I wanted to write a letter to my son, sharing with him all of the things that I have learned about money and that I wished I had known when I was younger.
He is only two years old, so he’s not going to be interested in this topic for quite some time, maybe he never will! And perhaps by the time that he reads this, the world will be entirely different. But I hope these lessons will stand the test of time and will be helpful for him when he grows up.
Dear Henry,
There are a lot of things I hope to teach you throughout your life. One of the topics that I hope to help you with is teaching you everything you need to know about money, so that you can have it work for you, instead of killing yourself working for it.
Money can be an incredible tool if you learn how to use it effectively. The wealthy know this and understand it well.
So here are some of the most important things I’ve learned, distilled down into 6 main lessons.
Lesson 1. Avoid marrying someone who isn’t aligned with your financial goals.
The #1 thing couples fight about is money. If you aren’t aligned on spending and investing habits, it will be a long and painful road. Ask questions and understand people’s belief systems around money.
- What do they think about wealth?
- Observe how they handle their finances.
- Are they in debt?
- Do they spend every dollar they make?
- Do they get rid of money as soon as they come into some?
Please marry someone who is fiscally responsible, I promise you, your life will be so much easier.
Lesson 2. Live on half of what you make.
If you save 50% or more of your income, you can cut your working career in half and be financially free decades earlier. I didn’t even know this was possible until I started expanding my circle and finding people who were doing this.
Don’t listen to traditional advice that tells you to save a measly 10% of your income so you can work 40-50 years and then retire when you are in your 60’s. Buck the norm and save and invest at least half of your income.
This is easier to do in your younger years, before you have a family. Save on housing costs by living with a roommate (or staying with yours truly :)), take public transportation, instead of getting a car, etc.
If you start this at age 23, you can be financially set and able to be “work optional” in 17 years. If you save and invest more, you can do it faster. You would be 40 years old and financially free. Wouldn’t it be nice to shave off 25 working years to explore other things, travel and spend more time with your family (and your mom)?
Image credit: Mr. Money Mustache – The Shockingly Simple Math Behind Retirement
Lesson 3. Be intentional with your spending.
We live in a consumerism culture. Every time you turn the TV on, open your phone or step out of your house, you will be bombarded with messages to buy stuff.
You will be sent credit card offers in the mail on a weekly basis, you will have ads pop up telling you need to purchase these new clothes, this new gadget, a new car, a bigger house, a second house, etc. If you aren’t careful, you will wake up one day and realize that you spent all of the money you made and you “just don’t know where it all went?”
Be more intentional with your money. Sit down and look at the things that you spend on. Does it bring joy? Because, if it does, great. Spend on that handsomely. But cut back ruthlessly in the areas that you don’t get any excitement or joy out of.
Lesson 4. Don’t overcomplicate it.
The financial industry makes money by trying to convince everyone that money is just too complicated and that we have to hire the services of a professional to handle our finances.
It’s really not that complicated. Live on a lot less than you make (see lesson 2), invest the difference into low cost index funds (see this post here) or real estate if you are interested in that avenue. Or better yet, do a combination of both and watch your money grow and go to work for you.
With that being said, hiring a savvy tax professional is one area that I think is well worth doing.
Leave your money in the market for a long time. 20-30 years or longer. The longer your money is invested, the quicker it will grow. That money will grow substantially and passively over the long term and you will be set for life.
Lesson 5. Be frugal, but don’t be cheap.
My dear boy, you can be frugal, but please don’t ever be a cheap person. You know exactly what I’m talking about. The cheap guy who never offers to pay, who hesitates to pick up the tab, who pinches pennies just to save a few cents here and there. Who goes out to dinner, but then skimps on the tip to the waiter.
Being cheap is perhaps one of the most unattractive qualities in a person. Often that person is just fearful around money and not having enough.
I hope I teach you better than this. Don’t be cheap, but you can be frugal.
Being frugal is to be thrifty and prudent with your finances. It’s figuring out how to find a house that you love, but that doesn’t cripple you financially. It’s doing your diligence to find the best deal on a trip. It’s buying a used car that gets you around safely, but doesn’t break the bank. It’s being smart with your money, not stingy.
Lesson 5. Start investing EARLY.
This is really the lesson I wished I had known when I was younger. The earlier you start, the more incredible magic you will see from the power of compound interest. The difference between starting to invest at the age of 23 vs. waiting until you are 30, could easily be the difference of several million dollars.
I have already started investing for you when you turned two, so I hope that by the time you read this, you will be set up well for your future.
Most people don’t care to learn about finances and investing. I don’t blame them. It’s more fun to spend money and not worry about the future when you are young.
But if you start young and make some of those temporary sacrifices, you will be leaps and bounds ahead of the majority of your peers in a few decades.
Lesson 6. Understand the power of F-YOU Money.
Life can be very unpredictable.
As I write this letter, we have been living through a global pandemic for almost two years. A pandemic that brought entire industries to a screeching halt. Millions of people lost their jobs and were left scrambling to figure out how to provide for their families.
This pandemic only further highlighted how disposable most of us are to our employers.
It took me this pandemic to really understand how critical it is to have F-You money saved. F-You money is really having enough money accessible to have freedom and choice over your life.
So that if life goes sideways, and you lose your job, or your health declines and you need to take time to heal and recover, or you just want to go on an adventure and travel, you have the freedom to walk away from your job and do exactly what you need or want.
Your Dad and I lived paycheck to paycheck for many many years and it’s not a pleasant way to live. It’s stressful and it leaves you without a lot of choices.
I want you to do better than that. I want you to be able to make the right choices for yourself. Having enough money saved and invested will give you more peace of mind and power over your life than you know.
In Conclusion
So that’s it my dear little boy. These are some of the most important money lessons I wished I had known earlier in my life.
The possibilities are endless for you and I can’t wait to see the path that you take in this life. I hope these lessons will arm you with the knowledge to make money a thing that provides you with a life of choices, freedom and flexibility.
Love,
Mama
