Tag Archives: Debt

Stimulus, Inflation, Unsustainable Debt and America | Fidelity Investments and Peterson Foundation

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“America has been on an unsustainable fiscal path for many years, since long before this pandemic.” The Peter G. Peterson Foundation

  • The new $1.9 trillion stimulus spending package, on top of trillions already spent to revive the economy, is driving the national debt to unprecedented levels.
  • History shows that high government debt often leads to inflation, and an uptick in inflation is expected this year as the economy recovers.

The $1.9 trillion federal stimulus package will help many families, businesses, and state and local governments hard hit by the pandemic. But it is also fueling concerns about the ballooning federal debt, inflation, and how investors can protect themselves.

The Congressional Budget Office projected that the federal budget deficit will rise during the second half of the decade and climb steadily over the following 20 years.  By 2051, the federal debt is expected to double as a share of the economy.

The projections by the nonpartisan office forecast a more challenging long-term outlook, as interest costs on the national debt rise and federal spending on health programs swells along with an aging population.  “A growing debt burden could increase the risk of a fiscal crisis and higher inflation as well as undermine confidence in the U.S. dollar, making it more costly to finance public and private activity in international markets,” the CBO report said.

Our federal fiscal budget has structural problems, driven by well-known and predictable factors that include an aging population, rising healthcare costs and compounding interest—along with insufficient revenues to meet our commitments, according to The Peter G. Peterson Foundation.

Over the last 20 years, the federal government’s debt has grown faster than at any time since the end of World War II, running well ahead of economic growth. In addition to COVID-related spending, rising federal debt has been driven by longer-term trends including increasing Social Security and Medicare spending for an aging population. Today, according to the Congressional Budget Office, the federal debt is $22.5 trillion, more than 100% of gross domestic product (GDP).

Why debt matters

New Fidelity research suggests that higher debt can slow economic growth, and ultimately lead to higher inflation and more volatile financial markets. Warns Dirk Hofschire, senior vice president of asset allocation research at Fidelity Investments: “Debt in the world’s largest economies is fast becoming the most substantial risk in investing today.”

In the short term, Fidelity’s director of global macro Jurrien Timmer says a market consensus has emerged that inflation will rise in the second half of 2021: “An inflationary boom could result from the combination of COVID infections falling, vaccinations rising, ongoing massive fiscal stimulus, pent-up consumer demand, and low interest rates.”

FEDERAL DEBT IS ON AN UNSUSTAINABLE PATH

Longer term, Hofschire says, “The rise in debt is unsustainable. Historically, no country has perpetually increased its debt/GDP ratio. The highest levels of debt all topped out around 250% of GDP. Since 1900, 18 countries have hit a debt/GDP level of 100%, generally due to the need to pay for fighting world wars or extreme economic downturns such as the Great Depression. After hitting the 100% threshold, 10 countries reduced their debt, 7 increased it, and one kept its level of debt roughly the same.”

Only time will tell which way the US goes and when. But Hofschire thinks “government policies are likely to drift toward more inflationary options.” Among them:

  • Federal spending aimed at lower- and middle-income consumers
  • Increased public works spending not offset by higher taxes
  • Protectionist measures with a “made in America” rationale
  • Infrastructure upgrades targeting sectors such as renewable energy, 5G telecom, and health care
  • Higher inflation targeting by the Federal Reserve
  • Mandatory pay increases for workers benefiting from government assistance

In the longer term, if further free-spending fiscal policies are adopted while interest rates stay low and credit remains abundant, the likelihood of inflation could increase. But history suggests the magnitude and timing is uncertain. Many predicted an inflation surge the last time the federal government embarked on major fiscal and monetary stimulus after the global financial crisis, but inflation mostly failed to appear.

