Recently, while applying for a loan, I received a compliment for my great credit score. It felt good, it was a reward for years of financial discipline, and will afford me some opportunities that would not be available otherwise.
However, I’m aware that many others struggle in this regard and, worse, when good advice is shared many would rather shoot the messenger (and score cheap political points) than promote what would actually help many people if applied.
So, at risk of my neck, I’ve decided to give some free advice.
Attitude Adjustment: Take Responsibility for Your Financial Future
One of the biggest mistakes I made early on in life was to waste time hoping for some big break, I would look at those who had more than me with envy and then blow paychecks on useless things.
Had I been more able to reign in my attitude then I may be more like a millionaire friend I have. Instead of complaining about his lot in life, he saved everything he could, bought a double and started earning rental income, as a teenager.
There is no easy road to success, but if you start taking responsibility for your own financial future today your life will become easier tomorrow and it all starts with attitude. If you have a poor attitude you will justify bad financial choices and sabotage the only real chance of success you have.
Future success almost always requires sacrifice in the present. It could mean getting your CDL or going to college and working two jobs. It may mean saying “no” to your friends when they ask you to go to Europe with them. One must temper their current hedonistic impulses and shift the balance towards the future.
Better Balance: Save Every Penny That You Can Today and Invest in Your Future
Saving is a necessary discipline for financial success. If you work for minimum wage at McDonald’s and insist on having the latest iPhone then you will likely remain very poor until you start making wiser investments. Those who spend everything they earn on things not absolutely necessary to survive are sacrificing their future success for trinkets.
To gain wealth one must invest in things that will bring a return. That Grande Salted Caramel Mocha might make you feel good for a couple moments and seem completely worth the money spent—until you consider the opportunity cost.
Over the long-term, a daily $4.00 coffee habit can become very expensive. In ten years that is $14,560 spent on a path to early onset diabetes. Had you taken that same money and invested it, at a 10% rate of return, you would have around $25,000 in cash and a down payment for a modest home and all because you quit Starbucks—can you imagine what would be possible if you quit steak dinners, beer, lottery tickets, and movies?
Of course, there is always a case to be made for enjoying the present moment, but one can often accomplish that end at a far lower cost and may even learn to enjoy saving in the same way someone can eventually take pleasure in going to the gym. At very least, moving the balance even a little in the direction of saving and investing is far better than the pain of dependency and debt.
Credit Control: Never EVER Buy Anything An Credit That Depreciates in Value
Having a balance carry over on a credit card is a terrible financial sin. If you can’t afford to pay the full balance of your Visa at the end of each month, then cut it up and use your debit card or plain old cash instead. It is completely insane how so many Americans sell themselves so willingly into debt slavery for things they really don’t need.
This is the one thing that I did well (for the most part with a few exceptions) and is probably why my credit score is as good as it is. I was always absolutely terrified of debt and for good reason. I may have blown too much money on frivolous things like performance car parts, but at least I’m not still paying interest on it today, own far more than I owe and am well above the median net worth for people my age despite my salary being average.
The only time a person should ever consider taking on debt is for something necessary that will appreciate in value. For example, real estate is something that stands a chance of gaining value over time. And, even then, one should take on debt with the upmost caution and realizing that their current circumstances could change. Any investment always comes with risk and that risk must always be fully accounted for before signing the loan contract.
But, at very very least, never ever borrow money for something like clothing, furniture or even a car, at least not money you cannot pay back in a month or two because that momentary happiness of something new will soon become a massive ball and chain of financial obligation. There is so much more pleasure in paying cash for something you’ve wanted than there is in paying a monthly bill for something you did not need and is now worth next to nothing for resale value.
Do Not Be Discouraged!
Finally, setbacks and struggle are part of the road to success, expect it!
For a young person, without a silver spoon in their mouth, the climb up the learning curve is often very steep. This is why there are so many who, comparing themselves to people years older, give up, cry “it’s not fair!” and become pawns to political opportunists who exploit poverty for votes.
But, take it from me, someone who did not win the lottery of life, who couldn’t afford college, had a few setbacks and still made it.
No, I’m not wealthy, at least not by American standards, but I am very comfortable.
I own a small house, a rental, two late model cars (both paid off) and no problem eating out on a regular basis. I have made slow and steady progress over the years, and will likely work until I am unable to get out of bed anymore, nonetheless, it is progress and puts me far ahead of those less disciplined.
My only real regret, financially speaking, is that I did not put these A, B, C’s to more use at an earlier age—because I might very well be a multi-millionaire today had I done so!