips To Protect Your Money
Where do you put money if you want to save it?
A savings account is probably the #1 answer, and you’d be right.
If you’re just saving to save, then your $100 is going to buy much less in 20 years than it would today. So the amount looks the same, but the price of goods grows and your money doesn’t stretch as far.
Are there better options?
Of course! Here’s where I would put my money if I started all over at 19 or 20 years old.
Option 1 – Stocks
It takes commitment to get into the stock market. This is where I started putting my money when I started by first “full benefits, good paying job” with a 401K match.
A lot of people put money in, then the stock goes down and they take it out. This is EXACTLY how to do the opposite of create financial security.
That’s how we create financial uncertainty.
There are blogs and websites all over (I’ll link one right here by Nerd Wallet) that will explain how to invest properly and the returns you can hope for, but nothing is a guarantee.
You can assume, based on trends that index funds like the S&P500 will yield a 14.7% return on average.
Drop it $50/month every year from the time you’re 20 years old, and by the time you’re 60, you’ll have amassed $1,000,000 (ONE MILLION) dollars. And your investment over those 40 years?
It’s only $30,000! To gain $976,000 in interest due to compounding.
Option 2 – Life Insurance
You read that right. It’s a great place to put your money and protect your family for the future.
When you’re young, you can spend $10/week on a huge policy that will even return your payments at the end of the term.
Here’s how it works:
You get a policy for $100,000. You pay in $40/month (or less) for 30 years. If something happens to you before that 30 years is up, then your family gets that money (that’s financially responsible). However, you plan on out-living the policy, in which case they’ll return that 30 years of premiums in one lump sum [think $14,000].
How’s that for savings with an extra benefit? There’s no losing with this option. Either you get your money back, or you’re protecting your family for the future.
I do have to add that I’m a licensed life insurance agent in several states, so I know this industry and it’s benefits. Drop me a line if you’re looking to get into this at any age, but it’s cheaper when you’re young.
Option 3 – Real Estate
This option is a little harder to break into when you’re young, but if you can save up long enough to get a down payment, then it’s the best investment vehicle on the planet.
Buy apartment buildings or multi-family homes.
Rent out the real estate that you own, and then live in a place you rent from someone else for a cheaply as you can.
This might be tough, but if you can put in the work for 5-10 years, you’ll build an empire this way.
This is how moguls like Grant Cardone have created undeniable, generational wealth that has changed their family tree forever.
Where are you heading?
If you’re heading toward financial security, that’s excellent.
But, if you’re headed the opposite direction like I was for the first half of my 20s, then it’s time to turn it around.
Hang on to your depreciating assets if you can’t sell them to break even, and start investing in options that will build wealth instead of taking it away.