“We don’t make mistakes; we create life experiences.” – Unknown
I’m a big believer in the concept that everything happens for a reason. Sometimes that reason becomes clear later in life, sometimes it doesn’t but, for me, trusting that even the worst experiences are part of a bigger plan makes the tough times easier to handle and the good times all the more enjoyable. I’m not sure if it’s the changing of the season or the fact that my 40th birthday is slowly creeping up on me but I’ve been thinking a lot lately about the experiences I’ve had and the financial lessons I’ve learned along the way. I wouldn’t say that I have any serious regrets but there are definitely some key financial habits I wish I’d adopted earlier and some holes that I would like to have side-stepped rather than fallen into. I saw a quote once that read, “Have you ever stopped to consider that perhaps your sole purpose in life is to serve as a warning to others?” I think that “sole purpose” might be pushing it a little far, but if I had the ability to stage an Ebenezer Scrooge style intervention as the “Ghost of Sarah yet-to-come”, these are the things I might encourage my 16 year old self to “do-over” a little differently:
1. Save More. Spend Less.
So many of the challenges I faced in my 20s and 30s could have been avoided altogether if I’d had more savings and less debt. Understanding (and consistently applying) core financial concepts such as the “rule of 72” and “pay yourself first” along with a strong money management system would have made many of life’s curve balls less devastating and sped up my recovery time. Choosing to pay attention to my Dad's assertion that “it's only a bargain if you wanted it before you went into the store” might also have helped keep more of my hard-earned money in my pocket! Good money management isn’t rocket science, it’s pocket science!
2. Use Credit Wisely
Credit can be a blessing and a curse. Used wisely it can help you finance a home, fund business opportunities and earn you a myriad of “rewards” through loyalty programs and incentives. Used with careless abandon and a chronic lack of understanding, it can sink your prospects of a sound financial future faster than quicksand. The debt-hole is easily dug, seriously difficult to get out of and its effects can last a long time. Had I known at 16 what I know now, my choices (and their consequences) would have been dramatically different. Teaching kids about credit, and how to manage it effectively, is fundamental to their financial success, especially in the society we live in today which encourages us to live beyond our means and makes it far too easy for us to do so.
3. If it looks like a lemon. It’s a lemon.
Trust your instincts and trust the experts. Whether it’s a car, a house, an investment or a business deal, if it sounds too good to be true, it probably is. If your gut tells you it’s a bad move, it probably is. Surround yourself with experts you trust and be willing to listen to (and accept) their advice. I learned a number of life and financial lessons as a homeowner and as an entrepreneur and, while I am grateful for the experiences, with hindsight I can see that trusting my instincts and the acting on the advice of experts would have saved me a lot of stress and a lot of money.
There are adages aplenty to help us feel a little better about the mistakes we make but the reality is, that when it comes to finances; far too many of those common mistakes can be avoided. Ignorance is not bliss and what doesn’t kill you can weaken you to a point you may never recover from. I may sound a little over-dramatic but I talk to people every week who are paying the price for mistakes and misjudgments they made years ago; for choices they might not have made if they’d been armed with more information. Too many young people are learning about the perils of credit when they’re already up to their neck in debt and our schools and universities aren’t teaching them what they need to know. I don’t have the ability to stage an intervention with my 16 year old self (more’s the pity!) but I do have the opportunity to share information with my niece and nephew as well as with my clients and friends. What financial lessons have you learned in your financial journey and who can you benefit by sharing those lessons? I’d love to hear from you.