The Worst Money Mistakes By Age (Part 1)

financial mistakes by age wouldn't it be nice if somebody had 30-plus years of experience I could share with you all the pitfalls all the the traps to avoid we got your resource right here it's Brian Preston the bloody guy Bo wisdom comes from experience okay I can believe that I mean I wrote that down and and I gotta say because human nature is we remember the negative stuff a lot better we remember the the positive stuff is that usually that wisdom comes from a lot of mistakes yeah it seems like the things I learn the most from or the things I've screwed up in the past and I don't think I'm alone in that I've learned a lot from your screw-ups too though I think if that's viable that's what and we're gonna we're gonna move pretty quickly today because we've got we're gonna be doing just as the title implied financial mistakes by decades so your 20s 30s 40s and 50s and even 60s so that's a lot of ground to cover so we got to kind of crank but I'm gonna try to make sure that we still save enough time to share some of those life lessons as stories because that's the stuff you guys are going to remember believe me I remember it because I live some of this as well as seeing what you guys out there who are clients or people who you know if you're part of the money got family and you've shared with me about writing emails we've learned a lot from all the things you've written us and shared with us and by the way if you want to go check us out money guy calm you can go out there you can connect with us on all of our social media platforms you can also if you're looking to take the relationship to the next level you go the contact us page always looking for relationships because we love just loving on you guys and watching you prosper and grow off of the advice we give that's right you know in our day job we do a fee-only financial planning for clients we have clients all over the country now and anytime somebody considers hiring us we always we have a questionnaire that they fill out and two of the things that we ask on that questionnaire what are the greatest financial decisions you've made and then what are the poorest financial decisions you made so a lot of the stuff that we're gonna go through today it actually comes directly from the experience of folks who have ultimately been successful who have shared what they did wrong in their 20s 30s 40s and so on so I think it's gonna be a lot of a lot of fun to get there so let's kick this thing off with the 20s okay this is the world your oyster I mean you have a blank canvas that really I get excited thinking about 20 year olds 25 year olds even 28 year olds who discover content like the money guys show because I mean guys you really can conquer the world talking about empire building this is where it starts and what I like about when you're in your 20s is there is a tremendous multiplier effect of anything you do good and your 20s will be handsomely rewarded when your 50s and 60s after that money's had a chance to work for you on the other side of it that has mistakes you making your 20s also are amplified so I want to kind of cover what we see because remember the topic is financial mistakes so we're going to talk about the mistakes we see and as well as experienced and then hopefully you guys can can avoid this with your own finances so the first one I wrote on here and there was a not so successful movie under the same name failure to launch oh yeah this this is a big one and what's interesting is I think this is a big one for current folks in their toys I don't know that this has always been the case back in prior generations this is sort of a new thing that it's kind of happened in the society in which we live we have um you do research and believe me we working with clients we see this a lot there's a new trend where adult children and a lot of you guys watching maybe you fall into this too don't necessarily leave to go out live on their own as fast as they have in the past now some of that is caused by let's face it we went through 2008 the the Great Recession so wasn't like job prospects were awesome you know for the last decade and then cost of living has gone up on housing and other things like that so some of this was was driven by some of those economic events that have occurred but we're now I think it's kind of a blank canvas and the fact that good growth you know I know things are still super expensive but this is a good time to try to make the life decisions to get out of the parents basement I know that not everybody lives in a basement but you get out of there as soon as possible and here's why I think this is important is yes maybe you're foregoing some of your savings that you could do if you lived with mom and dad for a be longer but the life experiences in just the way it changes the way your mind processes the world is going to be completely different when you are more of a self independent individual I can tell you that I switched my major my junior year from finance to accounting strictly so I could launch out of the house without staying and living with my parents because I wanted to what do you think that's we're thinking the money guy mindset was born out of Brian pressed and ready to get out of the basement yeah I was a finance major and you know and improve I was where I should have been but I saw that people graduate with finance degrees became salesmen right and who was I gonna sell to I was a baby-faced you know 20-something comes from no money so I had nobody to go sell to where's everybody graduate accounting degree from EGA had a job pretty much guaranteed I don't know of anybody who graduated an accounting degree so that's why I switch cuz we all had made plans that we're gonna live together in Atlanta right after we graduated now I wanted to ensure that that was successful so Brian one of the things I've heard you say before is you are a big believer that you should figure out how to move out of the house as quickly as practical right and I think that makes all the sense in the world but in pretty sure we were talking a little bit about there are some situation we have some really close friends who've done this that maybe there is an opportunity because of who your parents are the situation that you were born into or whatever may be that there might be some help that could exist from your parents that could really allow you a platform to do something pretty incredible you kind of brought up two concepts I do think that okay it's it's okay to live at home for a month or two or three I mean for me I saved up enough money to have a few thousand dollars in the bank and about a leather recliner before I moved in with my buddies my kids you know that's what we had but so I think that that's I think it's okay if you take a few months but the other thing you're talking about is if you come from a family that has resources should you try to do everything on your own or should you try to use the the opportunities provide I would tell you look as a guy who had to do it all alone I think I have no I don't begrudge anybody who has the opportunity to use the Reed sources their family has so if you have a successful father and Broadcasting or in finance there's nothing wrong with working one of my best friends was um we worked at the first accounting firm he went and took over his dad's accounting firm and I was always so impressed that he came from a successful accounting background but he went and kind of fine-tune that skillset and kind