Financial Wisdom for under 30

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Submitted by mydogsarelazy on September 25, 2006 - 5:05pm

Hi Everyone,

My nephew is doing well financially, and we talk about money from time to time. I have formulated a "do these three things" advice program for him, and here it is....

1) Make a Long Term Investment.

Before your thirtienth birthday make a long term investment. It could be a block of stock, a painting, an investment diamond, a piece of land, something that you think will be more valuable over time.

Research your purchase carefully and know a lot before you buy.

It has to be something that you are ready to hang onto for at least 20 years, and you need to know that you should not sell it if things get tough.

2) Avoid Debt

Debt is your enemy. The only debt you should have is secured debt for real estate or a car, and possibly some student loans if you are finishing school.
Debt when you are younger will make your later life a struggle.

3) Avoid "flash"

If you do have some money don't spend it on fancy cars and clothes even if you can. If you flash what you have, people will value you for your money and not for yourself. If you want to be flashy do it when you retire.

Anyone else have advice for under 30s?


Submitted by heavyd on September 25, 2006 - 5:16pm.

This is great advice -- I wish you could come to our office to deliver it in person to our jr analyst, a year out of college and spending down to his last dollar each month on a Porsche, trips to Vegas, the works! A couple of bits of advice that I would add are:

1) Establish a rainy day fund early on, equal to at least six months worth of your expenses -- and keep it in cash or cash-like investments (CDs, money market, etc).

2) Regarding your comment on 'flash', keep in mind that the greatest luxury in the world is having the financial security to tell your boss to take a hike!

Submitted by an on September 25, 2006 - 6:16pm.

I think it's a lot easier to talk the talk than walk the walk. Especially for guys who are single and just graduated. My #1 advice is take full advantage of the power of compound interest. Max out your 401k and ROTH IRA asap. The money you don't see won't be missed. You'll adjust your spending habit around the $ you have from your paycheck in your checking account. That's what I've been doing since my first full time job @ 22 and through 1st person point of view, I have to say that it works.

Submitted by PerryChase on September 25, 2006 - 6:27pm.

Only marry a rich girl. Just joking. ;)

Submitted by malfred on September 25, 2006 - 6:29pm.

I am 25 years old and graduated from Stanford a few years ago. I max out my 401k 7 months in to the year at 15%, put $5,000 a month in to ETFs, own a condo in San Diego, 2 lots on the beach in Nicaragua, a small record label I founded, and a percentage of a family run wealth management business. I also have a private bank unsecured line for 100k of which I am currently using 7.5k and 3 credit cards with total limit of 90k of which I currently am using 7k.

I think that you sound a little bit like Suze Orman with your well-meaninged yet somewhat cookie cutter advice. Your advice is perfect for a person of average ambition and intelligence who is at constant risk of making a bad decision.

Unfortunately, if you really want to be fabulously wealthy you need to take a few more risks. Watching out for consumer debt may be good but avoiding debt in general is a wealth-killing maneuver. You have to take on strategic debt to further your business interests or you will never make a large enough impact.

The other comment I have is that in most professional service businesses, some "flash" is important. If you are providing high level services to wealthy people, you need to drive a nice car and have nice business attire. They will not give you their business otherwise.

Submitted by rseiser on September 25, 2006 - 6:32pm.

I have some more, but you already gave the best yourself:
1) Never follow the crowd into a stupid bubble like oil, stocks, or real-estate have been in the past. This is of course the famous "contrarian" stance. First, we are not in paradise, and it would be impossible that everyone is getting rich without the equal amount of production. Second, you could never get a good price if everyone else competes with you for buying.
2) Use your own brain. If someone tells you that Y goes up because of X, just think it through yourself. Does it make sense in island economics? How did it do in history? Did it work in reverse, i.e. Y going down when X went down. There is so much nonsense on TV these days that can be dismissed immediately.
3) Don't rely on any government program for your retirement. The rule of thumb I use is to put aside the amount per month that I want to live on later (per month, in today's dollars). It works amazingly well. Say, I think $2000 would be an ok retirement nowadays. I now have to put aside pretty much $2000 every month (in various programs). The gains I make after tax are probably just around inflation, and if I work for 30 years, then it will last exactly for 30 more years, give or take. Sure, maybe I beat inflation a little, or maybe I work longer. But maybe I live a little longer too, or just live a little better. My point: The money can only come from you. The government and nobody else can pay anything that wasn't created. If they print money it will just go into increased prices.
4) Of course, use the best vehicles for your savings, e.g. diversified investments, and max out Roth and IRAs.

Submitted by Chrispy on September 25, 2006 - 6:38pm.

You might want to advise your nephew that people of real wealth don't have to brag about it. The people whose cocktail party chatter consists of how much their stock portfolio is worth, the raise they just got, the incredible deal they got on their new sports car, etc are not only boring to listen to, but quite often liars.

True wealth doesn't have to advertise. Also, the people who brag get hit on by salesmen of all types - another reason to just shut up about it and enjoy your treasures with the trusted few.

Submitted by an on September 25, 2006 - 7:00pm.

rseiser, I don't see what's wrong with follow the crowd and take advantage of the sheeple created bubble. As long as you know it's a bubble and get ready to sell at the first sign of weakness.