THE GROWING DEBT IS CAUSED BY A STRUCTURAL MISMATCH BETWEEN SPENDING AND REVENUES according to The Peterson Foundation

Why the national debt matters, according the The Peter G. Peterson Foundation:

  • High and rising federal debt matters because it reduces the county’s flexibility to plan for and respond to urgent crises.
  • Debt matters because growing interest costs make it harder to invest in our future — to build and sustain infrastructure, enhance education and support an economy that creates job growth and rising wages.
  • Debt matters because it threatens the safety net — critical programs like Social Security, Medicaid, Medicare, SNAP and Unemployment Compensation are essential lifelines for the most vulnerable populations.
  • Debt matters because America faces emerging and ongoing challenges that will require fiscal resources to keep the country safe, secure and strong — challenges like socioeconomic injustice, climate change, affordable health care, wealth and income inequality, international conflicts and an increasingly complex and competitive global economy.
  • Debt matters because the nation should care about its children and grandchildren. Borrowing more and more today reduces the opportunities and prosperity of the next generation.

The U.S. faces a range of complex, unprecedented health, economic and societal challenges, set against the backdrop of a poor fiscal outlook that was irresponsible and unsustainable before the crisis.

Building a brighter future for the next generation must become an essential priority for America, and the high cost of this health and economic crisis only makes that challenge more urgent. Once America has emerged from the pandemic, it will be more important than ever for its elected leaders to address the unsustainable fiscal outlook and manage the burgeoning national debt, to ensure that America is more prepared, better positioned for growth, and able to meet its moral obligation to future generations.

References:

  1. https://www.cbo.gov/publication/57038
  2. https://www.fidelity.com/learning-center/personal-finance/government-spending-2021?ccsource=email_weekly
  3. https://www.pgpf.org/what-does-the-national-debt-mean-for-americas-future

* The Peter G. Peterson Foundation is a non-profit, non-partisan organization that is dedicated to increasing public awareness of the nature and urgency of key fiscal challenges threatening America’s future, and to accelerating action on them. To address these challenges successfully, we work to bring Americans together to find and implement sensible, long-term solutions that transcend age, party lines and ideological divides in order to achieve real results.

Personal Debt in America

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“Debt means enslavement to the past, no matter how much you want to plan well for the future and live according to your own standards today. Unless you’re free from the bondage of paying for your past, you can’t responsibly live in the present and plan for the future.” Tsh Oxenreider, Organized Simplicity: The Clutter-Free Approach to Intentional Living

Debt stands stubbornly in the way of Americans’ financial goals and life dreams.  Moreover, debt is the biggest barrier to wealth creation and is the great destroyer of wealth. Debt and financial freedom are polar opposites – they never meet. Where there is debt, there cannot be wealth and financial freedom.

In the U.S., adults aged 18+ report having an average of $29,800 in personal debt, exclusive of mortgages, according to the latest findings from Northwestern Mutual’s 2019 Planning & Progress Study. The research also revealed that 15% of Americans believe they’ll be in debt for the rest of their lives.

While those numbers are staggering, they represent an improvement over last year when U.S. adults reported an average of $38,000 in personal debt. Still, the debt problem in America continues to run deep with wide-spread implications. The study found:

  • On average, over one-third (34%) of people’s monthly income goes toward paying off debt
  • 45% of Americans say debt makes them feel anxiety on at least a monthly basis
  • 35% report feeling guilt at least monthly as a result of the debt they’re carrying
  • One in five (20%) report that debt makes them feel physically ill at least once a month
  • One-fifth (20%) of U.S. adults are not sure how much debt they have
  • Over one in three Americans (34%) are unsure how much of their monthly income goes toward paying off their debt

Among the generations, Gen X reported the highest levels of personal debt with $36,000 on average. They’re followed by Baby Boomers at $28,600; Millennials at $27,900; and Gen Z at $14,700.

This is the latest round of findings from the 2019 Planning & Progress Study, an annual research project commissioned by Northwestern Mutual that explores Americans’ attitudes and behaviors towards money, financial decision-making, and factors impacting long-term financial security. This year marks the 10-year anniversary of the study.

The Credit Card Crisis

The leading sources of debt for most Americans is a tie between mortgages and credit cards, according to the study. An equal 22% of U.S. adults listed each as their main source of debt, more than double the next two highest sources — car loans (9%) and personal education loans (8%).

