While I don’t believe I can check the box of being considered “old” (my kids may disagree), I do believe that I’m crossing the point of having experienced a lot of things.
This fact isn’t lost on the younger generation and I’m finding myself with more than one request from a 20-something year-old to pick my financial brain.
You see, I’ve been in the business often times longer than they’ve been alive.
Perhaps I’m too nice of a guy, but more often than not, I agree to meet with them. This takes a significant amount of time to coordinate our schedules because they’re ‘busy’, and…well…I’m busier. Not in a prideful way, but in a I’m a CEO of a fairly large organization, and my time is booked out months in advance kind of way. (Shout out to my EA, Kelli Smith, for keeping track of it all!)
I recall being 20-something as well.
Granted, it was a long time ago, and half the interesting financial tidbits of 2024 weren’t even in existence when I was that age. Examples are numerous: Crypto, meme stocks, free stock trades, and AI just to name a few. So, when the meeting with my 20-something occurs, I must be ready for any and all barrages of questions. And, I’m prepared. I’ve heard it all. And, being a fairly opinionated person, I have an answer for most of what they throw my way.
I let them drone on about timing the market, which digital currency is going to the moon, what meme stock will go parabolic, what whole life insurance policy is sure to give them historically large cash value. I sit, sip my coffee (I usually buy, they don’t have any money yet), and wait for my turn. I typically book an hour with these 20-somethings and we’ll have already used up 45 minutes with their portion. I’m fine with that, as my rebuttal is short, pointed and simple. I need only 15 minutes.
So, I begin.
“Before we talk about investing in these interesting yet newfangled financial tricks, technologies and topics, let’s start with the basics. First, what’s the balance of your emergency fund? … I’m sorry? You don’t have one? Ok, let’s put a grand in that. Next, what’s your debt load? … [cough, cough, choke] I’m sorry, What?!?! How much? Holy moly that’s a big number for a 20-something. What’s the breakdown of that? Oh, so that much in college loans, that much in credit cards, that much in a car loan and you live in an apartment but want to move out soon to own your own home and need a mortgage. Uh huh. Ok, yep. Let’s come back to that one.”
I continue.
“Does your employer offer a 401k? Yes? Good. Are you contributing? … No? Why not? What’s their match? Huh? You don’t know? You’re leaving free money on the table. I wouldn’t worry about Bitcoin until you’re contributing enough into your 401k to take advantage of your employer’s full match.”
Almost done.
“You’re convinced you need a whole life insurance policy for cash value, you married? … Dating. Ok. So, what do you need whole life insurance for? … You don’t know? Insurance is primarily for debt payoff/reduction upon your death and income replacement for your spouse and children. Since you have debt, all you need is cheap term insurance to cover upon your death. If/when you get married, re-evaluate an income replacement for your spouse and up your term insurance at that point. Whole life insurance is rarely a good idea for a 20-year-old.”
Wrapping up.
“Do you have a Roth IRA? … No? Why not? You need to start one. Contributions go in after-tax and earnings grow tax free. When you withdraw from your Roth in retirement, no taxes are owed. It’s beautiful, please leave here and go open a Roth IRA. And once you’re done filling up your emergency fund and maxing out your employer’s 401k match, put as much money as you can in it. Yes, there’s a max dollar amount you can contribute, but very few 20-somethings will be able to max it out. But you should try.”
I conclude.
“I’m sorry, I guess I didn’t directly answer your myriad questions about Ethereum, GameStop, the get-rich-quick plan, and Roaring Kitty, but it looks like we did uncover quite a few other possibilities for you to consider on your path to financial independence. My encouragement to you is to keep it simple. Don’t get caught up in financial euphoria. Focus on the inputs and let the market compound the outcomes.”
“The primary factor influencing financial outcomes over the long term isn’t investment performance or keeping up with the current trend on CNBC. The primary factor is investor behavior. Doing the right thing over and over again. Putting money into the market each month, each paycheck for a career will compound to wealth beyond your imagination. Consistency compounds.”
I rise from the table to indicate our time is at an end. We shake hands and say goodbye.
As we depart, I offer my last bit of encouragement.
“You were made on purpose, for a purpose. An investment in yourself is the best investment you can make. Go be a blessing to those around you today! And turn off the TV!”
