There are a few things I wish I had known before heading into the real world. (My actual graduation…I’m in the middle.)
Yesterday at Gather Little by Little, a reader asked a question. Dave wanted to know if there was anything anyone could have told Gibble that would have prevented him from hitting his financial rock bottom. He also mentioned he was interested in hearing what other personal finance bloggers have to say. And it just so happens that my husband and I were talking about this subject on our walk Tuesday night.
I honestly don’t know if anything could have prevented me from hitting financial rock bottom. On the one hand, I’ve always been a fairly responsible person. On the other hand, I’ve always been a very strong-willed person, and if I get it in my head to do something one way, nothing will change my mind. With that in mind, I’ve had to learn a lot of things the hard way.
That said, there are a few things I wish I would have known before setting out on my own financially. These are things I’ll be teaching my own children before they leave for college.
Spend Less Than You Earn
I’ll give my mom credit. She told me debt is bad. Unfortunately, the way I interpreted that is “debt is bad if you can’t pay the minimum balance.” I’ve always had great credit. I’ve bounced two checks in my entire life, both in the same week, and both because of a calculation mistake on my part.
I’ve never paid a credit card bill late, and I’ve always paid at least the minimum. But I didn’t understand the concept of spend less than you earn. I always strove to spend what I earned or less. And what I charged on a credit card didn’t count in my mind, unless I couldn’t afford the minimum payment.
The Importance of a Budget
I never saw the need for a budget. I figured if I wasn’t overspending, I didn’t need a budget. I don’t even think I knew what a budget was, until after I was married. I remember sitting in premarital counseling, and our pastor told us to write out a budget. Our first budget was a joke. Nothing for car repairs, medical emergencies, or other irregular expenses.
I wish I would have known the importance of budgeting for irregular expenses, so I didn’t spend many years trying to deal with irregular expenses as they came up.
The Value of Investing
At 36 years old, I’ll admit that I still don’t know much about investing. It’s on my list of things to learn. When my husband and I were talking the other night, we were looking at the expensive houses for sale in our area. My husband lamented that he wished someone had told him to invest in one of those properties way back when they were inexpensive.
When I was in college, I figured I’d be financially responsible when I settled down with a husband. My husband thought the same thing. I was almost 24 when we got married, and my husband was 30. Add to that the years we spent trying to figure out how to manage our money, and we missed a lot of years that we could have been buying a house or managing investment income.
If we had known about compound interest, the long term value of buying a house, and the importance of starting early, our finances might be in better shape today.
I say might, because like I mentioned before, I don’t always listen to advice. In the end, I’m not generally one to look back and wonder “what if?”. I’m focused on the present time, and I’m thrilled with the financial turnaround we’ve made so far. I’m also optimistic that there are good things ahead for us.
But I will be teaching my children these three things, so they never have to look back and wonder what if.
What about you? Is there any advice you wish you’d have heard when you were younger? Would it have made a difference?
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For me, nothing that was said while I was having financial trouble would have made a difference.
But I firmly believe that if personal finance had been taught in high school (complete with real life examples of budgets, the cost of debt, the benefit of compound interest, how the credit reporting bureaus work, etc.) it might have made a big difference.
Personal finance was nothing but abstract ideas to me then. It would have helped to have a course that would have made the ideas more tangible.
I actually received some fairly good advice for my grandparents, but my mom was a single parent, and I got used to the idea of struggling, financially. I think it was sort of self-perpetuating, because I seemed to fall for many of the same traps (impulsive spending, signing up for too many credit cards, not having an emergency fund, etc.). I’m trying to break that cycle with my kids by making them more aware of the dangers, and the side effects, of having too much debt too early.
I just fininshed a book by Michael Masterson titled ” Automatic Wealth for the Grad”. I will give a copy to my grandchildren who have recently graduated or are about graduate.
The eye opener for me was learning about compounded interest…. How money can make money and how you can live off of that money as long as you don’t touch the prinicipal – and how $1000 at age 20 compounded and grows over the next 40 years…. That’s another one I am passing along to the grandkids.
I am having trouble with budgeting right now. I think the problem for some of us is not the creation of a budget, but sticking to it. It’s easy to say you’re going to spend X amount on food every month, but it’s another thing to keep track and stay under that amount. This is the problem I’m having and I’m trying to solve it by keeping records of my spending.
I wish someone would have said, “NO, do not get credit cards! If you do, make sure the limit is low”.
It probably wouldn’t have mattered though. $10,000 in debt later, no one listens to me when I tell them to BEWARE.
It’s not that I wish I had learned some particular information, but that my parents had demonstrated how to be financially responsible.
I think having that example would have helped me make some better decisions, particularly in the area of purchasing new vs. used stuff.
Like many others, I had no financial mentor in my life. I think if personal finance had been taught in school and treated like the very important subject it is, that may have made a difference. At least it would’ve made me THINK about constructing a budget to live by, spending less than I earned and saving. I did none of those things because I basically lived according to what I was taught growing up – money is to be spent until there’s nothing left AND then you struggle with the bills AND buy things you can’t afford AND worry about it later AND consider social security to be “retirement money”.
Not many people work out how much they exactly spend each month to see what disposable income they are left with. It is definately the first step to see how much money you have left over, from here you can see if any extra money is best put elsewhere