of leveraged it and could do a whole nother level but I think what you have to do when you are someone in your 20s is if you are benefiting from that maybe you're on mom and dad's health insurance for a longer time or maybe they're covering the cellphone bill or whatever it may be recognize the opportunity that you have that that hundred and fifty dollars a month you're not spending on insurance or not spending on a cell phone bill or whatever it may be or on rent start scrolling that away and start really setting yourself up for when you do launch you have a foundation to work on I don't want that money be wasted let it become a resource too maybe that's what allows you to save for the Roth IRA or that's what allows you to make good financial decisions so the next thing I had on the list was and this is a big one not establishing credit when it's readily available okay because I made that mistake I came out of college without a credit card big mistake because it's much harder to establish credit later and then also once you cuz because there's another side of it is that a lot of us established too much credit in college and are not responsible and you know credit cards are one of those controversial things I will look at you know I look at credit cards as just as dangerous as a knife a nice can be very helpful when you're cutting up your vegetables for dinner but if you do it wrong you get hurt I mean to the point that you have to go the doctor and get stitches so look at debt the same way but I give advice of make sure you establish credit when it's given out easily like in college but then once you get it don't be crazy and go out there and you know start ordering a bunch of mixed drinks for buying around for everybody at the bar going and you know instead of doing laundry you're buying yourself a bunch of new underwear and t-shirts I mean there's all kind of horrible decisions I think people make where or go on trips you know that's the thing I saw kids get in college a lot of credit card debt is that maybe they couldn't afford to go on a big crew or Big Spring Break vacation but they didn't want to get left out so they went and put it on a credit card and it followed them around for years and I feel like I have a lot of peers who every time they would go to a big-box retailer and they had a big purchase they would always sign up for the store credit card because they would get the 10% off that purchase while that's great and sometimes it makes sense to do that if you're doing that eight ten times a year and you have 20 different lines of credit out there it's not helping your credit the way the way that you want it's it builds to a point that it kind of adds up over over a while until one day it just breaks you so that's why you got to be very careful with your credit I put another point on here and in other financial mistakes we see 20 year olds making not being an advocate for yourself I talked about this in the owner of our past or most recent podcast when I was talking about my first car but I wanted to brag on you Beau and I've mentioned this on several shows is that I think so much of your life really from safe age 10 all the way through you graduate college you're trying to fit in yeah whole element of peer pressure and stuff is you're trying to dress like your peers you're trying to talk like your peers you know you just want to fit in because you want to be perceived as not making waves and that you go but you're going to realize that the older you get it's good to be a peacock it's good to be different than your peers I'd written and because I didn't know if I was using it correctly I see all the time on on some of the social media when I'm on Twitter or other things or just Google searches when I'm looking news looking at news and things like that people use the word basic as a negative thing yeah like if you're basic like you you have the same outfit you're wearing that's what we're describing here that's not good basic is not good we won't upgrade it we want your upgraded self money different if you're in your 20s don't be basic is what Brian press well here's what I mean by that is that because in because I want to elaborate and I want to brag on you I interviewed you for an associate job in from college I liked you you did very good but wasn't that going how are you I were some things about you I was concerned about your too outgoing I was worried I'd train you and then you go move on and do something else and that was those are fears you called me back I mean it's probably two months later and essentially advocated to get this job and I gave it to you over the phone that's how good you did but it's the same thing I mean my first job came from interviewing a client of the firm that was interviewing me I knew that I knew one because in the first interview I had with the firm the partner who was interviewing me mentioned hey I see you're from here that was my hometown we actually work with this client right her hometown so I was like wow that's cool I know him you know so I went and interviewed him and then the next time I got invited back for an interview I made sure two or three times I mentioned that I interviewed their client to find out if they were a good fit for me they admitted to me you know probably six months nine months later that's why I got the job I did not have the best grades as the other you know candidates were doing but they were so impressed that I went above and beyond and that's what I think about all the different ways that people aren't advocating for themselves I mean when you go because we've helped people get their first job before beau it's not using this strategy is that guys if you're not using the technology like LinkedIn and going and looking at the places you're thinking that you want to work and and going and seeing if there's some six degrees of separation like from Kevin Bacon you know that game that everybody has played in the past because you probably have some connection to that company you're not thinking about you need to figure out what your angle is and then here's something that we see happen all the time a lot of companies have something that makes them unique and this is why they're successful or they have a product if you go to that company and you haven't done your basic research to figure out why they're successful and at least done the due diligence to see hey do I use this product or is it something I can at least understand before I show you're just kind of showing up and letting going through the motions that's not that's not going above and beyond that's not trying to stand out from your peers I'll give you a perfect example okay but what's the what's the thing we ask people when they come an interview here anytime somebody comes to ask us so it say hey have you listened the show have you listened the money got show and and we're amazed at how a potential candidate might say something like oh yeah I saw the website you guys do a you're on the radio oh that's nice but well they say hey did you go listen to it oh no no I'll go check it out later yeah I need to do that you didn't want to go do some research on us I mean that's what I see if we're a good fit I mean that's what it's one of those things don't be basic and then look for situations as I bragged on like Bo did to go plead your case if there's something you really want make somebody give you a no you told me one of the things you've improved me at Bo as you said you're your second best answer is no that's always right