April is Financial Literacy Month and we asked executives at several of our clients to share things they’ve learned in their financial life that they wish they had known sooner. We’ve edited those answers down to some tips that are great advice for everyone.
Lesson #1- Personalized Plan: I have learned that basic financial literacy is missing in America and teaching it with a blanket approach doesn’t work. I took a finance class in college, but I still didn’t understand how to apply it to my life and manage my own income. What I needed most was an individual plan, tailored to my specific needs. That provides a best next step to take; guidance that isn’t personalized and actionable won’t even be remembered. Creating personal financial goals is exactly what helped me move forward.
Lesson #2 – Compound growth: When I started my first job, I thought I was too young to start contributing to the 401(k) plan. It wasn’t until 3 years after I started that a light bulb went off and I realized I was leaving money on the table (company match) and had lost 3 years of investment growth and compounding. I can’t get that time back. I would advise everyone to start on day one of their first job contributing to a 401(k) or other retirement plan, even if it’s a small amount. Don’t make the same mistake I did.
Lesson #3 – Diversification: I made the mistake of not diversifying my investments early in my career. My company offered their stock as one of the investment options and I believed in the company so I put all my 401(k) contributions into that fund. After some missed earnings targets and issues within the industry, I watched my 401(k) balance decline by over 50 percent. I learned the importance diversification no matter how you feel about any specific company or stock.
Lesson #4 – Cost of education: When looking at colleges, an important part for me was sporting events and places to get involved. I didn’t fully consider that it was out of state and the amount of tuition. I look back now and realize I could have chosen a less expensive option, graduated with the same degree and had a lot less student loan debt. I encourage anyone looking at colleges to consider all their options, their earning potential for the career they want and weigh that against the amount of the loans you take to pay for school. Student loan debt is a real issue and can slow you from achieving other financial goals.
Lesson #5 – Tracking accounts: I’m not one to review at my credit card charges every day, every week, or even every month. However, my accounts are linked to BrightDime and recently when I checked my spending analysis, I quickly discovered several charges that didn’t belong to me. Luckily I was was able to get them reversed and change my card number. I strongly recommend reviewing your monthly statements, whether on BrightDime or at your financial institution. It may save you from paying for someone else’s purchases!