DEAR 18-YEAR-OLD KRISTINE: You’re about to embark on adult life, so I want to share some financial advice with you. You will do many things right—and a few things wrong—so listen closely.
You’ll be heading off to college soon. Even though many of your high school classmates will be attending four-year schools, you’ll be staying closer to home. The local community college will be a good choice, since you have absolutely no idea what you want to do with the rest of your life. (Hint: You’ll really enjoy that genetics course you take as a sophomore.) And ignore the people who tell you a $250 or $500 scholarship isn’t worth applying for. You will win enough of them to cover the costs of your tuition and books.
Next, you’ll transfer to a four-year school. You’ll take your time there seriously, loading up with 18 to 21 credits each term. Since you work hard, and keep your grades up, you’ll earn more scholarships and you will graduate without owing anyone a dime. Rather than entering the workforce right away, you’ll attend graduate school. You will have a wonderful mentor who will help you land an unpaid internship in a genetics lab at the local medical school. Don’t question the wisdom of taking an unpaid position. You will quickly prove you’re a valuable member of the lab staff and they’ll eventually offer you a fulltime job. That job will include a generous pension benefit. Since it will be 50 years before you’ll need the money, it will be worth more than you can imagine.
After you finish graduate school, you’ll get married. (Another hint: Get a prenuptial agreement.) You will buy your first home—a true “fixer-upper”—and sell it for a handsome profit just a few years later. When you hit your 30s, things really start to change. As a DINK (double income, no kids) couple, you’ll be blessed with plenty of disposable income. After all those years of living simply and frugally in your 20s, you will suddenly feel you “deserve” new cars, a bigger house and countless electronic “toys.” You keep hearing about the importance of saving money, but somehow spending seems more fun. You keep meaning to learn more about personal finance. You tell yourself over and over to find out how your retirement funds at work are invested, but somehow it just keeps getting put off.
When you turn 40, you suddenly realize time is going by faster than you expected. Retirement doesn’t seem like such a distant dream anymore. And just as you decide to get serious about managing your retirement accounts, the Great Recession will hit and the value of your account will plummet. You’ll lose confidence in the stock market and decide to move what money you have left into a guaranteed but low-yielding account. (Yet another hint: The stock market will come roaring back. Leave your money where it’s at.)
At 45, you’ll get divorced and that generous pension you earned in your 20s will suddenly be worth only half what you thought it would be. You will realize all those material items you spent your money on didn’t bring you nearly as much happiness as you had hoped. You realize what you really want from life is the time to pursue the activities you enjoy so much—reading, writing, photography, training dogs and, believe it or not, shooting guns. You realize the path to that life requires being financially free. You will throw yourself into learning everything you can about investing, saving and planning for retirement.
When you turn 50, you will start believing you might be able to retire from fulltime work before you’re 60. You’ll become financially savvy, start saving a huge percentage of your income and, crazy as it sounds, begin writing blogs for a financial website. (Final hint: I know you don’t have a clue what a blog or website is, but you—and everybody else—will find out soon enough.)
Right now, at age 18, 50 seems so far away. You think people who are 50 are ancient, but when you get there yourself, you’ll realize 50 isn’t old at all. Fifty is when you can really start to dream about a life not burdened by the daily grind. A life where you can pursue your interests and passions. My advice: Remind yourself of that every day—and start saving every penny you can.
Enjoy the next 32 years. It will fly by faster than you can possibly imagine.
Your 50-Year-Old Self