7 Money Lessons I Wish I Knew Before Age 30
Are you feeling defeated in the beginning of your financial journey? Would you like to jumpstart your path towards financial independence?
If you’d like to skip decades of mistakes, then keep on reading to learn the 7 Money Lessons I Wish I Knew Before Age 30. You’ll learn the mindset shifts and habits to start in order to gain financial freedom.
Imagine how your life could look if you implemented these 7 tips today! Ready? Let’s get into it.
#1. Segregate your investments.
There’s a reason why this is listed first. The impact of this strategy is HUGE and I wish I had done it much earlier on.
You should segregate your investment funds into different financial goals. Each goal will also have it’s own time frame.
For example, I wanted to own my own apartment in my late 20’s. So, I put aside money into my savings account week after week, and month after month.
I just left it there. And this is a good example of what not to do.
Back then, I wish I segregated my investments because it allowed me to gain clarity in my financial goals.
Come up with a list of financial goals you want to achieve. Maybe you want to buy a car or a house, save for a wedding, or plan for retirement.
Correlate your financial goals with a timeline. For example:
Buy a car in 2 years.
Buy a house in 5 years.
Save for a wedding in 6 years.
Plan for retirement in 30 years.
Now that you know your goals and timelines, you can segregate your investments. Set aside your monthly savings by goals into a financial instrument that corresponds with the timeline of each goal.
For example, let’s say you want to buy a house in 3-5 years. You have some money now and you’re still putting money aside every month.
Put this money into an investment instrument that will give you a return within 3-5 years.
Or, what if you want to plan for retirement? If you have more than 10 years to go, you can put your funds into some investment instrument that gives you a return over a longer period of time.
Either way, be sure to segregate your investment funds into different financial goals. Match the investment instruments with the timeframe you have for each financial goal.
#2. Start small.
Start investing, even if you only have a small amount to use. Even if it’s just $10 or $100!
Building the habit of putting money aside to invest is even more important than the investment amount.
Plus, you’re going to need this time to help you understand yourself better. This time will help you come up with a strategy that really works for you.
In my experience of working with clients over the past few years, I know that different strategies work for different people and there is no one size fits all.
It’s up to you to realize which strategies work for you! For some people, it’s about:
Creating a budget
Determining cashflow projections
Different strategies work for different people. At this stage of your life, give yourself time to understand yourself. Experiment with different techniques to figure out what works best for you.
Just remember to start small, no matter how small the amount.
#3. Start now.
Wherever you are at in your financial journey, start now. I can't emphasize the power of compounding interest enough.
If you are younger than 30 and are planning for retirement, then the power of compounding interest is immensely valuable to you. Knowing this concept is crucial because it will help you to achieve your retirement goal.
The best time to start investing was yesterday, but since you can’t go back in time… start now!
#4. Learn from your mistakes.
In every single one of our life’s experiences, there is always a lesson to be learned. A mentor of mine once said, “In life, there is no failure. There is only feedback.” Ask yourself: what have I learned not to repeat next time?
Take all of your mistakes and turn them into lessons. You’ll only be better equipped in the future to know what you should and should not do.
#5. Learn from your wins.
This is the flip side of #4, and one that most people neglect. For example, let’s say you’ve been successful with investing into stocks. Ask yourself: what did you do that helped you achieve success?
If your portfolio has doubled or tripled, ensure you understand what you specifically did that helped you. Many of my clients were not able to answer this until I asked them.
That’s why you need to go into this level of depth. Knowledge is power! You need to be aware of the strategies you used in order to replicate this success in the future.
It’ll also allow you to understand yourself better. You’ll get a good understanding of:
Your investment temperament
How you take investing risks
How you react when the market falls
How you react when the market rises
This information will help you better calibrate yourself and select investment instruments that will serve you in the long run.
#6. Know your money cycle.
You need to be aware of your cash inflow and outflow. If you’re below age 30, I’m guessing most of your inflow comes from your salary. But don’t forget to include money received from any investments, dividends or money coming from your parents.
Be aware of how much money is coming in and going out as an expense. This is different from tracking your expenses because when you know your money cycle (cash in – cash out), you can know this on a one-time basis and track it.
Personally, I don’t track every single cent I spend because I think it’s a hassle. Instead, I organize my spending into categories. For example, I have money for groceries, entertainment, transportation, etc. Each category has a budget, which allows some flexibility in my spending.
This budget gives me more time and peace of mind to spend my money however I wish to spend it. This strategy works for me because I don’t worry about missing $1 here or there. That’s just how I function.
How do you function with expenses and a budget? Remember, different strategies work for different people. For some people, they’ll track every single dollar. For others, they’ll prefer a budget with categories to help them project the year’s cashflow.
So, what works for you? How do you track your money cycle?
#7. Be aware of opportunities around you, but don’t chase after shiny objects.
Be aware of opportunities around you, so that you can keep up with what's in the market. Keep an eye out to see if there is an alternative instrument that is better for you. If it’s different than what you’re doing now and appears promising, go for it.
If you do want to chase shiny objects, that's fine too. In my experience, I've noticed that early adopters gain the most from investing in shiny objects. This is why it’s so important to know yourself.
To gain the most from a shiny investment, it will take a lot of risk. Consider this about yourself:
How do you react to risk?
How do you function with added stress?
How much can you handle?
If you value security and protection more than higher returns, then you’ll want to invest in less risky instruments. Typically, people with more cash inflow can handle higher risk investments.
If you can tolerate high risk, then go for it. Otherwise, stay away for your own peace of mind. Remember, different strategies work for different people.
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