6 Things I Learned At 30 that I Wish I Had Known At 20 - Personal Finance

6 Things I Learned At 30 that I Wish I Had Known At 20 - Personal Finance

When it comes to money and couples, financial intelligence is a slow, but steady course. Here are six things I wish I would have known when I became a legal adult:

1)Time is on your side. Well, when you are in your twenties, time has no limit. When you're in your thirties, you do start to see an expiration date, and it's called "years to retirement". More specifically, it's "How much do I need to save each month to retire comfortably?" And then you look at those tables that show you what your nest egg would look like if you put away $50 per month from age 20, and compare it to starting at age 30. Wow! The compound interest factor sure helps out those twenty-something's. And they probably weren't even paying a mortgage or feeding a family of four! Start your savings early, early, early on: you'll really be glad you did!

2) A credit card is NOT about the points. When I got my first credit card, it was just so I could "write cheques; just for ID purposes..." And then I started collecting them to get the free hats, $25 off my first purchase, free airline miles, cash back - you name it, I had a card that gave me something. Well, what it gave me was a very big debt-servicing ratio; when I applied for a mortgage, I was nearly turned down because the available credit between all the cards brought me dangerously close to my maximum debt-servicing ratio. And I paid my cards off in full each month! So, don't overload on different credit cards - choose them wisely, and use them wisely.

3) Family Planning isn't just about birth control. Ladies, remember: people don't like to lend you money when you're not working. Take care of your credit needs while you are working, not when your maternity leave starts. And have some financial resources put aside in your own name. Nothing is worse than seeing your friends split up after the birth of a child, and have them tell you "He had all the money..." or "She never let me see where the money was going". Think of what life will look like if you become a stay-at-home parent, and what it will look like after paying crazy day-care fees if you do decide to go back to work.

4) Life insurance is far better than mortgage insurance. You've bought the house, and you're in the bank signing the mortgage documents, and your banker says "Oh, you'll want mortgage insurance as well, right? Just in case something happens to you, and it's only $45 per month..." Be smart and get some life insurance quotes for the value of your mortgage (and of course any additional amount you may need as well) before you step foot in the bank. You can usually get a life insurance policy for the value of your mortgage for less than the amount the bank will quote for "mortgage" insurance. With life insurance, your estate will be paid out the full value on the policy, and then your estate will pay off the mortgage, with any remainder going back to your estate. The more you pay down your mortgage balance over the years, the less your estate pays to clear the mortgage. You can also choose to lower your policy value as the value of your mortgage decreases, which will lower your premiums. With mortgage insurance, the bank is the only one to get paid, and your premiums don't go down as your mortgage balance does, so you're paying the same premiums at the beginning of your mortgage as you are when you have only $5000 left to pay on your mortgage. Protect yourself - not the bank.

5) Have someone else pay your mortgage. That's right - get a rental property! Now I know we all know someone who got burned by a bad tenant, bad inspection, etc. But it really can make a big difference to your overall net worth if you just went out and bought one rental property when you are in your twenties. By the time you're 50, the property is paid for, and the monthly rent is straight cash flow to you. Consider living in a house and renting out the basement. Or buy a two-bedroom condo by a college or university and rent out a room. Do this before you settle down and have kids that will bother your tenants...One caveat: make sure you do your homework on rentals - join some networking groups, and only work with a real estate agent who has rentals of their own. Real estate is not the thing to "try out" without some advice from people who've been there.

6) Get educated about money. In your twenties, money buys you things, things, and more things. What you don't know is that money buys you assets, which buys you financial freedom. Robert Kiyosaki, author of Rich Dad, Poor Dad tells us to buy assets that make you money, not doodads that cost you money. You really need to have a good look at your philosophy surrounding money, and begin to understand that you need to have your money working for you, not you working for money. Until you actively learn about money and passive income, you'll just be paying bills with your cash instead of accumulating cash. By the way, I highly recommend Robert's book Rich Dad, Poor Dad for every young person - it's a real starting point in a person's financial awakening.

So whether you're a single, a couple, or a family with kids in tow, make sure you are always looking ahead when it comes to finances. I hope you avoid the traps I fell into in my twenties, because there is a whole other list of pitfalls to beware when you hit your thirties!

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