What I Wish I had Known When I Was Younger

What I Wish I Had Known About Money When I Was Younger

By Jim Shellenberger, CFA, CFP®

Money is an essential part of our lives, yet many of us often don’t learn the fundamental principles of personal finance until later in life. Many schools don’t offer personal finance education, and it’s not a given that your parents will teach you the basics. Adding to that, when we are younger, we tend to focus more on our present wants and needs and less on long-term financial planning.

All this adds up to the point where 57% of U.S. adults are not financially literate and 77% are anxious about their financial situation. This lack of knowledge has clearly led to significant problems in many lives. However, it doesn’t have to be this way! 

By learning the basics of personal finance early on, we can set ourselves up for a bright financial future and avoid common pitfalls. This article will explore three key things I wish I had known about money when I was younger and provide insights and tips that can help you on your own financial journey. Whether you’re just starting out or looking to improve your financial literacy, this post is for you.

Power of Compounding

“Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” This popular quote is from Albert Einstein, and I wish every young person would learn this concept as soon as possible. Simply stated, compounding is the process by which your money grows over time by earning interest on the interest it had already earned. In other words, the sooner you get your money invested and earning something (even if you don’t contribute much to start), the more time your money has to grow and compound, leading to greater wealth in the long term. 

One way to understand the power of compounding is to use the “rule of 72,” a nifty trick that will tell you how many years it would take to double your money. To get your answer, take the number 72 and divide it by your annual rate of return. For example, if you were to invest and earn a 6% annual rate of return, it would take approximately 12 years to double your money. If you were to earn a 12% annual rate of return, it would only take 6 years to double your money.

Money Can Be Both Good and Bad

Money isn’t necessarily good or bad in and of itself. What’s more important, and what I wish I had known when I was younger, is that how money is used can be both good or bad. On one hand, starting to save and invest early, and being consistent with your savings, can have a tremendously positive impact on your financial future.

For example, if a 22-year-old saves $500 per month until the age of 65, while earning a 7% rate of return, in 43 years they will have $1,648,047. I’d say that’s a pretty good use of money!

On the other hand, taking on too much debt, especially high-interest credit card debt, can have the opposite effect and harm your ability to reach your long-term financial goals. High interest rates can quickly add up and make it difficult to pay off, adding extra levels of stress to your life and hampering your ability to save for the future. While I don’t believe all forms of debt are inherently bad, I do think you need to be cautious when taking it on.

Money Is a Tool

Finally, I wish I had known that money is simply a tool, nothing more and nothing less. But to use this tool properly, you need to know what you’re using it for. What goals do you hope to achieve? Why is it that you save so much? Why do you spend money on the things you do?  

Understanding that money is a tool that can be used both wisely and unwisely (as well as knowing the deeper reasons you spend and save money the way you do) will not just help you create a more meaningful financial plan. It can also help to release some of the emotional ties many of us have to money in our consumer-driven economy. Money is a powerful tool that can be used to create positive change in your life and others, but it’s important to understand its role and how to use it effectively.

Making the Most of Your Money

Wherever you are on your financial journey, and no matter how much or how little you know about money, it’s never too early or too late to improve your situation. If you’re looking for personalized guidance and support, reach out to us at jshellenberger@frontierasset.com or 307.673.5675 to start your financial journey on the right foot. Remember, the earlier you start, the more time you have to build wealth and a stable financial future.

About Jim

Jim Shellenberger, CFA, CFP® is a financial advisor at Elevate Wealth Management, an independent, fee-only wealth management firm serving young professionals, pre-retirees, and retirees in Sheridan, Wyoming, and surrounding areas. With the mission of serving and educating, Jim is dedicated to providing comprehensive, top-notch services that not only help his clients reach their goals, but also empower them to make the best financial decisions for their lives and walk toward their future with confidence. Jim is known for going the extra mile, not only offering valuable knowledge in investment management as a former investment analyst, but building long-lasting relationships so he can give honest, customized advice and strategies that make an impact on their lives. 

Jim has a bachelor’s degree in business administration with a minor in finance from the University of Wyoming. He is proud to be a Wyoming native and loves exploring the outdoors with his family—hiking, fishing, hunting, and backpacking. Faith is an integral part of Jim’s life, and he always looks forward to attending church on Sundays, Bible study on Fridays, and being part of his church community. He’s also an avid sports fan! Fun fact: Jim owns shares in the Green Bay Packers. To learn more about Jim, connect with him on LinkedIn.

The views expressed represent the opinion of Frontier Asset Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and nonproprietary sources that have not been independently verified for accuracy or completeness. While Frontier Asset Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. The use of such sources does not constitute an endorsement. Frontier does not have an affiliation with any author, company or security noted within. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and the Frontier Asset Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. Past performance is not indicative of future results.

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