Two decades on earth has taught and tested me more than anticipated yet Iâm truly grateful for every experience Iâve been offered, rejected from and struggled through.
Wouldnât life be boring if we already knew what we were capable of?
Some say life is about trying to figure out something and realizing thereâs nothing to figure out.
Well at least thereâs always something to cure our boredom.
âLife is hard because youâre doing it right.â
This one of the ultimate nuggets of wisdom my father told me shortly after I saw him for the last time.
I was at breaking point with my internship. As a sophomore in HS, I was beyond ambitious, I was ridiculous and somehow I convinced HR and a prestige division at a Fortune 500 company to hire me. It wasnât a mistake on their part, it was my mistake for not realizing it;s normal to be scared, not know anything and feel like an imposter at 15 not as a camp counselor or lifeguard.
What doesnât challenge you doesnât change you and ever since my first real corporate challenge, I was hooked to learn as much as I could before time runs out.
Blow Out
When I obtained my first job as a tennis coach at 13, my goal wasnât to earn my first paycheck and blow it, it was to learn, invest in myself and not make summer so dreadfully boring.
I never thought of working solely for money because there are far more important things that money cannot buy. Yet it still is the number one thing people want in life for security and sanity.
Growing up in an upper-class household born from immigrant parents, the idea of being a frugal minimalist, living below our means and taking an unnecessary amount of time to scoop for discounts was recommended and part of life. It wasnât abused to the point where we went cheap or didnât enjoy life, rather we knew what we wanted our money to provide to us and genuinely enjoyed planning out our future, while attempting to soak up every moment in the present.
Thatâs how immigrants are hardwired. You can read here about the unwavering unique commitment and dedication they have towards pursuing their dreams. These non-cognitive skills explain why a majority of businesses are owned and operated by immigrants. They are the farthest from lazy.
Financial Guru
As a sophomore in college, I continue to despise any sort of literature offered in the classroom. They never appeal to me since majority of the text comes from a 2 decade old textbook or books written in 1972. I want to be briefed on whatâs happening in the now not in the past although one of the most important facts to take into consideration while managing your finances and monitoring the stock market is realizing that history does repeat itself and a recession occurs every 8â10 years.
Iâm proud to call myself a financial guru, especially since itâs the most vital skill in oneâs life and isnât taught in the education system. If implemented, the racial wealth gap and staggering inequality between the rich and the poor in this country can be bridged. Education can be the âgreat equalizerâ.
During the deadly covid pandemic, the top 1% amassed roughly 8 trillion while the bottom 50% gained only $1 trillion all thanks to the stock market, real estate industry, SPAC market and hot technology stocks surge while stimulus and taxes could barley keep those in need afloat. If you want to learn how the rich avoid billions in taxes each year, read no further than here. Some strategies are legal, most arenât and a tax bill wonât change much.
With that being said, letâs identify what a boring, innocent frugal 20 year old female has followed to propel her finances and get every teen on a path to financial success.
#1 Retirement Is Cool
As soon as you obtain a job working for an employer, you have the option to open up an employee guaranteed retirement plan, 401(k), pension or 403(b)-non-profits, schools, churches, etc. Thereâs absolutely no reason you shouldnât unless you plan on dying early and in that case, donât bother working anymore. The more you save, the more you can contribute to your retirement. Once you hit 23, you can easily do a dollar for dollar match once youâve saved and earned enough. Small contributions add up overtime considering your best advantage in the market is time and compounding works wonders. In my case since I don’t work full-time yet, as a student I’m focused on maxing out my Roth IRA and taking advantage of my post-tax 529 plan for college.
Within your retirement portfolio, no need to go crazy with your investment style. By simply investing in an index fund or ETF that tracks a broader market, youâre all set for life since indexes always go up overtime as more investors come about, get wealthier and want to gamble, I mean trade.
Retirement is the most expensive phase of your life. More expensive than college tuition even as itâs rising roughly 2% each year, not counting inflation. Retirement is a scary time because you are relying on your hard work and earnings from the past decades to supply your income for the next 2 decades or longer. With inflation and high interest rate hikes abound, these are additional stressors for retirees who are struggling to make ends meets since they didnât spend time investing in themselves earlier when they got the chance at their employer.
Last thing, retirement benefits are by far the biggest perk working for a company. Companies sure have their cons such as a pay ceiling, taxes, long brutal potentially slave hours, ridged schedule and less free time to follow your desired passions to be your own boss but when it comes down to health and life insurance benefits, free food/equipment/college education (read here how I got free tuition to NYU)Â ,PTO, paternity/maternity leave, retirement plans and bonuses, it may not be bad afterwards.
After all thatâs why over 100m+ Americans are employed. Itâs not just a paycheck. People work somewhere for a reason.
Not planning and considering retirement is your worst mistake. The earlier you plan for it, the easier your life will be with your grandkids 50 years from now.
