It seems 18 year old guys know EVERYTHING, but from a societal cross section are perhaps the most clueless group of people on the planet. I certainly wish I knew half as much as I thought I knew 10 years ago ;). The problem is young guys are often surrounded by other young guys and take financial cues from their broke friends. This is the time when what you do with money sets the course for the rest of your life, mistakes are expensive and it is much easier to learn from someone else’s mistakes then to repeat them yourself. Because of these observations, I am writing this financial guide for young men.
My friend Ron runs a business and he has a sign up that reads “Work hard and be nice to people.” You can learn this in kindergarten and get through life with it. Regardless of what you are doing, whether you are cooking fries at McDonald’s, cleaning out septic tanks, or managing a company, dedicate yourself to being the best at what you do. Dedicate yourself to learning everything about the business you are in. Take time to learn the job your boss has. Network with co-workers, customers, and those above you in the management chain. Present yourself with energy and a positive attitude 24/7 and give a damn about what you are doing. The number 1 thing I look for when interviewing someone is enthusiasm.
Don’t borrow a ton of money for a degree that won’t earn you any real money. Before deciding to go to college, understand the true total cost of the degree: Tuition and Fees, Room and Board, Books, and the opportunity cost of going to school vs. working full time. Understand what other people make as an entry level wage in your field. Don’t just take what you read on the internet as gospel, find people doing what you want to be doing, and figure out what they earn, what their future career prospects look like and if they would do anything differently than what they did to get to where they are. Do everything in your power to minimize expenses on college. Spend the first two years at community college while living at home, utilize tax credits, apply for scholarships relentlessly, take CLEP exams, and of course, work. Do everything within your power to ensure you start out your life without tens of thousands of dollars in debt for a degree you can’t use. In addition to going after a college degree to enhance your prospects, there are some additional tests and certifications you can gain that will help you out without siting in a classroom for 4 years.
Chauffeurs License: A chauffeurs license allows you to drive a company vehicle on public roads. All I had to do to get mine was pay around $35, take a 15 question multiple choice test, and get a basic medical exam. You can study for this and take the exam in a couple hours.
CDL: The main difference between a Chauffeurs licence and a CDL is the type of trucks you can drive. A CDL requires a road test and costs a bit more to get. If you are interested in the slightest in any career driving big trucks, get a CDL as soon as possible.
CAPM exam: If you are interested in project management and have worked on projects at any level, you can take the CAPM exam. The Certified Associate in Project Management qualification basically means that you understand the basic concepts and moving parts of a project. This test costs around $300. I’m personally working towards this right now and plan to take the exam this summer.
MASS/POSS exam: This is the exam needed to get into maintenance or operations at most power plants. These tests cover mechanical aptitude, ability to read charts and graphs, basic mathematics, and understanding of simple machines. I paid under $100 to take this exam, and it is good for 5 years.
OSHA 10: If there is any possibility you will work in construction at all, grab an OSHA 10 cert. You can take this online for under $100 and can immediately print out a qual card. Many employers require you to have an OSHA 10 to work for them. On a recent job I was on, our project became over staffed. My company talked with another company that needed laborers at the same job site and they agreed to accept them. When the people we sent over go there, they were told without an OSHA 10 they wouldn’t have a job. Initially they weren’t going to be given a chance to get it, but our project management was able to work out a deal to give them a couple days to get it. In this situation these people could have lost out on a job worth around $6,000 over the course of a month for want of this qualification.
Education is oftentimes separate from school. Sure you learn stuff in school, but there are many life skills that are not taught in college classrooms, dedicate yourself to being a lifelong learner. Virtually every person you meet can teach you something, be willing and eager to learn!
- Home repair: Plumbing, electrical, painting, drywall, etc. be able to use basic hand tools and become a lifetime student of fixing things.
- Budgeting: If you can’t develop and follow a simple budget, getting ahead will be damn near impossible.
- CPR and basic first aid: You never know when these skills will come in handy. My son was choking on a carrot once and couldn’t breathe at all. Knowing the heimlich minimized the time he couldn’t breathe and prevented panic and a possible very scary outcome.
- Networking: This has been difficult for me as a natural introvert, but getting to know people, ensuring that they like you and see you in high regard is the number one way to get ahead in life. It is these people that will assist you in getting the jobs you want down the road.
- Read. Read about everything. Read about finance of course, but read about engineering, read about history, read about science experiments, read about management, read about animals, read anything and everything that interest you. The more you read the more you learn, the more you learn, the more valuable you are.
A vehicle doesn’t define who you are. I see young guys get their first “real job” and go spend more on a car than their yearly salary. (I typically spend around 1 to 2 weeks of my average yearly pay on a vehicle). The trucks these guys buy own them. Even a “cheaper” vehicle at $20,000 with a 4% interest rate for a 6 year loan ends up around $300 a month, plus insurance will probably run as much as the car payment, because teenage guys and guys in their 20s are a much higher risk.
