Dear 20 somethings,
I know this is hard for you to imagine, but there is going to come a day when you will be in your thirties. You will wake up after a night of binge drinking and realize that it's going to take you two days to recover instead of just one. It just happens. But really, that's not the worst part. During your 30's you suddenly have bills, responsibilities, and possibly health issues. So consider this your warning to prepare for your future. Here are a few things that I have learned over the past couple of years:
1. Save, save, save!
During your 20's you are either living at home or have just moved out to your first apartment. Life is pretty good. You don't really have to make much to survive. There are going to be bumps in the road eventually. Your car will breakdown, you will need a new one, and you will eventually want a better place to live. Start putting money aside now to use later.
2. Build a foundation
Do you want to be something great? Studies show that you are who you hang out with. If you are socializing with losers, you too will most likely be one. But if you want to be successful, start hanging around successful people. How do you do this? Ask questions when you meet someone older who seems to have their shit together. Older people love to be mentors. And I don't necessarily mean 'old' people. This could be someone in their 30's, 40's, or 50's. There is nothing better than seeing someone from the younger generation WANT to succeed.
Just a quick example: Ten years ago I was at an engagement party which was located in a million dollar home. Once I realized who the rich uncle was that was having the party I approached him and said, "I have to ask, how is someone so young (he was 55... get it, I complimented him) able to afford something like this?" He then went on to tell me about his company that he sold for over 5 million dollars. Weeks later he became our company's business adviser. Why? Because he loved working with two younger people who wanted to succeed and were willing to do what was needed to make it happen.
3. Learn!
During this past year I have literally been in shock at the number of my friends (men and women) who have very little knowledge about what I like to call - life. They don't have retirement accounts or they did something silly like took the money out of it to pay off debt. They have no idea how to refinance their homes and the regulations involved. And some are at the age where they are having to deal with aging parents. It's a reality people. Here's a small breakdown of what I'm referring to....
a. Retirement Accounts: I have a Simple IRA so I am going to use it as the example. If you pull money out of your retirement prior to the authorized age you will have to pay the income tax on this money. If younger than 59 1/2 years old, then you also get the pleasure of paying a 10% penalty tax. If you withdrawal this money within two years of your initial contribution you will get hit with a 25% penalty tax. WOWZA!!!! One of my friends paid nearly 40% in taxes on the money she withdrew. She didn't ask anyone. Her thought process was - it's mine so I'll just take it. She about pooped herself in April when the tax bill came due. Ask questions. Research. Learn.
b. Refinancing your home: I will just touch on this. Way too many people refinance their homes for the original borrowed amount. No. I say it again... NO. Not unless you need that money to pay off some major bills should you ever do this. Example: Home is originally sold for $100K. You put 20% down (because you are smart and WILL avoid PMI... great blog post located here) which means your original loan is $80K for 30 years at 6% interest. Ten years go by and interest rates have dropped to 3%. So now you technically have 20 years left on your original loan. Many banks will try to refinance you back to 30 years (tacking on another 10) and then again for the $80K instead of the current principle balance on the loan. They will then give you a check at the refinance closing and you will feel like a rock star who just made a large check. Instead hand that check right back to them and have them pay off some of your mortgage that you just worked the previous 10 years paying! And make sure it's a 20 year refi and not the original 30! Ask questions, research, and learn! Call an accountant, call a friend, call someone smarter than you when it comes to this stuff. Get over your pride.
c. Aging Parents: UGH! My parents are now in their late 60's and mid-70's. NOOOOOO!!!!!! I really don't want to ever think about them getting old or even worse... never being here. But, it is reality. Keep in contact with your parents to see how they are. I have a couple of friends and family members currently dealing with parents who have dementia. It is saddening and frightening all at the same time. This isn't really an avenue I have had to go down yet (thank you God!), but when we do I will definitely ask questions, research, and learn as much as possible.
Final note, I know you think you are invincible. I did too. Then at the age of 35 I got hit with some major health issues. I'm a business owner so my health insurance SUCKS! My deductible is $6500 a year, straight up. So getting hit with two surgeries that fell in two different years.. back to back... took a chunk of money. Yes, I know you can do the math. Shit happens. (See #1.) This year alone I have had 3 close friends get hit with medical issues. One lost her job due to it. (See #1.) I have two other friends flirting with the idea of filing bankruptcy. (See #1) Are you catching on to what I'm saying? (See #1)
I hope you get to enjoy your 30's as much as I have been. It's finally a time when you get to find out who you really are. That is if you grow up.
From,
Your 30 Something Fan