Millennials cite credit card bills as their main source of debt (25%), while Gen Z notes personal education loans as theirs (20%). Both Gen Xers (30%) and Baby Boomers (28%) note mortgages as their leading source of debt, followed by credit card bills (at 24% and 18% respectively).

Digging deeper into the numbers around credit card debt, the study found:

  • Nearly one-third of Americans (31%) are paying interest rates on their credit cards greater than 15%
  • Over 1 in 10 (12%) say they “always” pay only the minimum required payment, just covering the interest without paying down any principal
  • Close to one-fifth (19%) don’t know what their interest rate is, with Millennials being the most likely to report not knowing (22%)
  • 18% report having four or more credit cards, with Baby Boomers being more likely than other generations to have four or more (23%)

According to the Federal Reserve Bank of New York, credit card debt has reached $868 billion in the United States, and delinquencies are on the rise.

“Before you spend, earn. Before you invest, investigate. … Before you retire, save.” William A. Ward

When you are in debt the clock works against you. Every morning when you wake—weekends, holidays, sick days, birthdays and work days—you are already behind. The mortgage, credit card, car loan, et cetera, all tacked on interest the second after midnight. Long before you rolled out of bed and poured your first cup of coffee you need to work to pay the interest before you have money for food, clothing, shelter or entertainment.

In debt you are a slave; without debt you’re free.  Every day in debt you owe your master. Every day! He is a cruel, heartless master. When the clock ticks past midnight the interest for the day ahead is due.  Only those without debt and in possession of investment assets are free to live each day as they choose.

Without debt you are free; without debt and with possessing of assets and wealth, each day is yours to use as you chose.

References:

  1. https://news.northwesternmutual.com/planning-and-progress-2019
  2. https://wealthyaccountant.com/2018/04/12/the-greatest-secret-between-debt-and-wealth/

Financial Literacy: Six Principles of Personal Finance | TD Ameritrade

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Imagine operating a boat without the basic understanding of nautical rules of the road or even how to operate a boat. Scary thought.

Here’s another scary circumstance – one that is all too real. Many Americans are making financial decisions with minimal financial knowledge of investing, budgeting, and credit. The TIAA Institute conducted a survey on U.S. financial literacy, asking 28 basic questions about retirement saving, debt management, budgeting, and other financial matters. The average respondent answered only about half of the questions correctly.

Another study, conducted by Pew Research, found that one in four Americans say that they won’t be able to pay their bills on time this month.

It has been said that knowledge is power, and if that’s true, then too many Americans lack the power to control their financial futures. Financial success rarely happens by accident; it is typically the outcome of a journey that starts with education.

Talking about money is one of the most important skills to being a fiscally responsible and a financially literate person. However, 44% of Americans surveyed would rather discuss death, religion or politics than talk about personal finance with a loved one, according to CNBC.

Why? Two major reasons are embarrassment and fear of conflict, even though the consequences can be grave: 50% of first marriages end in divorce, and financial conflict is often a key contributor. Additionally, it is considered rude to discuss money and wealth.

The missing component is financial literacy education and training.

Mastering personal finance requires you to look at your financial situation holistically and come up with a plan for how to manage your money. In this TD Ameritrade video, we’ll look at helpful principles for six personal finance topics:

  1. Budgeting – focus on the big ticket items by cutting cost on the expensive costs such as cars and homes
  2. Saving and investing – be specific about your destination and your plan on achieving your goal and reaching your destination
  3. Debt and Credit – avoid high interest debt and loans on items that will quickly lose value
  4. Reduce taxes – find ways to legally pay less taxes on the income you earn,
  5. Avoid insurance for expenses you can pay out of pocket – purpose of insurance is to protect you in unfortunate scenarios.  60% of all bankruptcy is related to medical expenses
  6. Investing for retirement. – don’t just save for retirement, invest for retirement.

Make high impact adjustments to your finances to improve your financial future.

