I was asked a question the other day that really got me thinking. A client asked me,
“Jeff, what is the best financial advice that you have ever received in your lifetime?”
I really had to take a moment and really think about, of all the information I have got, of all the tips, of all the advice I have gotten over the years, what is the absolute best advice? I honestly couldn't answer that question immediately. I thought I had a few ideas, but I really wanted to take a breath and just really see what is some of the best advice I ever got.
The one thing, if this is your first time ever hearing me talk or if you haven't been to the blog yet to know a little bit about my back story, my family, my father, my mother, they didn't really give me a lot of good financial advice. They always said maybe you should save, but they never really showed me how or never really introduced me to a lot of cool tools like the Roth IRA that I could save into. The best financial advice I have received has been through my clients, through the experiences that they have gone through, the trials and tribulations of their financial rights and wrongs. What they passed down to me is where that advice has come from. I can think of a few different things as some of the best financial advice I ever got or ever received.
The first thing is you should start saving earlier. Duh, right! I know that's not rocket science. It's not some great revelation. I have met with so many different folks that were in their late 50s maybe early 60s that were approaching retirement and weren't as comfortable or confident as they would like to have been. Had they started saving earlier they felt that they would be much more comfortable going into retirement with a really good strong feeling about it, and they didn't have it. They wished they would have started earlier. What such tremendous advice for, at the time in my mid-to-younger 20s to get that, because if my parents were telling me you need to save early, you need to start, you need to start, which they didn't but even if they had I don’t know if I really would've listened. Now being in my 20s and starting my career and sitting across the table from folks that didn't listen to the advice maybe that their parents had passed down to them and now they are paying the consequences.
Do You Really Need to Buy <Fill in The Blank>
To go along with that as far as starting earlier, the other thing that they taught me or some of the other advice that I got was you need to save more. Once again, this isn't some epiphany like, “Oh wow! Thanks Jeff. That really helped out a lot.” It helped a lot hearing it coming out of their mouth saying, “Jeff, trust me. Here we are. You see our situation. You see where we are at. You see where we are lacking and the money that we wish would have. The reason that we are lacking is because we didn't start early, and we didn't save enough.”
Earn Baby Earn
I think the other aspect is trying to earn more. It's always about saving, but it's also trying to earn more. That's you getting raises at your job. That's maybe doing freelance work. That's working a part-time job maybe from home. Maybe it's a side passion of yours to basically try to earn more income. That's something that I have kind of adopted. I do save. I did start early. I do save often, but I have also tried to find other ways to increase my income. I think there is a delicate balance. Saving is a good thing, but if you can make more it makes it that much easier to save. That could be choosing a different career path. If that's not in your blood then maybe it's doing a side job. I have a lot of clients that will do maybe freelance writing or photography or anything for that matter just to basically have some extra income as well.
More from GFC, Below
The third and final thing, which actually if you go to my other blog, Soldier of Finance I actually wrote an article about it. I talk about the “Lu”, which is the 1998 Chevy Lumina that I drove whenever I was in college then also drove for my first several years of working. This was a car that was passed down from my now-deceased grandmother. It was champagne colored, had the alloy wheels, four door, no spoiler, and had the cassette player. This thing was sharp right? You can imagine driving around town in a four-door Lumina. A few things about it though: It had about 12,000 miles on it and I think I got it from her back in 2002, maybe earlier, I believe. It was a car that was four years old, maybe a little bit older than that actually, and it only had 12,000 miles on it. So that was one aspect of it. The other aspect of it: It was paid off so I had no car payment. But here's the thing. If it hadn't been for a finance professor in college, the “Lu” wouldn't be such a success story.
The professor on the first day of class asked us, “How many of you plan on trading in your car every 3-5 years?” I want to say all of us, maybe with the exception of two and you have a class of 30 folks or so, all of us raised our hand. I remember at the time I had this big vision of driving a BMW. I am not sure why that was, but I just envisioned myself driving a BMW. Once I graduated that was my car, four-door sports sedan; that's what I wanted. I knew once I graduated, I didn't care how much I was going to make, I was going to find a way to get that BMW. When he asked us that question, we all raised our hand and he responded by, “While all of you are trading in your car every 3-5 years, I'll be taking my family overseas to European vacations.” When he said that I thought, “What does that mean? What are you talking about?”
That was our introduction to the power of compounding interest and how saving an amount of money today and what it can grow to be. It showed by putting in a car payment per month, whether it be $300, $400, $500, $600 a month, what that can grow to be. For me as a young male who had these big aspirations of driving this sport luxury foreign car I was like, “Wow! What am I doing? What am I thinking? I'm going to be wasting money when I could actually be saving?”
That was extremely helpful to me and some of the best I ever got because whenever I inherited that Lumina, I had the option of trading it in or selling it, getting the cash and applying it towards the BMW. I still would have had a car payment, but I would have been driving my dream car. Instead I drove the Lumina for almost three or four years up until I returned back from Iraq, and I didn't have a car payment that whole time. Not having that car payment gave me the ability to be able to save into my 401K, into my Roth IRA. It made me appreciate the fact of how to spread a dollar, not go out and waste money on just useless things. That was a huge pivotal point in my life because now I reflect back. Because I didn't have that car payment for those years I've got a decent amount socked away in my retirement accounts that has been able to grow over the last few years. I am glad that I received it. I'm glad that I applied it, and any chance I get to share that story with others as I'm doing now I look forward to it and hope that you get something out of it as well.
What's Your Best Financial Advice?
Those are three of some of the best financial tips I have received over the years. I hope that was helpful. I'm curious as far as with you, what is some of the best financial advice that you've received in your life? Be sure to share your stories, your comments, so that others may benefit.