If you’re anything like me, you finished high school, went to college and entered adulthood able to recite the periodic table, navigate a library with the Dewey Decimal System and perform a frog dissection. What our schooling didn’t teach us — and what turns out to stick with us longest — was how to manage money.
Now at 34 and schooled by experience in financial matters, here are the top five lessons I’d share with my younger self about money.
1. Build a Budget and Honor It
That old saying about failing to plan equating to planning to fail? It’s more than a catchy phrase.
My spouse and I found ourselves buried in debt during our first three years of marriage because we never mapped out where our money should go.
We viewed budgeting as merely tracking monthly spending and promising ourselves we’d either earn more or cut back… next month.
Once we hit rock bottom financially, we had to make serious changes. Our first move was to write a monthly budget and assign every dollar a purpose.
It sounds dramatic, but the difference was immediate — our day-to-day money decisions improved dramatically. We even eliminated $52,000 in debt in just seven months.
2. Plan for the Unplanned with an Emergency Fund
We all think “it won’t happen to me” until it does.
Think of a time you faced an unplanned expense: a car breakdown, an unexpected vet bill or a flooded basement.
Over the years I’ve learned that surprises will occur and they cost money. The trouble is most people lack sufficient savings, which turns a manageable problem into a crisis.
After too many financial missteps, I finally decided to stash a small emergency fund before the next surprise came along.
The remarkable thing was once I had that cushion in place, emergencies didn’t disappear — but they stopped feeling catastrophic. I could pay for the issue and life continued.
3. Avoid Car Payments
In my view, one of the biggest determinants of lasting wealth is whether you own your vehicle outright or are chained to monthly payments. Unless you collect classic cars, almost every vehicle depreciates rapidly. In fact, a new car can lose 10% of its value the instant you drive it off the lot and about 60% in five years.
To make matters worse, the average monthly car payment hasreached a record highof $517. That means spending over $6,000 a year on a vehicle that’s losing value quickly — your payment can’t keep pace with depreciation.
Maybe the system is built to keep us tied to car loans for decades.
If I could go back, I’d steer clear of brand-new cars in my 20s. Instead, I’d buy a five-year-old model for roughly 60% less than the original sticker price. That single choice could have a huge impact on your financial trajectory.
4. Put Compound Interest to Work
Albert Einstein reportedly called compound interest “the eighth wonder of the world.” He said, “He who understands it, earns it… he who doesn’t… pays it.”
He wasn’t exaggerating.
We go to work for wages, but imagine something working for you, requiring no pay, and adding to your savings year after year. That’s the essence of compound interest.
When your investments earn interest, your money is hard at work. Leave those earnings invested and you’ll start earning interest on the interest — that’s compounding.
Time is the secret ingredient. The earlier you grasp and take advantage of compound interest, the more wealth you’re likely to build.
5. Concentrate on Growing Your Net Worth
In Secrets of the Millionaire Mind, T. Harv Eker says, “Rich people focus on their net worth. Poor people focus on their working income.”
Whenever people discuss the finances of figures like Bill Gates, Jeff Bezos, Warren Buffett or LeBron James, the conversation centers on net worth rather than salary.
Focusing solely on income is a mistake because income is only part of the net-worth equation. You could earn $250,000 a year, but if you save nothing and owe more than you own, your net worth would benegative.
Your paycheck is only the starting point. Use it wisely to save consistently and acquire meaningful assets while keeping debt in check by living within your means.
Final Thoughts
I tell people we’re doing well now because we started making smarter financial choices in our 30s. Still, I’m convinced I’d be far wealthier if I’d made these same choices in my 20s.
You can always earn more, save more and invest more, but time is something you can’t reclaim. The sooner you adopt these five financial habits, the easier building wealth becomes — and your future self will thank you.
Aaron Trent is an EMT who lives in Phoenix, Arizona with his wife and two children. He launchedMoney Peach— a growing personal finance site — where he removes the dullness from money talk and provides direct, practical financial guidance through his blog, podcast and no-nonsense advice for everyday life.
Also see related tips for later life planning at smart money moves for empty nesters.
