Last night my husband Thom and I watched a television show called Billions. It followed a few previous nail-biting episodes where the main characters, Axe, Chuck, and his wife Wendy, stood on what appeared to be an inescapable precipice of disaster. Then, through an unexpected twist, they all managed to escape jail time and return to their former wealth and status with little or no repercussion. While we’d all like that kind of break in our own lives, especially when it comes to our finances, we usually aren’t as lucky. Even more interesting, at least to me, was that after triumphantly returning to his billion-dollar hedge-fund business, Axe looks at Wendy, his financial performance counselor, and says something like, “I thought the high would last longer than it did.” Don’t we all? When it comes down to it, many of the messages we think we know about money don’t pan out. And while I’m certainly no expert, here are a few truths about money that I wish I had known when I was young.
As I’ve mentioned before, Thom and I have been self-employed for our entire lives – except for those miserable 6-12 months where we both tried to fit into a business model built by someone else. We learned early on that we are “un-employable” so that required that we figure out ways to pay our bills, invest, and save on our own. Yes, in the beginning, we lived below the poverty level, failed at a couple of businesses and made more than a few of mistakes. But recognizing that nothing is a failure if you learn from it, we have acquired valuable feedback from each experience that allows us to now live mostly stress-free, healthy, happy and comfortable. However, I can’t recall that path ever being shared with me when I was young.
With that in mind, here are seven things that we learned along the way that I believe would have made the journey go much more smoothly:
- Recognize that wealth and success looks different to everyone—and don’t compare your level to others. When we are young most of us are taught—go to college and get a degree, get the best (meaning most highly-paid) job possible, stick with that job even if you hate it, buy a bunch of stuff that others envy, and hopefully, if you live that long, retire and finally do what you want. Instead, when I accepted that I wanted something different than most people right from the beginning, and was willing to make choices to support that lifestyle, I found my happy place. Sure, I know that if I worked harder I could make more money, have a bigger investment portfolio, and look more successful. But the tradeoff for that is something I’m not willing to do. Instead, I now know that I get to decide what success means to me and what part money will play. We all can. A big key is not comparing myself to others.
- Select your significant other wisely. A while ago I wrote a blog post about 1,200 people over 78 years old who, when interviewed, offered a list of things they wish they knew when they were young. At the top of the list was realizing how important it was to have the right spouse or partner in their lives. In other words, your significant other can either make you happy—or make you miserable. They can also make you wealthy in many ways, or make you a pauper. Don’t we all know women who spend fortunes on jewelry, product, shoes, etc.? Or men who have to have boats, the latest car, or the latest gadget? The trouble is, no one tells us that all that stuff costs money, time and life energy. And if we aren’t on the same page as the one we live with—it will drain us dry. If both of you agree that “looking good and having stuff” is far more important than having financial peace of mind or savings in the bank, then by all means partner up with that person. But trust me on this, if you don’t agree, then you will be miserable, and your finances will reflect it.
- Learn to appreciate the value of delayed gratification as soon as possible. Were you taught the value of putting off things today so you could benefit from something even better tomorrow? It wasn’t a specific lesson in my household but I learned it because if wanted something, I had to figure out a way to pay for it myself. Remember layaway plans? Of course, this was before credit cards allowed us all to buy whatever we want, as soon as we want it, and then face the consequences later. Unfortunately, when I first managed to get credit I had to address that learning curve as well. What I wish I had realized was that instant gratification never lives up to the hype. Like Axe in the TV show Billions, the high does not last and paying for that momentary thrill isn’t worth it in the long run.
- Find a mentor (s) who lives the life you want to live. As I’ve written before, Daniel Gilbert in his book Stumbling on Happiness explains that most of us don’t really have any true idea what will make us happy. When we are young most of us follow the suggestions of our parents, teachers, or what we see on tv—but those are only other people’s versions of happiness and success. Instead, Gilbert recommends that we find someone who is living the kind of life we think we want, and then ask them about it. Are they glad they made the choices they did? What did it really take to get there? Was it worth it? Would they do it again? If we can find someone who is living the life we think we might want, we can learn from them. A good mentor is someone who is modeling the life you think you want and is willing to help you get there. I sure wish I had learned that when I was young.
- When you find that mentor—listen and pay close attention to what they can teach you. As I’ve written before, Thom and I got involved in real estate investing when we were fairly young. We started flipping long before others even knew what that meant and we lived on the proceeds as we churned through the properties. At some point Thom vividly remembers a conversation with an older man who owned a dozen rentals free-and-clear in our neighborhood. When Thom asked him what he advised, he said something like, “Don’t sell them, pay off the mortgages, and you’ll never struggle for money again.” Oh, that we would have listened to that wise counsel back then!
- Do not accept that debt is normal or advisable. Back when most of us were kids credit was not as readily available. Still, in real estate we were told that a mortgage was inevitable and that debt was the way to build wealth. (Sort of like all those who are now saying college debt is unavoidable.) Sometimes yes, sometimes no. While I’ve known a few people who “worked the system” very well using “other people’s money,” I’ve also known quite a few who tried but lost everything. No one told us when we were young that being completely debt free was the best thing that we could do. But it is both possible and doable. Sure it takes self-discipline, effort and tradeoffs, but the freedom and peace of mind that comes from it is well worth it.
- Know your own finances. Lots of financial advisors teach that budgeting is a key to money success. We prefer to think of it as knowing your finances—what you have coming in, what’s going out, and what’s left over. Unfortunately, most people don’t seem to be that aware. If you ask someone what they pay to live in the house they live in—most will tell you a rental or mortgage amount, but they have no clue the total cost (taxes, utilities, insurance, maintenance, etc.). Or what about the price to drive that new car? If we don’t know the true and full cost of something, we are living in denial or fantasy. Eventually, however, those true costs will catch up to us. I really wish I’d learned early on that everything requires tradeoffs and that eventually we will be accountable for what we spend.
Bonus tip: Realize that your time and good health is more precious than money!
I’ve heard that more people would rather tell you about their sex lives than talk about their finances. But if I’ve learned anything through the years, it is essential to talk about money if we ever want to be free of the weight that comes from unconscious consumerism, out-of-control spending or crippling debt. Like I mentioned in a previous blog post where I shared tips from older people at the end of their life, every single one of them confessed that they wish they had been true to themselves rather than live the life that someone else planned for them. But let’s face it, is it possible to be true to yourself if you aren’t true about how money works or doesn’t work, in your life? Surely the SMART path is to remember that we each get to decide what wealth and success mean to us. And a good place to start is to honestly tell the truth to ourselves about what money means to us, and why, and then live accordingly.
Okay, your turn! What have you learned about money that you wish you could tell your younger self? Please share that and any other thoughts in the comments below.