It took me far longer than it should have to start making sound financial decisions.
Although, it seems to be taking everyone far longer than it should to get their money right.
So, I put together a list of the top ten money lessons I learned the hard way.
Maybe some of you can benefit from my not so savvy experience.
1. Make a monthly budget and STICK TO IT.
Also make sure to include ALL expenses in your budget.
If you go out on Friday nights and regularly drop a hundo at the bar, don’t fool yourself into thinking you won’t.
There is no judgement in finance, just numbers.
No matter what it is, put it in the budget.
Like blowing coke off a hooker’s ass? No judgement! Just put it in the budget!!
2. Save 20% of your income. At least. I know it seems like a lot but when that rainy day comes and you’re in a jam you’ll be happy you did.
3. Never, ever, ever take money out of your 401k. This also applies for when you leave one job for another. ROLL THAT SHIT OVER!! Taxes and penalties aside, for those of you how don’t know how compounding interest works take a look at this:Basically your interest is earning interest. You earn $50 from year 0 – 1. But in year 1-2, now that your total is $150, you earn $75 for the year, giving you $225. In year 2-3 you have $225, so you earn $112.50. In 3 years you more than double your return. Think about what that would look like over 20 years!
That’s a shit-ton of money to lose out on for something you could probably don’t need. No one wants to HAVE to work when they’re 80. Start saving now.
3. Always, always, always, always, always, always, pay off your credit card at the end of each month. If it helps, consider it cash, whenever you use your card, enter the amount into your checkbook just like you would a debit card transaction.
4. Do NOT live beyond your means. If you haven’t earned it, don’t spend it. Ever hear the saying “Don’t borrow trouble”?? They’re talking about money!
5. For most of us, students loans are unfortunately a necessary evil and the devil writes in very small print. Make sure you know exactly what you’re taking and how much that payment will be when the piper comes a-calling.
Forbearance sounds like an awesome idea. Indefinitely defer paying my student loans?? Why not?
Just an FYI – any unpaid interest during your forbearance time period will be added to your principal. Meaning you can go from having $20,000 in student loans to $25,000 over night. And at 8% interest that makes one huge difference come pay day.
6. Having a second job will help pay for those student loans, keep you out of trouble and stop you from spending money. Think about it.
7. There is a difference between a “want” and a “need”. You need groceries. You want the new iPhone.
8. There is absolutely nothing wrong with buying generic. Paying $10 more for a bottle of lotion just because it says Aveeno on it is stupid. Don’t be stupid.
9. Being industrious can save you serious scratch. Paint your own nails, change your own oil, wash your car at home, cook meals instead of eating out, I just wouldn’t recommend cutting your own hair…
10. Always have a little “mad” money tucked away. Some days you just want to say “fuck it” and buy the new iPhone, if you have mad money set aside, you can. Second jobs are a great source of mad money.
Or if you really, really want it – PUT IT IN THE BUDGET!
What about you guys?
What are the best financial lessons you’ve learned?
How many times did it take you to learn them??