your second best answer was always no the worst thing happens they say no so you probably were much better at the dating scene and everything else then I was if I didn't know you were a serial monogamous with all the you only really had two relationships in your life but it's still you had that you had the game if you wanted so a lot of this you know Brian said we ought to have a shirt a shirt made this is the money guys Shona says be a peacock because I just think that'd be an awesome shirt but you know we're talking a lot about getting a job or how do that even if you know in your 20s is a fantastic time when you start your first job in your career to figure out what makes you unique and special and if you can figure out even in the job you already have how you can go above and beyond how you can stand out amongst your colleagues you're gonna set yourself up well so in your 20s figure out what makes you a peacock and dive into that yeah no doubt and in your 20s is the perfect time because you don't have all the other life commitments you can just throw yourself at it and and really make yourself stand apart do the work that other people won't do I read a commencement speech it was I don't think it was a real commencement speech but somebody was saying that you know he felt like part of his success was was he was willing to mop the floor at his first restaurant job when others weren't and that's why he ended up getting the first management management job right you know because people were looking for somebody who's willing to do the work the others won't do that's another way to stand out so let's talk about another financial mistake is not measuring twice and cutting once on big family decisions yeah this one yeah this one's heavy we're gonna pick on 30 year olds in a minute is one of the biggest financial mistakes they make is they get divorced do you know where that bad decision actually occurs though in your 20 but yes most often I mean most marry you'll hear me talk about in the 30s in a minute it lasts about eight years okay the average age for divorce the first divorce is thirty years old so you can see it's somebody probably in their 20s decides they're going to get married and it doesn't work out and and financially that is horrible you know and I want to give you guys because I hate to leave things with negative so let me give you some advice here's some statistics of things that you can do to improve your chance of success in the marriage if your parents are happily married your risk of divorce decreases 14 percent you don't really have control over that so that's kind of a it is it's one of those things but I'll turn that around and I'm just going to throw this out there I don't know the statistic makes sense but it seems like I could use the principle to do this if you stay happily married right yeah probably decrease your children's chance of divorce about fourteen percent so that is something you kind of take away there you and I failed this next one people who wait to marry until they are over the age of 25 or 24% less likely to get divorced yep I felt that one yeah if you attend a college your risk of divorce decreases by 13% it's awesome so there's a more educated you are the better chance you have a success here's another wife decision that you need to measure twice on children oh that's raising a child listen to this statistic raising a child costs approximately two hundred and thirty three thousand six hundred ten dollars and that's birth to seventeen that's not including college or all the other economic ala patient care when they live in our basement when you're you know later that's that's a lot of money so as we told you know we're about to show you every dollar in your 20s is worth a lot in the future so that that's there's a lot of money disappearing right there and then I even put even a pets a big commitment yeah I'm surprised at how many people in their early 20s go out and get dogs and their first job well it makes it hard to travel and there's no I loved it I mean we have dogs I don't want y'all I have a pet Lily's not listening to show she's not gonna she's not gonna know what she just I call her my wife's dog but as I've confessed I've actually taken a shot under this dog but it's um it is one of the things that even pets are a big family financial decision so make sure you measure on that I want to move on to the next item though it's not understanding financial basics people come out of college or high school or whatever your education is and they start life and they truthfully nobody's ever taken the time to show them how does money work how do you how do you balance a check I know for me and maybe this has changed nobody has checkbooks anymore yeah yeah I guess most 20 rows are like well that's what we're so used to saying it it you know we wish high school kids would learn how to balance check really what you need to learn how to do in high school is not balance a checkbook is how to reconcile your bank statement every month so you know how much you're pulling out through your debit card or paying credit cards you know all the things like that I know for me personally coming through a high school you know once I graduate there was no personal finance class I had no knowledge of it and if I had not gone into a financial planning major in college and I would have done something you know in the medical field I don't know that financial concepts were in there I don't think there is a curriculum for that unless you choose doll those are correct curriculum you know that's a big word the money gotcha this is 101 material here to get in your graduate degree on financial success so there is curriculum on good financial management but I want to get back I mean here's what's probably I think the average 20 year old mistake they're making is they don't understand that uncle's taking much more their money than they realize I mean I think about the fact that this is how you get yourself in trouble you come out of college for me it was $28,000 a year okay you're like well I was when I used to can make $10 last the weekend you're like $28,000 I'm rich I mean you really do think that but then you get your first paycheck and you realize oh my goodness Social Security income taxes and uncle takes a lot of my money and then there's all kind of other things like you know you can afford a $200 a month car pane right but what you didn't probably plan on is that your insurance might cost $200 a month too because you're young and haven't you know especially if you're a guy who's unmarried under 25 your insurance is much more expensive so there's all kind of things that are going to be sucking your money and renters insurance all these other things you know your utilities that you just can't for granted when you lived you know in college when you're being taken care of so so make sure you understand how much uncle's taken because that leads to the housing and lifestyle lifestyle decisions that probably go to cause you trouble if you're not paying attention to those things you know one thing one question I'd ask is if you are just getting out of school and you're taking that first job do you really need to be in that absolute top tier nicest condominium or that nicest apartment complex because is that money that's actually well spent I feel like I saw so many my peers doing that they had to be downtown in the heart of things spending a mortgage payment in rent every month for no reason at all right so that's just something to keep in