Friday, October 10, 2014

My answer for Quora. What are some smart moves a 22-year-old can make as soon as he/she starts earning?

What are some smart moves a 22-year-old can make as soon as he/she starts earning?

I'm sure there are many different cultural and economic specific situation to account for. My assumptions are U.S. middle class, and resident. I think many of the answers above are all great tactical advice. I think you want to step back and look at the big picture of your life.

My first and only financial advice is to set some goals. Decade by Decade..
My plan was to start my own business by 30.
Have net worth of $1M by 40.
Have the option to retire from work by 50. 

You goals will be different but until you have some goals you can't judge any of these advice are worthwhile or not. You need a yardstick to measure your progress in life.

The second part of my financial advice is to track your money carefully. Doesn't matter if you use paper and pencil, spreadsheet, or personal finance software, but learn to track your income and expense down to the smallest detail. This skill is like a muscle. If you're successful, your financial records and taxes will get more and more complicated. You need to build up the financial muscles for tracking and thinking about all your expenses and income sources. The rest is all up to you. Keep your expenses down. Make a budget. Diversify your income. All these goals requires you to track your money and make money work for you. This skill will be invaluable if you start your own business. Tracking your income and expense regularly will help save you considerable time and frustration when doing taxes.

The third part of my financial advice is to diversify your income sources. Make higher salary is great but you can get laid off any time. Start a consulting business and some clients doesn't pay or sues you. Buy rental properties, and some tenants will not pay rent. Buy 401k and invest in stock market with all the tremendous ups and downs. Buy CD with fixed income and inflation increase higher then the CD rates. I don't believe there are any risk free financial instruments. The only way to go is to diversify your income sources, and make enough margin so you can hire other people to manage the income source for you. You focus on growing and diversify multiple streams of income and scale up your financial power over time.  Hire other people to manage any single income sources.

My second advice is to find the love of your life..
With luck your life will be will long, find the right person to spend your  life with will be the happiest thing you ever do for yourself. No matter how much money you have or how successful you become at work, I don't think you can be truly happy unless you have someone to share it with.

My third advice is to practice life work balance.
You will never find that balance for long. Life and work change too quickly but as a skill you can learn to re-balance  more quickly over time. Learn what it takes to recharge your personal battery and your family's batteries. Traveling, vacation, reading, sports, volunteer, whatever. Don't wait until you're burned out to recharge. Recharge often!

My forth advice is start a diary or a blog..
And write in it regularly and often, about the things that you are grateful for in life. You will look back over time and be amazed. Human memory is a strange thing. People tend to remember the painful things and forget about the good things. You need to write it down to compensate. You'll live longer and be happier for it.

My 1ast advice is to do something personal, beautiful and creative. If you are like me, my life up to the point of college graduation was planned or filled with external expectations. Which school I go, what classes to take, what activity to do, what books to read, etc. There is something freeing about turning 22, graduating from college and making my own money. You will have the time, and the financial means to pursue something personally beautiful, creative, and emotional rewarding. Drawing, dancing, playing an instrument, singing, hiking, golfing, photography, etc. You don't have to be good. This is not an competition. This is fulfilling your personal need for beauty and freedom in your own life. I started photography once I had enough money to buy decent gears and taking photography classes. Now, I'm learning to play the piano with my kids.