Dear 16-year-old Lauren,
Hey! This is going to be one of the strangest letters you’ll ever read because it’s from yourself 14 years in the future. You’re 16 right now and in high school. I’m 30, married, have a career, and am building some wealth you’d be proud of. There’s some stuff about money I’ve learned since I sat where you are now that I’d like you to know.
1. The people around you with the nice stuff probably aren’t as rich as you’d think.
I know you get envious of the Christmas presents your best friends get every year. It’s hard to believe they got a Playstation and an Xbox at the same time. Their parents are going to have trouble retiring. And that kid a few blocks away with the new go-ped? His dad’s company is going to fail because of some interesting accounting practices. There’s a difference between material things and wealth.
2. Mom and Dad are not “cheap,” they’re prudent (and you will be, too).
Yes, dad often wears worn out clothes around the house and mom shops at thrift stores for everything. It’s frowned upon to order a soda when we’re out to eat because water is free. I know that’s frustrating, but it’s going to pay off. They must save now so we can do really fun stuff later. Wait until you see the wedding they pay for!
3. Yes, you will make more money later, however, your money is valuable now.
How’s the job at Chick-Fil-A going? Did you do the math yet of what you’re making? The 10 cents per minute probably doesn’t seem like much, but if you save it instead of buying a couple new Hollister shirts, it will be worth it later. Even $50 could be thousands later.
4. You can start a Roth IRA as soon as you make taxable income.
Did you put your savings into that CD yet? We should have put that money into an Individual Retirement Account. You can do that once you have W-2 income, which is what you have from Chick-Fil-A. Dad will explain IRA’s to you in a few years, but you should ask him about it now.
5. Credit cards are only a bad thing if you don’t pay them off every month.
You’re hearing how bad credit card debt is, and it’s true. That’s why you’re using a debit card. It would be OK to have a credit card if you just pay it off every month though. You’re more protected from fraud and you could get cash back.
6. You don’t have to work for every dollar you have; your money can work for you.
It’s easy to think taking that $200 paycheck to the mall and buying some clothes makes sense. I know it’s what your friends do. Get this, though, you could invest $100 and have that could grow to $110 by the end of the year. Then that $10 extra you made then starts making money too. You’ll read a book someday that says your dollars are your employees and they have employees that also work for you and your mind will be blown.
7. There’s a difference between money and net worth.
Do you remember when we asked dad how much money he had? He said $50 and we were satisfied with that because that’s the cash he had in his wallet. He probably wanted to tell us about net worth, which is the value of everything you own, less what you owe on it. Some neighbors have nice cars and big homes, but Mom and Dad will have more net worth than them soon enough.
8. Surround yourself with people who understand your relationship with money and are not bad influences.
You’ve always been more of a saver than your friends. They’re not going to get it for another decade or so. Still, don’t let them convince you to spend more than you’re comfortable spending. Better yet, find people who feel and save the same way you do.
9. It’s great to save for a rainy day, however, it’s also good to treat yourself from time to time.
You’re going to save most of what you make for a very long time. When your college friends go on that $500 cruise, don’t say no. You’ve got plenty of cushion and it’s OK to spend money on experiences.
10. Money is morally neutral.
Money is neither good nor bad. Money is not power. It is simply a tool and is morally neutral. You’ll learn this in a book too. It can be used for good or bad things. Learning this now will shape your relationship with money for the future.
I hope you found this helpful, younger self. Keep working hard in school. That work ethic is going to take you places and set you up nicely for the future. It’s all worth it.
PS – See if you can get the parents to buy some rental properties in 2009.