your mind in your 20s so pay attention to where the money goes I mean because I do think that's important and this is probably a perfect time when you're in your 20s you hear us talking about cash management plans all the time what you need be doing your 20s is but learning how to budget because budgeting is going to be the foundation knowing where your money's coming in where it's going out if you can understand and conquer that skill setting your 20s by the time you get in your 30s 40s and 50s you don't have to budget anymore it's kind of like from the natural muscle memory uh you know it's like riding a bike or anything else because you have good cash management skills it lets you graduate beyond budgeting but you've got to start doing the budgeting in your 20s first so let's jump it this is a big one and I got so excited when I was doing these stats and they pulled out the financial calculator and figure this out I talked about on this show all the time the army of dollar bills I want you to be a field general for your army of dollar bills so you not working with your back your brains and your hands you're letting your money work for you everybody hears me say at all Tom but you really do the 20s when you're in your 20s it is so much more valuable than any other time in your life and and what I mean by that is I saw an email I was going back I had a phone call with somebody we've been trading email the emails with this money got a listener for years and he had written something on Twitter he in and I can't he put another podcaster on there but he had pulled something where he was saying your money in your 20s is twice as valuable as money in your 30s okay and I thought that was a powerful statement that he had tweeted that out but it's actually incorrect I mean it's it's incorrect because sorry friend looks as well but he he'll know what I'm talking about when I say when you're twenty years old every dollar you invest could become $88 every dollar becomes 88 if you think about help me give you the assumptions for this cuz you'll notice I mean there's gonna be a trend here as we go through 20s 30s or 40s for a 20-year old I think you can put a 10% growth rate on it the long time frame or aggressive portfolio okay that makes sense 10% growth rate and then I said we're going to retire at 65 so this money has 45 years to grow so $1 invested when you're age 20 by the time you turn 65 is going to be worth $88 that's unbelievable it really is every dollar is and then a 25 year old because in look I recognize Brian at 20 years old didn't have money invested so I want to be more realistic because it takes a little while to get your foundation about you know where you are 25 year old that puts $1 away is going to be worth $54 so every dollar is worth $54 not as good as the 20 year old but a 25 year old still 54 for every one that's pretty powerful so I take back to that Twitter comment that a listener made a few years ago and he said it's twice as valuable that's not the case because actually when you're 25 years old every dollar you put the work in you're when you're 25 is worth three to four times more than the money you invest when you're 35 years old and what I mean by that is is that if you think about $54 I mean I'm gonna go ahead and cheat because I've got it right here for a 35 year old that money is only $15 Wow if you do 54 divided by 15 you can see that it's well in 3 to 4 multiplier so your money is very valuable in your 20s so don't squander that opportunity your 50 year old self no matter how successful how wealthy you are is go say your 20 year old self didn't do enough I mean I have somebody that I talked to all-time multi-millionaire and they still tell me they didn't save enough when they're in their 20s and I know their behavior they save a ton of money but they and they always have but they even a successful person's go look back to their 20 year old self and go man you could have done more because at this threshold where you're getting 50 one or eighty to one type of multiplier effect you're gonna be ticked off that you bought Starbucks I mean you really are does have that type of impact so make sure you understand the value of your money and that transitions nicely into when you start your first job get that free match when your employer cuz if your money's worth eighty to one your employer's money's worth eighty to one so please take advantage of the free money that your employer is putting out there and then also I want you to have a thousand or two thousand dollars get that of some basic emergency reserves but but you've got something that's even more powerful than emergency reserves that you that you said people need to be thinking yeah so all the time when I'm talking to folks in their twenties they're asked me for some advice starting out and they said well you know I always hear you guys say I need three to six months for no mercy and that is true yes you do need three to six months for emergency fund however if you're someone who's young and you're not married you don't have kids you don't have a lot of folks pulling on you I think that the dirty little secret that a lot of people to know about is when you put money into a Roth IRA you can always pull that money out that you put in penalty free and tax free so if you're someone who has that thousand bucks and you're thinking okay well I have a hundred extra bucks what should i do should I put it in my savings to get two three months or so I do the raw go do the raw because you have a limited window to get money into that Roth IRA then if you need to get to it you can always can you don't want to use an immersion Reserve but I always tell young folks prioritize getting money in the Roth IRA as early as you can and even though you're supposed to leave it in there until 59 and a half there's a there's some wiggle room there if you got in a really tight spot now in most circumstances you're not going to you can let that money start working and watch what happens when it turns 88 times over what's what's valuable about Roth because a lot of you don't understand the difference money you put into a Roth right now you won't get a tax benefit now but as it grows 88 times over between age 20 to age 65 when you go to pull that money out you don't pay any taxes on it so that $1 that you pay tax on that's now worth $88 no more taxes do on all 87 dollars of that change it's pretty powerful now I have to give a word of caution though because I'm sitting here thinking and I we've talked about this in show prep I was like man that is bold I mean that's a that's kind of a bold planning a suggestion to say to you could you can use the basis in your Roth IRA as emergency reserves because that's scary too because I don't want people thinking you're your Roth IRA those assets are designated for retirement so it should not be your piggy bank I don't want it but I do understand I think back to aggressive Braun Preston who was saving hyper saving I think that that is okay if you're not going to use that that money that you the five thousand dollars that is at fifty five hundred 500 250 500 that it's gone to if you're not gonna be able to maximize that yeah okay maybe that does make sense so I think about aggressive Bryan or beau saving in your 20s I think it does work for that but I do need to give the disclaimer not a piggy bank you need this money to be working for you your 50 year old self is only going thank you if you leave that money in there to work but I do think if you're trying to maximize