References:

  1. https://www.cnbc.com/2019/04/30/the-us-is-in-a-financial-literacy-crisis-advisors-can-fix-the-problem.html
  2. https://www.tiaainstitute.org/publication/financial-well-being-and-literacy-midst-pandemic
  3. https://www.pewtrusts.org/en/research-and-analysis/articles/2017/04/06/can-economically-vulnerable-americans-benefit-from-financial-capability-services

Your Credit Score and How it Works

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It is important for consumers to understand how your credit score works.  Since, not understanding how credit scores work can actually hurt your credit score.  Your credit score can affect your financial future and you need a good credit score to get the lowest interest rates on future loans.

Stack of credit cards and dollars.

Most consumers understand that bankruptcy or foreclosure is going to negatively impact their credit score for seven years, but there are plenty of other small mistakes a consumer can make that can turn a good score of 750 or higher into a mediocre 680.

One mistake people make is thinking that carrying a monthly balance on your credit card statements helps improve your credit score.  The truth is that you can build a great credit score without carrying a balance and paying interest on your purchases, according to consumer advocate Clark Howard.

The smart and responsible way to use credit cards is to have a budgeted amount that will go on your credit card each month and pay your bill in full each month.  Clark Howard also recommends that consumers do not charge more than 30% of your available credit card balance.  Preferably, keep it below 10% if you want to boost your credit score quickly.

According to Clark Howard, your payment history makes up 35% of your FICO score and it is important to understand this fact when bills are due.  Consequently, you can attain a good credit score by paying your bills on time and keeping a low credit card balance.

References:

  1. Howard, Clark, Big mistake can hurt credit score, The Atlanta Journal-Constitution, October, 1, 2020, pg. D1
  2. https://finance.yahoo.com/news/7-small-mistakes-that-will-hurt-your-credit-score.html

The Vestiges of Spending and Debt

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“Debt means enslavement to the past, no matter how much you want to plan well for the future and live according to your own standards today. Unless you’re free from the bondage of paying for your past, you can’t responsibly live in the present and plan for the future.” Tsh Oxenreider, Organized Simplicity: The Clutter-Free Approach to Intentional Living

Debt is often described as a four-letter word, burying borrowers with substantial balances and double-digit interest fees. And for many Americans, that’s the case.

Living with and accumulating debt has always been an almost certain path to financial ruin and can be a recipe for disaster. Debt can be sneaky. It is difficult to get ahead financially when you don’t have enough money to pay for something and reaching for a credit card to fund. It is no way to live in the short or long term.

Debt eats away at disposable income and limits the borrower’s ability to meet other financial goals, such as saving and investing for retirement. It also forces those who carry a monthly credit card balance to overpay for consumer goods — including furniture, clothes, and flat-screen TVs — due to the interest charges that accrue.

But debt isn’t just credit cards. It comes packaged as student loans, car payments, store credit cards, home mortgages, personal loans, business loans, payday loans, and even “buy now, pay later” deals. Essentially, anytime you owe somebody else money for anything—it’s debt.

It’s important to give debt the boot for good. First, stop taking on any kind of new debt. That means stop paying for goods and services with a credit card to make ends meet, stop leveraging your future to pay present. Stop living beyond your means.

You can’t get out of debt if you keep adding additional purchases and expenses to it. Instead, start focusing on paying off your debts with the smallest to largest balances.

Stop living with debt.

Anytime you owe somebody else money for anything—it’s debt.

Paying off debt continues to be one of the most pressing financial goal for Americans. A 2018 Transamerica Center for Retirement Studies found that nearly a third (31%) of survey participants stated that eliminating bad debt was their number one financial goal.

Paying off bad debt, and debt in general, is extremely important for consumers. It can be difficult to save for retirement and other long-term goals when a big chunk of your money is going toward debt repayment. That’s why it’s important to have a financial plan that details how to get out of debt—it can save you money in interest and ultimately help you save more money and reach your goals faster.

