By the time my next column hits the web I will have crossed over from “young up-and-comer” to “legitimate adult.” I will be thirty and will enter the world of accountability and responsibility.
Financially, your 30’s are a very important decade. Most 30-somethings purchase their first home at this age, their incomes are rising but so are expenses. Most have their children in this decade. The average age for a person filing for bankruptcy is 38.
This column will be split into two parts, a reflection back and a look forward. Age is a good milestone to get on track, but there’s never a bad time to re-evaluate your situation and determine if your current path is leading you where you want to go.
4 Things I’m Glad I Did
The word “investing” is scary to some people. You’ll get a reaction similar to that of buying lottery tickets.
“I don’t want to invest! You can lose your money doing that.”
It was scary opening my first account and putting my hard earned cash into stocks that may or may not go up in the future. In fact, for the first two years, most stocks went down when I started investing and I lost a lot of money. But the experience helped me to learn about investments, the language of investments and the idea of risk.
Here’s a thought: The fact that you have your money in a savings account at the bank – YOU’RE INVESTING.
You’re using your money to accrue interest that can be spent at a later time. The problem is, the interest you’re accruing on your money at the bank doesn’t cover the rise in prices of goods like food, gas etc. You’re still losing money, but it just doesn’t feel bad because you can’t see it on paper.
Understanding investing and the value of money has been very important. I did not make the connection until I had some real dollars on the line.
Start investing and you will learn. You may not have to go through losses like I did to do so.
This is something I never would have done if I did not go into the Real Estate field. Having the responsibility of a mortgage payment was terrifying to me. However, I thought I needed to go through the process if I was going to be advising people to do the same.
In the end, it’s not as scary as people make it out to be. Even if the property did not appreciate at all during the few years that we’ve been here, I have these thoughts:
- We (my wife and I) can stay here for as long as we want to and the payments are somewhat fixed (property taxes and maintenance fees change).
- If we choose to move we’ve built enough equity in the home to rent it out for positive cash flow or,
- We can sell the property and move the proceeds into our new home.
- We’ve done a major renovation this year and changed the specs to our personal taste.
- There’s no landlord to answer to.
- I’m not scared of buying another property.
Real Estate is like any other investment, the difference is you usually need a large amount of money to start with, or you’re borrowing a large sum of money. As long as the decision to do so is thought out and the plan is to hold the property for a long period of time (5 years +) I see great benefits in owning a home.
In college, I was making a decent amount of money playing gigs around town as a musician. Whatever was paid to me was spent right away. Nowadays, I track my expenditures daily on my computer.
Just being able to see the outflow of where the money goes helps to keep my wife and me on track for our goals. There’s no sense in setting goals if you’re not going to monitor your progress. Olympic runners time themselves at practice to determine if they need to train harder or take a rest.
- Moved out of my parents home (with nothing)
This is probably the fourth time I wrote about this, but it was something that really opened my eyes. Upon buying my condo, I moved from my parents and took nothing with me (no TV, couch, dishes, etc.). The experience of starting from scratch helped me to understand what was important, what I could live with and what were necessities.
When putting together your goals and budget most advisors will talk about “needs” vs. “wants.” What better way to solidify the difference between the two than to start off with nothing.
3 Things I Would Have Done Differently
Starting at the age of 23 is not that bad. However, with time on your side, the earlier you can start to understand the value of saving and investment, the better off and in my opinion, the more exciting it becomes.
- Not Tried to Play the Stock Market
The first two years I was day trading online and didn’t have a clue as to what I was doing. Whether it’s finding a financial advisor that you trust or investing in a couple of good index funds, watching the stock market daily will only cause you stress.
- Put Money Into A Roth IRA
The Roth IRA is an amazing tool to help plan for retirement. The earlier it can be started the better. I didn’t know about it until I was 25. If I started at 20, the extra 5 years would have been beneficial.
Have a Happy New Year!!
