10 Things I Now Know at 40 That I Wish I Knew at 20
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The best thing about being 40 is surviving your 20s and 30s. And at 40, I’m considered an old-timer in the personal finance blogging community. Reflecting back on the past twenty years, I realized that I’ve learned a thing or two that I wish (oh, how I wish) I knew when I was 20. Here they are, in no particular order:
- School loans are like a bad date, easy to get, but hard to get rid of: At 40, I still have more than $20,000 in school loans. Education is important, but I spent far more money during school than I needed to spend.
- Compounding, like the 1970s Big Red Machine, is pure magic: Assuming you retire at 65 and earn a 10% return on your investments, $1 invested when you’re twenty will be worth 2.5 times more than $1 invested when you’re thirty, 6.5 times more than $1 invested when you’re forty, and 18 times more than $1 invested when you’re fifty.
- New cars, once bought, aren’t: I wish I could have back all the money we’ve spent on cars, particularly new cars. The cost just isn’t worth the financial freedom you have to sacrifice.
- Great fortunes are made from small investments: It’s amazing to me how small monthly investments, given enough time, can grow into substantial wealth.
- Investing, like children, shouldn’t wait until you can afford it: If you can read this blog, than it’s not too early to start investing. This makes me wish I had started investing in high school. Fifty dollars invested per month in high school earning 10% would be worth about $212,000 at retirement.
- Financial shortcuts increase the time it takes to reach your goals: Ignore all the silly personal finance books that promise great wealth in a short time with no risk. Investing isn’t hard, but these promises are designed to sell books, not create lasting wealth.
- My wife is more frugal than I: If I had recognized this 20 years ago, I would have listened to her and not frittered away so much money on stupid stuff. Sorry, Mrs. Dough.
- Unlike everything else in life, with investing, you don’t get what you pay for: My first few mutual funds were load funds with high expense ratios. I was so keen on picking the best performing funds that I completely lost sight of one of the most important factors when picking a fund–cost.
- Consumer debt is like swimming with an anchor: We’ve now shunned consumer debt, but it took us far too long to learn this lesson.
- Too much stuff robs you of happiness and wealth: I look around our house at all the stuff we’ve accumulated in 20 years and all I see is lost investing opportunities and clutter.
I wonder what I’ll know at 60 that I’ll wish I knew at 40?
33 Comments, Comment or Ping
Pinyo
Truly enlightening post. I got my start early in the 20s, so I am one of the lucky few. These are all good advice, and for those new to investment…be wary of mutual funds with high expense ratio. Investing in them is like trying to fill a strainer.
Jul 26th, 2007
calgirlfinance
Great post! I’m in my twenties and I realize that I have already accumulated too much stuff!
Jul 27th, 2007
The Digerati Life
hehe. We’re kind of around the same age there…
I find that I have a very similar list as you do!
Jul 27th, 2007
Jennifer
I’m right there with you! I’m 39 and made all the same mistakes. I’m forwarding your post to my two sisters who are in their 20’s in hopes they won’t make the same mistakes we did! Thanks!
Aug 6th, 2007
Amber Yount
Great post! I’m going to subscribe
Aug 6th, 2007
Joe
It’s so true about the idea of compounding; it is probably the most powerful tool for an investor. It is never against you, but never doubt that the earlier you invest, the better off you’ll ever be.
Aug 6th, 2007
marie
I like the example of compounding that you gave.
Sending it to my son.
Marie
Aug 7th, 2007
SavingDiva
Great post! I found a link from the personal finance carnival. Since I’m in my 20s, I appreciate the advice
Aug 7th, 2007
Minimum Wage
I started saving when I was ten, and had $4,000 (about $20,000 in today’s dollars) by the time I graduated high school. Then I blew it all on college and ended up with student loan debt.
Aug 7th, 2007
Millionster
Ive taken #10 item to heart in the past months.. living rather pragmatically — at least until I get my new house!
Sep 19th, 2007
Marie Claire
Very informative post. Have you ever wondered what you should know at your deathbed that you wish you knew at 20?
Sep 20th, 2007
Anwar
Great article! Something that is really close to my heart.
I wrote a book titled…”We wish we knew this 20 years ago” for my children.
Gave it away to my nephews etc…. and some of my staff.
Keep your good work going!
Oct 25th, 2007
DR
Anwar, is the book something you want to share?
Oct 25th, 2007
The Dog
At 60 you’ll begin to admit to yourself that you are going to die and it may be any day……..and any amount of money can’t stop it from happening.
That’s something you should consider now at the age of 40. It will make all your worries about money and material wealth disappear real quick.
Nov 2nd, 2007
-Jobbik-
thank you,
its articles like this that reassure me that I am not “wasting my youth” in tackling the investing hurdle at such a young age.
I started investing at about 20 years old, having a small nest egg that was only in forms of regular savings vehicles. (MMA’s etc). I started my own account and granted i have made some mistakes, but the endeavor is incredibly more enlightening than any other hobby i have had to date.
I recently turned 23, i live a simplistic lifestyle, and currently finance/investing/economics are my primary interests (even so much as to say that these studies encompass my “entertainment costs”, as investing IS my entertainment.)
Even at my currently young age, and with the mistakes i have made. I have already accumulated a fair enough nest worth (not even considering debt, or the lack of it) that rivals many of my considerably older peers.
Its just nice to read and be reaffirmed that what I am doing is (most likely) going to be a good decision.
-Jobbik-
Nov 23rd, 2007
Clueless
Can you elaborate number 4 and number 5. I am in my 20’s right now and I really want to get started on “investing” what should I start doing?
Nov 23rd, 2007
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