the growth opportunity it's okay to cut some corners off and hope that because in the beginning when you're in your 20s you're squeezing I mean if you go back and listen to the podcast we just did on when is it okay to spend you'll notice I give you guys a little bit of reprieve in your 20s because I know you have to be aggressive on attacking your goals because every dollar is worth so much more and this is the time that you can have the aggressiveness in your nature of the way you handle your finances I mean you're 40-plus years from retiring so so let's make that money work for you let's move on to the next thing that I think is powerful great advice on the Roth oboe is that not listening to your elders and this one sounds like because I am I'm only my wife even missus I'm two steps from yelling at kids from the front porch to get off the lawn I think it's kind that she gave you two steps yeah I mean I'm getting close but I do think that you should remember that wisdom comes from experience and if you guys can cut a corner off meaning if you don't have to fall in the wily Cody trap that you know and you get to be the Road Runner and kind of go right past it that is much more beneficial than you falling into the trap and then taking years to recover from from the bad experience so also why you know when you so listen to your elders also take serious - 10,000 hours to become a master or an expert at a skill set I mean it really is I mean if you go read outliers Malcolm Gladwell it's not the ten thousand hours is not Malcolm Gladwell's but he's but he's the one that kind of made it famous by putting it in outliers the concept and it's true I mean I think back to my life gotta do stuff probably five years get 10,000 hours to become an expert so take that serious and go work for somebody go get mentored by somebody it will put you lightyears ahead if you can conquer that skills yeah you said two things or I think they're so important being to put the time in and then second go find a mentor find someone who has done the thing that you want to do is in the place you want to be and learn from that person I feel like so many 20 year olds our 20 ish girls try to do it on their own and go make their own lingo create their own thing and there's nothing wrong with that but partner up with someone who's been there done that and you will be amazed at how far ahead of the game you get you'd be surprised at how many people I meet that are super successful you say how did you get in this career I mean there was somebody in the aviation field that was just like man that is a unique job to be brokering airplanes I said yeah it's like how you even get in that and one of things he met a guy in flight school that was an older gentleman he was young and kind of took him under his wing and brought him into his business and took him under his wing but but there's so many businesses we see where people will kind of stumble in an opportunity because an older person that took a shine to them and kind of brought them in and show them their ways right and then their ways become their ways and then they amplify that effect by having more time I mean though I get excited about what you are going to be able to do because you've been able to kind of see all yeah my mistakes plus my victory absolutely and you're gonna be able do even more just because Tom I mean Tom is so valuable so so take advantage of that and find somebody to learn from that that's advice I think well well you will be very happy that you took advantage of that here's the last one before we move into the 30 year olds and this is a big one because we just watched a video on some poor guy Utah has a million dollars of student loans and he's a orthodontist so they'll he'll make good money but getting out from underneath a million dollars it's overwhelming it's talking about a weight cuz carrying on your shoulder that's a big one what do you think about a million dollars you think about the way a portfolio GRA grows and you think about interest on that you you wish your portfolio would do what his student loan is gonna do so you want to avoid running up large student loan debt while you're in college and you know it used to be I I hate that things in society change but they definitely do is this world we live in when I was in college college was a lot cheaper than college isn't that right and I think that there is this mantra that kind of led to this is that education and I still believe education is your key to getting out of whatever bad situation yeah but now unfortunately it's not just the universal all education is the same I think you have to be much more strategic strategic about the how you're going to approach your life education because going to college and loading at any cost and I mean any cost of built running up student loans and other things at all costs to get your degree doesn't make the same sense it might have made twenty or thirty years ago and what I mean by that we read something recently where there is a value proposition separation from somebody who's running up fifty to sixty thousand dollars worth of student loan debt going to a private school for an art degree and believe me I'm not picking on the art degree my wife has an art degree but it is one of those things where that fifty to sixty thousand dollars a student loan debt and you know you have to think about what what is that person going to what type of job is going to pay back the 50 to 60 thousand dollars versus you know a university and getting twenty thousand dollars of student loan for an engineering degree I mean and that's you know that would probably return on investment the engineering degree with twenty thousand dollars of student loan debt is going to yield substantially more than the art student with the fifty to sixty thousand dollars just because of what the potential is with you starting jobs so we want to give some guidelines and we've used these before but I think it's important to come back to is that you don't want when you come out of college you don't want your student loan monthly payment to exceed eight percent of what your income is okay so less than eight percent of your gross income and so but let's not even get in that situation where this thing's impacting cash flow let's is there there's a better tool for how to avoid how much student loans to get debt to get into in the first place don't let your student loan balance exceeds sixty five percent of what your first year income will be out of college so what your anticipated income will be out of college you know sixty five percent of that keep your student loan debt below that exactly and there's a you know a lot of this stuff what's fun is is there's all kind of resources out there mapping your future dot o-r-g has a tool called the debt wizard where if you don't want to be I love calculators I've been I've had a love affair with the calculator since second grade so but if you're not one of those people you could go use this this tool you know where that love affair came from I have no idea I mean I had a calculator watch is that without in my second grade and I used to sit there and that's how I got to be the fastest kid and the second grade on doing multiplication tables that was not in show notes but I felt like I'd share that so take advantage of all that and remember guys we just talked about the financial mistakes in your 20s but there is so much opportunity in your 20s that I don't want you to think about just all the negatives I want you to avoid