What we wish we knew about money before we turned 18

As a financial professional who has spent years helping clients optimize their finances and build wealth, I often reflect on the financial lessons I wish I had learned earlier in life. Recently, my family and I had a candid discussion about the financial knowledge and principles we wish we had known before age 18, as well as the valuable financial lessons we’re grateful to have learned in our youth. I’d like to share some key insights from that conversation, as I believe they can benefit anyone looking to improve their financial situation, regardless of age.

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The Pitfalls of Aggressive Debt Payoff

One of the first topics that came up was the common advice to aggressively pay off your mortgage as quickly as possible. While becoming debt-free is generally a worthy goal, we found that laser-focusing on paying off our house actually created more financial stress than freedom.

“We were very diligent in paying off our house, directing a lot of our finances towards that goal of paying off the house. But in doing that, we neglected other areas in our finances. And because we didn’t have a cash cushion that really put a crimp in our lifestyle and in our finances, it was more stressful than if we had just been making regular monthly payments.”

The lesson here is that balance is key. While it’s important to pay down debt, it shouldn’t come at the expense of building up liquid savings and investing for the future. A more moderate approach that addresses multiple financial priorities simultaneously is often the wiser path.

Understanding True Financial Priorities

Another crucial lesson we discussed was the importance of truly prioritizing your own financial wellbeing.

“People talk about putting yourself first. Well, what does that really mean? I thought it meant you pay your electric bill, you buy your food, you buy your clothes, your housing, you pay your bills so that you can take care of yourself. Those things are important. Absolutely. But those are really part of your living expenses. So your lifestyle, it’s not saving money to keep for your future.”

This insight highlights the need to differentiate between covering basic living expenses and actually building wealth for your future. True financial prioritization means setting aside money for savings and investments before allocating funds to discretionary expenses.

The Importance of Financial Education Structure

Our son brought up an interesting point about the structure of financial education. While he had learned some financial math concepts, he felt he lacked a comprehensive framework for financial knowledge. He referenced a quote from Elon Musk about viewing knowledge as a “semantic tree” – understanding the fundamental principles before getting into the details.

This speaks to the need for a more holistic approach to financial education, covering topics like:

– Fundamentals of business and bookkeeping

– Different types of taxes and their implications

– How to apply financial math to real-world investment scenarios

– The basics of financial goal setting

By building this foundational knowledge early on, young people would be better equipped to make sound financial decisions throughout their lives.

The Value of Whole Life Insurance

One topic I’m particularly passionate about is the value of whole life insurance as a financial tool. In our discussion, my wife mentioned wishing she had known more about the benefits of whole life insurance earlier in life:

“If we had known about the benefits of whole life insurance, I think, you know, in retrospect, I think we would have chosen to get whole life insurance for the value it would give us long term.”

As someone who now specializes in designing high cash value whole life insurance policies, I can attest to the power of this financial tool when used correctly. Whole life insurance provides not just a death benefit, but also builds cash value that can be accessed during your lifetime for various financial needs. It offers guarantees, tax advantages, and flexibility that many other financial products lack.

Understanding the Cost of Capital

Another critical lesson I wish I had learned earlier is the importance of understanding and recovering the cost of capital. As I shared in our discussion:

“I wish that I would have learned how to recover the cost of capital and not be so fearful about paying interest to other people before I was 18.”

This fear of interest led me to make decisions like aggressively paying off our mortgage, which as mentioned earlier, actually created more financial stress. Understanding that interest is simply the cost of using capital, and learning how to leverage capital effectively, can open up many financial opportunities.

The Power of Financial Goal Setting

Our son, John, also brought up the importance of setting specific financial goals:

“Something I wish I would have known before I was 18 is more about financial goal setting. I feel like I was afraid to set some financial goals early on that were specific enough because I didn’t want to be too overconfident.”

While it’s important to remain flexible, setting specific financial goals can provide direction and motivation. It can also, as our son noted, “provide insight into God’s direction in your life” as you work towards those goals.

Valuable Financial Lessons Learned Early

While we all had things we wish we’d known earlier, we also recognized many valuable financial lessons we were fortunate to learn in our youth:

Basic math and critical thinking skills: These provide a foundation for understanding more complex financial concepts later in life.
The importance of saving: Learning to set aside a portion of every dollar earned is a crucial habit to develop early.
Work ethic and the value of service: Understanding the connection between work, service, and financial opportunity is invaluable.
The concept of moderation: Realizing that happiness doesn’t come from constantly acquiring more possessions helps avoid the trap of overspending.
Gratitude and giving: Cultivating an attitude of gratitude and a spirit of generosity can actually lead to greater financial creativity and productivity.

Practical Steps for Financial Success

Based on our family’s experiences and the lessons we’ve learned, here are some practical steps I recommend for anyone looking to improve their financial situation:

Build a strong foundation of financial knowledge, focusing on understanding core principles before diving into complex strategies.
Balance debt repayment with building savings and investments. Don’t neglect your future financial security in pursuit of becoming debt-free.
Set specific financial goals, but remain flexible enough to adjust as circumstances change.
Consider incorporating whole life insurance into your financial strategy for its combination of protection, cash value growth, and flexibility.
Learn to view interest as a tool rather than something to be feared. Understand how to leverage capital effectively.
Cultivate gratitude for what you have and look for opportunities to give back. This mindset can lead to greater financial creativity and satisfaction.
Start early in teaching children about finances, work ethic, and the value of service.
Remember that true wealth isn’t just about accumulating money, but about creating a life of purpose, service, and fulfillment.

While there’s always more to learn about finances, it’s never too late to start improving your financial knowledge and habits. By applying these principles and continuously educating yourself, you can work towards greater financial security and freedom, regardless of your starting point.

At McFie Insurance, we’re passionate about helping people optimize their finances through properly designed whole life insurance policies and sound financial strategies. If you’d like to learn more about how we can help you keep more of the money you make, grow your wealth, and achieve financial peace of mind, I invite you to schedule a strategy session with us. Together, we can work towards creating a financial future that aligns with your goals and values.

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