A few things I’ve come to realize about money as I recently hit the mid-point of my 30s…
1. A successful financial life comes from increasing your career prospects and saving the difference, but that doesn’t happen with lifestyle creep. Most personal finance experts talk about how much you can save from cutting back, but very few talk about the benefits of finding ways to earn more money. A combination of the two helps with financial security, but the biggest thing most people have a hard time with is keeping their standard of living relatively constant when they do finally start making more money. The secret sauce comes from making more money while not wanting more stuff.
2. House payments act as a form of a fixed income investment. One of the best things about a fixed rate mortgage is the fact that you know exactly what your payments will be every single month of every single year you remain in that house. This is a great thing for financial planning purposes. And paying down your mortgage offers a guaranteed return based on the after-tax interest rate on your mortgage. Pay a little more each month and that return improves. Housing has not been a great investment historically. But being a homeowner offers a simple way to slowly turn a liability into a valuable asset that can provide psychic income.
3. It makes sense to pay up a little for good beer. This is something I did not value highly enough in my 20s as quantity won out over quality. Craft breweries might be getting a little out of control with some of their new flavors, but to me the number of new breweries popping up is one of the few bubbles where everyone wins.
4. It rarely makes sense to pay up for good wine. Expensive wine, on the other hand, is overrated. You shouldn’t have to pay more than $20-$50 for a really good bottle of wine. In a tasting most people can’t tell the difference anyways.
5. Spending money on time is always a good investment. This one became even more apparent to me when my daughter came along, but it certainly makes sense when you want to focus more time on your career, as well. In the past there were a number of tasks that I would do myself out of principle alone. Why pay someone else for something I’m able to do myself? I’ve now realized that outsourcing makes sense when it gives you more time to do things that are really important to you.
6. How much money you make has diminishing returns over time. After a few years in the workforce many people will start to figure out their number. If I could only make $X a year I would be set. The problem is that once you reach that level there will always be another one and then another after that you’ll be striving for. It’s obviously not a bad thing to make more money, but making more money alone isn’t going to make you happy.