Financial (and life) advice for the young and maybe the older as well

There are, in general, two types of people in this world – those who live distracting themselves from realizing they are subject to the whims of others and those who are free from needing to be subject to the whims of others. Everyone (speaking generally) can choose to eventually become the latter category if they choose to live in a way that can make that happen.

The sad part is that those who are free from the whims of others are an exceptionally small percentage of the population. Why? It’s often because of decisions like this:


Originally Posted by someone on the internet
I want to make a good amount of money when I’m older but I also want to enjoy what I do.The only problem is I’m 17 and have a bmw which is funded solely by me. So I don’t really have any extra cash laying around to put into a retirement plan, although being tax free I’m sure it’s a smart thing to so.

That type of decision results in this type of thing:


To become free from the whims of others, you must accumulate net worth consistently and grow that net worth until you no longer “need” to work (and realize that even the self-employed are “working” and have days they hate their job). At that point you are only subject to the whims of others (whether it be bosses, customers, clients, vendors, etc) when you CHOOSE to abide by their whims because you will know that you don’t have to if you don’t choose to.

How does that happen? Well, first off you have to realize that building net worth is not a “diet” for your finances. Diets do not work. It has to be a lifestyle change if it is going to last. You have to commit to making building your net worth a top priority in your life. Every decision you make to spend money has to be made with the understanding that it means sacrificing the growth of your net worth and thus extends how long you will be subject to the whims of others. Is having a slightly nicer car/house worth being forced to put up with others for days/weeks/months/years longer? Is going out to the bar 5 days a week instead of just on the weekends in your early 20’s worth being forced to answer to others for months/years longer in your life? etc.

Now, before the idea of building your net worth being a “top priority” in your life makes you think I would suggest you shouldn’t enjoy the money you earn let me tell you that a “top priority” is not “the only priority” you should have. Increasing your quality of life throughout your life is something you should also have as a priority. I would caution you however, that increasing your quality of life starts at the bottom once you are on your own (not from whatever quality of living was provided for you before you become independent). For most this means working their first job and living in their first apartment with a roommate(s) or living in dorms going to college (i.e. the “broke student” stereotype).

When you start with that “bottom line” point, the following is my generic advice:

1. Always live “below” your means. I say this because most people do not consider money spent on savings/investments as “living” though it surely is a necessity just like having a roof over your head.
2. Save a 9-12 months emergency fund (monthly expenses only) as soon as possible.
3. Expect to make more money as time progresses, most people do.
4. When you start earning more, make sure you increase your emergency fund to match.
5. As soon as you are earning money, invest some of it. Never say “it’s only $xxx.xx so it’s not worth investing yet” or “I’m too poor to invest anything“. If you can’t afford to invest then you can’t afford your current lifestyle, because investing is a bill you need to be paying yourself as soon as possible.
6. When you start making more, maintain your quality of living (i.e. allow some of that increase to cover inflation/increasing costs of living).
7. Take half of what is left over and put it in savings/investments, use the other half of what is left over to increase your quality of life. Repeat these steps every time you start earning more, whether it’s from a raise/promotion/new career/etc.
8. Set goals in life but don’t be blinded by them. Your goals will likely shift throughout your life and you shouldn’t ignore your new goals simply because you had other goals.
9. Never go a day without a budget. If you don’t know where your money is going then there is a strong chance that too much of it is being wasted.

Now, notice that I repeatedly mentioned “savings/investments” but didn’t say “IRA” or “401k” etc. I did that on purpose because saving for retirement is only one saving/investment that you will likely need in the future. Savings for a house, savings for your next car, savings for a vacation, etc are all things you should save for. Interest is the most common way people let themselves avoid maximizing their ability to grow their net worth and thus prolong how much time they will spend answering the whims of others. Interest is only a positive thing financially if it is paid understanding that you will be growing your net worth faster by paying the interest than you would by paying for the item immediately upon purchase.

Regarding careers, I will say that getting a college education which is in a field that you can turn into a career (preferably a number of different types of careers) without incurring excessive debt (relative to what those careers would pay if you find a job in them) is “generally” a good investment. Though if you can manage to get that education without student loans you’ll find life much simpler later on as well as probably be “free of the whims of others” sooner.


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