My personal finances aren’t perfect, but where I am today is considerably better than where I was 15 years ago. Like many young adults I made mistakes with their money. I got into credit card debt while in college, I didn’t budget, and saving was the last thing on my mind. I was young, free and having a good time. But unfortunately, this good time was at the expense of my bank account.
Obviously, I can’t go back in time. But if time machines did exist and I could have a sit-down with my younger self, I would definitely share what I’ve learned about money over the years and give myself a financial head start.
Build an emergency fund before moving out…
I moved out of my parents’ house at the age of 23, six months after graduating college. I attended a university about 15 minutes away and lived at home the entire time. I worked part-time and I didn’t have many bills, so it was the perfect opportunity to save up and build an emergency fund – but of course, I didn’t.
Instead, I was enjoying my freedom and spending my money on anything I wanted. I worked throughout my entire college career, yet I had nothing to show for it, unless you count the $200 in my savings account.
I didn’t give my situation much though at the time. In the back of my mind, maybe I felt I had my entire life to save. Whatever my mindset at the time, now that I’m older I would tell my younger self to make the most of this time and build a hefty emergency fund before life (and expenses) get in the way.
I was eventually able to save a six-month emergency fund, but only after several years and many setbacks.
Don’t carry credit card debt from month-to-month…
My credit cards were my best friend in college, so it might come as no surprise that I got myself into hot water. Fortunately, I smartened up early on and began chipping away at my debt before things got out to hand. But paying off my balances didn’t happen overnight, and I would advise my younger self to manage debt responsibly from the get-go and always pay off balances in full—each and every month. Don’t wait until your back is up against a wall to get serious about debt.
At the time, I didn’t think high balances were a big deal as long as I paid the minimum payment and the credit card company got its money every month. It wasn’t until later that I realized the impact of credit card debt—high interest rates, a lower credit score, and I even had a credit card company lower my balance as I was on the verge of maxing out a second credit card. That was the wake up call I needed to adjust my spending.
Don’t get a student loan, if possible…
I attended a community college before transferring to a university, and since my father paid for my first two years of schooling, I only had to get a student loan for the last two years. But thinking back, I wish I would’ve skipped getting a student loan and paid my own tuition each semester.
Although I was only working part-time, I think I could have made it work with careful planning and budgeting. Another mistake I regret: requesting forbearance and deferring my student loan payments for three years after graduating. This decision made sense at the time, especially since I was still adjusting to life on my own. But three years of forbearance adds up quickly. Although I wasn’t required to make a monthly payment, interest incurred monthly and my student loan balance grew. I can’t remember the exact amount, but it was several thousand dollars.
Make at least one extra mortgage payment a year…
It wasn’t until I began writing mortgage-related articles that I understood the benefit of making one extra principal mortgage payment a year. I purchased my first house at 28, and like so many other homeowners, I only made 12 mortgage payments a year. I later discovered that it only takes one extra payment a year to pay off a mortgage balance six to eight years sooner, plus extra payments build equity faster.
I dropped the ball on my first mortgage. However, we recently sold this property and are in the process of buying another home, and it’s my plan to pay more toward the principal each month and pay it off sooner.
Don’t let anyone borrow your credit card…
It was a stupid and dumb mistake, and I’m embarrassed to admit it—but yes, I was foolish enough to let a friend borrow my credit card. In my defense, I was trying to be helpful, but instead I got burned big time.
The good news is that this story has a happy ending. My friend apologized and paid every cent, although its took several months. In the meantime, I had to make the credit card payment myself, and I would definitely want to spare my younger self this headache. It was a lesson learned and a mistake I never made again.
Sometimes, I still beat myself up over some of the financial decisions I made in the past. These weren’t exactly my finest moments, but I did learn from these experiences, and as a result, I was able to make better choices and build a stronger financial foundation.
What money advice would you give your younger self?