We like to say that hindsight is 20/20, and this is especially true of money. We often think about what we would tell ourselves if we could go back in time and provide some advice to younger versions.
The money advice I would give a younger version of myself falls into two categories: “What were you thinking?” and “Why aren’t you doing THIS?”
I think that’s probably true for many of us, depending on how far back you go.
What Were You Thinking?
The “what were you thinking?” advice pretty much goes to the me that existed 15 to 12 years ago. These were my college years, when I made lots of stupid decisions. When I’d do things like take out student loans even though I had a full-tuition scholarship and a sweet part-time job in the university cafeteria. Or put yet another trip to Las Vegas on the credit card.
Me from 15 years ago would get an earful about what not to do, and advice on budgeting and saving and staying out of debt. These are lessons that I try to impress upon my son because I don’t want him to make the same mistakes I made 15 years ago. While my parents talked about saving money and only spending what you have, the lessons were more abstract than practical. I’m trying to be a little more hands-on with my son, and talk more openly about money (which is something that didn’t happen much in my parents’ home.
Why Aren’t You Doing THIS?
Me from 10 to 6 years ago was a different animal. By then, I was married, raising a toddler, our family was paying down debt and I was practicing much better financial discipline.
However, I wasn’t maximizing my resources. I opened a retirement account during that period, but it involved a managed fund with a 2% annual fee. I didn’t refinance my home when I should have. My rewards credit cards were feeble, and I didn’t have a plan for using them.
If I could go back to myself 7 or 8 years ago, I’d say, “Hey, you’re doing pretty well, and you’re not being stupid with your money. But you’re not being as smart or effective with your money as you could be.”
Even today, I’m sure that there are changes I could make to do even better — we can always improve. However, most of the things I do now are things that I should have been doing almost a decade ago. I wasn’t doing anything wrong back then; my family lived within our means, we had an emergency fund, and we were saving for retirement and our son’s college costs. However, I wasn’t running my finances as well as I could have been, and I’ve probably missed out on between $10,000 and $15,000 as a result of paid fees, paying too much in interest, and credit card rewards that I could have had.
In some cases, I can’t be too hard on myself when looking back, since I just didn’t have the knowledge that I have now. In other instances, though, I did have the knowledge — and I waited years to act on that knowledge. It’s about those things that my now self would probably want to give my then self a swift kick in the pants for motivation.
Don’t Give Your Future Self More to Be Upset About
Now, my focus looks a little forward. Often, as I review my finances, I ask myself this question: “What will my future self say about this?” If I think that my future self will regret that I didn’t make a move, or learn more about something, or change course when I know I should, that’s incentive for me to change things up a bit.
Sure, I want my future self to be glad of the memories she has. But not at the expense of a solid future. As a result, I’ve been trying to incorporate a more “big picture” view that looks at what I’m doing now and what I want to happen in the future, and balancing the two so that I have the resources to enjoy life today, without stealing from the future.
What do you think? How have your money practices evolved? And what would you tell your past self at different points?
I could give my former self all sorts of advice…but she wouldn’t listen. I wish I would’ve realized what all the money I earned through age 25 was worth…and not wasted it!
I think we all have spending mistakes we regret. And, one would hope that we are better at listening no that we are older.
I would tell my past self to not try to time the market, don’t trade in individual stocks, and do not count on momentum. Instead, invest often, and invest in low-cost passive index funds. A three fund portfolio of US total stock market, Total international stock market, and Total bond market with percent bonds equal to your age, will get the most bang for the buck. And stay the course through thick and thin. Never sell during accumulation unless it is to rebalance to the desired asset allocation.
That’s great advice for all of us, of any age! It’s amazing how much you can do over time if you just take a balanced approach — and stick with your plan.
I would tell myself to put more money aside for retirement, rather than desperately throwing it all at debt. We did $100 a month for a couple of years b/c we were living on very little and had student loan/medical bills. But even $300 a month wouldn’t have slowed our progress that significantly, and we’d be further ahead in our IRA balance.
That’s a good point that turns some of the conventional wisdom on its head. Since your retirement is a long game, it can make sense to focus more on that.
‘Stop focusingonly only on what you earn! Take stock of what you keep!’
This is pretty much it.
I would start putting money into a pension pot in my earlier 20s, instead of leaving it until my 30s, which is what I’ve done. Also as I now know a lot more about the stock market than when I was younger, I would invest some of my spare cash myself into relatively safe, high dividend stocks.