Whatever the case, here are four things I really wish I knew at 18!
1. That Retirement Thing
I worked all the way through high school and college, and now that I fully understand what a Roth IRA is, I wish I had started one way back then. It would have been awesome to witness the power of compounding over the last few years from the money I could have invested in high school and college. I mean, what was a really spending my money on then anyway? Usually beer and video games. It would have been so much more productive to invest that cash!Second, my first job in college offered a 401k with an employer match. I didn’t want to give up 5% of my paycheck at that point – but what I realized now is that I was really leaving an additional 5% on the table by not taking that match!
Lesson learned: don’t give up free money, save for retirement, and enjoy the power of compounding.
2. Don’t Buy That Car!
Since I was working full time during school, I always had more money than my friends. My cocky self thought it would be a great idea to buy a new car. Really, my old beat-up truck served it’s purpose well, but I really wanted something new. I ended up shelling out over $13,000 (after selling my truck) for this car.And you know what? Nobody cared about the car. After about 2 weeks of driving the car, I didn’t even care I had the car. Plus, over time, I think I ended up sinking more money into repairing this new car than I ever put into my old truck.
Lesson learned: don’t go buy a new car unless you really need a new car. Cars are just liabilities, and you want to limit your liabilities.
3. Stay Away From Day Trading!
After taking a few finance and investing classes in college, and interning at a brokerage company, I thought I was an investment pro. Little did I know, I wasn’t! I learned this strategy for picking stocks based on technical analysis, and running them through a spreadsheet. I thought it was a fool-proof system.Well, once I put my first $2,000 into my account and started trading, I started racking up losses. In about three months, I’d lost all that money. It was an expensive lesson.
Lesson learned: don’t day trade, actually invest in companies for their fundamental earnings potential.
4. Saving is Not Just “Not Spending”
Finally, I always thought of myself as saving if I just didn’t spend all my money every month. And while, yes, technically, I had “saved” something, it was really just because I hadn’t spent the money. All the money did was sit in my checking account until I needed it – for buying a car I didn’t need or day trading.Lesson learned: actually save each month, and designate a savings account with a set amount.
Readers, what financial lessons do you wish you knew at 18? I’d love to hear your thoughts!
