Lessons to learn while you're young

If I could live my life over, I definitely would be smart enough not to make the same mistakes again. Nope, I would probably find some brand-new ones.

I did receive life’s essential lessons, such as waiting an hour after eating to swim, that sitting too close to the television screen will make you blind, and something about not handling frogs with your bare hands.

But when it comes to money, here’s what I wish they had also mentioned:

• Don’t spend money to impress people. It’s a great way to waste money and lose friends. (By the way, they know you’re faking it, because they are too.)


• Start saving a fixed percentage of your income while you’re not making much. That way, as your income increases, the amount you save increases automatically and painlessly. It only has to hurt once.


• Get time on your side. Money makes money – wealth compounds – but very slowly at first, so don’t get bored and lose interest. Reinvest all of your dividends and interest.


• Get out of debt, and stay out. When you borrow and pay interest, money compounds against you instead of for you. Pay off your non-mortgage debts as soon as you can, and never borrow money to invest.


• Fund a Roth IRA while you still can. Tax-deferred compounding beats taxable, and tax-free beats them both. That’s what Roth IRAs offer, but you can no longer contribute once your income reaches certain levels. Try to max-out every year while you can. Do this before you get rich and famous.


• Never pass up a free lunch (unless it involves timeshares). My three favorites: 1) the employer match on 401(k) plans; 2) dollar-cost averaging; and 3) rebalancing your investment portfolio once a year. These are no-brainers.


• Invest in growth for long-term goals and safety for short-term goals. Equities (stocks) are probably appropriate for your 401(k) plan, but not for the down-payment on the house you want to buy next year. Invest according to your specific goals and when you will need the money for them.


• Health is wealth. If you have access to a health savings account (HSA) or flexible-spending account (FSA) at work, take advantage of it. Life can get very expensive when you’re not healthy, and it only gets worse later on. Eat well, exercise, and think twice about what you inhale. (And for heaven’s sake, move your chair back from the TV.)


• Have a Plan B. Your life won’t turn out the way you planned; there’s a good chance it will be even better. But don’t let setbacks throw you off your plan. Always know your next career move. Build a little side business in your spare time. And be ready when opportunities come knocking; they are often disguised as problems.

The fact that you are reading a financial blog instead of doing something else right now tells me your head is in the right place. As a young person you probably don’t have a lot of money, but you’ve got lots of time. Use it to your advantage. There will come a time when you’d be happy to exchange the former for a little more of the latter.

And don’t forget the sunscreen.