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What Should You Have Done Differently About Money In Your 20s?
Same here. Student loan poor in 20's. House poor in 30's, but was saving enough in 401 to always get full employer match. Things started getting better in 40's. Saw how quickly it could all retract and recover in 50's.
A large chunk of my twenties came around during the Carter malaise/depression. I'm not sure I could have done anything different. I did save money but around 1983-84 is when my saving took off and I started to check into mutual funds.
Hmm ... Not much $$ to invest. But do recall that Nixon froze prices and wages - which was nice of him.
Bought my first new car (a 1970 Plymouth Fury) for $2800. ... Come to think, should have bought a bunch of new cars and put them in mothballs. How much would a '70 Road Runner in mint condition be worth today?
I wish one person (anyone) would have said to me, "Son what you need to do is buy ONE share of your favorite company, ie MCD, AT&T,Coke or later Walmart EVERY pay check, and watch your money and your company grow, by the time you are 40 something, you won't be working for anyone else anymore. never happened, I was probably 40 something before I caught onto this investing Game, 20+ years of capital growth wasted ...Oh well
Similar case here. Started getting some real money only a little after 35. Took me couple of years to figure out that I need to invest in mutual funds vs. just CDs. Learning every year since then.
Teaching my daughter to save and invest wisely. She is in her early 20s and already has more money in her portfolio than I had in my late 30s. She is well diversified globally. If she stays on track, she will do fine.
"I have tried to convey the importance of investing soonest to my daughter. And fortunately, think it has stuck."
"Teaching my daughter to save and invest wisely. She is in her early 20s and already has more money in her portfolio than I had in my late 30s. She is well diversified globally. If she stays on track, she will do fine."
Not that I am proud of it, but I think I have everyone here beat when it comes to being a loser in my 20s and 30s. But at least I wasn't a deadbeat. Because deadbeats don't have dreams and I DID have a dream. My downfall as described below was my mindset of quick and easy money.
>>>>I made my first trade as a college sophomore when I was 19 years old buying five shares of stock in Chrysler Corp. I then spent the next nineteen years consumed by the markets. For much of those years, I worked a series of minimum wage jobs to support myself while trying to get my trading off the ground. I was a security guard at a nursing home, delivered circulars door to and even collected old newspapers and aluminum cans for recycling money. But it had been nineteen years of basically just spinning my wheels with a meager trading account of only a couple thousand dollars. You name it - stocks, options, futures - I traded them, but to no avail.
My trading mindset was quick and easy money. But I didn’t limit my get rich quick mentality solely to trading. I spent untold hours at the local racing tracks in my home state of Kentucky. I even made several trips out west to the Nevada casinos. The lowest I sunk was when I got involved first as a participant and then as a promoter, in some questionable work at home schemes. It should come as no surprise then that I lived a life forever in financial distress. Because of perpetual credit card debt, my net worth was always negative. I resided in run down boarding houses or worse, such as a bug infested basement apartment with little to no heat in the winters. I drove beat-up rusted out cars, could never afford health insurance, and lost count of the times I had to pawn my TV to make it through to the next pay day.<<<<
I didnt have any money in the twenties. One advice for anyone at any age is manage your debt. Never live beyond your means. Dont do something because your friends are doing it. If you dont fit in with a crowd, find another or be a loner. I personally took the later route.
My story mirrors everyone else's here pretty much. I had no money in my 20's, heck, I had none in my 30's either. However, once I caught up and caught on it's been learn, learn, learn and put away what you can. I've been gently banging it into my children's heads ever since. I hope they get it and I think they do.
@Tampabay - I wouldn't call it a mistake, a misfortune maybe. I certainly wasn't living beyond my means although my ex was certainly trying to make up for my failings in that department. However you are correct in stating that I had no money for investing in my 20"s.
I certainly had no money for most of my twenties. The mid 70's were not kind to most people. Working a min. wage job compounded the situation.
