Financial Hypothetical Question

[Evans, Marv]

Decades ago when I was teaching high school age kids I used to try to instill some ideas & perspectives that might pay off later. Of course they know everything, but I had an approach to getting them to accept someone older & with more life experience might have something of value for them to consider. I'd ask them at what age they became aware they weren't a little kid anymore. Most of them would say maybe 12 to 14. I'd comment that was about right, so awareness wise how old did that make them? Of course the answer was three, maybe five years. Then I'd point out how much their awareness had developed during that three to five years, which they would realize was a lot. Then I'd point out how old adults were relative to them and how much their awareness must be in comparison (in most cases). Then I'd let them know whatever advice I gave them was optional, & they could take it or leave it or think about it later on. I think that approach served several well. At least those who came back over the years to say hello seemed to indicate that. My idea for them was life would get messy as it does for everybody, but to keep in mind some of the worthwhile things older people had said.

[epbrown]

Originally Posted by Pazuzu

EDIT: Nevermind, I didn't read your last line, forget everything I said. Tell him to invest in Bitcoins.

interesting responses, similar to many of my own. Really, I think it'll be a few years before he'll really do something constructive. I was mid-20s before I set a serious financial goal and laid out a plan.

Anyone seen The Score? Our conversations remind me of that scene where old criminal Robert DeNiro tells young criminal Edward Norton to make a list of what he wants and plan on spending 20 years acquiring the items, and Norton's character scoffs.

[Tidybuoy]

Originally Posted by Ayles

No financing wheels for his car...

What? I don't understand.

[sammyg2]

[mepstein]

Hookers and blow.

[Seahawk]

There are no hypothetical financial questions if you manage your money well. Zippy. The math always pencils out. It simply does.

There is no more powerful metric than compound interest over time. One, as Tabs would aver, needs discipline and a readiness to build a nest before taking risks.

As an Ensign in 1984, I put $200 a month into a USSA growth fund. Still do. Amazing return...

See below, no better advice. The 'marry well' portion of the post is penultimate. Do that and win.

Originally Posted by LWJ

First. He isn't really listening. So this is for other 19 year olds that will listen.

1) Live well below your means. Try to spend 50% of your take home. Invest the other 50%.
2) Leverage with an eye on risk.
3) I like real estate. If he can buy a duplex, triplex or four plex, do it.
4) Hire a property manager for the legal end but do as much of the maintenance as possible yourself.
5) Add to the mix every year but caution to being over extended. I think Oregon is at peak value on RE for a while. It is very pricey in Portland.
6) I am a big fan of buying cashflow. Working people will always need housing. Buy in secondary or tiertiary markets that have good infrastructure.
7) Work on your career. Investments are great but a career can pay very well which gives you more to invest.
8) Marry well. A sane spouse is a great investment. Divorce is a huge destructor of wealth. Best yet, marry someone with a killer career or portfolio.
9) Life -work balance. I could retire today at 52 but I still would be earning / doing something with my time. I have friends that are trust funders who loaf at home all day. I don't envy them.
10) Remember that children are costly.
11) Don't be a zealot. Your time on Earth is limited. Enjoy it.
12) Be a good human. Karma pays large dividends.

[ckelly78z]

If he has no real expenses, put 20% away into mutual funds that return well. When he gets enough to buy property, get into real estate.

[KFC911]

Originally Posted by ckelly78z

If he has no real expenses, put 20% away into mutual funds that return well. When he gets enough to buy property, get into real estate.

The kid is not living in the "real world" yet....I didn't start "saving for the long run" until I was about 25 or so...then paid off an expensive sports car . After college....working my dream job in communications r&d for peanuts, living on my own ...I was broke . Not really...but I was also being a kid and having the time of my life....balance. Didn't start over again in ernest until I was in my late 20s....

[Norm K]

Originally Posted by Seahawk

See below, no better advice. The 'marry well' portion of the post is penultimate. Do that and win.

Actually, "Don't be a zealot..." is penultimate, while "marry well" is pre-preantepenultimate.

_

[biosurfer1]

If I could go back and talk to 18 year old me, I would tell him don't ever, EVER, get into real estate, at least not residential.

I know it's mostly California, but the scum bag tenants, laws, court system, etc don't even come close to making it worth it. Sure, you might end up a millionaire when you retire, but the years and years of putting up with evictions, sob stories about non payment, lies, cheats, stress, problems will mean you probably won't live to enjoy it if you can even remember what joy is at that point.

Maybe commercial real estate, even with the much higher cost of entry, but more likely just invest in dividend growth stocks.

[aschen]

max legal limit for 401k and Roth starting the next pay period, or as close as he can get.

He should be able to live easily on ~1000 / month with free housing.

He may be a dumb kid but if he is truly focused and ambitious on being an entrepreneur he will probably pull it off after a few hard lessons.

[Rich76_911s]

Obviously, I don't know this Kid at all, but if he has that get rich quick mindset it might be a good time to let him invest in some get rich scheme.

If he follows the wise choice now but sees returns that fall short of his expectations, later when you're not there to guide him, he'll decide to try the get rich quick scheme with more money.

Some lessons have to be learned the hard way.

I also don't know what business he's in, but using his money to further his education is probably the best thing he could invest in.

[jhynesrockmtn]

The real money I've made over the last 30+ years was in real estate. Single family rentals, small apt building.

I had a cousin who graduated in the 70's with a Masters in Psychology. Unable to find a decent job, he started buying run down homes, lived in them while he fixed them up and over the years built a small fortune.

Admittedly he was a bit unusual and died before he should have :-)

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I'd buy a duplex that needs some cosmetic stuff, live in half, rent the other out. When it's in good shape and you can afford another, repeat.

[ohdavey6286]

I meet so many people (young-old) who ask me for advice as soon as they hear what I do for a profession. When you tell them that its not the "get rich quick" scheme they had in mind, it all goes right out of the window...

[KFC911]

Originally Posted by ohdavey6286

I meet so many people (young-old) who ask me for advice as soon as they hear what I do for a profession. When you tell them that its not the "get rich quick" scheme they had in mind, it all goes right out of the window...

So whaddayado....I wants to be rich...I've got until the weekend though....so there's really no rush

[rcooled]

Originally Posted by jhynesrockmtn

I'd buy a duplex that needs some cosmetic stuff, live in half, rent the other out. When it's in good shape and you can afford another, repeat.

I've seen this strategy work out very well for several people I know. If you're going to deal in residential real estate, this is the way to go. Duplex first, then move up to triplex or fourplex as finances permit. One flaky tenant will not sink the whole ship, as is possible with a single-tenant rental. Commercial real estate is easier to deal with (fewer laws protecting problem tenants) but cost of entry is typically much higher.

That being said, I would think that very few guys his age would have the necessary focus and discipline to see a plan like that thru.

"I wants to be rich...I've got until the weekend though....so there's really no rush." I think this pretty much sums up your average 19-year old's mindset when it comes to finances.

[Drbraunsr]

The best investment ? -- himself.
Still living at home with no kids - take his five grand and get his next level degree.
It'll take more than five grand but he's working with little or no overhead.
Turn that $30K income in 60 - 80 pretty darn quick.

[epbrown]

Originally Posted by Drbraunsr

The best investment ? -- himself.
Still living at home with no kids - take his five grand and get his next level degree.
It'll take more than five grand but he's working with little or no overhead.
Turn that $30K income in 60 - 80 pretty darn quick.

Where we work has tuition reimbursement - they cover 95% of school and it doesn't have to relate to work in any way (my old job required that). And since we work nights and only 4 days a week, it should be totally feasible. He's not interested, of course.