Student loans, credit card balances, car loans, and mortgages all represent types of debt that typical consumers must pay off. It’s important to make sure to pay at least the minimum required—and on time—to keep all loans in good status. After all, defaulting on credit cards, car loans, student debt, or home mortgages can destroy your credit rating, and risk bankruptcy.

Debts are negative bonds

A fixed rate mortgage acts like a bond with fixed payments. But, the exception is that you are the one issuing the bond instead of buying it, which makes it a negative holding. Debts are like negative bonds, you’re making interest payments in addition to principal.

A bond is an investment in which you expect to get back your initial investment (principal) plus some interest. Conversely, a mortgage is a promise to pay back the borrowed amount (principal) plus some interest. Thus, it appears to be that a mortgage and all consumer loans are basically just a negative bond.

Viewing mortgages, automobile loans or student loans as a negative bond, where you are paying interest to the loan holder instead of collecting it, might change a person’s mindset regarding debt. Indeed, paying off debt almost always garners a higher after-tax return than you can earn by investing in high-quality bonds.

Before you tackle debt, pay yourself first.

Use tax-advantaged accounts like a flexible spending account or a health savings account if you have a high deductible health plan. That lets you pay for medical bills using pre-tax money.

Save enough in a workplace retirement savings plan to get the match from your employer—that’s “free money.” Set aside some cash for emergencies.

Assuming you are meeting those primary obligations, here’s a guide to help you pay off debt while saving for emergencies and long-term goals like retirement. It may seem counterintuitive, but before you tackle debt, make sure you have some “just in case” money and save for retirement.

It can be easy to run up a large credit card balance. And once you do, it’s not easy to pay it off. The minimum payments are typically low, which means you are paying mostly interest, so it will take much longer to pay off the balance. And it will cost you more. So if you can, consider paying more than the minimum each month.

Debt and Credit Reporting

Once a delinquency has been reported to a collection agency, paying it off won’t help your FICO score. The damage has already been done, and the blemish will remain on your credit report for seven years.

At this point, it is recommended that you negotiate with the debt collector so you can repay a smaller amount and keep more of your savings. Creditors will often accept far less than what is actually due. One important caveat: When you negotiate a lower payment, the IRS usually counts the forgiven amount (what you’re not required to pay) as income, which means that you’ll owe taxes on that money.

Take pleasure in saving.

Personal Financial guru Suze Orman states that the most important piece of advice she can provide regarding debt is that, “Until you can feel more pleasure from saving than you get from spending, you are going to be tempted to spend money you don’t have.” Essentially, until an individual makes saving a priority and core objective, they will be fighting a uphill battle to curb spending and to ensure the spending remains below the earnings.

It worth repeating the fact that Americans have a spending problem. Every research and survey conducted on the subject of debt reveals that conspicuous spending, or in the vernacular of a former Federal Reserve Chairman, conspicuous consumption has long been a concern of economists in American. Many of the bursting economic bubbles over the past dozen decades can be directly contributed to Americans getting over their proverbial skies with respect to debt and spending more than they earn.

Debt for appreciating and income producing assets

If used properly, debt can potentially provide the leverage to accumulate income and producing assets wealth. Very few people could afford to purchase a primary residence without a mortgage loan.

Not all property appreciates in value, of course, but for most Americans, their primary residence is their single largest asset. As of 2018, U.S. homeowners are sitting on a record $15.2 trillion of “tappable equity,” defined as the total amount of equity a homeowner with a mortgage can borrow against their home, according to Magnify Money by Lending Tree.

  1. https://www.fidelity.com/mymoney/ditch-debt-and-start-saving?ccsource=Facebook_YI&sf228845371=1
  2. https://www.transamericacenter.org/retirement-research/19th-annual-retirement-survey
  3. https://www.suzeorman.com/blog/Americans-Say-Paying-Off-Debt-is-Their-Top-Goal

Ditch Debt and Start Saving | Fidelity Investments

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Balancing paying off debt and saving can be tricky. Here’s a step-by-step guide.