It's not always dependent on the person. If the general economy is down that also burdens saving and investment habits. The rampant inflation back then was cruel. If one had the money though, certificates of deposit were very attractive.
"Pay Yourself First" --- probably the best advice for youngsters in their twenties. (means to put regular systematic investing at top of each month's expenses). I didn't fully grasp that wisdom for another 20 years.
Back than financial well being meant having a nice apartment, color TV, fast car and and plenty of music and booze. Hopefully, today's kids have their heads screwed on straighter.
I made and lost fortunes as a young kid. I gathered it a penny at a time, under a mattress, on the doorstep of a paper route, or at the end of a cleared path of snow. Fortunes were made and lost weekly. I treated money like a sport fisherman...catch and release...catch and release.
My best investments in my early twenties were in tools. A pickup truck created endless opportunities for favors, part time work, and for my budding desire to fix/build/repair things myself.
All of this prepared me well for learning the concept of delayed gratification. Waiting a week or two as a teen turned into waiting months or years as my wish list for things got more expensive. Learning to wait a working lifetime has been the ultimate investment lesson.
Time and a steady inflow of small periodic savings turns a savings puddle into a reservoir.
If you want to make a point to a non-believer try this: 1. Block the drain of a sink or tub. 2. Set the faucet to a slow drip. 3. Check back periodically on their accumulating wealth.
I bought my first stock in the mid-1950s. It was Chock Full O’Nuts coffee shops for reasons that Peter Lynch later popularized. I was an engineering student in New York City at the time, and whenever I stopped into one of their outlets, breakfast or lunch, it was wall-to-wall people.
Being an engineering student, I thought that technical analyses would give me an investing edge. I always had an affinity for numbers, for manipulating those numbers, and for pattern recognition from charts.
It was a natural fit that I buy and absorb the Edwards and McGee classic “Technical Analysis of Stock Trends”. About that same time, in San Diego,, I attended a lecture by the (in)famous Joe Granville. In retrospect, calling his presentation a lecture is more than a slight exaggeration. It was an extravaganza; it was pure showmanship with special dresses and stage props. Granville used all kinds of influence tricks to sell technical analysis. I recall that this event was held even before Granville started publishing his investment newsletter. Regardless, I bought the package.
I won some, and I lost some, so the whole experience was not a complete disaster. Again in retrospect, my early investing approach was far too unbalanced and incomplete. It was costly with my many small orders. I totally ignored the fundamental analysis component to investment decision making. It was years later that I finally read Benjamin Graham’s “The Intelligent Investor” book.
In those early days I did not compare my results against any benchmark. Without a measurement standard I did not know if my methods were really helping or harming my very small (really miniscule) portfolio. Back in the early 1960s, it seems that even large financial institutions similarly failed to impose this now obvious tool to gauge performance.
In those early days I was very susceptible to overreaction from investment house tipsters. I simply did not do my own homework, and did not verify their recommendations. That was partly my laziness, but also I believed them to be more knowledgeable on investment issues. I trusted far too easily and was not skeptical enough with due consideration of misdirected incentive motives. Given the numerous studies that demonstrate that proclaimed experts are not especially expert forecasters, my attitudes have reversed on these matters.
Summing the parts, I suppose my overarching reappraisal of my 20s investing is that I was just too slow a learner. I continuously learned, but I failed to implement quickly enough. Currently, I use technical analyses sparingly, I benchmark carefully, I am skeptical of expert opinion, I eschew financial news programs, and I do verification tasks.
However, I still am very deliberate in my actions and reactions; as Daniel Kahneman might say, I choose to engage the reflective segment of my brainpower far more often.
Thank you for encouraging my reflections about yesteryear. Rookie mistakes were all over the place; a trip down memory lane can be painful. I believe I make fewer investment mistakes today than I would have likely made 5 decades ago. Then again, maybe not given my age!