#2 Credit the Card
The golden rule in personal finance is to spend less than you earn because itâs not about how much you earn/make, itâs how much you keep. Unfortunately with over 191 million Americans holding on to $5,315 in student loan debt, this is a huge disappointment as Americans cannot budget properly all due to a lack of financial literacy.
No wonder the rich save 50%+ of their income holding onto no toxic debt while the average savings rate for the middle class is 40%! By the time the wealthâs income (mostly investments and passive income, rarely earned income from a 9â5) is allocated into their retirement and investment portfolio, what goes into savings usually ends up being reinvested as they spend less relative to what they earn and necessities donât take up a huge percentage as with lower income individuals being hurt by regressive tax on goods that are the same for all.
With the total U.S. consumer household debt standing at $14.9 trillion, this is not the time to catch up on all the wasted time spent at home in the past 16 months. Yes, you need to get out and back to normal life but that crosses the boundary of frivolous spending. The last thing you want to do is destroy the savings youâve built up over these past 15 months. Instead getting rid of that pesky debt that is hurting your credit score disabling you from taking out a mortgage to build up more equity, get on to diversifying your assets and most importantly understand what you need not want. Deals and normal life is enticing but donât let it sabotage your savings and hard work from the pandemic. Once youâve dealt with your toxic liabilities from car to credit card debt, then spend accordingly. You earned it.
Although Iâve been trained by my family to prioritize what I spend and genuinely be appreciative of the small things in life not allured by the next gadget, Iâve come to responsibly spend and you should to. If I spend more than $10 for a meal, it starts to hurt. You shouldnât feel regretful about living life especially if you pay off your bills each month, automate the process through autopay, build up your credit score, arenât holding onto any lingering debt and qualify for perks to save even more money.
Banks want you to spend and donât care if you have enough funds or not. Thatâs your responsibility. Stop keeping up with the Joneses and donât be allured by that bonus or car. Your future self will thank you.
#3 Ditch The Debit
Thereâs absolutely no point in having a debit card. Itâs the easiest way to splurge on junk, doesnât help you build credit, no receipt/monthly transaction amount recorded and immediately takes cash out of your checking.
Now itâs fine to use it if you need to make a quick purchase and donât have your credit card handy. Otherwise, thereâs no reason to use it unless you want to get back into a bad cycle of spending.
Hide it deep inside your wallet.
#4 Putting It All Down
As weâve learned, debt is not only a pain and hassle thanks to its recurring interest payments and burden on your credit score, it prevents you from living a financial free life.
Until you pay off that debt, it isnât yours.
Letâs consider the classic money in the drain purchase: cars. 99% of the time you never make MORE on a car than what you spent it on.
There are thousands of models and brands to choose from yet at the end of the day no car will get you faster through traffic so your main considerations are either size and safety as the base requirements. Everything else is beyond discretionary, more like luxury.
You shouldnât spend more than 10% of your income on your car. If you do, youâre putting yourself in trouble especially as itâs a depreciating asset that looses half of itâs value the moment you drive it off the lot.
With 80% of car owners not able to pay for their car, do yourself a favor and live below your means to not put your whole financial future in jeopardy all because you need to impress a stranger with your car.
The more expensive it is, the more of a pain.
Same thing with a house. Donât buy what you donât need nor can afford. We always believe we need something we donât have until we get it, realize we donât use it but still have to take care of it.
Home buying is a tedious, stressful and long process that cannot be reversed. Itâs recommended that homebuyers put down at least 20% in cash to buy a home. Unfortunately with home prices at all-the highs in 11 years and the average U.S. price inching towards $400k, novice homebuyers cannot possibly afford this market and are putting as little as possible down which is dangerous for their future.
Most likely they will NOT live in the home for 8â10 years as people want to change and move out. 8 years is the estimated time it takes for homeowners to get their money back and earn capital gains otherwise from the renos to closing fees, moving out isnât always worth it even if the house appreciates in value.
Everything always costs more than you think.
Have more cash on hand to stay sane and safe. The last thing you want to have happen is â08 all over again and you need to foreclose your home because you couldnât afford the hefty interest on your 30-year fixed mortgage.
Put as much cash down as possible otherwise youâll never own it.
#5 Just Wait
If you ever feel rushed in making a decision, back away.
Whenever I feel unsure about a decision, I give it time to breathe.
The truth is, most things are unimportant yet we may them such a big deal.
If you canât wait 24â72 hours to decide on a mid-size purchase (you determine what that is), then youâre better off leaving it.
Live in abundance not scarcity. Thereâs always another one out there somewhere.
Itâs never the last one.
Patience is a virtue after all.
Your wallet will thank you.
For the youngsters reading this, I hope this helps you stay focused on your financial independence journey and you are able to accomplish your short/long term goals without any trouble following these lessons since money is at the crux of every decision in life.
And remember, money is a tool not a solution nor quick fix.