How often do you think about your future self? Often? Seldom? Wherever you’re at on that spectrum, my bet is that you’d be better off thinking about your future self more often. Before you do anything, it’s helpful to ask yourself: “Is this going to benefit me more now or in the future?” If your answer is that you’ll be benefited more now, you may want to reconsider your options. You can apply this advice to many different areas in life, but let’s focus on how it can help you manage your money better and make you a better investor.
Here are several ways to prevent your 70-year-old self from hating you:
1. Get life insurance for you and your family
If you’re married, make sure you and your spouse have adequate life insurance policies. Coverage of ten times the annual salary of an income producing spouse you don’t realize how much money they save you until they are not there to do all the things that they do.
2. Harness the power of compounding over time
Albert Einstein has been quoted as saying, “Compound interest is the eighth wonder of the world. He who understands it, earns it . . . he who doesn’t . . . pays it.” Well said Mr. Einstein. The ability to compound adds an incredible financial advantage. As interest or earnings are added back to the principal, your money can start growing exponentially over time.
Did you catch that? Time plays an important role. The less you have of it, the less potential you’ll have to see exponential growth in your portfolio. If you want your 70-year-old self to love you instead of hate you, take advantage of the power of compounding early in life.
3. Find new business opportunities and build a solid career
Just about every day I see new business opportunities. It took me a long while to get to that point, but the more I practiced, the more I saw them. You know what they all have in common? They require work – usually hard work. There are three things you can do when you see a good opportunity: (1) give up because it looks like hard work, (2) put it on your to-do list and get it done, or (3) delegate it to someone who can get it done for you. The first option is taken all too often. Thomas Edison was once quoted as saying, “Opportunity is missed by most people because it is dressed in overalls and looks like work.” So true.
The second option is great when you don’t have the capital to pay others or when you think you’re the only one who can accomplish the task. The third option is very powerful as it can allow you to focus on what you do best and still get the job done. It frees up your time, promotes business growth, and can feed a lot of fantastic hard-workers out there.
4. Review your beneficiaries on a regular basis
Did you know that a beneficiary on an asset like an IRA account usually overrides who’s named in your trust? That’s why it’s so important to review your beneficiary designations. I’ve heard pretty horrible stories, one from one of my clients, where because someone was a beneficiary on an account, they got the money instead of someone else who was the intended beneficiary on the will. Don’t let this happen to you or your family. It can tear them apart.
5. Stay away from unreasonable and unnecessary debt
Debt can really hurt you. There are times where going into debt would be reasonable and necessary. Then there many more times when it’s not.
Stay away from payday loans. The interest rates are usually outrageous, and many times they’re unnecessary when you could just sell a few expensive household luxuries (like that flat screen television or surround sound system) and have enough money to pay some bills.
Stay away from vehicle loans, too. Did you know that dealerships make a lot – if not most of – their money from vehicle financing?