My employer first offered the 401k plan when I was about 24ish and we were limited to a once a year contribution through our yearly bonus plan. There were no weekly or bi-weekly pay check contributions. And when you have a young family, giving up any part of that bonus was difficult. When weekly paycheck contributions were available, my wife and I both decided to contribute a minimum of 10% each pay check. We knew it was important so we closed our eyes and just did it.
Would I have done anything differently? Not really. Hell, we lived pay check to pay check most of our lives, especially when the kids were small. So saying I should have saved more in my twenties would have diluted life then.
Maybe we were lucky, certainly not investment savvy, but my wife left work 10 years ago and I plan to leave in a couple. Somehow we've accumulated well over a million through I guess just blind persistence. Who wouldn't want more? But I wouldn't change my 20's.
@Tampabay - I wouldn't call it a mistake, a misfortune maybe. I certainly wasn't living beyond my means although my ex was certainly trying to make up for my failings in that department. However you are correct in stating that I had no money for investing in my 20"s.
Completely agree. People who criticize others who do not have enough money for retirement always give same old spiel on how one should have invested at early age and power of compounding and so on and so forth. Nothing original from them. No practical advice for anyone who didn't have any money in the 20s to invest.
People earning retirement right now didn't have iPhones or Starbucks to waste their money on. They had the promise of social security. They had no reason to save in their 20s. In hindsight everything is 20/20. Someone please find me newspaper from 1965 which says invest in 20s and see what will happen 50 years later. And even if they did, let's see how much money they used as an example, 10K invested at 20 or $10.
I should have eaten well and dressed better, brought a lexus. Instead I invested in the stock market. Money markets were yielding 4%, auto loans were 3%. I bought and held stocks and THAT money, I lost it all.
I grew up in Canada. My father was a fireman, he didn't know a stock from a bond. He invested all excess in Canada Savings bonds for the children's education. It worked out well for me. I was able to go university and study music with no student debt. Won a scholarship to study musicology and piano in Vienna, Austria. In my twenties I continued to save in bonds and C/D's. Wish someone had told me to buy shares of Disney, GE, or Microsoft, companies I could identify with. I eventually caught on, a little late, in my thirties. Retired at 60 last year. Watching the nest egg carefully.
I grew up in Canada. My father was a fireman, he didn't know a stock from a bond. He invested all excess in Canada Savings bonds for the children's education. It worked out well for me. I was able to go university and study music with no student debt. Won a scholarship to study musicology and piano in Vienna, Austria. In my twenties I continued to save in bonds and C/D's. Wish someone had told me to buy shares of Disney, GE, or Microsoft, companies I could identify with. I eventually caught on, a little late, in my thirties. Retired at 60 last year. Watching the nest egg carefully.
Your father was a smart man. The investment HE made is what matters in your life the most.
The subject question provoked a pretty fair response from the active MFO membership. The replies were a little surprising by their uniformity. A grand summary is that No Regrets was the constant reflection.
We appear to all agree with the disparate wisdom of guys like Henry Kissinger and Robert Redford. Kissinger said: “Accept everything about yourself – I mean everything. You are you and that is the beginning and the end – no apologies, no regrets.” Redford added that “ I have no regrets, because I’ve done everything I could to the best of my ability.” Amen, Amen to both.
I was also surprised that no MFO contributors elected to address the cumulative benefits of just a little savings discipline. It does integrate over a work lifetime to a substantial war kiddy that will enhance retirement. I’ll fill that vacuum now.
Assume abstaining from one exotic coffee or cocktail each day, or perhaps buying weekly at a discount outlet like CostCo. That can save 35 dollars per week each week of the year. Apply this discipline for 45 years from age 20 until retirement at 65. I used MoneyChimp compound calculator to estimate final wealth.
If you secure that savings under a mattress, your risk-free(?) cumulative savings would be $ 81,900. Not bad, but not a life changer either.
If you invested that savings in an equity Index mutual fund, your savings would accumulate to a $1,613,047 windfall with a 10% respectable and realizable annual return assumption.
