Some people are blessed with family and friends who mentor them in the ways of wealth. The rest of us learn from other people’s money mistakes. According to a recent article by credit.com, a person can learn a lot from the financial missteps of others. I have learned from people who are older than me, my peers as well as younger people. I don’t know whether my own children will heed my financial advice of life, but hopefully they will continue to be open about money matters by talking to people they trust.
Retiring to a life of poverty
I think some of the best lessons I learned from older friends and family is the importance of staying in the job market as long as possible and delaying retirement. I know people who not only depending on Social Security benefits as a main source of income, but limited their lifetime earnings by taking Social Security early at age 62. I also see the wisdom of paying off a mortgage before retiring instead of buying a home just before retiring or taking a reverse mortgage. I never would have thought about paying down my mortgage if it weren’t for older friends living in poverty because they can barely afford a mortgage payment.
Keeping up with the Joneses
When I look at my peers, I notice a lot of people in their 40s who are stretching themselves to buy step-up homes in nicer neighborhoods. It’s tempting to want to keep up with the Joneses, but most of the Joneses I know end up having homes in foreclosure. After watching friends my age lose their homes to foreclosure, I made it my goal to pay off my home in another 12 years. Instead of spending money on upgrades, I pay extra toward my mortgage. I stay motivated by telling myself I can buy the granite countertops and new floors as soon as I own my home outright.
Staying out of debt
I’m constantly reminded of the dangers of debt when I think about the younger generation. Millennials are putting off marriage and buying homes because they are weighed down with too much student loan and credit card debt. I admit I had a ton of credit card debt in my 20s as well. It took me about a decade to build up my credit so that I have an almost perfect credit score. My focus has been to stay out of debt while simultaneously saving up for retirement and emergencies. Although I wish I could make more progress, I’m at least going in the direction of a positive net worth instead of a negative one.
When it comes to financial habits, my children know where I stand. I don’t believe in carrying debt if at all possible because it’s a financial burden. Saving is a discipline that rewards the saver with freedom and flexibility in the future. I don’t think my children have to make the same financial mistakes other people have made in order to learn. They simply need to find a model of financial success that doesn’t conflict with their values. I rather be a role model of good financial habits for my children instead of a financial wreck that scares them onto the path of prosperity.
More from this contributor:
How I Tricked my family into Saving Money
Aspiring to be Comfortable, Not Rich
Financial Lessons My Sons Taught Me