these traps I want you to look at this as definitely a glass-half-full moment is because guys you could have a drop just think about a thimble or that you're pouring into a lake so you're a drop of financial investment in your 20s could turn into a tidal wave by the time you turn in it if fifty year old a sixty year old version of yourself right so turn this thing positive don't avoid these mistakes but then find positive things you can be doing with your financial life and I promise you you will be rewarded down the road that's great let's talk about 30 year olds 30 year olds are a little wiser there's a little more jingle in your pocket hopefully yeah and this is hopefully the decade that you're starting to have some achievement in your career your life you're starting to feel like things are making a little more sense yeah you're you're figuring life out you're in your 20 in your 20s I know and I'm stereotyping but I'm basing this off of my own self is that you you come out of college and you feel like you're going to attack the world and you have this feeling that you know a lot more than you probably do but you also get bewildered because you feel like the world's working against you because of your age I mean I I felt that way but it's probably because when I was 22 I looked like I was 17 you know super skinny it's hard to get people to take you serious so you get into your 30s you're starting to show a little age you actually also have some wisdom to you experience so so it this is hopefully where you can start really getting some traction on things you can also this is the age where you can still take big risk without and and still have time to recover if it all falls apart so really exciting time to be a thirty year old so let's kind of jump into this so here's some of the biggest mistakes that we see folks make in that thirty biggest mistakes thirty year olds make and I put this one on purpose as number one and I've picked on 20 year olds about this because they're the ones that got us our twenty year old self usually got us in trouble to where this hurts the thirty year old is that getting divorced yeah and that just kind of sends waves down me because it's getting divorces expensive it stinks from a life perspective but it's also a really hard difficult bad financial decision yeah it's um typical avoid divorce occurs according to the statistics when you're thirty years of age eight years of marriage so like I said you made the decision probably in your 20s right but here's the thing when you think about financially what does this mean for you that you have to make have a 30% increase in your income to cover what you're married self cost so the same standard of living is when you're married so if you think about this if you are making $50,000 to have the same lifestyle as your $50,000 self as a married person you'd have to have seventy one thousand dollars to keep the same lifestyle because think about all the things that you're splitting if you're a two-income spy you know household is now following on your shoulders and plus you got to carry this burden of paying off the divorce attorneys and all the other stuff so if you can avoid it avoid getting divorced make the decision as your twice before you make those big life decisions I picked on the 20 year olds about that previously the next thing I put on here the financial mistake is not playing for the long game what do you mean by that I think this is the beautiful age where you do have skillset you've now hopefully worked in your industry five seven years you got ten they're an expert 10,000 hours you're an expert now you since you've taken that decade of your 20s and absorbed and become the version of yourself that you wanted to be now you need to ask yourself okay am i doing what I'm supposed to be doing am i living where I'm supposed to this is the part where you really need to start vision planning for what is my long-term self and wife going to look like I don't know that a lot of people some people don't make those decisions until they get to older and and I'd love for you to a tackle that because this is the the foundation of becoming a planner if you're thinking about these things in your early 30s believe me your your version of yourself in your 40s 50s and 60s is going to be very happy because these skill set of becoming a planner pays off would you agree with this statement run that if you don't ask yourself these questions in your 30s you likely will ask yourself these questions in your 40s but at that point you might not be able to make the same adjustments that you could have anywhere you can make a very small moving your 30s I come from an income perspective or you know and it it just doesn't seem like that much of a hardship right whereas when you have to make decisions in your 40s and 50s to get your financial life on track you'll find it gets much harder so I mean you have to instead of it just being an incremental slight move now you're having to move mountains to make changes and I'm not trying to downplay my 50 year olds who have to make a big decision but it's just so much easier when you're in your 20s and 30s so this is the point where I'm going to challenge you are you saving enough you know think about these things because it will definitely be the tale that you drag around for many years to come if you can make those hard decisions when you're in your 20s and 30s I thought this one was important Bo you probably you've always done a good job when I hear you talking to prospects oh you talked about this on shows not assure not ensuring away likely risk that's a big mistake I see you yeah walk through that all the time folks you know it's easy in our 20s to think that we are young and invincible and and and some of the things we don't need but in your 30s when you start to have people depend upon either your income or your ability to provide shelter provide food it does become necessary that you have to kind of put put on your big person pants you have to go buy those insurances you have to go make sure that you do have adequate life insurance our rule of thumb is 10 times your income is a pretty pretty solid bet do you have disability insurance you are statistically more likely to be disabled than you are to prematurely die and so disability insurance is you want especially if you have somebody depending on you want to makes you have that in place is your health insurance where it needs to be to provide for you and your family are you taking advantage of tools like health savings accounts maybe you have access to it you didn't pay attention for the past few years that's a huge triple threat savings opportunity we have an entire show dedicated to health savings account so go to the money guy got comfortable tax advantage that's it go money guy calm look up health savings accounts and you'll find it and then what about on your home and auto side are you adequately insured on your auto insurance do you have an umbrella policy in place it's amazing how many times Brian I get on the phone with someone who's in their 40s and maybe they have seven figure portfolios but they're lacking umbrella insurance and it's just something that makes all the sense in the world to have in place it's cheap if you have assets or if you have earning potential I think those are the two things that it makes sense in your third is when you really have to start getting those things in place and here's the cool thing when you're young in your 30s you're typically healthy so all the things