Thursday, May 01, 2014

A REAL Financial Advice Column for 20-Somethings

CNBC has one of those nice, anodyne financial advice columns up geared towards "20-somethings."  It's fine and harmless as far as it goes.  The advice is likely good for anybody, not just those in their 20s, but, like I said, it's fine.

A more impactful and raw advice column might suit 20-somethings better as we live in a world of deep uncertainty and fraught with the potential of severe dislocations.  Of course, 20-somethings could always start with some general advice at investing for the future given the realities today, but let's customize it a bit to be more useful to them given their age.  So, let's give it a whirl...

1)  Save, but Don't Stop There, Invest - as a youngling, your biggest advantage is time.  You can harness the power of compounding like a 40-something could only dream about.  Sock away every bit you can, but don't stick it in low yielding crap.  Invest for the long haul in something that is relatively immune from the Fed's current financial repression.  No point in using your inherent time advantage to earn 0.5% in a savings account.  Think about a dividend paying stocks or high grade corporate bonds.  If you really want to think outside of the box, think about owning land.

2) Don't Count on Social Security - if you think Social Security will be there for you, you're smoking something.  It's going bust and/or it'll be eroded of purchasing power that it won't mean a thing.  Save on your own, don't even think these entitlements will be there for you.

3) Don't Lend to Governments - You lend to governments by buying their bonds.  Don't.  They're mostly all broke.  Your generation represents the most recent entrants into the Ponzi scheme, don't participate.

4) Learn About Smart and Legal Tax Avoidance - Your tax bill is likely one of your largest bills, larger than you utility bill, your clothing bill, maybe even your food bill.  Learn to minimize it.  A corollary to this is to take free (or freeish) money when it is offered.  Does your company offer matching 401k contributions?  Take it.  Anytime you can get paid for doing something you are already doing, take it.

5) Stop Voting for Socialists - Yeah, I'm sure it felt really good being caught up in the Obama movement and having that Elizabeth Warren bumper sticker on your Subaru, but if you intend to work hard, save/invest and play by the rules, eventually socialists (here in America we call them Democrats) will attempt to steal what you have.  You can give them power now and they will put in place policies that inhibit you from getting ahead, but, more dangerously, they will start building the policy machinery to steal what you've worked hard for, saved and built.  You can follow all this good advice and 30 years down the road have most of it taken from you because you were politically na├»ve.

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