"If only I knew then what I know now" is a familiar saying to most of us. If only we had a way to give advice to our younger selves on all of our hard-learned lessons. Maybe then we could take an easier path, especially when it comes to finances. Knowing what I know now, I have a lot of advice to my younger self.
As a young woman, my wealth-building journey really started right after I graduated from college and got my first real job earning my first real income. Around the same time, I started to educate myself about personal finance. As a result, I saved my first $100,000 in a little over 3 years right after graduating.
As I look back at my financial journey to date, I'm grateful for the great financial decisions I made. But there are also a lot of things I wish I knew or wish I had done differently.
5 pieces of financial advice for my younger self
If I had the chance to have a sit down with my younger self, I would give myself these key pieces of advice!
1. Max out your retirement savings right away
When I started working at my first job, I didn't know what a 401k was, i.e., an employer-sponsored retirement plan. All I knew was that my employer offered me free money up to a certain percentage of my contributions. Once I heard free, I decided to contribute.
I contributed just enough to get the match to start out. I gradually increased my contributions over time until I eventually started maxing out my retirement savings contributions. However, If I had maxed out my contributions right away, I would have saved so much more money. It wasn't until I started learning about investing that I realized how worthwhile contributing to my retirement accounts could be.
My advice to my younger self would be to make it my mission to learn about and understand my 401k and max out my contributions as soon as I could.
2. Get life insurance while you are young
For many people, talk of life insurance can be a tad bit morbid. Plus, I used to be one of those people who thought having life insurance was similar to planning your own funeral.
Now that I'm older, I fully understand the importance and benefits of having life insurance. Although I have the right kind of insurance for my needs right now, if I had gotten insurance in my 20s, my premiums would have been so much cheaper.
Now in my 30's I have to pay a lot more to keep my policy. I would have advised my younger self to invest in the right insurance to save myself money later.
3. Learn about investing and invest sooner
Once I had saved that first $100,000 of mine, over $50,000 of it was money that I kept in a savings account that earned me a pitiful amount of interest.
I had by far exceeded what I needed to have in emergency savings or a sinking fund. One of the most important pieces of financial advice I'd tell my younger self would be to delve deeper into exactly how investing worked. I would have invested much more of my money as opposed to keeping so much in cash.
I eventually did learn about investing outside of just contributing to my 401k and got into it a few years later. But if I had started sooner, my money would have had even more time to grow towards my non-retirement goals.
4. Buy fewer things e.g. handbags
Once I had accumulated a good amount of savings, I got a bit comfortable because I had money in the bank. As a result, I relaxed my aggressive savings and started to splurge more on myself. My way of splurging was buying gorgeous yet very expensive handbags.
My justification for owning these bags was that I was a saver. I had saved a ton of money at this time. Also, I was maxing out my retirement accounts; I wasn't traveling as much as I would have liked, I worked hard, deserved it, etc.
But as I got older (and wiser) and I began refocusing more on my savings vs. my spending. I started to realize these handbags were just money sitting in my closet that I could have been investing instead.
Over time, after going back and forth (with myself, lol) and trying to justify my costly but very useless handbag collection (because those handbags were sitting useless in my closet), I decided to let go of them one by one.
Luckily for me, I was able to sell most of them for what I paid or slightly more; because of the brand and the price increases that were occurring. I was able to put my hard-earned money where I'd rather see it— invested and working hard for me and my future self.
If I could go back in time, I'd definitely tell my younger self to keep aggressively saving and chill out on the excessive handbag purchases!
5. Use credit cards responsibly
In college, I applied for a credit card and maxed it out. Not only had I racked up debt, but the interest on this credit card was also a whopping 24.99%! Looking back, the advice to my younger self would be only to use your credit card if you can pay it in full each month! Credit cards can be great financial tools if you use them responsibly.
Learning from my mistakes
These are the 5 key pieces of advice I would give my younger self looking back. I've learned so much on my financial journey, and each experience has been a major lesson towards the money decisions I make today and will make in the future. The important thing to remember is we all make mistakes, but you can always learn and grow from them to better yourself and your finances!