If you invested that savings in an actively managed equity mutual fund, a broader range of outcomes exist. If you unluckily select a poor active manager with a possible reduced 8% annual return, your end war kiddy is reduced to $ 807,560. If you luckily choose a winning active manager who delivered an annual return of 11%, your end nest egg would be about $ 2,307,078. The underperformance and overperformance are again realistic estimates based on historical performance data.
Based on historical results, about 30% of active managers outdistance their Index benchmarks. Therefore, the active management fund option has an Expected outcome of (0.3 X 2,307,078) + (0.7 X 807,560) = $1,257,415 with a wide range of possibilities (uncertainty).
The final end wealth ordering of these options is: (1) Save and Index invest, (2) Save and invest in actively managed fund products, (3) Save and hide the savings under a mattress, and (4) Enjoy an exotic coffee or hard liquor drink each day. You are free to choose.
A simple calculation fully demonstrates that the end wealth differentials are meaningful and ultimately life style changing. I actually did the second option. I don’t regret that action whatsoever, but I could have done better. Too, too bad. The younger MFO cohort get to choose for themselves. That choice will make a difference when they retire.
I learned a lot about the MFO membership from these postings. I thank everyone who participated.
Well, where to start?.....Let's see.....should have drunk cheap beer, driven slow cars, and dated fat women......right? lol It's good to be poor. Puddnhead
I did everything right in my 20's. I saved, lived a frugal lifestyle and invested in mutual funds that were diversified and well thought of by M*. Then the Y2K crash happened and I watched as my profits evaporated. Taught me a lesson about holding too long. I later married and watched our savings crash again in 2008 & 2009. I should have sold earlier than I did, but hindsight is always 20 - 20.
Then my wife and I had our first child, turned 30, and have since had our second child. Money's in short supply again due to the expenses of our growing family.
What I would have done differently in my 20's would have been to keep more money in cash and not hesitate so long to sell my funds if valuations justify going to cash, especially when the markets are tanking...
My grandmother and grandfather bought a bond every month after their marriage for 25+ years until my grandfather had a heart attack. In the 2008 & 2009 holiday seasons, these were sold and each of their 5 grandchildren received 10k each year. I used that to max out my Roth contribution each year and then payed off some student debt. Grandma yelled at me that the money was for living and I should do something more fun, but the timing was good and it's almost tripled in value since then.
I would've made different transportation choices. I've flushed about 16000k into a lemon of a used car and hospital bills after getting hit by cars while cycling, but my retirement account is off to a good start.
Comments
Derf
Bought my first new car (a 1970 Plymouth Fury) for $2800. ... Come to think, should have bought a bunch of new cars and put them in mothballs. How much would a '70 Road Runner in mint condition be worth today?
http://www.autoblog.com/2010/06/27/barrett-jackson-oc-10-1970-plymouth-roadrunner-hammer-has-fa/
Hey, some one did say it...you Tampabay. Thanks.
I have tried to convey the importance of investing soonest to my daughter. And fortunately, think it has stuck.
Teaching my daughter to save and invest wisely. She is in her early 20s and already has more money in her portfolio than I had in my late 30s. She is well diversified globally. If she stays on track, she will do fine.
"Teaching my daughter to save and invest wisely. She is in her early 20s and already has more money in her portfolio than I had in my late 30s. She is well diversified globally. If she stays on track, she will do fine."
The gift that keeps on giving. This is priceless.
>>>>I made my first trade as a college sophomore when I was 19 years old buying five shares of stock in Chrysler Corp. I then spent the next nineteen years consumed by the markets. For much of those years, I worked a series of minimum wage jobs to support myself while trying to get my trading off the ground. I was a security guard at a nursing home, delivered circulars door to and even collected old newspapers and aluminum cans for recycling money. But it had been nineteen years of basically just spinning my wheels with a meager trading account of only a couple thousand dollars. You name it - stocks, options, futures - I traded them, but to no avail.
