I’m 31 years old. Still pretty young to consider “retiring” in 5 years, right? Well, if I understood money at age 21 like I do now, I suspect I would be hitting my retirement number in 1-2 years. Reaching financial independence can be simple if you start young. I don’t think I made a lot of mistakes or foolish moves, but I wish I would’ve had more financial vision during a few key stages of my early adult life.

Stage #1 – College

I always hated school.  I started college at age 21 in 2008. Fortunately, my university was cheap (about $2200/semester tuition). Unfortunately, no field of study really kept my interest. I don’t know if I could’ve changed that, but I spent too much time bouncing between majors and taking unnecessary classes. Too often kids jump into an expensive college situation without realizing how much it can cripple them financially. Don’t let that be you. Don’t feel rushed to get out of school, just feel pressure to get the most out of  school! I felt rushed and didn’t approach it deliberately to get the most out of it.

A few takeaways:

1. Once I realized I didn’t want to be a doctor, engineer, or actuary, I wish I would have turned my focus to working and taken fewer credits. Spending time in jobs would’ve helped me realize what was worthwhile to study in school. Also, I wish I realized there were part-time jobs outside of retail. I think I could’ve landed a job with a startup or otherwise small company and been paid $15/hr. With companies like that, great employees can find opportunities to influence beyond their experience level.
2. Education is an investment. You want to buy low and sell high with investing. Perform cost-benefit analysis with your university and major selections. With higher education, price often doesn’t correlate to value. A computer science degree at a school with $50k/year tuition likely won’t land you a job paying proportionately more than a school with $10k/year tuition. Also, it’s nonsense to spend big money on degrees that employers don’t find value in.
3. Both of the above will help you avoid/reduce student loans. Luckily, my parents kept me naive to the existence of student loans until I was just about done with school.

Stage #2 – First Home

We got sick of paying $700/month for rent in a place we disliked, so we decided to buy a home in early 2012. Although, we could be financed for much more, we bought a 5 bed/3 bath home for $185k, put about 5% down, 15 year FHA mortgage, and 3% INTEREST RATE! We didn’t know a thing about investing, but we hated debt. First challenge was to get rid of mortgage insurance (MI). We paid off $27k in principal in about 18 months and got rid of MI. Later on, we set a goal to pay off our mortgage by December 2017. Instead we sold the house in April 2017 for $300k with about $63k left on the loan.

What I wish we did:

1. Home type: We should’ve bought a townhouse or condo. We didn’t need any more space than that. I rarely enjoyed our ¼ acre yard, but spent a lot of nights, weekends, and money fixing it. We tore out the grass, trees, fencing, and sprinklers, then had to replace everything and maintain it. 💰💰
2. Financing: I wish we used a 30 year mortgage. My 15 year $185k purchase equated to about a $1400 payment (including taxes, insurance and MI). A $125k townhouse over 30 years would have been closer to $750/month (assuming 3.25% rate). I wish I would not have paid an extra dime towards principal (only exception would maybe be to pay off MI). This would have freed up a lot for investing.
3. Stock Investing: By saving $650/month in payment and nothing towards exterior repairs/maintenance, I could have invested an extra $10k per year on top of the extra $1000 or so per month I was paying towards principal. I was paying 3% interest. During the 5 years I owned that house, the S&P 500 returned over 13% annually. If I invested $1700/month over those 5 years, I would have ended up with roughly $145k. I would’ve even come out ahead in a mediocre market at 5% growth. On top of the extra money we put into our house, we still funded a savings account every paycheck. I should’ve capped my savings account at about $10k and put the extra into the market.
4. Real Estate Investing: I wish I would’ve instituted a buy, hold, and move strategy with housing. When you buy a primary residence, you sign that you intend to occupy the property for at least the next 12 months. If you buy a primary residence as opposed to an investment/rental, you get lower interest rates and can use smaller down payments. I should’ve parked my money in the market, and pulled it out to buy a house every year, while turning my previous home into a rental each time. Using 30 year mortgages keeps payments lower and cash flow higher on rentals. Using this approach would’ve provided me $3k-4k/home in income per year, more tax breaks, and built equity while real estate values climbed.

Stage #3 – Earning and Saving

My first real job was at Wells Fargo in 2011. I started as a teller, making $11/hr plus bonuses (about $25k/year). A promotion 5-6 months later got me closer to $45k/year. Another promotion got me around $55k. I contributed 6% to my 401k, and the company matched another 6%. My wife was making more than I was. We had more than enough to cover our expenses, but in my mind we were still spending too much. I wish we had goals to spend less and save/invest more.

I also regret not being more bold about negotiating salaries. There are 2 ways to increase your savings rate: earn more or spend less. GO FOR BOTH! When I left Wells Fargo, I took less money to do a job I enjoyed more. They said “this is what the job pays,” and I accepted. I could/should have negotiated a higher salary. Had I done that, subsequent 5% or 10% raises would’ve been larger as well. After I gave my 2 weeks notice to become a real estate agent, my former company offered me a 30% raise plus other perks/stock. That just told me I should’ve been making more in the months/years leading up to that.

Final Thoughts

Think of all major decisions as investments. Investments don’t have to be financially motivated, but do consider the financial consequences. Ask questions like “what is my opportunity cost of this decision”, “what are the short and long-term pros and cons”, or “does this help/hurt me get the things I want.” I’ve said before that time in market is more important than timing the market. Get started in your early 20s, stay disciplined, and reaching financial independence will be a certainty. Most likely, you’ll reach it decades before your peers.