What I Wish I Had Known About Money When I Was Younger

Young people can’t be expected to know about money as they’re growing up. But when they turn into adults, many of them find themselves unprepared to handle financial issues that are fast approaching.

I’m a financial professional now, but it took a lot of learning (and unlearning) for me to become one. Here are a few things to know about money I wish I had known when I was younger.

Understand How Investment Accounts Are Taxed

If young people think about investing at all, they may only envision it as a way to earn (or lose) money through the stock market. Even among adults, there’s a tendency to underrate the effect taxation has on portfolio performance.

Understanding taxes—and especially how they impact the actual returns of your investments—is one of the most important things to know about money. Taxes on capital gains, dividend distribution, interest income, retirement fund withdrawals, and more all impact the taxes you pay and therefore can reduce the net return you.

Don’t Let Risk Scare You Away From Investing

On the other hand, some young people have a bearish attitude about the investment market. They’ve been taught how a stock market crash led to the Great Depression, or they recall how their parents struggled during the Great Recession of 2008–2009. Negative stories can cause young people to think it’s too risky to get involved with investing.

There’s more to the investment market than high-risk stocks, though. Savings accounts, CDs, government and municipal bonds, Treasury securities, money-market funds, and fixed annuities are just a few low-risk investing options that can generate dependable, steady revenue.

Set Up a Budget

Being aware of how you spend your money is a matter of basic financial literacy. Even some people who have been taught this all their lives still balk at setting up a budget to track expenses. Maybe it’s because some are afraid it’s too complex, or they don’t want to feel “restricted” by limitations.

The truth is that setting a budget is a step toward financial freedom. Tracking debts and expenses, establishing an emergency fund, managing savings, and prioritizing spending all encourage transparency and mindfulness about your finances and what you know about money.

Build Good Credit

Credit is a very important factor when you are young as young people have needs such as buying a car, renting, getting best insurance rates.  The ability to get the best rates or to be considered an attractive risk to rent to is dictated by your credit history.  Lenders and Land Lords want to know that you are responsible and the best gauge of that is by your credit history.   Establishing good habits in establishing and maintaining good credit will help you reach your personal and financial goals as you go through life.

Never Carry a Credit Balance; Buy Only What You Can Pay Off

Of course, spending on credit can spin out of control. A young person with new credit might feel empowered to make impulsive purchases that stack up. They might believe everything’s fine as long as they make the minimum monthly payment.

But they’re accruing interest debt at very high rates. Left unchecked, this debt could grow and become unmanageable. Be careful about using credit, and make it a point to only buy what you can afford to pay off every month.

Let Your Savings Account Do More Than Save

The idea of stashing away money isn’t exciting. But savings accounts can do more than just hold cash; they can generate interest earnings as well. High-yield accounts, money market accounts, CDs, and other savings vehicles can rake in a surprising amount of passive revenue. Work with your bank or credit union to open a savings account that could spur growth.

Remember That Traditional Financial Wisdom Isn’t the Final Word

You’ll meet many well-meaning folks who say they know about money and what to do with it. “Buy and hold forever!” “Real estate is always a good investment!” “Stash everything in your 401(k)!”

Times change, though. While those maxims aren’t completely outdated, many modern strategies for risk management and alternative investments may prove just as wise. Respect your elders, but don’t let them keep you from opportunities.

Find Out What You Need to Know About Money

You don’t have to continue your financial journey in the dark. Consider partnering with us at Woodcrest Financial Group; we can help you put best practices into action. In fact, our mission is to provide the best possible source for financial advice to help you accumulate, retain, and distribute your wealth. To get connected, call (586) 961-6243, email clientsevices@woodcrestfg.com, or schedule a meeting today!