Advice to the Newlyweds!

Rob's niece recently got married. Here is the letter he sent them upon their return from their honeymoon.

As the two of you embark upon your lives together, I want to offer you some advice that is backed up by 28 years in the financial services industry. 

No one ever sat me down and taught me about money when I was young. Luckily, I started early and saw the dangers of money by learning from the mistakes of others.

Like everything in life money is both good and bad. It is simply another tool to use. It can be used properly, or it can be used improperly. If used improperly, it can be dangerous. Over the course of my career, I have seen people use money wisely and I have seen them use it poorly. Here are a few simple tips to help you use money wisely:

1.     Spend less than you earn: This is the most basic, most cliched bit of advice. However, if you don’t get this one right and get it right at the beginning, money will be a constant source of tension in your life together. Don’t let this happen. Argue over what’s for dinner…not who put more purchases on the credit card.

2.     Use credit wisely! Do not put more on your credit card than you can pay off each and every month. Never run a balance from month to month. This does not mean credit is bad. Borrow long term to buy a car, a house or to fund a child’s education. Don’t buy a TV on a credit card and only pay the minimum. Take advantage of a retail store credit offer, something that offers 0% interest if you pay it off in 2 or 4 years. Just make sure it is paid off at the end of the 0% time period.

3.     Pay bills on time! Use whatever method works for you but pay bills on time. Never be late. Late payments affect your credit score. A low credit score means higher borrowing costs.

4.     Be wary of debit cards. In fact, I recommend you do not use them. If some crook gets a hold of your card/PIN, they can drain your bank account. If some crook gets a hold of your credit card number, the most you can lose is $50.

5.     Save like your future depends on it…because it does! Put money into your company 401k. Start out by at least putting enough in to get the full company match. Then every year, increase your contributions by 1%. Just do it. Create side accounts or use little envelopes to save towards bigger purchases.

6.     Understand that unexpected expenses happen every month. Budget for them. Every month something will break, some need will arise. The expense may be small, like replacing a doorknob, or it might be large, like needing a new fridge or a big car repair bill. But they happen every month. That is why having some money in the bank is important.

7.     Put money where it belongs. The bank is for holding money to pay your monthly expenses and for expenses you know will happen with in the next couple of year (vacations, furniture, etc). You won’t make any money on your money held in the bank. That is ok, because it is more important that money does not lose. Investments are for the future: retirement, college, etc.

8.     Your co-worker or friend is not an investment guru. Most individual investors fail miserably. They invest on emotion instead of knowledge. Don’t fall for the hype. This also applies to the TV and internet. Jim Cramer is selling advertising time and books; he isn't giving personalized investment advice in a 30 second response to a "Boo Yah" caller.

9.     Use your BS detector. There are a lot of scammers out there. Use your head. Ask yourself: “does this make sense”. If you really aren’t sure, ask someone you trust for an honest opinion.

Well, I guess that is enough. There are lots of things in life that are important. Money is just one of them. It isn’t necessarily how much you have it is how wisely you use it. Oh...and you will make mistakes. When you do, take ownership of them, learn from them, fix them, stand back up, brush yourself off and start moving forward again.