[email protected]'s Blog
Financial Advice For Young People
by, 01-10-2009 at 03:23 PM (5706 Views)
You can control your financial destiny, live a good lifestyle, retire with security and grace -- even luxury -- if you make good decisions and avoid some of the mistakes your friends are making:
Plan for a good career. Don't just settle for whatever comes along. You have to make your own way. If you want financial success, you will have to take responsibility for preparing yourself to earn it through education, developing your skills and abilities, and improving your worth to an employer or a customer every day. If you fail to make yourself productive, there is no one else to blame but yourself.
Learn the value of saving money. There are two ways that money is obtained: 1) you can earn it with your labor, ideas, or skills 2) the money you have will earn more money Obviously, you have to do #1 before you have #2. But if you never save any money, you will never accumulate wealth. Don't confuse making money with having money. There are a lot of people out there driving a Lexus who will have only their social security or some other handout when they retire. Start saving now, and let the miracle of compound interest make you rich.
Be patient. Most people who are financially successful started out with nothing, just like you. It takes patience, determination, and humility to avoid jumping at every temptation. Every day that you delay buying something is another day that your savings are working for you. Trust me, you won't have to wait forever, just for a while.
Don't go into debt. Someone who borrows money to buy something always pays more than the person who doesn't. That has a "double whammy" effect. When you borrow money, you not only pay for the luxury of having it when you can't afford it (interest) but you lose the income your money could have earned if you had delayed the purchase and saved up for it. The two biggest culprits: credit card debt and car loans. Remember this: If you never make a car payment in your life, you will spend half of what everyone else spends on cars for the rest of your life. Pay cash for your cars -- buy what you can afford -- and one day (soon!) you will be able to walk into any showroom and write a check for the car you want. But if you get in the "car loan" habit, trust me, you will never get there.
Another note: sales people will try to talk you into buying a car that you can't afford by selling you a long-term loan. The payments might seem really affordable, but as soon as you drive off the lot you have immediately lost thousands of dollars, because you now owe more than the car is worth. If you tried to sell the car the very next day, you would lose a ton of money. That's called being "upside down", and it's not a good position to be in.
Don't take risks. Insurance is necessary. Saving for emergencies is necessary. Keeping your job is necessary. Grades and graduation are critical. Don't drink and drive. Don't smoke. Don't do drugs. Be honest, don't break the law. Pay your taxes. If you take risks with your money, health, and security, sooner or later you will get burned. Trust your instincts -- if it doesn't feel right or safe, don't do it.
Get in on your employers retirement plan. One of the greatest wealth-builders out there is the 401(k) plan offered by most employers. You take money out of every paycheck before tax is calculated (which means you pay less tax) and your employer will add a "matching" amount. This money is put into an investment account of your choosing, and it builds like crazy. Many people are retiring young with a million dollars or more in their 401(k) accounts. Don't miss out on this opportunity, and don't be tempted to "borrow" the money out of your retirement fund for other purposes.
Marry someone who shares your economic values. Divorce is a major cause of financial problems, and disagreements about money often cause divorce. Your life partner should be your wealth-building teammate, not a financial enemy.
It's important to understand that your future is within your control. But you have to start now! Learn all you can, be patient, work hard, and make good decisions. You can join the millions of Americans who have taken advantage of the opportunity to become wealthy and happy.
-H. J. Rolston