that we were talking about like the life insurance the disability insurance and eating you're now getting to the age where you're old enough that your auto insurance your homeowners insurance is cheaper but cheap it's the perfect it's a good time to be covering these things because they incrementally don't cost a lot from a cash that's perspective it's really a lot of bang for your buck in your 30s to insure away risk and it builds that habit that will serve you many years in the future here's one that I was guilty of and Bo I I have told you time and time again and you finally I think you've caught on in the last two years slow down take a deep breath and enjoy the season you're in because seeking complicated / sophisticated because you do perceived that is what success or what wealthy people do don't don't fall into that trap that is a trap by the way guys is because sophisticated or I should just keep it simple and say complicated is what I think a lot of young people think that they have to do to act like somebody who's rich but you go find complicated finds you naturally your life the more success you have it's going to just find you one day you'll wake up and be like man doing taxes is a lot harder now than it was when I was a 20 year old don't accelerate creating complexity just so you can feel cool about about yourself because nobody here's the thing I think that I fell in this trap is I was like man having a k1 because I bought ownership into something would be a lot cooler or doing rental property and all this other stuff because that's what I need to be doing but what you don't realize is is that some of that stuff you're just asking for trouble down the road because like I said your life you you're going to find opportunities and things are going to happen so so understand what you're getting into for the basic foundation of it the financial you know wherewithal or goodness of the investment versus it just seems sexy and cool to do this behavior yeah you know I personally I always wanted to be really really busy until I got really really busy it was all wishing for but we do this all the time since you are 30 since you do have some wisdom about you now and you've kind of seen some things out there you start thinking maybe I do need to go get involved with that private placement maybe I do need to go by that fancy insurance policy that I don't really understand but I think it's good because this colleague told me it was good make sure you understand the things that you're investing in and where you're putting your time and your effort because you're gonna get busy and it's much easier to not make those bad decisions have to unwind them later then to make them and have to deal with it in your 40 we probably didn't talk about it enough during the 20s but thirty-year-olds I'll give you the the pickup advice that I should have probably given to the 20 year olds - is that be careful when you don't know basics on investing is that you might get sold something perceived as sophisticated or sexy that might not be in your best interest so do a lot of due diligence on investments I think there's just so many opportunities with target-date retirement funds index funds keep it simple while you're getting your foundation you know beneath you and getting those army of dollar bills going don't you know if you get the the spidey sense that somebody's going to be profiting off of this product that they're recommending to you you can always ask them what do you make off yeah that's a great you know ask people what do you make off of this and that's going to give you probably cut right to the heart and you'll figure out really quick based upon if they're able to calmly answer it and it seems reasonable or if all of a sudden gets very shifty and you get told crazy things like well you don't actually pay me anything the company pays me you know it goes into it's just like when you do deal with the real estate and you hear the sellers paying closing cost you like man I'm still paying you're you the buyer are still paying those closing cause it's just baked into the purchase price so you understand it works that way with financial products as well this is a big one bow faking success and ties it dovetails nicely into that previous one we just talked about faking success by paying for life two hundred dollars at a time what do what do I mean when you hear me say faking success with two hundred dollars at a time yeah so at thirty our income is increased or maybe a little more Jing a little more comfortable and so two hundred bucks a month for that boat payment or for that Country Club membership or for that nicer luxury car I can afford two hundred dollars a month and very often folks in your third is when you do have some discretionary cash flow you start adding up monthly payments not adding up total obligations and you can get yourself in a lot of trouble okay buy new house in your 30s and you say yeah instead of decorating the house or putting furniture in the house over four years yeah just going out there and doing it all at once because you say yeah it's only $200 a month plus they let it defer it out for safety or seven years no you can fake your wife 200 hours a month but here's the thing that $200 a month for this car you know store credit card the car loan the nicer car you put $200 more you just keeps building on top of itself before long you go I got more debt my payments my minimum payments for credit cards and all these debt is more than I even may that's what it breaks you and that's what you never get to work for yourself here's the thing that a compounding interest is one of the incredible powerful forces out there in the world you've heard me say for the 20 year-old that's 20 or the the 25 year old now or soon we'll be talking about the 30 and 35 year old investor you get a huge multiplier effect if you get in debt that multiplier effect that compounding interest actually cuts against you so let's keep it on the positive side and not get yourself in that bad life just because you're faking success you the good things that the the spoils of your labor and of your success will come I promise that the squeeze of the fruit you're getting that juice at a later Tom I always put this one this is let's talk about the investing continue to procrastinate on saving and investing for the future yeah 30 year olds you know we often say oh we're still young yes that's true but not as young when you're 20 yeah I mean the 20 year old like we talked about in the previous let's give some perspective here I said a 20 year old every dollar earning 10% because I think in a 20 year old can have that type of beer that aggressive with their portfolio for 30 year olds I brought it down to 9% I took a little bit off the return I took it from 10 to 9 percent you'll notice I'll do it on the 40 year olds I'll take it down to 8 okay so I did 9 percent now you know you assuming you work until you're 65 every dollar that thirty-year-old saves it's going to be 23 dollars when you're 65 so it's still pretty incredible in context one dollar turns into 23 but it's not 88 dollars like a 20 year old or $54 like a 25 year old a 30 year old now it's 23 and for a 35 year old each dollar that you're able to invest is worth 15 still incredible if you think about every dollar I invest is going to have a 15-time multiplier that's awesome but but recognize this is the probably the last stop on that train of huge double-digit exponential growth where the assets will work for you still