BY STAFF WRITER, FIDELITY – 06/28/2019

Key takeaways

  • Save for an emergency—consider saving enough to cover 3 to 6 months of expenses.
  • Consider a health savings account if you’re eligible, and contribute to your workplace retirement plan.
  • Pay down debts with the highest interest rate first.

Student loans, credit card balances, car loans, and mortgages—oh, my. You probably have a variety of debt—most people do. So which should you focus on paying off first? And how can you save at the same time?

Of course, make sure to pay at least the minimum required—and on time—to keep all loans in good status. After all, defaulting on credit cards, car loans, student debt, or home mortgages can destroy your credit rating, and risk bankruptcy.

Before you tackle debt, pay yourself first. Make sure you:

  • Use tax-advantaged accounts like a flexible spending account or a health savings account if you have a high deductible health plan. That lets you pay for medical bills using pre-tax money.
  • Save enough in a workplace retirement savings plan to get the match from your employer—that’s “free money.”
  • Set aside some cash for emergencies.

Assuming you are meeting those primary obligations, here’s a link to a guide to help you pay off debt while saving for emergencies and long-term goals like retirement. It may seem counterintuitive, but before you tackle debt, make sure you have some “just in case” money and save for retirement.

— Read on www.fidelity.com/mymoney/ditch-debt-and-start-saving

Conspicuous Spending and Skyrocketing Debt

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“The hard truth is: the amount of money we earn is not always directly proportional to the amount of money we save because, more often than not, the more money we make, the more we spend.” David Bach, author “The Automatic Millionaire”

Let’s face financial reality and an inconvenient truth. Whether on Main Street, Wall Street or Pennsylvania Avenue, Americans continue to have and have long had a spending problem. Government statistics and other studies show that Americans’ spending has generally risen in the years since the 2008 – 2009 Great Recession. This trend is reflected in Americans’ general pattern of consumer spending and reflected in the rising levels of consumer, corporate and public debt which has topped a whopping $75.3 trillion in 2019 according to the stats coming out of the Federal Reserve.

Moreover, Gallup found in an April 2018 poll that people “…want see themselves as fiscally responsible, to some degree.” Even Americans who admit that they are spending more than they earn over the past several months are more likely to claim this is only temporary, rather than their normal. Those who say they are spending less believe it is permanent, despite what the numbers reveal.

And Americans’ have a predilection to say that they enjoy saving more than spending, which rose dramatically between the period before and the period just after the recession, has remained in place, even as the economy has improved.

Positive Cash Flow

Asked about their spending habits, Gallup results show that Americans are as likely to say they are spending the same amount as they used to (35%) as to say they are spending less (35%). Slightly fewer, 30%, report spending more. The takeaway is that Americans’ conspicuous spending habits will not change unless they first acknowledge it as a problem.

On the other hand, most wealthy people understand and stress the importance of spending much less than their means. Spending less gives them financial freedom which then translates into various opportunities such as career mobility, flexibility to venture into activities outside of work, and of course the ability to increase their wealth.

On the other hand, if Americans are spending more than what they earn, then even with a big six-figure income, they will be excessively reliant on each of their paycheck. It is very important that they are financially independent before the time comes when they decide to become self-employed or to retire. So it’s important to start saving, investing and accumulating wealth.

Simply spending less than we earn, eliminating bad debt, managing taxes and fees, paying ourselves first, starting to save early, automatically saving and investing for the long-term, and developing smart financial habits and positive financial mindset will result in huge results over a long period of time.

References:

  1. https://www.federalreserve.gov/releases/z1/20190307/z1.pdf
  2. https://usdebtclock.org
  3. https://news.gallup.com/poll/209432/americans-say-saving-spending.aspx
  4. https://www.bea.gov/news/glance

10 Money Lessons He Wished Heard — or Listened to — When Younger | MarketWatch

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Updated: February 23, 2020

Jonathan Clements, author of “From Here to Financial Happiness” and “How to Think About Money,” and editor of HumbleDollar.com., is the former personal-finance columnist for The Wall Street Journal. He has devoted his entire adult life to learning about money.