Submitted by heavyd on September 25, 2006 - 7:02pm.

Why am I not surprised the 25 year old talks about the importance of 'flash'? I think it was Chrispy who pointed out that the truly wealthy typically do not make a show of their wealth or achievements -- after all, who do they need to impress? And while I can agree that avoiding debt altogether is difficult and sometimes unwise, unthinking reliance on debt financing has destroyed a lot more fortunes than it has created. These days, real wealth is created by people with great ideas. And great ideas are usually funded, in the initial stages, with venture capital or cash savings -- not debt.

Submitted by mydogsarelazy on September 25, 2006 - 7:11pm.

Hi Malfred,

I also graduated from Stanford, with distinction, and should point out to you that you meant to say well-meaning, not well-meaninged.

You commented:

"I think that you sound a little bit like Suze Orman with your well-meaninged yet somewhat cookie cutter advice. Your advice is perfect for a person of average ambition and intelligence who is at constant risk of making a bad decision."

So I gather you are above the fray?

My advice is heartfelt, and represents my own wisdom, gained the hard way.

Why don't you drop by this forum in 25 years or so and let me know how things have worked out for you.


Submitted by an on September 25, 2006 - 7:04pm.

malfred, there's absolutely nothing wrong with playing safe. Not everyone is ready or able to do the calculation behind the calculated risk that you're referring to.

Submitted by rseiser on September 25, 2006 - 7:37pm.

asianautica, regarding
I don't see what's wrong with follow the crowd and take advantage of the sheeple created bubble. As long as you know it's a bubble and get ready to sell at the first sign of weakness.

Sounds probably easier said than done, especially for someone under 30, haha. Not sure how easy it is to still make money once the crowd is on it. There are quite some transaction costs involved including time and psychology, and certainly it's not creating much for the overall system. Think of the Japanese people. Wouldn't you agree, they would be better off, if they wouldn't have all jumped on the bandwagon in 1987-1990?
But if you can personally do it, hats off. How about this: When the crowd is onto gold in a few years I will notify you and we can both hop on with some speculative position. Then, on the first sign of weakness you will let me know when to hop off. Let's see how well it will work out for us.

Submitted by an on September 25, 2006 - 8:23pm.

rseiser, I agree that it will not be easy. I will keep on trying to perfect my timing and knowing that I will fail many times. But I'm hoping I'll succeed more than fail.

Submitted by sdduuuude on September 25, 2006 - 8:28pm.

My advice:

Date 35 year olds when you are 18. Date people the same age as you in your late 20s and, if you aren't married or interested in getting married, date 18 year olds when you are 35.

It all works out financially and otherwise.

Submitted by La Jolla Renter on September 26, 2006 - 7:15am.

1. Get 100k in credit cards
2. Buy a business with 50k down.
3. Party hard like your peers with the other 50k… trips to Vegas, 15k martinis in the gaslamp, etc.

It will all work out… did for me.

PS read the book "The Millionaire Next Door" and one or two of Dave Ramsey's books... over and over and over.

Submitted by mydogsarelazy on September 26, 2006 - 7:54am.

Hi La Jolla Renter, and others,

Since I started this thread -- only to be accused or being another Suze Orman -- maybe I should mention some of my lifetime financial highlights.

1. Said "yes" to every credit card offer on earth while completing grad school.

2. Bought painting by up and coming artist for $5, but then sell it under pressure a few months later. Current value $2-3 million.

3. Build up massive debt, assisted by first wife who likes $150 haircuts.

4. Bankruptcy at 40.

5. Wife leaves during medical crisis, gets house.

6. Wise up, buy real estate, marry fiscally conservative wife.

7. Cash in on real estate, and realize it took quite a while to learn to really handle money.

8. Give preachy advice to others.


Submitted by JES on September 26, 2006 - 8:07am.

Wow, who was that artist?

My ideas:
1. Be very, very selective about who you marry.
2. Pursue your career passions during your 20s.
3. Place little value on material wealth. When you die it is unlikely that people will look down at your casket at your funeral and say "boy, he sure did have alot of money in his bank account and a nice car." We lose it all when we die, and yet the goal of most people in SoCal seems to be to accumulate more, impress their neighbors, & go for flash.

Submitted by mydogsarelazy on September 26, 2006 - 8:12am.

Hi Jes,

My post should say that I paid $5k (five thousand) and the painting was by Jean-Michel Basquiat.

I sold it back for $5,500 when the artist promised to do my portrait, and he welched on the deal.

Your advice is very good, although a person should have enough material wealth to have a good health plan.


Submitted by FormerSanDiegan on September 26, 2006 - 8:20am.

My advice to the youngins'

Rule #1. STAY in School. Get an advanced degree. Your job/career is the best investment you can ever make.

Rule #2. When you get a job. Enroll in your 401k, max it out, and pay down your debt from grad school.

Rule #3. Diversify your investments.

Rule #4. Save 15% on your car insurance by switching to Geico.

Submitted by JES on September 26, 2006 - 11:18am.

mydogsarelazy - Never look back, right:) That money may have been a hidden curse!

