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The other day I emailing with Heath, a listener of the podcast. Heath commented that the Marriage, Kids and Money podcast has a family focused tone to it, but it can really be enjoyed by single guys (like Heath) who don’t quite yet have a family as well. The compliment was extremely appreciated – thank you Heath – and it got me thinking. What advice would I have for myself 10 or so years ago before I met Nicole, before I had kids and before I knew anything about money?
Heath’s email inspired me to time travel to my mid 20’s … My days of MySpace, Craigslist roommates and living for the weekend.
Here are 9 pieces of advice to my former single guy self:
1. Luxury Cars Do Not Equal Success
– 22 years old –
Hey Andy. So, you thinking of getting an Audi TT convertible at 22 years old, eh? I’d hold off on that new lease pal. You might want to consider moving out of your Mom’s house first and getting your own place.
Spend a few years living on your own and get some practice with paying rent, utilities and buying your own food. You’ll quickly find that paying $500/month for a car is just not worth it.
I know that you think the car is cool and you look badass driving it, but really it’s not something you can afford right now. You might want to think of your parents (you know … those people who aren’t receiving rent from you). Think about the money they spend on your food and shelter before you drive around in a luxury car. Just sayin!
2. Don’t Rush to Buy a House
– 22 years old –
Oh, thinking of buying a house, eh? That’s interesting. Have you considered how much owning a house REALLY costs?
Before you end up borrowing money from Mom when you can’t make the mortgage payment on your $30k salary, let’s consider renting for a few years. You’re not even sure that this house, this city and this current job are even right for you.
When you are ready to buy a house, make sure you can afford the payments on a 15-year mortgage and DO NOT get an adjustable rate. ARM is a bad word when it comes to mortgages.
3. Learn to Budget Early
– 23 years old –
Okay, you went ahead and bought the house anyway and now you’re realizing that being a homeowner can be quite expensive. When Chase bank gave you that mortgage loan and told you that you could “afford” it, you didn’t factor in repairs, utilities and your other life expenses.
Take some time, sit down and write out a monthly budget to live on. Here’s a simple spreadsheet to use. In a few years, they are going to come out with some super intuitive personal budgeting apps like Mint. You’ll want to be an early adopter. Living within your means and on a budget is super crucial at your age.
4. Start Investing for Retirement Early
– 23 years old –
Remember when your employer said that they have a 401k that matches? That is free money! Meet with your benefits rep at work and sign up!
A simple rule of thumb for investing in stocks and bonds for retirement is as follows:
120 – YOUR AGE = STOCK PERCENTAGE
For you this would be: 120 – 23 = 97% Stocks
So based on that rule of thumb, your portfolio would be based on 97% stocks and 3% bonds. Here is the diversification breakdown that I’d recommend for you at your age:
- 57% Large Cap US Based
- 15% International
- 25% Small Cap
- 3% Bonds
As you get older, you should increase your bond holdings as that is typically a less volatile investment. The older you get, the more conservative you want to be so your money doesn’t all disappear in a big market crash right before you retire.
Sign up to have the money taken out of your paycheck before you even see it. Yes, you won’t be able to get as many “7&7’s” at the bar this weekend, but you’ll thank me in the long run.
While you’re at it, reach out to Vanguard or Fidelity and start a Roth IRA. Start off investing 5% of your salary and increase it a percentage point per year. Your salary won’t always be $30k buddy. Don’t worry.
— Andy Hill (@AndyHillMKM) February 13, 2017
5. Read More
– 24 years old –
Hey, I know you are really digging Lost right now. It was a pretty epic series I must admit, but try to pick up a book every once in a while? There are some excellent books out there that will get a jump-start on improving your finances so that when you are married with kids, you’ll be able to enjoy life that much more.
Here’s a few books that will make a big impact on your financial situation:
- Total Money Makeover by Dave Ramsey
- MONEY Master the Game by Tony Robbins
- The Millionaire Next Door by Thomas J. Stanley
If you don’t have time to read, listen to audiobooks in the car or while you’re exercising. (Side note: I don’t think they had Audible in 2006, but that’s how I’m doing most of my “reading” lately).
6. You Don’t Need a Master’s Degree to Make More Money
– 25 years old –
Please let me save you $40,000 and almost 6 years of your life, Andy. You don’t need an MBA to get ahead in your job. The marketing services industry you’re in does not require it. Having one will not automatically get you a salary increase. I know you’re depressed that your salary hasn’t grown very much over the past few years. It is going to rise soon, but you don’t need an MBA for that to happen.
Instead of spending $40,000 on your MBA, channel your energy, funds and spirit into flexing your entrepreneurial muscle. Start a side business while you’re working your full-time job so you can learn how to be a successful entrepreneur. Here are a few more books that will help you find your inner entrepreneur:
You will not become wealthy through your job alone. Be smart with your money, stay out of student loan debt and think about what “Andy Inc.” could be.
7. Buy an Engagement Ring Within Your Means
– 26 years old –
You’ve met “the one”! Your dream girl! Nice work buddy!
Save up enough money to buy the ring with cash. Trust me, you really don’t want to be making payments on this ring to start your marriage. I know this purchase seems like the most important thing right now, but in the long run it’s really the least important. She loves you and you love her. That’s what matters.
Whatever ring you can afford, that’s the one you should buy. You can always upgrade it later if you both really want to.
8. Travel More Before you Have Kids
– 28 years old –
Congratulations on getting married, Andy! What a wedding!
I know you’re excited to be a Dad and you’ll be a great one. Before you and Nicole jump into parenthood, take some time to travel together. Make some memories, get lost and explore this country. Go abroad together too (at least once).
You’ll cherish these experiences you had together when you become parents. The opportunity to travel decreases quite drastically when the little ones come around.
9. Avoid Commission-Based Financial Advisors
– 29 years old –
You just met with a commissioned based financial advisor. I’d highly recommend that you not work with him. Since he’s a commission based broker, he is more interested in selling you products than making sure you’re successful in your retirement plans. If you’re going to work with a financial advisor, choose someone who is a “fee-only Certified Financial Planner”. They receive payment from you for their advice as opposed to receiving commissions for pushing products.
You can also manage your retirement by yourself as well! Keep reading those books we talked about and you’ll see it’s easier than you think.
— Andy Hill (@AndyHillMKM) February 9, 2017