I haven’t been great with money…
That could be the main theme of my 20’s and early 30’s. Money was never important to me in the sense of building wealth and saving for the future. Part of the reason was that I never had a mentor to guide me on how money worked. As you can see on my “about me” page, I grew up with a single mom who did her best to keep food on the table. While the succeeded in doing so, money, was never her specialty. Budgeting…yes. Saving…a little. But investing and using your money to make money was not on her radar, and rightfully so.
My first money mistake
Looking back, I think the first major mistake I made was not understanding how to save money. Making money was never a problem. Not saving money was the problem. I was always more of a “live for the moment” type of person. I would worry about the future when it got here. I would spend money on things I wanted. I would buy things for friends. I even bought sports car that I probably shouldn’t have, although, that was fun. I suppose that may be true of most kids in their late teens and early 20’s.
If you are young and starting to get into the workforce, hopefully my life story will help you avoid the same pitfalls. If I had set aside a small percentage of my paychecks, say 5%, from when I started working full time until today — I would likely have bought a house by now…IN THE BAY AREA. No small feat, I can assure you. I’ll talk more about savings accounts and how to use them in future posts.
Not understanding credit cards or credit scores.
This one really came back to burn me in my first years of adulthood. I think the saving grace was that I screwed up when I was 19-20, so I had time to recover from my mistake. As soon as I turned 18, I started getting offers for credit cards. By the time I was about 19 I had two cards in my name. They didn’t have large credit lines, but it was enough to get me in trouble. One card had a max of $1000. I think the other had roughly the same, maybe $1500. I can’t remember anymore.
I know what you’re thinking. Did I think I really had $1000 to spend? Typically that’s the problem young people run into with their first credit cards. They think they actually have that money. That wasn’t my issue. I think in theory I understood that I didn’t have that money and I needed to pay it back. In practice however…well, I failed. I maxed out one card on a weekend getaway with a girl I was trying to impress. I maxed out the second one on what was probably needless purchases. I was making minimum payments and I thought it was fine. Then…bam! A mistake at work cost me my job, and I fell behind on payments. Worse yet, I wasn’t very organized with my finances, so even keep track of what was happening was a mess. I fell behind on payments, the fees piled up, and I couldn’t afford to make the payments.
Eventually, I settled with the card companies and paid them back a portion of what was due. My credit was ruined for years. It was about the time I settled with the card companies that I found out about credit scores, what they were, and how they worked. At one point my credit score was down in the 500’s. It took my 7 years to get my score above 700. Today my score is excellent and I have ZERO debt. I pay my cards off every month and collect the rewards.
If you are unfamiliar with how credit scores work, you should read this
In retrospect the most frustrating part was how I let myself get into so much financial trouble over such a small amount. You live, you learn. I’ll talk more about how to use credit card properly in future posts.
Investing…or lack thereof
This might be my biggest sin of all. Growing up I never heard about investing, stocks, bonds, markets, charts, etc. It wasn’t even a foreign language, it just didn’t exist in my house. I did like to watch the news, so by my teen years I was aware of the stock market, but outside of knowing it existed, I had no idea how it worked. I thought it was something rich people did. Knowing what I know now…HURTS…it just hurts. lol. But I can’t let that stop me from moving forward and doing the right thing.
In my late 20’s I took a job as a professor at a local community college. It was the first job I had that offered a retirement plan where they matched my contribution. I signed up for it because it sounded like the right thing to do, and then I forgot about it. I spent a couple of years at that job, and in that short amount of time I had built up a little under $2000 in a Calstrs account. Calstrs is the retirement plan for teachers in the state of CA. I quit my job in 2011 to join my wife working full time on growing our business. That ended up being a great move, but with the business we didn’t have any investments or 401k options setup. We were just reinvesting everything into the business in those first years.
After making that move I started to think more about investing, retirement, and how I would achieve it. We had two young boys, and a thriving business. With most of my focus on those two aspects of my life, I still didn’t take the time to focus on investing. Luckily I had that small nest egg from Calstrs just sitting there, growing, without me doing a thing.
In late 2018 I finally took the time to research investments. Our CPA had been asking us why we hadn’t been putting away money for years. I finally listened. I went back to look at my Calstrs account. I figured I could just keep adding to it now that I was able to. When I called to set that up, I learned that I couldn’t contribute to it since I was no longer employed by the state. I looked at my options and decided to move my money to an IRA with Schwab. (I’ll get into different brokerage accounts and companies in future posts). It was a small account by most standards, but it was mine, and I could now do something with it. In December of 2018 I opened my IRA with about $2500.
Now, 18 months later, I have my IRA, my day trading account, and some money in Bitcoin. All together my investments went from $2500 to just over $20,000 in just 18 months. I am KICKING MYSELF for not doing this sooner, but it’s time to focus on the future. My journey is just beginning. Don’t wait to start yours.
NOTE: My blog is not investment advice. I am not affiliated with or get paid from any business I mention in my posts. These are merely a record of my investment journey as told by me. Before investing you should do your own research and decide which investment options are right for you.