Many people take their parent’s or friend’s advice when it comes to saving, investing and spending, but why not receive financial advice from the experts themselves? Let’s take a look at what financial advisors wish they could tell their younger selves so you can avoid making these financial mistakes.
It’s Possible To Live a Life Without Debt
One important financial tip that is critical to learn early, is that while debt may be common, it is very possible to live a life without it.
“We seem to all assume there is no choice but to take out debt,” Jay Zigmont said, CFP and founder at Live, Learn, Plan. “We even get taught there is ‘good’ and ‘bad’ debt. The reality is that it is all debt is money we owe to others. Debt is stealing from your future. Once you are debt-free you can invest in your own future, not the banks.”
While sometimes debt is inevitable, other types of debt are engrained as “normal” in society, when it’s actually completely unnecessary. A great example of this is car financing.
“I used to trade in my cars every 2 years and thought it was ok as the payment stayed the same,” Zigmont said. “What I missed is that the total amount financed kept growing (as did my debt). It wasn’t until years later that I learned that a debt-free life was possible. It is also possible to get through college without student loans, and you can live without a credit card.”
If you are willing to keep a car for a longer time, you will avoid a great amount of debt later on.
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It’s Never Too Early To Start Investing for Your Future
The beauty of investing is that it builds over time. Even if you can only afford to invest $500 a year, as long as you are consistent and let that money grow, over time that $500 will build into a sizable reserve.
As investments accumulate over time, it’s perfectly acceptable to start early — even as early as high school, according to Marguerita Cheng, CFP and CFP Board Ambassador. Cheng adds that there is such thing as being “too conservative” with your money. As important as it is to watch your spending, it’s also important to invest in your future and start building your wealth early with modest amounts of money.
Keep a Cool Head When Investing
Another key to investing is going back to the basics and remembering common sense and long-term thinking to take advantage of investment opportunities as they occur. When looking at investing it’s important to not focus on the dips in major industries, and instead, remember that essential industries will always bounce back.
“When oil crashed, many panicked,” Erik Weir said, principal at WCM Global. “People questioned how oil could rebound from negative $40 a barrel. So, they gave up. The same with COVID. People thought the travel industry was dead. They assumed the pain of the moment would never go away. Today oil prices are sky-high. Travel is booming.”
In order to be a smart investor, remember that temporary crises do not mean permanent declines. Avoid panicking and instead follow the advice of Weir and keep a cool head and get into the market as soon as you can. Even if there is market chaos and bad inflation, buy stocks and allow your investment to grow.
Don’t Let ‘Lifestyle Inflation’ Keep You From Reaching Your Goals
Everyone has long-term goals beyond their career. Whether it be retirement, starting your own company or going on a lavish month-long vacation, it’s important to continue setting aside money as you grow in your career in order to keep a nest egg for your future goals.
“As we transition and grow throughout our careers, it’s natural to gradually make more money,” Jennifer Stein said, CFP and director of client engagement at Priebe Wealth. “Instead of inflating our lifestyle, say by upgrading the house, car, buying a cabin, etc., try to save 50% of every raise and bonus. This way, you can still over time enjoy the things you want in life, but you are increasing your savings rate with each pay increase you also receive.”
Think Long-Term When Making Major Financial Decisions
As exciting as it might sound to move to New York or London after receiving a job opportunity there, before making major financial decisions, you should consider whether you can afford a long-term, expensive commitment.
“Financial advisors should follow the same advice we give to our clients – think long-term,” Mike Fessler said, financial advisor for Edward Jones. “Look for a place where you can grow and build a successful practice in the long run.”
While it’s exhilarating to have a “no limits” attitude toward your own growth and success, it’s also critical to make responsible financial decisions that foster success and are not going to put you in a hole of debt.
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