Learning From The Best
Over the course of my nearly ten-year career in finance, I have taught a lot of people about saving, investing, making smart financial decisions and so on. I’ve now run this blog full of financial advice for just over 4 years. In that time, I have never once had an original idea. I wish I could tell you that I personally came up with every piece of advice I share, but I have to be honest with you, I’m really just a great regurgitator. I’m not trying to reinvent the wheel, and anyone who tells you that they are should probably scare you at least a little bit.
I have had the pleasure, over the past 10 years, of working with some incredible people. My clients have arguably taught me much more than I could ever teach them. So, for this blog post, I went straight to the source. I reached out to some of our most successful clients and asked what advice they’d give to younger savers and investors. These aren’t necessarily our wealthiest clients, or the ones who made the most money or made big bets on Apple fifteen years ago. These are honest, hardworking people who created their own financial success. I got some incredible answers back. The main theme throughout their responses was that it wasn’t one single decision that got them to where they are; it was a lifetime of good habits that led to their success. Without further ado, here are some great financial tips straight from the mouths of people who did it right!
- Budget! You had to know that was coming. Creating and living by a budget is the first step to financial success. Nearly every client agreed on this one. Everyone’s budget looks a little different depending on your income, expenses and priorities. One client said she and her husband save a tenth, give a tenth and “spend the rest with thanksgiving and joy.” That’s an incredible way of looking at it!
- Don’t forget to enjoy the fruits of your labor. This one piggy-packs off that last piece there. Sometimes we see people so bent on saving that they forget to enjoy what they’ve worked so hard for. You don’t get to take it with you in the end. It’s okay to reward yourself and enjoy what you’ve earned. Include a line in that budget specifically for something that brings you joy.
- Think in hours, not dollars. Rather than looking at large purchases (or even small ones) in terms of dollars, think about them in terms of hours worked. If you make $10 per hour and that new pair of shoes costs $100, it really costs 10 hours. 10 hours of your life for those shoes, are you willing to pay that? Another way to think about it is in terms of what else you can purchase with that $100. This is called opportunity cost. Every decision you make is the decision to forego something else. It will force you to think twice before you spend.
- Don’t buy things you can’t afford. Well duh! That’s an easy one. But in today’s society it’s harder to determine what you can and cannot afford. Credit card companies would tell you that you can afford pretty much anything you want. As long as you can afford the payment, you can “afford” the item. A great client of ours who spent his working life in education specifically cautioned about this. He said they never bought things that they couldn’t pay for in full. It meant delaying gratification and saying no to things often, but they were never slaves to debt.
- Understand basic financial concepts. We have all kinds of fancy technology these days that can spit out any number we want, but there are back-of-the-napkin rules that a lot of our savvier clients understand and use regularly when making financial decisions. These include the Rule 72, the 4% rule, the risk pyramid, and the time value of money. And while you certainly don’t need to be a tax expert, having some basic tax knowledge doesn’t hurt.
- Have an emergency fund. This came from a client who is still in the trenches working, raising kids, buying homes. Sometimes it’s difficult to take advice from someone who isn’t in the same season of life as you. The couple who gave this advice is! They understand that building an emergency fund means delaying other wants, but they also understand the importance of having that emergency fund to protect your other assets.
We’re hardly ever one decision away from financial success. For most of us, it takes a lifetime of making good financial choices. Yes, sometimes you do pick just the right investment at just the right time or you fall backwards into a great opportunity, but that is seldom the case. Call me Dave Ramsey, but all of the millionaires I know didn’t become millionaires by chance. They made conscious decisions every day to take control of their financial lives and are better off for it. Ed and I always say, “smart savers make smart investors.” We can’t create money where there wasn’t any money to begin with. If you’re in your 20s, 30s or even 40s, now is the time to take this wise advice and change your financial future for the better. Don’t just take my word for it!