My trading mindset was quick and easy money. But I didn’t limit my get rich quick mentality solely to trading. I spent untold hours at the local racing tracks in my home state of Kentucky. I even made several trips out west to the Nevada casinos. The lowest I sunk was when I got involved first as a participant and then as a promoter, in some questionable work at home schemes. It should come as no surprise then that I lived a life forever in financial distress. Because of perpetual credit card debt, my net worth was always negative. I resided in run down boarding houses or worse, such as a bug infested basement apartment with little to no heat in the winters. I drove beat-up rusted out cars, could never afford health insurance, and lost count of the times I had to pawn my TV to make it through to the next pay day.<<<<
probably more realistic " I had NO money for INVESTING in my 20's" a lifetime mistake
I certainly had no money for most of my twenties. The mid 70's were not kind to most people. Working a min. wage job compounded the situation.
It's not always dependent on the person. If the general economy is down that also burdens saving and investment habits. The rampant inflation back then was cruel. If one had the money though, certificates of deposit were very attractive.
Back than financial well being meant having a nice apartment, color TV, fast car and and plenty of music and booze. Hopefully, today's kids have their heads screwed on straighter.
My best investments in my early twenties were in tools. A pickup truck created endless opportunities for favors, part time work, and for my budding desire to fix/build/repair things myself.
All of this prepared me well for learning the concept of delayed gratification. Waiting a week or two as a teen turned into waiting months or years as my wish list for things got more expensive. Learning to wait a working lifetime has been the ultimate investment lesson.
Time and a steady inflow of small periodic savings turns a savings puddle into a reservoir.
If you want to make a point to a non-believer try this:
1. Block the drain of a sink or tub.
2. Set the faucet to a slow drip.
3. Check back periodically on their accumulating wealth.
I bought my first stock in the mid-1950s. It was Chock Full O’Nuts coffee shops for reasons that Peter Lynch later popularized. I was an engineering student in New York City at the time, and whenever I stopped into one of their outlets, breakfast or lunch, it was wall-to-wall people.
Being an engineering student, I thought that technical analyses would give me an investing edge. I always had an affinity for numbers, for manipulating those numbers, and for pattern recognition from charts.
It was a natural fit that I buy and absorb the Edwards and McGee classic “Technical Analysis of Stock Trends”. About that same time, in San Diego,, I attended a lecture by the (in)famous Joe Granville. In retrospect, calling his presentation a lecture is more than a slight exaggeration. It was an extravaganza; it was pure showmanship with special dresses and stage props. Granville used all kinds of influence tricks to sell technical analysis. I recall that this event was held even before Granville started publishing his investment newsletter. Regardless, I bought the package.
I won some, and I lost some, so the whole experience was not a complete disaster. Again in retrospect, my early investing approach was far too unbalanced and incomplete. It was costly with my many small orders. I totally ignored the fundamental analysis component to investment decision making. It was years later that I finally read Benjamin Graham’s “The Intelligent Investor” book.
In those early days I did not compare my results against any benchmark. Without a measurement standard I did not know if my methods were really helping or harming my very small (really miniscule) portfolio. Back in the early 1960s, it seems that even large financial institutions similarly failed to impose this now obvious tool to gauge performance.
In those early days I was very susceptible to overreaction from investment house tipsters. I simply did not do my own homework, and did not verify their recommendations. That was partly my laziness, but also I believed them to be more knowledgeable on investment issues. I trusted far too easily and was not skeptical enough with due consideration of misdirected incentive motives. Given the numerous studies that demonstrate that proclaimed experts are not especially expert forecasters, my attitudes have reversed on these matters.
Summing the parts, I suppose my overarching reappraisal of my 20s investing is that I was just too slow a learner. I continuously learned, but I failed to implement quickly enough. Currently, I use technical analyses sparingly, I benchmark carefully, I am skeptical of expert opinion, I eschew financial news programs, and I do verification tasks.
However, I still am very deliberate in my actions and reactions; as Daniel Kahneman might say, I choose to engage the reflective segment of my brainpower far more often.