gonna be good in your 40s and 50s don't get me wrong you're still going want to save but this super this is the time where you really are getting to put a lot of multiplier effect on it but this is also we kind of talked about this a little bit when you're in your 30s you start having a little bit of success you got a little jingle this is in your pocket this is when you might in addition just being susceptible to somebody selling you something you might be susceptible to thinking man I'm so smart yeah and this is when you start thinking about day trading I love I've watched CNBC I know how to stop market rate trading individual stocks stock options the worst thing can happen with stock options is you make money on your first investment in stock options true that so where's any cap engagement I've lived that mistake you know I've played around with some stock options turned a few hundred dollars into a few thousand and then you're like man this is what I ought to be doing with every dollar of my money and then you quickly realize you might be right on your decision but the timing might be just off just enough to where you take it to zero that's right I'm not going to pick on the companies that we did that on but the problem with option investing is you could be exactly right with your observational either company's overvalued or company's undervalued but if it doesn't hit it in the window when that option is good or the timing cuz realize the longer time goes just like it chases you down until you die and leave the earth option time is much more accelerated though the closer you get to the expiration of your options the the less value your options have so like I said the worst thing can happen with an option investment is you make money on your first one because then you think you figured something out so avoid falling in that I'm so smart transaction also you know we talked about this all time but I do think you 30s I really harp on this from my thirty year olds you should hopefully be saving fifteen to twenty percent of your gross income for the future hopefully even pushing it towards twenty five percent of your gross income by the time you leave your 30s because that's the money like I said you get that this is your last stop on the big multiplier effect the more money you can have working for you at a younger age the more you're going to be benefited in the future I've shared my philosophy with me and my wife came up with that we really really tried to prioritize saving in our 20s and 30s so that when we hit 45 or 44 we could pull off the throttle a bit and actually start enjoying this money because the army of dollar bills is doing what it's supposed to and growing for us so make sure you're doing that maximize that company retirement plan go ahead and max out that Roth IRA if your income allows for it and if you make too much money for the Roth IRA you might still be able to do Roth contributions as well as that we won't you know you can't go into all the details on this because it's not a one size fits all but you could definitely reach out to us on the contact us page and we can help you out and you should also be definitely closer to that three to six months of emergency reserves and then here's the last mistake I left this one on purpose because I wanted to close with a punch on my thirty-year-olds bow is that a lot of people make the mistake when you have children you prioritize saving for their education more than you do for your retirement what's that alive there's a problem with that there is an entire industry for getting your kids through college if you think about you can get scholarships you can get grants you can get student loans and even though student loans are very scary there is an industry where at least you know your kids can do coops where they work when you hit retirement age you get Social Security you may or may not get a pension you may or may not get Social Security either by that way but um the rest of its kind of on you there's no loans for retirement there's no retirement loan there's no there they can go do a reverse mortgage and some other crazy hell marry type things but I'll talk about those in a sense of them are great examples of opportunities that you get excited about so make sure your Porritt izing saving for yourself and your retirement first before you pay for your sons or daughters education believe me your sons and daughters will thank you when you're not living in their basements right because you're your self-sufficient on your on your own so try to avoid and get your priorities right on where the money needs to go when you're in your 30s on the kids so that kind of brings close the the financial mistakes of 30 year olds and we could go on and on because this is such a valuable timing your life guys 30 year olds this is like I said when you're setting that foundation where you you know I get the 20 you know people kind of enjoy their newfound getting out of college their independence their freedom in their 20s so it's not uncommon that people kind of wake up and when in their thirty year old self and start getting responsible about things go and learn from these mistakes we said for 30 year olds and turn it into something positive for yourself and I think that you'll just be lightyears ahead of your peers who kind of let that party from your 20 year old self carry on into the 30s and then they get the wake-up moment in their 40s and here's the thing when you get your wake-up moment in your 40s might not have as much time so that leads me to a great point we've recognized this show ran longer than we anticipated because I mean it's just a lot of lovin on mistakes to avoid and we want you guys to avoid it so we're going to turn this into the the financial mistakes by age we're gonna do part 1 and part 2 so this brings the close the part one version will come back you know in for our next show next week and do a part two of this so the podcast will be broken into two sections but here's what I want you guys to know you can sense there's a passion that we want you to make good financial decisions with your money so reach out to us you know let us know if this stuff is it do you resemble this or is there something here that hit you in a certain way that now is going to help you re-evaluate some of the decisions you were considering making I want you to reach out to us go to money guy com go to the contact us page we love getting feedback from our listeners we we actually read everything you guys send us so thank you thank you for for you and reaching out and considering sharing with us and that's how we feel like this is the money got family I'm your host Brian Preston we'll be back shortly with part 2 so my 40 year olds my 50 year olds and my 60 year olds will know how to even make better decisions to grow and know what they need to be doing so that they can have the life that they've always dreamed of

Channel: The Money Guy Show

Views: 22,467

Keywords: Worst Money Mistakes By Age (Part 1), money guy money mistakes, the worst money mistakes by age, the worst money mistake by age, money mistakes, the money guy show, financial mistakes, money mistakes to avoid, finance, mistakes, budgeting, budget, financial, saving money, how to be a millionaire, how to handle your money, how to be smart with money, how to save money, tips, how to save money fast, ways to save money, cash, money saving tips, how to, personal finance, money

Id: FlxoyAt_nX0

Length: 55min 36sec (3336 seconds)

Published: Fri Jun 15 2018