What is a hard personal finance lesson that most people learn too late in life?

I often write on Quora.com, where I am the most viewed writer on financial matters, with over 257.2 million views in recent years.

In the answers below I focused on the following topics and issues

  • What are some hard personal finance lessons that most people learn too late in life? I focus on a range of issues, such as the fact that academic success doesn’t guarantee financial accomplishments.
  • How can you get support from rich people? Or perhaps, rather than support, people should focus on co-operation and learning from others?

Some of the links and videos referred to might only be available on the original answers.

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What is a hard personal finance lesson that most people learn too late in life?

There are too many. I will focus on some main ones:

  1. A high salary doesn’t guarantee high wealth.

The media love to imply that wealth and income are the same, and “wealth” people all spend lavishly.

The reality is more nuanced. The world is full of wealthy people who have only ever had a middle-income. Those are the get-rich-slow kind of people.

Then there are other people, usually due to bad spending habits or divorces, who have earned a lot, but are broke.

2. Academic achievement doesn’t guarantee wealth either

School and university isn’t real life. Some of the values as well, like “it is the taking part that counts”, also isn’t real life.

Getting good grades is great, but it doesn’t make financial success certain

3. Smart work is just as important as hard work

This is becoming a bigger issue in the digital age. Hard work is important, but working smart can become even more important.

Working hard at the wrong things can even be destructive. Life isn’t always fair.

4. Not everybody will celebrate your success

If you do succeed, don’t expect everybody to celebrate your success. Envy is alive and well.

5. Saving money is dead money

It doesn’t even beat inflation. Investing is the key. Yes it is more volatile, but it has always beaten cash long-term.

A simple Google search comparing the long-term performance of the S&P500 or Dow Jones to cash will show people that.

6. If you are failing, it is partly your fault.

Life happens to us all. As mentioned above, life also isn’t fair. Yet we live in a culture where people are encouraged to blame others for their situation.

Many people are, in reality, doing silly things. For instance, as per the video below, most university students are indirectly wasting millions!

7. Time is more important than money

If you look after time, as per the last video, money is more likely to flow in any case.

8. Don’t try to be all things to all people

If you go into private business, don’t try to please everybody. The most successful businesses turn people away.

Think about clubs and bars as one example of many. Most go out of business.

A small percentage have waiting lists, and can be very strict about criteria for even getting in the door.

They don’t care if 95% of people don’t like these rules.

9. There are many things we can’t control

It is pointless to worry about the direction of politics, the stock market or many other things.

Best to just control what we can control, and manage risk based on those factors.

10. Relying on, and blaming, others is silly

Relying on the government, your friends, parents and other people is silly. Rely on yourself.

It is great if other people can help you out, but don’t put all your eggs in that basket.

Likewise, don’t blame “the rich”, your parents or others for any lack of success

11. It is easy to give up too soon

The period after graduation is tough for many people. Success is more likely to come if you keep at it.

Success often looks like this:

12. You have been too cautious

As the saying goes, fortune favours the brave….especially if you keep being brave and persistent over long periods of time.

But society also teaches us that it is ” better to be safer than sorry”. The reality is, most people are too cautious about taking risks, even if they are young and have nothing to lose.

If you are 21, you won’t regret “losing” 2k on that business venture or investment when you are 30, never mind 60!

It makes more sense to become more cautious when you have more and are closer to retirement, not when you have less.

What’s more, taking no risks and doing nothing, can indirectly result in you taking more hidden risks.

Putting money in the bank isn’t risk-free. It is a guaranteed lose to inflation. Staying in a job you hate isn’t risk-free for your health and finances.

13. Most people can get rich slowly

It is hard to get super rich. It is also very hard to become rich whilst young, if you define rich as being wealthy as opposed to having a high-income.

Yet most people, in relatively developed and high-income societies at least can get wealthy by middle-age, by taking advantage of compounding.

14. The market doesn’t care about you and your passions

The market doesn’t care about what you are passionate about. People care about you solving their problems.

15. Past success is no guarantee of future greatness

Just because you did great things in business, sport or any other domain in the past, doesn’t mean you always will.

Over-performance doesn’t last in most situations, and there is a reversion to the mean.

It is hard to teach an old dog new tricks. It is even harder to teach a previous successful old dog new tricks.

Many previously successful people get bitter that “i have all this experience and yet some youngsters are making more than me”.

Again, the market doesn’t care about fairness.

Again, the market doesn’t care about fairness.

