Since our daughter, nephews and cousins were in middle school, we made a conscious choice to give them gifts of adventure rather than things. Our adventures have included surf camp in Cali, diving in the Caymans, white water rafting in West Virginia (the kids claimed that there was a death by water theme), and urban exploration (Los Angeles, New York City, Chicago, Houston). They are now all in their mid-twenties and older. The subject of finances and investing has led to some interesting discussions and I am so proud that they are thinking about their financial futures.
Like training, each of us should have a baseline of investing. My advice to the ones I love is simple:
Live below your means. Choose your friends wisely and resist the urge to keep up with the pretty people. Many of them live paycheck to paycheck without you ever knowing it.
Manage your own investments. Open a Vanguard account. Set up automatic monthly transfers to invest in the Vanguard 500 Index Fund. Increase the amount you invest as your income increases. IRA’s, Roth IRA’s etc. can all be managed through Vanguard. “If you look at the portfolios of finance professors, we all own index funds, and we don’t think very much about them.” – David Yermack at the Stern School of Business at NYU.
Never carry credit card debt. Always set your credit card to autopay the balance at the end of every month. Some cards can be a great way to accrue travel benefits. Mortgage debt is debatable. Just make sure you and the one you love are on the same page. NEVER use buy now, pay later.
Max out your companies retirement contributions. Set it and forget it. Again, choose a 500 Index Fund.
What about all the other noise? Crypto? NFT’s? Meme stocks? Shorts? I spend a lot of time educating myself on these things. I think Crypto may have a small place in our portfolio with cold storage only. Avoid any type of investing that gives you a dopamine hit – especially if it has a cool app!
As your nest egg grows, it is okay to have fun with a conservative amount of dollars. KT has been very supportive of my investing small amounts in specific stocks. It paid off and allowed us to diversify into developing a retail/apartment complex. Eventually we may decide to leverage it for other types of diversification.
Last thing, having an emergency fund when you are young is important IF you are on your own and your family lacks the willingness or resources to assist you. If your family/friends are willing to be your emergency fund, I highly recommend investing as soon as you secure your first job. You will never regret it.
Successful long term investing is like most of my aerobic training; easy, repeatable, and boring. And like my training, it has created a foundation for us to do cool things. No easy way!
***Thank you to Willa, Stephen, Joe, Matt and Sarah for creating the conversations that inspired this piece. We are so proud of all of you and love you very much! Love, Sue and KT