5 things I wish every 25-year old knew about money.
Flexibility, time horizons, and what really moves the meter.
We’re closing out the year and I think it is a great time to highlight some of the most important things I wish I knew sooner about money.
I think Gen Z stands to be impacted by the opinions and thoughts of others more than any generation prior. Mainly due to social media but also because in the information age, anything is accessible.
Today, I’ll cover 5 things that really stand out to me as they pertain to young professionals and why I think they are important (or not important).
You don’t need 7 sources of income at 25.
We’ve all seen it. “ThE AvErAgE MiLLiOnAire hAs 7 SoUrCes of iNcOmE.”
Yeah, yeah, we get it. But for a younger professional, spreading yourself too thin can lead to distractions from what really matters.
For the vast majority of younger professionals, what will move the meter most is their ability to grow income.
Growing income is usually the number one driver of financial security. It can allow for increased savings, investments, and even risk tolerance.
That will move the meter. Additional “streams” of income will come with time. Don’t feel behind if you’re starting your professional life and focusing on that next raise, a bigger bonus, or a lateral move to another job that will pay more!
You cannot put a price on flexibility
I mainly work with young professionals. Over the last few years, I have come to realize that flexibility is one of the main drivers in financial decisions.
Our lives are incredibly dynamic. Sometimes, a decision may not make complete financial sense, but it may provide the flexibility that is needed down the line. A little more cash on the side or funding a brokerage account in lieu of locking up funds in a 401(k) can offer some peace of mind when life gets hectic.
You don’t need passive income to become wealthy
So many people are focused on building these massive streams of dividends. There must be 100 different accounts on X solely focused on dividend investing. If you don’t know my feelings on dividends already, check out this post here.
These “passive income” sources can sometimes create significant tax drag. Focusing on capital appreciation is where I’d rather spend my time.
Dialing into expenses can be one of the best ways to gain more control over your financial life
Tons of people are acting on a whim when it comes to their finances. They have no understanding of money in versus money out.
Every single financial plan we deliver begins with a cash flow analysis. The best part - we barely ever focus on lowering expenses. Rather, we focus on ways to grow income.
This allows people to find the amount of money they need on a monthly basis to feel comfortable (which is always subjective) and identify what needs to occur next, which is usually either to work at growing income or begin saving and investing any surplus in cash flow.
Having a solid understanding of cash flows can have a drastic impact on reducing financial stress.
Take your time in pursuit of financial freedom
There are literally a million ways to make a million dollars. There is no need to feel rushed. Almost everything we do at the firm has an undertone of long-term time horizons.
Lifetime tax planning, not just for this year. Asset accumulation over decades, not days. Earnings potential over a career, not what this year’s bonus will be.
There is less urgency than many young people realize when it comes to building wealth. Starting on the right foot, making the right long-term decisions, and building a solid foundation are some of the most overlooked aspects in building wealth.
This is for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of publication and are subject to change without notice. Past performance is not indicative of future results.