That might sound like cruel-and-unusual punishment, but he has mostly enjoyed it. For more than three decades, he has spent his days perusing the business pages, reading finance books, scanning academic studies and talking to countless folks about their finances.

Yet, despite this intense financial education, it took him a decade or more to learn many of life’s most important money lessons and, indeed, some key insights have only come to him in recent years.

Here are 10 things he wished he’d been told in his 20s—or told more loudly, so he actually listened:

— Read on www.marketwatch.com/story/10-money-lessons-i-wish-id-listened-to-when-i-was-younger-2020-02-12

1. A small home is the key to a big portfolio. Financially, it turned out to be one of the smartest things he had ever done, because it allowed him to save great gobs of money. That’s clear to him in retrospect. But he wished he’d known it was a smart move at the time, because he wouldn’t have wasted so many hours wondering whether he should have bought a larger place.

2. Debts are negative bonds. From his first month as a homeowner, he sent in extra money with his mortgage payment, so he could pay off the loan more quickly. But it was only later that he came to view his mortgage as a negative bond—one that was costing him dearly. Indeed, paying off debt almost always garners a higher after-tax return than you can earn by investing in high-quality bonds.

3. Watching the market and your portfolio doesn’t improve performance. This has been another huge time waster. It’s a bad habit he belatedly trying to break.

4. Thirty years from now, you’ll wish you’d invested more in stocks. Yes, over five or even 10 years, there’s some chance you’ll lose money in the stock market. But over 30 years? It’s highly likely you’ll notch handsome gains, especially if you’re broadly diversified and regularly adding new money to your portfolio in good times and bad.

5. Nobody knows squat about short-term investment performance. One of the downsides of following the financial news is that you hear all kinds of smart, articulate experts offering eloquent predictions of plummeting share prices and skyrocketing interest rates that—needless to say—turn out to be hopelessly, pathetically wrong. In his early days as an investor, this was, alas, the sort of garbage that would give him pause.

6. Put retirement first. Buying a house or sending your kids to college shouldn’t be your top goal. Instead, retirement should be. It’s so expensive to retire that, if you don’t save at least a modest sum in your 20s, the math quickly becomes awfully tough—and you’ll need a huge savings rate to amass the nest egg you need.

7. You’ll end up treasuring almost nothing you buy. Over the years, he had had fleeting desires for all kinds of material goods. Most of the stuff he purchased has since been thrown away. This is an area where millennials seem far wiser than us baby boomers. They’re much more focused on experiences than possessions—a wise use of money, says happiness research.

8. Work is so much more enjoyable when you work for yourself. These days, he earn just a fraction of what he made during my six years on Wall Street, but he is having so much more fun. No meetings to attend. No employee reviews. No worries about getting to the office on time or leaving too early. he is working harder today than he ever have. But it doesn’t feel like work—because it’s his choice and it’s work he is passionate about.

9. Will our future self approve? As we make decisions today, he think this is a hugely powerful question to ask—and yet it’s only in recent years that he had learned to ask it.

When we opt not to save today, we’re expecting our future self to make up the shortfall. When we take on debt, we’re expecting our future self to repay the money borrowed. When we buy things today of lasting value, we’re expecting our future self to like what we purchase.

Pondering our future self doesn’t just improve financial decisions. It can also help us to make smarter choices about eating, drinking, exercising and more.

10. Relax, things will work out. As he watch his son, daughter and son-in-law wrestle with early adult life, he glimpse some of the anxiety that he suffered in my 20s and 30s.

When you’re starting out, there’s so much uncertainty — what sort of career you’ll have, how financial markets will perform, what misfortunes will befall you. And there will be misfortunes. he’d had my fair share.

But if you regularly take the right steps—work hard, save part of every paycheck, resist the siren song of get-rich-quick schemes—good things should happen. It isn’t guaranteed. But it’s highly likely. So, for goodness’ sake, fret less about the distant future, and focus more on doing the right things each and every day.

You can follow Jonathan Clements on Twitter @ClementsMoney and on Facebook at Jonathan Clements Money Guide.