Thank you for encouraging my reflections about yesteryear. Rookie mistakes were all over the place; a trip down memory lane can be painful. I believe I make fewer investment mistakes today than I would have likely made 5 decades ago. Then again, maybe not given my age!
Best Wishes.
Would I have done anything differently? Not really. Hell, we lived pay check to pay check most of our lives, especially when the kids were small. So saying I should have saved more in my twenties would have diluted life then.
Maybe we were lucky, certainly not investment savvy, but my wife left work 10 years ago and I plan to leave in a couple. Somehow we've accumulated well over a million through I guess just blind persistence. Who wouldn't want more? But I wouldn't change my 20's.
People earning retirement right now didn't have iPhones or Starbucks to waste their money on. They had the promise of social security. They had no reason to save in their 20s. In hindsight everything is 20/20. Someone please find me newspaper from 1965 which says invest in 20s and see what will happen 50 years later. And even if they did, let's see how much money they used as an example, 10K invested at 20 or $10.
The world has changed a great deal.
The subject question provoked a pretty fair response from the active MFO membership. The replies were a little surprising by their uniformity. A grand summary is that No Regrets was the constant reflection.
We appear to all agree with the disparate wisdom of guys like Henry Kissinger and Robert Redford. Kissinger said: “Accept everything about yourself – I mean everything. You are you and that is the beginning and the end – no apologies, no regrets.” Redford added that “ I have no regrets, because I’ve done everything I could to the best of my ability.” Amen, Amen to both.
I was also surprised that no MFO contributors elected to address the cumulative benefits of just a little savings discipline. It does integrate over a work lifetime to a substantial war kiddy that will enhance retirement. I’ll fill that vacuum now.
Assume abstaining from one exotic coffee or cocktail each day, or perhaps buying weekly at a discount outlet like CostCo. That can save 35 dollars per week each week of the year. Apply this discipline for 45 years from age 20 until retirement at 65. I used MoneyChimp compound calculator to estimate final wealth.
If you secure that savings under a mattress, your risk-free(?) cumulative savings would be $ 81,900. Not bad, but not a life changer either.
If you invested that savings in an equity Index mutual fund, your savings would accumulate to a $1,613,047 windfall with a 10% respectable and realizable annual return assumption.
If you invested that savings in an actively managed equity mutual fund, a broader range of outcomes exist. If you unluckily select a poor active manager with a possible reduced 8% annual return, your end war kiddy is reduced to $ 807,560. If you luckily choose a winning active manager who delivered an annual return of 11%, your end nest egg would be about $ 2,307,078. The underperformance and overperformance are again realistic estimates based on historical performance data.
Based on historical results, about 30% of active managers outdistance their Index benchmarks. Therefore, the active management fund option has an Expected outcome of (0.3 X 2,307,078) + (0.7 X 807,560) = $1,257,415 with a wide range of possibilities (uncertainty).
The final end wealth ordering of these options is: (1) Save and Index invest, (2) Save and invest in actively managed fund products, (3) Save and hide the savings under a mattress, and (4) Enjoy an exotic coffee or hard liquor drink each day. You are free to choose.
A simple calculation fully demonstrates that the end wealth differentials are meaningful and ultimately life style changing. I actually did the second option. I don’t regret that action whatsoever, but I could have done better. Too, too bad. The younger MFO cohort get to choose for themselves. That choice will make a difference when they retire.
I learned a lot about the MFO membership from these postings. I thank everyone who participated.
Best Wishes.
It's good to be poor.
Puddnhead
Then my wife and I had our first child, turned 30, and have since had our second child. Money's in short supply again due to the expenses of our growing family.
What I would have done differently in my 20's would have been to keep more money in cash and not hesitate so long to sell my funds if valuations justify going to cash, especially when the markets are tanking...
I would've made different transportation choices. I've flushed about 16000k into a lemon of a used car and hospital bills after getting hit by cars while cycling, but my retirement account is off to a good start.