Take that $600 a month for 6 years, and you end up paying over $40,000 for a truck that at the end of the loan is maybe worth $5,000. Do yourself a favor, buy a car or truck you can afford with cash, put $100 a month into a car replacement fund, and put the other $500 a month into your long term savings. 6 years down the road you would have put $6,000 in your car replacement fund (and possibly upgraded along the way) and with 8% annualized returns, that $500 per month should be worth around $47,000. Even if you never add any money to this, 30 years later you would have almost $500,000, That’s over halfway to a decent retirement, all by deciding to drive an affordable car for the first 6 years of being an adult. I know a guy in his mid- 30s who has always driven trucks he can’t afford, he’s had 3 repos, has horrible credit and can barely get by. Do you really want your truck to own you? Do yourself a huge favor and get comfortable driving a car worth around $1,000 to $3,000 that you pay cash for.
Saving and Investing:
This is what I was just starting to talk about with getting a cheaper vehicle. Cut unnecessary expenses and save at least 15% of your income, challenge yourself to earn more and save more. As a young man with no wife or kids now is the time to set your future self up for success. Stay out of debt, build up a savings account of at least 6 months of expenses, and then throw as much money into retirement savings as possible. The earlier you get started the better. Saving for retirement also provides great tax incentives. You can get a tax deduction on your contributions, and depending on your income may also get a tax credit of up to $1,000 on your first $2,000 contributed per year. Play with an investing calculator to see the difference it makes to start saving at age 20 vs age 30 or even age 40. See what difference it makes to save 10% of your pay vs. 25% of your pay. The numbers may seem large, but keep in mind at retirement you will only want to take out about 4% per year. This means to generate a $30,000 yearly income you would want a nest egg of $750,000. If you feel unsure about what to invest in, I would start with Betterment. Betterment makes investing simple and provides a great amount of diversification and tax efficiency. You may think, I don’t need to save for retirement, I’m just going to work until I die. Fair enough, but that may not be an option. Especially for people who work in a physical job, by the time you hit 50, your body may not be able to keep working those types of jobs. Employers may not want to use you in your 50s, 60s, and 70s. You may get injured. You never know what will happen, and having a large chunk of money squirreled away is an insurance policy that makes sure when you do get old, you will be able to take care of yourself and loved ones if you aren’t able to work, without becoming a burden to others.
A pack of cigarettes a day costs around $3,000 a year. It triples the cost of life insurance and greatly increases the cost of health insurance as well. Give it 40 years and it will cost you your life. I can’t tell you how many broke people I know buy a pack of cigarettes a day and spend $50 to $100 at the bar every single weekend and they complain about having no money. That’s where the money is going! Between smoking and drinking at the bar frequently, you can easily piss away $300 to $500 a month, and take years off your life. I’m not saying never go to the bar and have a good time, but don’t do it every weekend.
Women and Children:
Have a plan. Starting a family is the most expensive endeavor most of us will go through, unless of course you get divorced, divorces can be super expensive. Choose your reproductive partners wisely. By choosing the right woman you greatly reduce the chances of divorce and child support payments down the road, I know, easier said than done right? Plan when you are going to have kids and be established in your job, in your place of residence, and in your finances. If you do get divorced, don’t see child support as a payment to your ex, it is a payment to your kid. Child support is necessary to take care of children when there is an absent father. If you produce a child you are fiscally responsible for that child, regardless of your income level and whether or not you live with your child. Yes there are times when child support is set ridiculously high, (and ridiculously low). It varies by region, but in the midwest I think roughly $500 – $700 a month is a fair and reasonable amount for child support. It drives me crazy to see people having to pay only $10 or $20 a month for child support. Regardless of if you live with your baby mama or not, you have to support your kids, this means providing at least half of the cost of their food, shelter, clothing, medical care, etc. If you can’t afford to do so, then you should’t be producing kids, if you come on hard times, then do everything you can (legally of course) to get some money together to pay to support your kids.
Step Dad: If you choose to be involved with a woman who has children, you are choosing to be involved with the children. One of my biggest pet peeves in this world is men who treat their step kids like they are not their responsibility. It is a package deal, so if you choose to step into this role, understand that you are becoming a key part of this child’s life. Treat them the exact same as you would a kid you produced. As a step dad it is still your role to mold these kids into productive adults. It is also your job to do everything in your power to keep a civil relationship with their biological dad. No matter how much you don’t get along with the biological father, it is not okay to talk negatively about that parent in front of the child.
Getting started in life on a good financial platform makes all the difference. By planning and making purposeful lifestyle choices and financial plans you will set yourself up for a life a thousand times easier than if you didn’t.
What did I miss in this financial guide? Anything you disagree on?