Little Jack’s Corner

As I mentioned in my last post about our investment portfolio, Friday is the day I do our household financial account balancing.  Consequently, my mind tends to have little dollar signs floating around in it all day, messin’ up my thinking.   And, with only one more bill to pay today, my mind has wondered to the lessons I’ve learned over the years about finances. 

In today’s society, the cultural brainwashing includes such facets as “it takes 2 incomes to survive”, “life takes visa”, “you deserve it”, “buy now, pay later!”, and even “come on in, you can afford it!”.  And don’t even get me started on the katrillion pay day loans / title loans / rentacenters in our area!  I get ill thinking of all of the people trapped behind such statements and false thinking.  The heavy credit laden consumerism of today is not an American trait that I admire.  And it’s sad to know that our country has one of the lowest personal saving rates in the world!

And I’m speaking from experience more than anything!  I remember at age 18, the biggest excitement in my life (besides graduation) was my first credit card.  Seeing my name on that piece of plastic said something.  Although back then, I didn’t realize the “something” that it said was “You’re an idiot, now give me your money at 29% interest!”.  Whew.  If only I could go back to that time and snatch a knot in my silly young clothes-obsessed head.  Living at home with mom & dad from age 18 to 23, I had no obligations or no bills of any kind (besides the car I purchased when I was 21).  I had a good job, and I had money.  So why on earth did I even use credit cards?!   The turning point in my life came in November, 2006.  Kevin and I had been married for less than 6 months, and in less than one year we’d managed to rack up $11,000 in unsecured credit card debt.   HOW?  I don’t know.  We weren’t dripping in bling, Gucci, or plasma TV’s.  We’d just foolishly bought & consumed faster than even our two full-time professional incomes allowed.  What was worse, my poor husband had never even touched a credit card before I introduced them to him.  He had been a cash only person his whole life.  So with the realization that something had to be done, we tore up the cards, pledged ourselves to never use credit again - and within a year we turned that $11,000 debt into a remaining $3,000.  We also cut our car loans in half.  (Determination will get you very far in life).

As I think back over the past 11 years of my working life (I got my first job at age 14), I realize just how stupid I really was.  Why didn’t I learn these lessons earlier?  The $17,000 I earned working as a teen in high school - where is that?  Gone.  Wasted on clothes that I’ve long since gotten rid of and electronics that are broken or out of date.  I saved nothing.  I didn’t even think of saving that money.   The little bit I contributed to my 403b retirement before marriage even pales in comparison to how much I was making in my early 20s!  It bugs me that I could have saved so much more - but didn’t.  The financially wasted years before I took on the responsibility of marriage haunts me when I consider how much further ahead in life I could have been now if I’d only known. 

It haunts me even more when I consider the wisdom of my depression era Granny, who always said “If you aren’t saving 50% of your income, you’re spending too much” - words she actually lived by till she died.  Why didn’t I listen to her back then?   I hope Little Jack will learn financial wisdom long before I did.  I plan on teaching him about money & investing from the start! 

And these are the lessons I want to convey. 

Lessons I’ve personally learned along the way…

———————————————–

25.  Invest when you’re young, even if it’s a small amount.  Then look for ways to increase - you won’t miss it!

24.  Don’t buy individual stocks on a whim.  Study them thoroughly!  Learn to read the prospectus, or at least look them up on Morningstar or Yahoo Finance first.

23.  Start a ROTH when you’re young.  Distributions from a ROTH during retirement are tax free.

22.  If you’re not contibuting to your work’s retirement plan - and they offer matching - you’re giving up free money!!

21.  You should always save a minimum of 10% in some way (retirement, savings, money market). 

20.  There is no reason why a teenager (or young adult living at their parents) shouldn’t be able to save 50% of their income.

19.  Don’t buy into the ARM mortgage.  If you can’t afford a fixed rate mortgage payment, you can’t afford the home.  ARMS will eventually bite you in the patooty.

18.  Anything that doesn’t return more than 100% of the purchase price when you resell is not an investment. 

17.  A new car depreciates 50% of it’s original value within the first 3 years.  It is not an investment.

16.  New clothes are not an investment.  Paying $100 for a shirt is simply rediculous. (Unless you’re Donald Trump).  Brand name clothes bought at thrift stores or yard sells - then resold for a higher price on Ebay - IS an investment. (As long as they don’t hang in your closet, forgotten about).

15. Cooking at home is far cheaper than eating out.

14.  It is completely possible to live on one income.

13.  If you want to stop spending money, stay out of the stores!

12.  Track your money (income and outgo), and track it daily.

11.  Credit cards will turn you into a slave.  There is no true need to use them.  Ever.  Unless you’re dying and need to pay medical bills.

10.  It is completely possible to live without credit cards (we have for 17 months now).

9.  Paying interest - on anything - is like throwing your hard-earned money out your new car window.

8.  Everyone needs an emergency savings account. 

7.  Toddlers don’t need $500+ birthday parties.  A cake and a nice cardboard box will make them just as happy.

6.  Buying DVDs is a waste when you can rent so cheaply from Netflix.

5.  A 65 year old without a retirement or savings account can not live off of the current average $646 per month social security alone…

4.  …don’t mistakenly think that you’ll never be 65!

3.  Be content with what you have.  There is absolutely nothing wrong with that old couch, 26 inch tube television, bed frame, or 8 year old dining room table.  You don’t need another one and the happiness a new one will supposedly bring will not last. 

2.  Saving money is not just about socking dollars into an account.  You should cut back on spending as well.

1.  You’ll never be ahead financially if your outgo is constantly more than your income.