A Guy Who Just Turned 30 Gives Advice to 20-Somethings About Finance and Life
I saw this Reddit thread awhile back about a guy who just turned 30 giving advice to the younger people. I am around the same age and I can say that I would give a lot of the same advice he gave. Anyway, take a look at the advice and let me know if it helps. Here’s his entire post.
I figure with turning 30 this month, I may be able to write a bit about my 20s, what was right, wrong, and what I regret not doing. These ideas are not perfect, but they may help some of you about to embark on your third decade.
A little about me – I grew up and reside in the Lower Mainland in BC, one of the most expensive places to live in Canada, and possibly the world. I graduated HS in 2002, and attended and dropped out of college when I was 19. I decided to work instead of school. I bought a house when I was 26, and have only recently decided to attend class again part-time while working full time. I expect to receive my 2-year paper when I’m 32, and my degree when I’m 36. I have a good job, great benefits, and have worked hard to earn a management title, all without any formal post-sec education. Some people do much better than I do, others do much worse. I feel I’m “middle of the road” for someone without post-sec education. I live with my gf of three years, living together 2, and we have no children. We’re dual income, but only started this recently, so it has little bearing on the majority of my post.
Things I learned in the past 10 years
1) Time flies when you’re doing nothing. – Seriously, I spent about 8 years just working and paying bills. I remember having my 24th birthday like it was yesterday, and that was six years ago. If you’re not working towards something (anything), time will literally disappear, and you’ll never get it back. Going back to school was the best thing I ever did. I enjoy my free time much more, and time seems to pass slower because I have so many more accomplishments in a short period of time.
2) You have lots of time to find work, if you want an education, go for it – I don’t regret dropping out of school when I was 19, but I do regret not finding a new study to replace it with. It is much harder to get a degree when you’re carrying a mortgage and working full time. I wish I had used the four years and my savings to work towards a degree as fast as I could. I have done well without school, but it doesn’t change the fact I wish I had taken the time to do it when I was younger. Some of you may not want or need it, then good on you! Get earning and get saving.
3) Credit and loans are the devil – I’ve found there are only a few things worth using credit for (See new edits below on this one). Housing, education, and emergencies. Even with that said, don’t pay the minimum down on your mortgage like I did. What a stupid idea that was. If you have the income to afford a house, save up 30% or more down, and pay rent at a small place while doing so. I paid 5% down on my house, and my interest kills me. Don’t do it. I wish I had saved up $1000/mo for 5 years, paid someone $500/mo to rent a small suite, and then bought my place. My mortgage would be much easier to manage that way.
Student loans are worth it too as long as you’re not in it for years. I see stories about people being $50k in debt, and that doesn’t seem reasonable or manageable. Find a way to subsidize yourself, even if it means living at home and working p/t in order to take out a smaller loan. Education is worth it (unless you’re an art history major, sorry if you are).
4) Car Loans – Just don’t. I have spent so much time paying for car loans that I can’t even believe it. I have 2 years left on my current car loan and then I will never take one again. I’d rather spend $5000 on something I can pay in cash instead of $20000 where I end up forking over another $5k in interest along the way. I would recommend cheap, reliable cars until you’re in a position where you can afford something outright. If you do things right, you should be able to buy whatever you want a little later in life, using CASH. **See edits below on this one.
5) Investments and properties – Ok, so I was lucky here. I have an employer who pays dollar-for-dollar RRSP (401k if you’re in the US) up to 6% of my gross income. It means that every month I end up with about $500 in savings towards retirement. Combine it with the American equity returns in the last 3 years and it has amounted to a tidy sum of money that continues to grow at 8-10% a year (I had a 26% return in 2011). But you may not be me. So I recommend that once you get your life together, and no matter your job, you always sock away 6-10% of what you earn. When your income is solid and consistent, jack that number up to 15%. If you do have an employer retirement plan, use it or a financial planner to start planning for retirement as soon as your education is done (if you want/have one). Investment is the key, you’ll need more than the 1.2% return that your savings account will get you.
My home – I love it, and I’m glad I have it. But I made mistakes here too. I bought too young, with too little money. I bought when I thought the market was down in 2010 because I was going to “get ahead of it” and hope for a return. NOPE. My home is worth less than I bought it for, and my payments suck. If you’re looking to buy a house than you can upgrade in 10 years, speak to an property specialist to see where you should buy to increase your chance of return on sale. I didn’t do this. I have a house that will eventually yield a return, but it still might be another 15 years away. Everything I thought I “knew” about buying my house was wrong, and now I see I could have asked and avoided this. That said, I can afford the payments and it is a nice place, it just ain’t worth squat.
These are the tips I can give you in point form:
- If you want an education, get it early
- Only take out loans you need. If you want toys you can’t afford now, you probably can’t afford them next month when your payments come up.
- Set goals for yourself. Doesn’t matter the goal, having something to work towards will make time slow down. Time does fly when you’re idling and doing nothing.
- Buy cars with cash, houses with credit, and education 50/50.
- Invest your savings. Set up a meeting with your bank if you don’t know what this means, even low risk is worth far more than just a savings account.
I hope this helps someone, but it might just be the ramblings of a 30 year old who needed to put his wins and losses on paper. Thanks for reading!
Edits, notes, and additions –
- Car loans – a 0% car loan probably isn’t a bad thing. Where I live they don’t exist, but if you have one, then you’re in the same boat as paying in cash. This point continues to be argued throughout the thread, going both ways. I hate interest and that is what I aim to avoid paying, the rest of the interpretation comes down to where you live, and how much you want to take on the liability of a loan, 0% or not.
- Credit and loans – Several people have PMed me this – You need credit to get credit. I always had balances on my credit card so I earned credit well. Someone pointed out that you should be using a credit card for small things and paying them off in order to build credit. Gas and things like that. Seems like sound advice. My point was to try to avoid interest payments and long term loans that aren’t getting you anything.
- Saving while renting – apparently the math in my wishful plan was flawed. Before you decide how much to save and how much to rent for while saving, speak to a mortgage adviser. You may just actually be better off jumping in to that mortgage and shoving it all in there as quickly as possible.
- Housing prices – those of you who live in Toronto, LA, DC, and other super-metro areas. I hear you, you are probably paying more than I am to live further away from your down town cores. But as far as general population spread goes, we’re all above the average by a huge margin comparative to smaller cities all over the country.
- General advice – I’ve received a lot of feedback that some of what I wrote isn’t great advice (especially in the loans area). It is all based on personal experience, and definitely doesn’t apply to everyone. Take what you need, or none of it! PM me if you have questions, there are too many conversations going on to keep up.
If you are interested in reading the full thread and seeing the responses, it can be found here. If you found the advice he gave helpful, do your friends a favor and share it with them.