I WAS LISTENING recently to the Beatles’ song, “She’s Leaving Home,” and I wondered what I would tell a young person starting life on his or her own. If I had a few minutes before he or she walked out the door, here’s what I would try to say:
Relationships. Your personal relationships will matter most in your life. Choose your significant other and friends carefully. They will be your moral compass, make you feel safe and bring stability to your life.
You cannot navigate life on your own. It’s too difficult. You need someone you can lean on in difficult times. Find someone to whom you can tell your innermost secrets and feelings. Life is mostly mental. You need a sounding board.
Marriage. If you decide to marry, this will be one of your life’s most important social and economic decisions. Your spouse is not only your lover, but also your friend and business partner. You two should exchange financial information and make sure you’re financially compatible. You need to discuss having children. If you decide to have a child, expect to work a long time.
Job. Find a career you’re passionate about. You will spend a big chunk of your life at work. Developing relationships and social networking will play an important role in your career. Who you know is sometimes more important than what you know. Getting along with coworkers and being a team player will be extremely important. When selecting a career, remember your income will determine what kind of lifestyle you’ll have.
Credit history. Having good credit is probably the most important tool in your financial toolbox. Without a good credit history, it’s difficult to rent a place and to qualify for car and home loans. Even employers often check your credit history to see if you would be a responsible employee. Poor credit might prevent you from receiving a security clearance, which could limit your employment options. Two important ways to earn a good credit score are paying your bills on time and keeping your credit card balances low. Never consign a loan for anyone, including family.
Spending. Live within your means. Keep your fixed expenses reasonably low. You’ll suffer less financial stress and sleep better at night. Remember, the less you spend, the more you can save. Don’t overextend yourself by buying an expensive house, car or education. Large monthly debt payments can make your financial life a living hell. Money spent on experiences, instead of possessions, will be more joyful and memorable.
Saving. First, build up a cash emergency fund that would cover your living expenses for six months. A Roth IRA could also be used in an emergency. Next, you should invest in your 401(k). Invest at least enough to receive your employer’s matching contribution. The earlier you start saving for retirement, the less you have to save in total, thanks to the wonders of compounding. Invest in low-cost index funds for your long-term goals. If you can do so through a target-date fund, that would be ideal. It’ll give you a low-cost, diversified portfolio that requires little maintenance.
Protect yourself. You need to protect your body, mind and identity. Be aware of your surroundings. Don’t keep late hours. That’s when you are most vulnerable. When you are out at night, try to be with a group of people. Carry your cell phone at all times.
The world can be very stressful. You need an escape where you can relax your mind: meditation, music and exercising can all help. Beware of scammers who try to find out your personal information. They are everywhere: telephone, email and on social media.
Health care. It’s expensive and isn’t getting cheaper any time soon. You need to do your part to keep expenses low: Try to eat a healthy diet and exercise. Buy a good pair of walking shoes, download your favorite music and walk a least 150 minutes a week. A robust walk after a meal is good for digestion and lowers your blood sugar level. Try to live a lifestyle of moderation.
Dennis Friedman retired from Boeing Satellite Systems after a 30-year career in manufacturing. Born in Ohio, Dennis is a California transplant with a bachelor’s degree in history and an MBA. A self-described “humble investor,” he likes reading historical novels and about personal finance. His previous articles include Lighten the Load, Rescue Dog and Better to Be Rich? Follow Dennis on Twitter @DMFrie.
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Interesting. If you’ve read Jonathan’s most recent book, “How to Think About Money”, he makes the case for NOT necessarily choosing a career you’re passionate about when just starting out, suggesting (and I paraphrase poorly) that for many young entrants into the workforce, they may not really know where their passion will ultimately lie. So in that case he contends go for a stable, dependable, and hopefully significant, income early in a working lifespan, so if and when that passion ignites then one would have the means and cushion to make that leap. I was in your boat regarding thinking, but the more I’ve had a chance to reflect on the perspective in the book the more I find it has merit. I’m a later career person now, and restarting on my 3rd career in my mid-50’s. But due to fortuitously embarking on a well-reimbursing initial career, AND not spending beyond my means or my peers (who have a penchant for big homes and big cars), the subsequent career choices, while perhaps eyebrow-raising to some, have been the source of great satisfaction, and more than cover expenses. Perhaps the advice I would give someone “just starting out” is to be willing to take measured chances, akin to the “don’t keep your eggs in one basket” advice, and to try and focus on what brings YOU satisfaction, NOT what please others.
and FAITH….Mathew 16:26