Although I consider myself to be fairly financially savvy, I’ve certainly learned a few things having been out of college for 10 years. In those 10 years, I’ve: had 3 real jobs, bought 2 houses, had one car stolen, and had a kid. I’ve done well financially, both by continuing to grow my salary at work and by saving/investing a large portion of my income. There are however, a few things I wish I could go back and tell my 25-year-old self.
There are better savings accounts out there.
For a while, I kept all of my money in a regular savings account at the one bank where I also had my checking account. It just seemed easier to keep all of my money at one bank, and having it more readily available if I needed it seemed wise. Come to find out, this bank was (and still is) paying a terrible interest rate, like 0.01%. I didn’t have a ton of money so didn’t think I was missing out that much. I would get a few pennies every month and feel ok about it. Oh, 25 year-old-self, if only I knew that there were other banks that paid 10x more interest!
A year or two ago I found out that online banks like: Capital One, Ally or American Express offer high interest, no-fee savings accounts. I’ve kept most of my savings with American Express ever since, and have really enjoyed their 2% interest rate. Nowadays I get a few dollars instead of a few pennies each month in interest. That may seem trivial or not worth my effort, but honestly if the money is just sitting there, it might as well earn as much interest as it can!
Index funds are the way to go.
I always thought of myself as a superb investor, one who was able to pick winning stocks time and time again. I spent a fair amount of my free time reading about companies and their stocks and watched the market daily. As such, I would keep a fair amount of my investment money traded in individual stocks. Oh, 25 year-old-self, if only I knew that picking stocks is risky and difficult and that actually I wasn’t nearly as good as I thought! Upon the advice of other financial gurus, I started putting more of my investment money in index funds, which are low-cost mutual funds that invest across the entire market. The idea is that by diversifying, you’re able to reduce risk and still earn a good return. After about a year of trying this, I was shocked to see that my index fund had outperformed my individual stock picks! Since then, I’ve kept about 90% of my investment dollars in index funds. I still keep a little in individual stocks just for the fun of it, a little ‘mad money’ if you will.
Less places to keep your money is better.
While in my 20’s, I was all about trying new investments or platforms and taking advantage of signup bonuses. I got into my late 20’s and realized I had money in probably 5 or 6 different spots. Thinking about how difficult it was for me to manage, I shuddered to think what would happen if I passed away unexpectedly and left that mess to my family. Oh, 25 year-old-self, if only I knew that money all over gets messy, forgotten and not given the attention it needs! Moving forward, I’ve attempted (slowly but surely) to consolidate my money in fewer places. That means rolling old 401(k) plans into one IRA plan and moving money out of other investment platforms in favor of just my main one.
Don’t fret about the ups and downs of the market.
Being in college during the 2007/2008 financial crisis was tough for a college student like me. Seeing my parents worry about their job and my grandparents worry about their retirement really inflicted some long-term angst in me. Thankfully I got a good job and have maintained one post college, but it’s been a tumultuous time since then. The news is always predicting the next financial crash and geopolitical woes are ever present. I used to worry about the ups and downs of the market, and would find myself trying to pull money out of my investments and keep more in cash, then try to jump back in when I thought I was improving. Oh, 25 year-old-self, if only I knew that timing the market is impossible and that in the long run everything will be ok! Moving forward, I’ve kept a steady investment strategy of contributing roughly the same amount into my retirement and non-retirement investment accounts. Sure the market has ups and downs but I don’t pay attention to them and steadily over time, without fail, my money has grown!
Buying the right house isn’t scary but also isn’t a must.
Being a young professional, I found myself constantly comparing myself to my peers. I would worry about my clothes, car and balance in my retirement account compared to friends and colleagues. Buying a house was a huge deal for me in my mid 20’s and I obsessed over it. I frantically tried to save enough for a down payment and was constantly reading about buying houses (got a book for Christmas one year) and researching houses in my neighborhood. I stressed about it, and rushed to buy a house as soon as I could. Oh, 25 year-old-self, if only I knew that buying a house wasn’t scary but also wasn’t a must. I’ve learned later on that there are lots of good reasons to keep renting a house; if the market isn’t right, if houses are too expensive, or if you aren’t in a good spot financially or in life to buy a house, which is a long-term commitment. In retrospect it worked out well buying a house early, but I wish I had known to not stress as much about it!
Eating out occasionally won’t kill the budget.
All throughout my working career, I’ve been known as the “PB&J” guy. Pretty much everyday, without fail, I bring my lunch to work instead going out to buy. Typically it’s a peanut butter and jelly sandwich. I would still meet colleagues in the kitchen for lunch to eat my sandwich. Oh, 25 year-old-self, if only I knew that eating out once or twice a week would have killed my budget. I think that spending a few dollars on lunch would have been ok for me and that perhaps I shouldn’t have been as stubborn to bring my lunch. It all has worked out, I still have friends and have saved $5-$10/day for my entire working career, but I think investing more in time with colleagues getting food could have been nice, as well as getting a break from PB&Js!
I’m very happy with where my life has turned out financially, but if I could do it all over again, I may change a few things here and there!
Ben runs the site YoungMoneyFinance where he’s on a mission to provide relevant, actionable, easy to understand financial articles to young professionals. Outside of blogging, he just welcomed his first child, enjoys travelling and heads to his local Crossfit gym whenever possible.