16. Timing the stock market doesn’t make sense.

Only lairs can consistently beat the stock market by timing the right perfectly. 

Now sure, you might beat the market over a year, five or even ten by trying to time it. Over fifty years is a different matter. It is far better to just put your money in and forget about it. 

Most people, at least long-term, tend to regret financial speculation. Investing and speculating aren’t the same thing, and timing the market is only one example of speculation.

17. Don’t spend too much on houses and cars

Buying depreciating assets, such as most types of cars, in excess at least, doesn’t make sense. 

What also doesn’t make sense is spending the maximum possible on your primary residence/house. 

A primary residence isn’t the same as a rental property or a stock market investment.

In some ways it can act as a liability. The bigger the house means the more the bills, taxes etc. 

What’s more, unless you sell it or downsize it, any increases in capital gains won’t matter too much.

Best to just buy the minimum housing for your needs to be comfortable. Not the maximum.

Beyond that, be careful with liquidity. Houses and your own business aren’t liquid assets which can easily be sold in an emergency. 

In fact, sometimes you can even struggle to find a buyer to begin with. If you want to buy houses, best to have a diversified portfolio, which includes liquid assets like ETFs as well.

This will limit your risk if an unexpected event happens, without affecting your upside.

How can I get financial support from rich people?

Nobody, regardless of their background, likes to think somebody is just looking out for self-benefit.

Therefore, the more productive way is to focus on potential win-win partnerships with wealthier people.

Don’t focus on getting financial support from rich people. Most rich people came from nothing or middle-class backgrounds at best, so it makes more sense to learn.

Focus, instead, on

  1. Finding out what made them successful. Read their books, watch their interviews. Don’t just focus on very famous people. Also focus on people in your industry or company you admire.
  2. Then work out which of those characteristics are applicable to your situation. Plenty of wealthy people earned their money in a different time, or in an industry you aren’t in. That is why I mentioned on the previous point that it is also good to focus on somebody in your own circle or industry you admire for their present performance.
  3. If you are in business, focus on solving their problems. If you can save people time, money and hassle, you can engage in a win-win relationship. So, rather than trying to look for them for financial support, sell to them or learn from them.
  4. Create a business yourself which is successful. Then pitch for a private investment from a wealthy person, rather than expecting funding just for a good idea. Shows like Shark Tank and Dragons Den have fuelled the idea, amongst some, that you need private investment to have a successful business.
  5. Network more. Meet more wealthy people at networking events, offline or online. Don’t try to get something from them. Just learn. The comparison I will make is this. Imagine you want to lose weight. What is better? Meeting with a bunch of people who love drinking and eating fatty foods, or going to sports clubs and joining healthy living events? The answer is obvious. The same is true of wealth. If you network up, no matter how wealthy you are, that will have benefits as opposed to networking down. It will subconsciously form habits.
  6. Or get a job working for a wealthy person directly. Learn from them. Make yourself a key part of the team. If you are young and don’t find it easy to get an internship, write a letter or email to businesses and founders you admire the most. Focus on a problem they might have, like a lack of online presence. Then offer to help them fix that problem in three months without pay. If you do as you say you will do, you are more likely to get a permanent position. Now sure, not everybody can afford to do that, but some can as students.
  7. If you own a charity, then that is a bit different. In that case, focus on what those wealthy people are passionate about in terms of causes.
  8. Also be very persistent and start cultivating the habits of many of those people you might admire, like living below your means, working hard and smart etc.

As an aside, I have learned something. That is that we can learn something from everybody we meet.

Rich, poor or middle. Of course, it is better to learn from people who you want to be like, but every person you meet has at least one piece of information that is useful for you.

Pained by financial indecision? Want to invest with Adam?

Financial Planner - Adam Fayed

Adam is an internationally recognised author on financial matters, with over 257.3 million answers views on Quora.com and a widely sold book on Amazon

Further Reading 

In the article below I spoke about the following issues and subjects:

  • Will the tech bubble burst in 2021? Or perhaps it is the wrong question and there isn’t a bubble to begin with?
  • Is the widening gap between rich and poor for political reasons? I explain why changes in the world economy, such as the opening up of China and the former Soviet countries, alongside technological developments, is a bigger reason for this gap than politics. 
  • Is $1m enough to retire if you are young? I look at all the variables you should consider before retiring on a given amount of money. 
  • Why do people worry when stock markets are crashing? Is it fear and other emotions, lack of knowledge or something else? I examine the many, often complex, reasons people panic sell during these extreme moments.

To read more click below 

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