10 Tips We’d Like to Give Our 25-year-old Selves
Last week, movie buffs (or Biff’s) around the world celebrated Back to the Future Day. You know, October 21, 2015, that day when Marty McFly traveled to the future with Dr. Emmett Brown to correct those mistakes from the past that would affect his future. Well, in McFly’s spirit, we’re taking our own sort of time warp today to talk with the 25-year-old versions of ourselves about an important matter. After all, if you had the chance to give your 25-year-old self a little financial advice that may benefit you one, five or even 20 years later, wouldn’t you relish the chance to do so? Great Scott! Here are 10 things we wish we could have told ourselves about managing our finances when we were in our mid-twenties: You don’t need that morning cup of Starbucks or daily trip to McDonald’s with your coworkers. As a professional, young or old, it can be so easy to join the crew for a morning coffee trip or stress-relieving lunch out. But, believe us, those $5 cups of coffee or extra value meals add up quickly. You could be wasting hundreds of dollars or more a year by dining out at work… and, that’s just the impact on your financial health! Transferring credit card balances is not the same as paying them off. When you’re constantly receiving 0% interest rate offers in your snail mail, it can be hard to resist transferring your current credit card balances and continuing to rack up more debt. But, reread that sentence, you’re still RACKING UP MORE DEBT. If you decide to take advantage of no-interest credit transfer offers, do so because you’ve got a plan for paying off all debts, not accruing more. Paying the minimum amount on credit cards is not managing your credit. If you’re paying your credit card bills on time each month, then bravo; but, don’t be fooled by one good repayment habit. If you’re simply paying the minimum balance month after month, you’re not even touching the principal balance on those cards. Even paying $10-20 more than the minimum balance is working toward paying those debts off. Don’t spend money until you have it. You’ve undoubtedly heard the phrase, “Don’t count your eggs before they hatch.” Apply that thinking to your spending habits. If you’re told you’ll be receiving a promotion, pay increase or tax refund, wait until that money is in your hands before you’ve already spent it all. In fact, try to wait even a few more days to determine if your intended purchases are a must or a money pit. A pay raise doesn’t mean that you should spend more money. When you get a pay raise, it is easy to start planning the many ways you can spend your additional money. But, how about trying another line of thinking. Instead of imagining all of the new things you can buy, try to think about all the money you can save for the future?! It may sound crazy, 25-year-old self, but you’ll thank you later! You need to start contributing to your retirement fund. At 25, retirement sounds like it’s eons away. But, the reality is that if you don’t start putting some of your earnings away for the future, you’ll be sorely disappointed when you want to try to enjoy your retirement. When you begin your professional career, explore your company’s retirement plan options. You may be surprised to find what they’ll contribute if you do! Just buy a car. When you’re young and earning money, you want a nice-looking car as evidence of your hard work, right? So, go buy one that you can afford. Leasing a brand new car is a temptation that can be hard to avoid; but, try to think about it long-term. Yes, you can lease a nice, new car; but, at the end of your lease, you’ve got nothing to show for those monthly payments. You should have an emergency fund. You know how your parents have always told you to put some money away in case of an emergency? Well, now future you is giving you that same advice. Financial experts will tell you to sock away enough money to live on for six months, in case of any unforeseen circumstances. But, let’s be honest, even starting off with few pay checks worth of funds could help you out in case of an emergency. Taking a vacation is not an emergency. It’s called an emergency fund for a reason. That money you’ve saved is only to be used in case of an EMERGENCY! Things like spur-of-the-moment trips to the beach with your best friend or following your favorite team to the big game do not classify as emergency reasons to tap into that money that could help you out of a bind someday. It is never too early to start financial planning. You do not need to have responsibilities like a family or mortgage in order to be smart with your finances. Sure, you’ll thank yourself when you do have those responsibilities, but you shouldn’t wait until you have them to start thinking wisely about the future. Take it from future you; we’ll be in much better financial shape when you get to be my age if you start planning for us now! This post is sponsored by PA Preferred Mortgage: Pennsylvania Preferred Mortgage is a full service mortgage banker and is a member of the Prosperity Home Mortgage, LLC family. Specializing in residential and refinance loans, Pennsylvania Preferred Mortgage offers a wide range of mortgage products, including fixed and adjustable rate mortgages, jumbo loans, Federal Housing Administration (FHA) and Veterans Affairs (VA) loans, and renovation financing. Learn more at www.papreferredmortgage.com.