On the rules, getting a degree has got to be the first on any list. I'm amazed at the number of relatives I know in their early 20s who are not in school but still find time to party and just hang out with no plan for their lives. It's one thing to decide not to go to college because you have something much better in mind, but that's not what is going on.

Submitted by Chrispy on September 26, 2006 - 12:17pm.

Here's three adages that have helped me over the years:

1) Decide what you really want and the price you need to pay to get it. Then, resolve to pay that price.

In other words, if you want a degree, instead of telling all your friends as you're swilling beer, "Oh yeah, I'm going to college next year" resolve that the "price" for college will be nights spent with the books and days spent in classes, instead of hanging out with your buddies.

Everything that is worth having has a time and/or money price involved and you must pay that price IN ADVANCE of achieving your goal. Dreaming about it is not the same as daily action.

2) If you are working a minimum wage job and want to be paid $15 an hour, do $15 an hour quality work. Doing the minimum will NOT get you any raise other than a cost of living one - but working beyond your wage will get noticed. If nothing else you will develop new skills and be able to transfer these skills elsewhere.

3) During the day, as you get caught in a number of activities, ask yourself, "What is the most valuable use of my time right now?" Then, focus on that activity.

Having said that, I'd better get off Piggington and back to work!

Submitted by PerryChase on September 26, 2006 - 12:44pm.

Generally good advice all around.

JES, I disagree with you on Iraq and religion; but from your posts, I think that you're alright. I wish you success in your endeavors.

Submitted by malfred on September 26, 2006 - 1:36pm.

I can drop by next week. In 25 years I will be unavailable for comment.

I appreciate the heartfelt nature of your advice but I think it is oversimplified and consequently of little worth.

You can focus on one grammar error if you would like but I think you missed the larger point I was trying to make.

Submitted by bubba99 on September 26, 2006 - 1:40pm.

Don't take advise from anyone over 30 - they are most likely trying to justify their own decisions or atone for their bad choices.

Don't hesitate to take a risk if it feels right. Regrets about things not done are the worst. At least if you tried you know what would happen.

Do it now! Whatever the drive, do it while you are young enough to enjoy it. Bumbing around Europe is not as much fun at 50 as it would be at 20.

Don't ever stop trying to learn and accomplish difficult things. The drive to better yourself is one of the best we have.

And finally do not take advise from anyone who claims to have all the answers. You should know that by definition they are fos

Submitted by FormerSanDiegan on September 26, 2006 - 2:01pm.

"Don't take advise from anyone over 30"

A classic. Unfortunately, this was first recommended in the 1960's by the boomers, who are now pushing 60. So the recommendation itself is to ignore those old fools who suggested it in the first place.

Manfred- None of this advice is for you, since you are already made. Except that maybe Geico CAN save you 15% off your auto insurance.

Submitted by Chrispy on September 26, 2006 - 3:00pm.

I won't take advise from anyone over 30, but I will take advice.

Submitted by mydogsarelazy on September 26, 2006 - 7:43pm.

hi malfred,

I corrected your grammar to get your attention and see if I could knock you off your high horse for a moment. You took a shot at me and I reacted in a very human way to protect myself.

To change tone for a minute, I know that on the net things are very impersonal and the words don't have a person's face or a tone to go with them. Chances are that if you met me you might actually like me and we might have a terrific conversation. People who know me know that I give advice in the spirit of "take it if you wish" and not as any kind of authority figure.

I did pay attention to your comments, and obviously you have a lot of acumen and achievements for your age.

I do get the sense -- and please forgive me if I am wrong -- that you could benefit from being more respectful towards others and more open to their ideas. The advice that I presented in my first post really does represent the best advice I can give in an internet forum setting.


Submitted by La Jolla Renter on September 27, 2006 - 8:16am.

Getting back to the original post…

It really depends on the 20 something’s view point and or position. It seems impossible to generalize advice for all 20 something’s.

Would your investment advice/philosophy be the same for a school teacher who just wants to be a great school teacher and volunteer every summer with no additional income until they retire, as say an attorney, a doctor, or a mechanic for Mercedes that moonlights as a bartender on Saturday nights pulling in an additional 500 to 750 each week in cash.

If you generalize with all, you get silly stupid little esoteric pieces of advice as given.

PS did we all fail to mention… become an expert in credit reporting and keep your score in the 780 and up range.

Amex jingle to get a little piggington humor going …

Student loan balance after 3 ½ years before dropping out to be a loan officer… $75,000.
Average dinner and bar tab for a night out… $450 week nights… $950 weekends…
Designer Jeans, shirt and Bruno Magli shoes that you wear to work and the clubs… $900
Rolex watch you bought in Vegas after loosing 20k at the tables so you can keep your image with your boys… $15k
New rims and low profile tires for tricked out Escalade that needs constant alignment… $12,000
Audio Video System with rear video screens and xbox when you don’t even have kids… $10,000
Down payment on 6 condos that you are planning to flip to hard working peers and make 250k each on… $240k
Being a 40 something getting ready to watch you get your ass handed to you and having to get a job at Starbucks…

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