3 Pieces of Financial Advice I wish I had when I was 20

I was talking to one of the younger fellows at work the other day, and gave 3 pieces of gratuitous advice I wish I had received when I was 20.

(It is quite possible I received this advice but was not wise enough to accept it, or remember it.)

1. Save 10% of everything you earn. This is your financial freedom fund. Aim to never ever spend it. The 10% is GROSS, not net.

2. Don’t blow your money on nice cars. Cars are a terrible way to use money. If you must buy a car, save for it. Never ever borrow to buy a car. Never buy more than is sufficient. This saving is over and above the 10% in rule 1.

3. Aim to retire when you are 40. You will probably never achieve this, but you might get close. Retirement does not mean playing golf every day. It just means that you can work because you want to, rather than because you have to.

With planning, a little luck, and a lot of discipline, you can achieve financial freedom. You might not make it by age 40, but you should be awfully close by age 50.

Frequent questions:

Q: Why bother – I might not be alive when I’m 40, or 50! Why not enjoy spending everything I earn right now?

A: That’s true. You might not be alive. But if you are, don’t you want to be free to make choices?

Q: What about life’s little luxuries? I can’t do without … (fill in… my car, going to the boozer every Friday night, wine women & song, etc etc)

A: Sure. Indulge. Just don’t take it from the 10%.

Q: How do I save? I have no discipline – I spend everything I earn and I cannot control myself!

A: Set up a separate bank account, or maybe a managed investment fund that do not allow easy withdrawals. Work out what 10% of your gross is, and get your paymaster at work to do a deduction to that account. Then DON’T touch it.

Q: What about emergencies?

A: Is it a real emergency? For example, a hospital bill? If it is real, use your freedom fund. If your “emergency” is that you need a new car, new clothes to look cool, or so on, then go back and re-think.

Obligatory legal disclaimer: The author is not a qualified financial advisor, has no license, and is giving personal opinions. Use or discard as you see fit.

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