Man, sometimes don't you wish you could go back in time and change something in your life – even your financial life? Sometimes I wish I could go back to that time right after high school graduation and re-think some of the financial decisions I made. While none of them have been detrimental to my current financial well-being, I always wonder if I could have been better off had I followed the advice I know give (but then, if I hadn't learned these lessons, I wouldn't be where I am today either – catch 22 anyone?).
Whatever the case, here are four things I really wish I knew at 18!
1. That Retirement Thing
I worked all the way through high school and college, and now that I fully understand what a Roth IRA is, I wish I had started one way back then. It would have been awesome to witness the power of compounding over the last few years from the money I could have invested in high school and college. I mean, what was a really spending my money on then anyway? Usually beer and video games. It would have been so much more productive to invest that cash!
Second, my first job in college offered a 401k with an employer match. I didn't want to give up 5% of my paycheck at that point – but what I realized now is that I was really leaving an additional 5% on the table by not taking that match!
Lesson learned: don't give up free money, save for retirement, and enjoy the power of compounding.
2. Don't Buy That Car!
Since I was working full time during school, I always had more money than my friends. My cocky self thought it would be a great idea to buy a new car. Really, my old beat-up truck served it's purpose well, but I really wanted something new. I ended up shelling out over $13,000 (after selling my truck) for this car.
And you know what? Nobody cared about the car. After about 2 weeks of driving the car, I didn't even care I had the car. Plus, over time, I think I ended up sinking more money into repairing this new car than I ever put into my old truck.
Lesson learned: don't go buy a new car unless you really need a new car. Cars are just liabilities, and you want to limit your liabilities.
3. Stay Away From Day Trading!
After taking a few finance and investing classes in college, and interning at a brokerage company, I thought I was an investment pro. Little did I know, I wasn't! I learned this strategy for picking stocks based on technical analysis, and running them through a spreadsheet. I thought it was a fool-proof system.
Well, once I put my first $2,000 into my account and started trading, I started racking up losses. In about three months, I'd lost all that money. It was an expensive lesson.
Lesson learned: don't day trade, actually invest in companies for their fundamental earnings potential.
4. Saving is Not Just “Not Spending”
Finally, I always thought of myself as saving if I just didn't spend all my money every month. And while, yes, technically, I had “saved” something, it was really just because I hadn't spent the money. All the money did was sit in my checking account until I needed it – for buying a car I didn't need or day trading.
Lesson learned: actually save each month, and designate a savings account with a set amount.
Readers, what financial lessons do you wish you knew at 18? I'd love to hear your thoughts!