14 Personal Finance Lessons You Never Learned in School
I’ve never been particularly good about how I manage my money until I lost all of it. In my 20’s I would spend money faster than I earned it and eventually it caught up with me. I wasn’t in financial ruin but it was a powerful motivator to hit rock bottom and move back in with my parents right after business school. I remember looking at my bank balance and seeing zero dollars for the first time in years. All I could afford was parking at the beach and a loaf of bread to make my PB&J sandwiches to eat between waves. I was lasting on $50 a week (given to me by my parents) in LA, sleeping on the floor at my own apartment which a friend decided to rent and let met stay at. Over the last few years I’ve learned some interesting financial lessons. Some of them will piss you off and others will inspire you. Choose the ones you enjoy and implement, and feel free to ignore the others.
1. Save all your large infusions of cash
Tax returns, commission checks and year end bonuses are awesome. Most people make grand plans for how they plan to spend these cash infusions. For me they often included trips, useless gadgets, and overpriced wardrobes. Eventually it turned into using these big paydays to payoff credit card debt. I’m not opposed to enjoying yourself, but when you get these big chunks of money, realize that you will go back to normal at some point in the near future, so plan and live accordingly. If you saved all of these for a couple of years, you’d eventually be able to be a bit more loose with your money when it comes in.
2. Don’t Make Long Term Financial Commitments that don’t appreciate in value
A new car is one of the dumbest purchasing decisions anybody makes. Unless you can get it cheap as hell and you know it won’t make a dent in your finances, don’t buy a new car. A brand new luxury car is probably the dumbest purchase that anybody makes, considering a pre-owned one costs about 20 grand less. Believe me that new car smell doesn’t last very long and it’s just a stimulus response mechanism put in place to cause you to behave like an idiot. To the best of my knowledge, nobody also got laid because of their brand new car (despite what Maxim or Entourage might have you think). I don’t own a house so I can’t speak to this, but from what I know about the people that do, it seems to tie them down. Mortgages seem to last a lifetime. I had a roommate whose girlfriend made good money and she told me she has no intention of ever owning a house. Smart girl.
3. Don’t buy anything on credit unless you can pay it off right away
The curse of credit is that it allows you to play today and pay tomorrow. And believe me you will pay. The only real justification for a credit card I can see is the ability to earn frequent flier miles. If that’s the case buy everything you can and pay it off right away. I only know this because I lived luxuriously on credit for years.
4. Don’t Own a Car if You live in SF. If you do make sure you have a parking spot
I’ve said for years that the San Francisco Department of traffic should erect a statue in my honor because of the amount of money I’ve spent on parking tickets there. The people who work there are apparently behind bullet proof glass because the entire city hates them. The amount of money I’ve spent on parking tickets over the years makes me cringe. It probably could have funded lots of other worthwhile things. It might have even been cheaper to take taxis everywhere if I look back over the years. Mark Lawrence is taking personal revenge and intends to profit from it.
5. If you suspect car trouble have it looked at right away
This is one of those stupid “I’ll get it taken care of tomorrow” things that can make the difference between your repair costing $100 and $1000. I am speaking from experience. If your car is making a funny noise or doing anything weird, have it looked at immediately. It will save you a small fortune in the long run.
6. A 1-hour Commute is Really Not Worth It
At my very first job out of college, i was adamant about living in San Francisco so I could have a life. I would commute one hour everyday to the boring town my company was in. Not only did it make me miserable, it costs me about $500 extra a month when I factored in the cost of gas and rent. It was a stupid thing to do and I’d recommend nobody do it. I should have held out for a job in San Francisco instead of agreeing to do the commute.
7. Don’t Date Girls Who Own Small Dogs they Carry in Handbags
I’m sure this is going to piss some of you women off, especially if you own a small dog that you carry in your handbag. But to me this is the sign of a high maintenance woman who will bleed you dry. Yes I know there are exceptions to every rule. But let’s face it. Stereotypes exist because people validate them. Any woman who carries her dog around in a designer handbag…. I’ll let you fill in the blank
8. Question Whether You’ll Need or Use That thing You want to Buy 5 Years from Now
My closet was full of useless crap for years. Most of my stuff is probably in a landfill somewhere. Unless you’re planning on opening the museum of your personal useless shit, question every purchase you make. Impulse purchases are designed to cause stupid financial decisions. So think twice before you break out your wallet and swipe that card.
9. Sometimes it makes sense to spend a little extra
My dad likes really nice electronics. Every TV we’ve ever owned has been a Sony. They’re not the cheapest TV’s, but what I can tell you is that every TV that my dad has purchased over the years STILL works. He questioned my sanity for my buying a pair of Ferragamo dress shoes. They cost about $350 a pair, sometimes more. I bought a pair about 3 years ago, and I haven’t bought one since. When they got a bit scuffed I took them to the shoe repair store and for five bucks the guy made them look brand new. It’s likely I’ll get another 2 years out of those shoes. Money well spent as far as I’m concerned. Sometimes it doesn’t make sense to be cheap because it will cost you more in the long run.
10. Make it a point to save a small amount of money consistently
When I look back at the amount of money I made working part time throughout college, it’s safe to say I should have far more money put away than almost anybody I know. But I spent everything I earned to “enjoy” my life. Even putting away a small amount on a consistent basis that I never touched would have made a HUGE difference. That small amount doesn’t seem like much in the first year or two, but over the course of ten or twenty years it adds up. I put away close to $7000 in cash for a rainy day. It was about $50 a week over the course of two years combined with saving some of my bigger cash infusions.
11. If you like going to trendy bars, be a cheap bastard and take a flask
This is partially a joke and partially not. When I was unemployed I would have to go to networking events at nice hotels where the drinks were $15.00 or more sometimes. So I’d go to the bar, order a glass of water, go the bathroom, dump out the water and fill the glass with vodka. I didn’t have to buy a drink for the rest of the night and I even acquired a taste for vodka on the rocks. Nowadays even if I do order a drink it’s never more than 1 or 2 because vodka on the rocks gets the job done relatively quickly. The other option is just don’t drink.
12. If you have to move to your parents and can avoid paying rent, do it
Some people see moving home to their parents house as this terrible thing. I have a friend who makes a six figure salary and lives at home. Believe me she enjoys her life to the limit with awesome vacations (we’re talking first class travel everywhere) and I’m guessing she rarely worries about money. On the flip side I have a few friends who rent really nice apartments and feel completely trapped. I know this is not an option for everybody. If my job had not been in SF when I graduated for college or 1-hour away from my parents at my first job out of b-school, I would have gladly moved home. Sure it might cramp your style, but it’s not that stylish to be screwed financially. Sometimes you just have to make a short term sacrifice for a long term gain.
13. Don’t Make Financial Decisions Based on What Other People Will Think of You
I gave into many of my ex-girlfriend’s demands to go to nice restaurants and other nonsense because I was afraid she’d break up with me if I didn’t. I didn’t have the money to live like that and truth be told I’d probably have been better off just telling her the truth and letting her break up with me. If you’re making financial choices based on how other people will judge you, you’re an idiot. You’re the one that’s going to live with the consequences of those decisions, not them.
14. Spend Your Money on the Things That Really Matter
After all these years I’ve come to the conclusion that you should always choose a life of experiences over one made up of possessions. It’s amazing how much happier you will be if you do this. Very few of your possessions will provide lasting happiness. My biggest purchases in the last few years have been surfboards. But those made sense. Figure out what really matters to you and spend your money on that.
Some of these were brutal lessons learned through stupid decisions and life experience. If they taught this in school, maybe we’d be bit more prepared for the real world.
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